The Energy Act 2023 is here

The Energy Bill, first announced in the Queen’s Speech on 10 May 2022 and introduced to Parliament on 6 July 2022, received Royal Assent on 26 October 2023, and is now the Energy Act 2023 (Act) – the Department for Energy Security and Net Zero issued a press release the same day headed ‘New laws passed to bolster energy security and deliver net zero’.

In the final debate on the Bill, which took place in the House of Lords on 24 October 2023, Lord Callanan expressed the view that this legislation will do great things for the energy sector.

The official text of the Act was published on 1 November 2023.

In summary

This new statute has been described by the Energy Security and Net Zero Secretary, Claire Coutinho, as being the “vehicle for delivering the energy strategy” and “the largest piece of energy legislation in a generation”. It creates a comprehensive new regime for energy production and security and the regulation of the UK’s energy sector, and is intended to deliver on key longstanding government commitments relating to clean energy, climate change and energy security and resilience.

The scope of the Act is vast, covering a wide range of policy areas from the licensing of carbon dioxide transport and storage to the environmental assessments system for offshore wind. Understanding this extensive content, and its legal, economic and environmental impacts, is going to be important for every business and organisation operating in the UK’s energy markets.

In practice

Significant parts of the Act rely on the future passage of secondary legislation to provide the detail on exactly how new measures will operate in practice. There will, therefore, be some elapse of time before we see the Act take effect in all key policy areas.

So, for example, in relation to transport and storage infrastructure for carbon dioxide, a power is conferred on the Secretary of State to make regulations about revenue support contracts; and in respect of offshore wind, the Secretary of State has power to introduce regulations which set out how the proposed new marine recovery fund(s) will be established, operated and managed; and the Secretary of State and devolved administrations are given the power to set out in regulations how environmental effects of offshore wind projects will be assessed and how compensatory measures will work under the new regime.

In addition, under the commencement provisions, large parts of the Act will not come into force until a date to be specified in regulations by the Secretary of State. For example, provisions relating to the independent system operator and planner, multi-purpose interconnectors, and fuel sector resilience, will not enter into force until such day or days as the Secretary of State may by regulations appoint.

Policy objectives

The Act has many policy objectives, including:

1. leveraging private investment in clean and low carbon technologies, such as carbon capture and storage and low carbon hydrogen;
2. establishing an independent system operator and planner (better known as the Future System Operator), to be tasked with taking a whole-system approach to coordinating and planning the development of Great Britain’s energy systems, and operating the electricity system;
3. creating a new governance framework for the energy industry codes;
4. increasing competition in Great Britain’s onshore electricity networks through competitive tendering; and
5. making changes to the legal processes which govern the development of offshore wind projects in the UK with the intention of speeding up the consenting process.

Territorial extent of the Act

The Act relates to the United Kingdom but its territorial extent differs between the constituent parts. Some of the provisions extend to England and Wales, Scotland and Northern Ireland; some to England and Wales and Scotland only; some to England and Wales only; and one to Scotland only.

Scope / content

As for its content, the Act is voluminous, covering the following areas of energy law and practice (and more):

• the licensing of carbon dioxide transport and storage and hydrogen pipeline projects;
• commercial arrangements for carbon dioxide capture, transport and storage and for hydrogen production, transport and storage;
• new low carbon technologies, including heat schemes and hydrogen grid trials;
• the independent system operator and planner;
• reform of the gas and electricity industry codes;
• market reform and consumer protection, including Ofgem’s net zero duty, competition measures, regulation of multi-purpose interconnectors and electricity storage, and financial support for energy-intensive activities;
• regulation and development of heat networks;
• energy smart appliances and load control;
• the energy performance of premises;
• regulation of energy savings opportunity schemes;
• the resilience of the core fuel sector;
• offshore energy production, including environmental protection, licensing and decommissioning; and
• the civil nuclear sector, including the services of the Civil Nuclear Constabulary and the role of Great British Nuclear in facilitating deployment of new nuclear projects in Britain.

The future

There was much debate on the content of the Energy Bill and the amendments proposed to it during its passage through Parliament - testimony as to the importance of this legislation at a time of national and international focus on energy affordability and security, and emission reduction targets. It is now on the statute book, and we look forward to working with our clients in the delivery of its policy goals and objectives.