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Energy Act 2023

Contents

Overview of the Act

  1. The aim of the Act is to help increase the resilience and reliability of energy systems across the UK, support the delivery of the UK’s climate change commitments and reform the UK’s energy system while minimizing costs to consumers and protecting them from unfair pricing.
  2. To enable this, the Act is structured around three key pillars:
    • Liberating investment in clean technologies.
    • Reforming the UK’s energy system so it is fit for the future.
    • Maintain the safety, security and resilience of the UK’s energy system.
  3. In respect of liberating investment in new technologies, Parts 1, 2 ,3 and 4 of the Act include provisions to ensure the development of carbon dioxide transport and storage, hydrogen production, transport and storage, a low carbon energy system, to reduce emissions from industry, transport and heat. These measures include:
    • Establishing an economic regulation and licensing regime for carbon dioxide (CO₂) transport and storage with the Office of Gas and Electricity Markets (Ofgem) as the economic regulator.
    • Enabling the Government to implement and administer hydrogen and carbon capture business models including introducing a new hydrogen levy.
    • Enabling the Oil and Gas Authority, whose business name is the North Sea Transition Authority, to require the retention, reporting and disclosure of relevant information from carbon storage licence holders.
    • Enabling the implementation, via gas transporter licence conditions, of a Regulated Asset Base in respect of certain hydrogen pipeline projects.
    • Enabling the establishment of a market-based low carbon heat scheme.
    • Enabling the effective and safe delivery of a hydrogen village trial.
    • Enabling the Gas Act 1986 to be modified by regulations in relation to, and for the purpose of facilitating or promoting, the production, transportation, storage and use of hydrogen.
    • Excluding fusion energy facilities from nuclear site licensing requirements under the Nuclear Installations Act 1965.
    • Enabling the support of recycled carbon fuels and nuclear derived fuels in renewable transport fuel orders under the Energy Act 2004.
    • Providing powers for a revenue certainty scheme for sustainable aviation fuel.
    • Providing for expansion of the types of greenhouse gas removals (GGR) which count towards UK carbon budgets including engineered removals.
  4. In respect of system reform and consumer protection, Parts 5 – 11 of the Act include provisions to ensure market frameworks and governance arrangements are geared towards strengthening energy security and becoming a net zero energy system while minimising costs to consumers. These measures include:
    • Establishing an Independent System Operator and Planner (hitherto known as the Future System Operator), an independent and first-of-a-kind body acting as a trusted voice at the heart of the energy sector.
    • Reforming the current energy code governance framework including granting Ofgem new functions to provide strategic direction and oversight on codes and creating a new class of more independent code managers to deliver an improved system for consumers and competition.
    • Enabling competitive tenders in onshore electricity networks.
    • Enabling the Competition and Markets Authority to investigate more effectively the impacts of mergers between energy companies.
    • Introducing a definition of multi-purpose interconnectors from which a new licensing and economic regime can be developed.
    • Clarifying electricity storage as a distinct subset of generation in the 1989 Electricity Act.
    • Removing obligation thresholds under the Energy Company Obligation scheme.
    • Driving the rollout of smart meters across Great Britain.
    • Regulating the heat network market.
    • Introducing heat network zoning in areas where they are the most viable solution for decarbonising heat.
    • Setting regulatory requirements for Energy Smart Appliances including enabling mandatory functionality for electric heating appliances and electric vehicle (EV) charge points and establishing a new regulatory framework for actors who control these devices.
    • Ensuring the energy performance of premises regime is fit for purpose and reflects the UK’s ambitions on climate change, including to support achieving the UK’s target for net-zero greenhouse gas emissions by 2050.
    • Strengthening the Energy Savings Opportunity Scheme.
  5. In respect of the safety, security, and resilience of the UK energy system, Parts 12, 13 and 14 of the Act include provisions to guarantee a robust and resilient supply of core fuels for the UK, to ensure that the UK is a responsible nuclear state and take essential action in protecting the UK Continental Shelf while transitioning to net zero. These measures include:
    • Reducing the risk of fuel supply disruption and improving fuel supply resilience in the core fuels sector.
    • Allowing compensation to be delivered strategically for all relevant offshore wind activities making applications from late 2023, helping reduce the time it takes to develop new offshore wind projects, whilst maintaining high environmental standards.
    • Ensuring that the offshore oil and gas environmental regulatory regime continues to be effective, to maintain current levels of environmental standards and facilitate the offshore oil and gas industry’s transition to net zero.
    • Amending the Petroleum Act 1998 to change the fee regime and cost recovery mechanism for the regulation and offshore decommissioning activities of oil and gas producers.
    • Granting the Oil and Gas Authority, whose business name is the North Sea Transition Authority, additional powers to ensure the UK’s oil and gas and carbon storage infrastructure remains in the hands of companies best able to operate or decommission it.
    • Making expressly clear that certain nuclear sites located wholly or partly in or under the territorial sea adjacent to the UK require a licence and are regulated by the Office for Nuclear Regulation.
    • Amending the regulatory framework for the final stages of nuclear decommissioning including bringing the UK into alignment with internationally agreed recommendations for ending nuclear third-party liability and allowing former nuclear sites to be delicensed earlier than at present.
    • Enhancing the UK’s nuclear third-party liability regime by enabling the UK’s accession to the Convention on Supplementary Compensation for Nuclear Damage through amendments to the Nuclear Installations Act 1965.
    • Amending the remit and powers of the Civil Nuclear Constabulary to ensure that the constabulary can support other critical infrastructure sites and assist other police forces.
    • Bringing Nuclear Decommissioning Authority pensions into line with wider public sector pensions in moving from a final salary scheme to a career average scheme.

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