what is the Energy Act 2023?
When the Energy Act 2023 (the “Act”) received Royal Assent in October 2023 it was described as the “biggest piece of energy legislation in the UK’s history“!
The Act is a relatively new UK-based law that sets out rules for managing energy networks (both current and future) and emerging energy technologies. Essentially, it explains how the Government intends to oversee these networks and technologies by supporting their development, promoting their rollout, and encouraging private investment through incentives. The Act will be supported by additional laws and guidance that will give more details on how the new networks and technologies will be implemented and operated.
why is the Act important?
The Act is all about bringing the British Energy Security Strategy (BESS) to life, with a goal to unlock £100 billion in private investment and create 480,000 jobs by 2030. How? By setting up the key laws we need, filling in legal gaps, creating new rules, and making existing ones clearer.
Therefore, the Act is in our view, a positive step in the UK’s larger plan toward achieving net-zero emissions by 2050. Don’t believe us? Read the latest progress report published by Parliament in September 2024, here.
when did the Act come into effect? One-year down the line – where are we?
While most provisions of the Act have already taken effect, fully implementing it will still require additional secondary legislation, regulations, guidance, frameworks, schemes, and rules, which Ministers have the authority to establish under the Act. This means that although one year has lapsed there is still significant work ahead.
However, some key parts, like the designation of a hydrogen counterparty and regulations for low-carbon heat schemes and heat networks, took effect immediately when the Act was passed on 26 October 2023.
Several other sections, including licensing and revenue support for carbon capture and storage (CCUS) and hydrogen transport, Ofgem’s net zero duty, and the Offshore Wind Environmental Improvement Package (OWEIP), have been in force since 26 December 2023.
what are the key changes introduced by the Act?
We do not go into greater detail here but provide an overview of the key impacts:
- A new entity to govern UK’s gas and electricity networks
The Act establishes the Independent Systems Operator and Planner (ISOP), an independent body overseeing the UK’s gas and electricity networks to ensure secure, efficient development. The ISOP will take on roles currently held by the National Grid’s Electricity System Operator and Gas System Operator, such as planning and balancing, and will also drive decarbonization and promote innovation under Ofgem’s regulation.
- New obligations to combat climate change
The Act strengthens the environmental responsibilities of both the government and Ofgem to support the UK’s climate targets. The government must now publish a policy statement outlining its approach to climate-related regulatory powers, providing a clear framework for sustainable decision-making. Please see the Government’s latest report linked under, “Why is the Act important” for more details on the progress on this.
- Rethinking Electricity Storage
Recognizing electricity storage as its own category in the energy sector, the Act classifies technologies like battery and hydro storage as distinct from generation or demand. By defining storage as energy converted from electricity for future use, the Act facilitates better integration of stored power back into the grid.
- Aiding the transition of oil and gas
While focused on low-carbon solutions, the Act includes provisions for oil and gas. It introduces an offshore decommissioning charge (pending consultation) and grants the North Sea Transition Authority (NTSA) new powers to revoke licenses in cases of unapproved changes in control, helping to enhance accountability within the sector.
- Considering offshore wind developments
The Act raises environmental standards for offshore wind, including strategic compensation for habitats. It allows for marine recovery funds and anticipates further regulations to enhance impact assessments and habitat protection, fostering sustainable offshore wind development.
- Enabling advancements to onshore electricity networks
A new framework will increase competition in onshore electricity projects, allowing competitive tenders for selected projects, which could lower costs and foster innovation. The Act also enables multi-purpose infrastructure (MPI) projects, which combine transmission, distribution, and storage assets, supporting a stronger, more interconnected grid.
- Carbon Capture and Storage (CCS)
A new regulatory framework for Carbon Capture, Usage, and Storage (CCUS) introduces licensing and decommissioning standards overseen by Ofgem. Operators now need licenses with defined provisions, and business models for industrial carbon capture encourage partnerships with private companies for revenue support.
- Encouraging Nuclear Power Investment
A new financing model, the Regulated Asset Base (RAB), allows nuclear investors to recoup costs through regulated charges on bills. The government can also set a national nuclear policy, with Great British Nuclear guiding strategic plant locations to align with energy goals.
- Regulation of Heat Networks
Ofgem is now the regulator for heat networks in the UK, which are subject to new consumer protections, emissions limits, and technical standards. Local authorities in England will be able to designate “heat network zones” in areas where heat networks provide an efficient, sustainable heating solution, with additional guidelines coming through secondary legislation.
the Act has an impact across the UK
Most of the Act applies across England, Wales, and Scotland, but some sections are more specific. For example, heat network zoning only applies in England.
In Northern Ireland, the Act’s impact is more limited. Certain parts, like licensing hydrogen pipelines, changes related to the ISOP, market reform, and consumer protection, don’t apply there at all.
In our view the Act sets a strong direction for a cleaner, more resilient energy future, laying down crucial frameworks to drive decarbonization, innovation, and sustainable growth across major energy sectors. However, in order to see a real impact, there is still a lot more work to be done. Onward!
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This blog is here to give you a quick overview of the Act, but it’s not legal advice. If you have questions or want to understand how the Act could affect your business and steps to stay ahead, feel free to reach out, we’d love to help.
Oh yes! If you would like to view the full text of the Act – check out the Government’s legislative webpage where it is published: https://www.legislation.gov.uk/ukpga/2023/52.