Energy Act 2023

Part 2: Carbon dioxide capture, storage etc and hydrogen production, transport and storage

Chapter 1: Revenue Support Contracts

Section 56: Chapter 1: interpretation

240. Section 56 provides the meanings and definitions of various terms used in Chapter 1.

Section 57: Revenue support contracts

241. Section 57 out the Secretary of State’s power to make regulations about revenue support contracts. These are referred to as revenue support regulations.

Section 58: Duties of a revenue support counterparty

242. Section 58 makes it clear that it is the duty of a person who has been designated as a revenue support counterparty to comply with the regulations and any direction given by virtue of this Chapter. This will include the requirement for a revenue support counterparty to offer to contract with an eligible person when the Secretary of State has directed it to, or an allocation body has given a notification under section 75.
243. Subsection (2) enables revenue support regulations to make provision to require a revenue support counterparty to enter into arrangements or to offer to contract for purposes connected to a revenue support contract, or to specify things that a revenue support counterparty must, can or cannot do. It also enables revenue support regulations to make provision about the making of directions from the Secretary of State to a revenue support counterparty. This will enable specific directions to be given in relation to particular contracts or matters.
244. Subsection (4) places a duty on a revenue support counterparty to exercise its functions to ensure that it can meet its liabilities under a revenue support contract.
245. Subsection (5) requires revenue support regulations to include such provision as the Secretary of State considers necessary to ensure that a revenue support counterparty can meet its liabilities under a revenue support contract.

Section 59: Designation of carbon dioxide transport and storage counterparty

246. This section makes provision for the Secretary of State to designate a person by notice, with the consent of that person, to be the counterparty for carbon dioxide transport and storage revenue support contracts. A carbon dioxide transport and storage revenue support contract is a contract to be entered into between the counterparty and a holder of a licence under section 7.
247. Subsection (5) provides that more than one carbon dioxide transport and storage counterparty may be designated at one time.
248. Subsection (6) deals with the continuity of counterparties. If the designation of a carbon dioxide transport and storage counterparty were to lapse, the Secretary of State must, as soon as reasonably practicable, make a transfer scheme under section 86, transferring all contracts to that new carbon dioxide transport and storage counterparty. This is designed to ensure that where a carbon dioxide transport and storage counterparty ceases to be designated the contracts are transferred to a new carbon dioxide transport and storage counterparty.

Section 60: Direction to offer to contract with licence holder

249. Section 60 confers a power on the Secretary of State to issue a direction to a carbon dioxide transport and storage counterparty to offer a contract to an eligible person, that is a person who holds or who will hold a licence granted under section 7, in accordance with provisions set out in regulations.

Section 61: Designation of hydrogen transport counterparty

250. This section makes provision for the Secretary of State to designate a person by notice, with the consent of that person, to be a counterparty to hydrogen transport revenue support contracts. A hydrogen transport counterparty will enter into and manage contracts with eligible hydrogen transport providers.
251. Subsection (5) provides that more than one hydrogen transport counterparty may be designated at one time.
252. Subsection (6) deals with continuity of hydrogen transport counterparties. If the designation of a hydrogen transport counterparty were to lapse, the Secretary of State must, as soon as reasonably practicable, make a transfer scheme under section 86, transferring contracts to a new hydrogen transport counterparty. This is designed to ensure that where a hydrogen transport counterparty ceases to be designated, the contracts are transferred to a new hydrogen transport counterparty.
253. Subsection (7) defines "hydrogen transport provider". Subsection (8) and subsection (9) provide further clarification on this definition, including territorial scope and transporting of compounds.

Section 62: Direction to offer to contract with eligible hydrogen transport provider

254. Section 62 confers a power on the Secretary of State to issue a direction to a hydrogen transport counterparty to offer to contract with eligible hydrogen transport providers in accordance with provisions set out in regulations. Subsection (4) requires that revenue support regulations determine what persons are eligible.
255. The section also makes clear that revenue support regulations determining the meaning of "eligible" in relation to a hydrogen transport provider may make provision by reference to standards or other published documents external to the regulations, as the documents have effect from time to time.

