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Energy Act gets Royal Assent: What does it mean for the UK’s energy future?

On 26 October 2023, the Energy Act received Royal Assent, becoming law in the UK. This is the most significant energy legislation in a decade, and the Government’s stated intention is that it will have a major impact on the UK's energy system in the years to come.

7th November 2023

On 26 October 2023, the Energy Act received Royal Assent, becoming law in the UK. This is the most significant energy legislation in a decade, and the Government’s stated intention is that it will have a major impact on the UK’s energy system in the years to come.

The Energy Act is a significant step forward for the UK’s energy future. It aims to ensure that the UK has a secure, affordable, and clean energy system to meet the needs of the future.

The legislation has several key objectives, including:

  • Strengthening energy security: The Act’s primary objective is to ensure the UK has a secure energy supply by diversifying our energy mix and reducing our reliance on imported fossil fuels. This will be achieved through several measures, including further supporting the development of renewable energy sources, investing in new nuclear power plants and carbon capture, and developing a hydrogen economy.
  • Delivering net zero: The Act also gives Ofgem new powers to protect consumers and reach net zero – by unlocking investment, accelerating planning decisions, building new infrastructure, and paving the way for innovation and technology, giving Ofgem a statutory ‘net zero duty’.

Commenting on the new Act, Jonathan Brearley, Ofgem CEO, stated: “We welcome the Energy Act getting Royal Assent. It is the most significant energy legislation for a decade and a world-first in giving us a legal mandate targeting net zero. It gives Ofgem the powers to drive through the energy transition – unlocking investment, accelerating planning, and building the infrastructure the economy needs. This will give us security from volatile world gas markets and end our dependency on fossil fuels”.

In relation to the Energy Savings Opportunity Scheme (ESOS), the Act, as we had anticipated, makes provision to reduce the de minimis site audit requirement from 10% to 5%. In addition, there is a new requirement to include an overall energy intensity ratio in ESOS reports and the reporting of carbon as well as energy savings.  Unfortunately, the other changes to ESOS will not be clarified until new guidance is published in the next few months, so ESOS submissions cannot currently be finalised but the implementation of identified energy-saving opportunities is to be encouraged and facilitated.

As the world gears towards a net-zero future, the UK’s energy sector needs longer-term certainty to stay competitive globally and garner investment. The Energy Act marks a significant step forward in building a modern energy system that meets evolving demands on the sector. It introduces innovative business models, enhances customer protections, and lays the groundwork for sustained investment across the energy sector. While further efforts are needed to implement the frameworks enabled by this Act fully, it serves as a solid foundation for the future of the UK’s energy market.

Some of the key specific measures included in the Energy Act:

  • New tender processes for offshore wind projects: This will increase competition and drive down the costs of offshore wind power.
  • A new merger regime for energy network companies: This will ensure active competition in the nation’s energy infrastructure.
  • Regulation of heat networks under the oversight of Ofgem: This will ensure that heat networks are operated fairly and efficiently.
  • Mechanisms to provide funding and a legal framework for the growing hydrogen industry in the UK: This will support the development of hydrogen as a low-carbon energy source.
  • A licensing regime for the transport and storage of carbon dioxide: This will set a framework for the delivery of UK carbon capture and storage sites.

The Energy Act may be a complex piece of legislation, but it is clear that it has the potential to make a major impact on the UK’s energy future. It is now up to the government, Ofgem, and the energy industry to implement the Act effectively and to ensure that it delivers on its objectives. We will leave others to judge whether the more liberal regime regarding oil and gas exploration licenses announced in the King’s Speech is compatible with the net zero intent addressed in the Energy Act.

Key benefits for businesses

  • The Act will create new investment opportunities; providing a clear framework for businesses to invest in the low-carbon energy sector, including renewable energy, nuclear power, and energy storage.
  • The Act should reduce costs and improve competitiveness; it aims to make the UK’s energy system more efficient and competitive, leading to lower energy costs for businesses.
  • It should increase regulatory certainty due to it providing clarity and certainty on the UK’s energy policy for the future.

Your business can prepare for this new law by reviewing your energy strategy and identifying areas where you can improve efficiency and reduce costs, seeking out government support schemes to help with energy efficiency and renewable energy projects, and staying informed of the latest developments in the Energy Act and related regulations.

To find out more about how Inenco can support your business please contact:

enquiries@inenco.com

08451 463 626

www.inenco.com

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