The Energy Bill – the most important energy law in a generation?

The Energy Bill is a major piece of Government legislation currently making its way through Parliament.¹ It creates a comprehensive new statutory regime for energy production, energy security and the regulation of the UK energy sector. The Bill aims to deliver “a cleaner, more affordable and more secure energy system for the long term”,² and it has been described by the Government as “the most significant piece of energy legislation in a generation”.³

 

Scope

The Bill is voluminous. Its content falls broadly into the following three categories (which form the key pillars of the Bill): (i) leveraging private investment in clean technologies and building a homegrown energy system; (ii) reforming the energy system to protect consumers from unfair pricing; and (iii) ensuring the safety, security and resilience of the UK’s energy system.⁴

It covers a wide range of policy areas, including:

• licensing of carbon dioxide transport and storage;
• commercial arrangements for carbon capture and storage and for hydrogen production and transportation;
• new technology, including low-carbon heat schemes and hydrogen grid trials;
• the Independent System Operator and Planner (currently known as the Future System Operator);
• gas and electricity industry codes;
• market reform and consumer protection;
• heat networks;
• energy smart appliances and load control;
• the energy performance of premises;
• 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 Civil Nuclear Constabulary and the role of Great British Nuclear in facilitating deployment of nuclear reactors in Britain.

 

Recent History

The Energy Bill is intended to deliver on key longstanding Government commitments related to clean energy and energy security. Most recently, these commitments have included:

November 2020

The Government published the Ten Point Plan for a Green Industrial Revolution setting out how it intended to invest in green technologies, including advancing offshore wind and delivering new and advanced nuclear power.

October 2021

The Government published its Net Zero Strategy which set out the policies and proposals for decarbonising the UK economy to meet the net zero target by 2050 (a legal requirement introduced by the Climate Change Act 2008 (as amended)).

April 2022

In the light of the global energy crisis and war in Ukraine, the Government published the British Energy Security Strategy which set out how the Ten Point Plan was being delivered, and further strategies to deliver energy security and cut costs for consumers (including the announcement of the Review of Electricity Market Arrangements).

The above publications were followed on 30 March 2023 with the Government’s Energy Security Plan and Net Zero Growth Plan, both delivered under the “Powering Up Britain” banner.

 

Extent and commencement

Some of the provisions in the Energy Bill 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. As for commencement, the Bill contains a clause under which some of the provisions of the Bill (when enacted) will come into force on such day or days as are appointed by the Secretary of State; some on the day the Bill is enacted; some two months after the Bill is enacted; and one when a convention comes into force in respect of the UK.

 

Why might it be of interest to my business/organisation?

The Bill impacts on all aspects of energy generation and market regulation, and consequently is of relevance to every organisation operating within the UK energy markets, as well as to energy consumers. We have flagged below just some of the many measures in the Bill.

Carbon dioxide transport and storage, CCUS and hydrogen, and new technology

The first four Parts of the Bill (the version made available on 11 July 2023) are aimed at leveraging private finance in low carbon technologies – they cover (amongst other things):

• the economic regulation and licensing framework for CO2 transport and storage networks;
• new business models to further (by the creation of long-term revenue certainty) the deployment of carbon capture, usage and storage (CCUS) and hydrogen production and transportation; and
• the creation of a market-based mechanism for low-carbon heat schemes.

Independent System Operator and Planner (ISOP)

Part 5 of the Bill is concerned with the establishment of a publicly owned 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 Great Britain’s energy system, with the objectives of maintaining energy security and minimising costs for consumers over the long term.

Market reform

The system reform pillar of the Energy Bill includes provisions in Part 6 to create a new governance framework for the energy industry codes, and provisions in Part 7 to:

• amend the existing duties of the Gas and Electricity Markets Authority (the governing body of Ofgem) to include reference to net zero targets;
• extend competitive tendering for electricity projects (which already exists for offshore transmission assets) to the onshore electricity networks;
• reform the mergers regime for energy companies;
• amend the electricity licensing regime to encompass multi-purpose interconnectors (which combine interconnectors and the transmission activities for offshore windfarms); and
• create a regulatory definition for electricity storage.

Offshore wind electricity generation and environmental protection

The first chapter in Part 13 of the Bill concerns the generation of offshore wind electricity (this has the backdrop of the Government’s ambition to deliver up to 50 gigawatts of offshore wind capacity by 2030). These provisions of the Bill make 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. The main changes relate to environmental assessments and compensatory measures where offshore wind projects would cause damage to the marine environment.  

 

Timeframes

The Bill was introduced in the House of Lords on 6 July 2022 and, following numerous amendments (including to introduce the so-called ‘Ofgem net zero duty’⁵), is now being debated in the House of Commons as it progresses to the final stages of its journey through Parliament⁶. It is due to have its report stage and third reading in the Commons on 5 September 2023, following the summer recess.

What's next from DLA Piper?

Our energy sector lawyers from across the firm and in all our UK offices have been closely following the progress of this major piece of legislation, as we advise our clients on how best to prepare for the changes it will bring. We look forward to sharing our insights on the Bill as it develops and is finalised, and after it comes into force. Sign up here to receive future communications on this subject; and if you require advice, please see our Contact us section on the main page.

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¹ Energy Bill [HL] - Parliamentary Bills - UK Parliament.
² See paragraph 1.2, of Energy Bill [HL] 2022-23: Overview.
³ See here.
⁴ See here.
⁵ See the Energy Security Bill Factsheet: Ofgem net zero duty (added 6 June 2023) - GOV.UK (www.gov.uk).
⁶ Energy Bill [HL] - Summary - Committees - UK Parliament and Energy Bill [HL] - Parliamentary Bills - UK Parliament.