Section 63: Designation of hydrogen storage counterparty

256. Section 63 makes provision for the Secretary of State to designate a person by notice, with the consent of that person, to be a counterparty to hydrogen storage revenue support contracts. A hydrogen storage counterparty will enter into and manage contracts with eligible hydrogen storage providers.
257. Subsection (5) provides that more than one hydrogen storage counterparty may be designated at one time.
258. Subsection (6) deals with continuity of hydrogen storage counterparties. If the designation of a hydrogen storage counterparty were to lapse, the Secretary of State must, as soon as reasonably practicable, make a transfer scheme under section 86, transferring contracts to a new hydrogen storage counterparty. This is designed to ensure that where a hydrogen storage counterparty ceases to be designated, the contracts are transferred to a new hydrogen storage counterparty.
259. Subsection (7) defines "hydrogen storage provider". Subsection (8) and subsection (9) provide further clarification on this definition, including territorial scope and transporting of compounds.

Section 64: Direction to offer to contract with eligible hydrogen storage provider

260. Section 64 confers a power on the Secretary of State to issue a direction to a hydrogen storage counterparty to offer to contract with eligible hydrogen storage providers in accordance with provisions set out in regulations. Subsection (4) requires that revenue support regulations determine what persons are eligible.
261. The section also makes clear that revenue support regulations determining the meaning of "eligible" in relation to a hydrogen storage provider may make provision by reference to standards or other published documents external to the regulations, as the documents have effect from time to time.

Section 65: Designation of hydrogen production counterparty

262. Section 65 makes provision for the Secretary of State to designate a person by notice, with the consent of that person, to be a counterparty to hydrogen production revenue support contracts. A hydrogen production counterparty will enter into and manage contracts with eligible low carbon hydrogen producers.
263. Subsection (5) provides that more than one hydrogen production counterparty may be designated at one time.
264. Subsection (6) deals with the continuity of hydrogen production counterparties. If the designation of a hydrogen production counterparty were to lapse, the Secretary of State must, as soon as reasonably practicable, make a transfer scheme under section 86, transferring contracts to a new hydrogen production counterparty. This is designed to ensure that where a hydrogen production counterparty ceases to be designated the contracts are transferred to a new hydrogen production counterparty.
265. Subsection (7) defines "low carbon hydrogen producer" and "greenhouse gas".
266. Subsection (8) makes clear that for the purposes of the definition of "low carbon hydrogen producer", carrying on hydrogen production activities in the United Kingdom includes such activities in, above or below the territorial sea adjacent to the United Kingdom and waters in a Renewable Energy Zone.

Section 66: Direction to offer to contract with eligible low carbon hydrogen producer

267. Section 66 confers a power on the Secretary of State to issue a direction to a hydrogen production counterparty to offer to contract with eligible low carbon hydrogen producers in accordance with provisions set out in regulations.
268. Subsection (4) requires that revenue support regulations determine what persons are eligible. Subsection (5) provides that such regulations may make provision by reference to standards or other published documents external to the regulations, as the documents have effect from time to time.

Section 67: Designation of carbon capture counterparty

269. Section 67 makes provision for Secretary of State to designate a person by notice, with the consent of that person, to be a counterparty to carbon capture revenue support contracts or a counterparty for any one or more descriptions of carbon capture revenue support contract. A carbon capture counterparty will enter into and manage contracts with eligible carbon capture entities.
270. Subsection (5) provides that more than one carbon capture counterparty may be designated at one time.
271. Subsection (6) deals with the continuity of carbon capture counterparties. If the designation of a carbon capture counterparty were to lapse, the Secretary of State must, as soon as reasonably practicable, make a transfer scheme under section 86, transferring contracts to a new carbon capture counterparty. This is designed to ensure that where a carbon capture counterparty ceases to be designated the contracts are transferred to a new carbon capture counterparty.
272. Subsection (7) defines "carbon capture entity" and "storage".
273. Subsection (8) makes clear that for the purposes of the definition of "carbon capture entity", carrying on carbon capture activities in the United Kingdom includes such activities in, above or below the territorial sea adjacent to the United Kingdom and waters in a Gas Importation and Storage Zone.

Section 68: Direction to offer to contract with eligible carbon capture entity

274. Section 68 confers a power on the Secretary of State to issue a direction to a carbon capture counterparty to offer a contract to eligible carbon capture entities in accordance with provisions set out in regulations.
275. Subsection (4) requires that revenue support regulations determine what persons are eligible. Subsection (5) provides that such regulations may make provision by reference to standards or other published documents external to the regulations, as the documents have effect from time to time.

Section 69: Appointment of hydrogen levy administrator

276. Section 69 makes provision for the Secretary of State to make regulations appointing a person to act as a hydrogen levy administrator. Subsection (2) provides that more than one administrator may be appointed at one time.
277. Subsection (5) deals with the continuity of administrators. If the appointment of a levy administrator ceases to have effect, the Secretary of State must, as soon as reasonably practicable, make one or more transfer schemes under section 86 to ensure the transfer of any rights and liabilities that the Secretary of State considers appropriate.

Section 70: Obligations of relevant market participants

278. Section 70 enables revenue support regulations to make provision requiring relevant market participants to pay a hydrogen levy administrator, so that a hydrogen production, hydrogen transport, or hydrogen storage counterparty can make payments under, or in connection with, hydrogen production, hydrogen transport, or hydrogen storage revenue support contracts.
279. Regulations may also allow for payments to a hydrogen levy administrator to be used to enable a CO2 transport and storage counterparty to make payments under, or in connection with, CO2 transport and storage revenue support contracts for purposes connected with hydrogen production revenue support contracts. This would allow levy payments to be used to provide funding for CO2 transport and storage revenue support contracts in cases where shortfalls in a CO2 transport and storage licensee’s ‘allowed revenue’ are caused by low carbon hydrogen producers who are expected to be connected to that licensee’s transport and storage network and are parties to hydrogen production revenue support contracts, for example: shortfalls caused by a low carbon hydrogen producer leaving a transport and storage network before its contracted capacity booking has expired.
280. Subsection (2) specifies that revenue support regulations may make provision for relevant market participants to make payments to a hydrogen levy administrator for the purpose of meeting other costs. Payments may also be required to enable a levy administrator to hold sums in reserve and to mutualise costs across relevant market participants to cover payments not made by an insolvent or defaulting participant. Subsection (4) enables revenue support regulations to make provision requiring these market participants to provide collateral.
281. Subsection (3) enables the revenue support regulations to make provision about the calculation and determination of amounts that are to be paid by a hydrogen levy administrator, including provision for adjustments or apportionments.
282. Subsection (8) provides that relevant market participants will be specified in regulations, but a description of relevant market participants may not include persons other than GB gas shippers and/or Northern Ireland gas shippers (as defined in section 56).

Section 71: Payments to relevant market participants

283. Section 71 deals with payments from a relevant counterparty and/or hydrogen levy administrator to market participants who are obliged to pay a hydrogen levy.
284. Subsection (1) enables regulations to make provision about payments to be made to relevant market participants by a relevant counterparty and/or hydrogen levy administrator, for example the pass through of payments received by a hydrogen production counterparty from a hydrogen producer under a hydrogen production revenue support contract.
285. Subsection (2) sets out that regulations may make provision regarding the calculation or determination of amounts which are owed by a relevant counterparty and/or hydrogen levy administrator and the issuing of notices requiring payment.
286. Subsection (3) enables the Secretary of State to make provision in regulations requiring that customers of market participants who are obliged to pay the levy benefit, in accordance with those regulations, from payments made to those market participants by a relevant counterparty and/or hydrogen levy administrator.
287. Subsection (4) defines a ‘relevant counterparty’ for the purposes of this section.

Section 72: Functions of hydrogen levy administrator

288. Section 72 enables revenue support regulations to make provision specifying things that a hydrogen levy administrator must, can or cannot do. It also enables revenue support regulations to make provision about the making of directions to a levy administrator.
289. Subsections (3) to (4) enable revenue support regulations to make provision about various matters such as the calculation and collection of amounts owed or collateral to be provided, including by means of the issuing of notices, the enforcement of obligations and the resolution of disputes.
290. Subsection (5) requires revenue support regulations to provide for a right of appeal against any imposition of a financial penalty provided for by the regulations by virtue of subsection (3)(d).
291. Subsection (6) clarifies that any sum which a relevant market participant is required to pay a hydrogen levy administrator by virtue of the revenue support regulations, and which is not paid when it is due by virtue of the regulations, is recoverable as a civil debt.
292. Subsections (7) and (8) enable revenue support regulations to make provision about the use of sums a hydrogen levy administrator holds and for the circumstances where sums held should or should not be paid into the Consolidated Fund.

Section 73: Power to appoint allocation bodies

293. Section 73 makes provision for the Secretary of State to appoint a person, with the consent of that person, to act as an allocation body responsible for administering the competitive allocation process for the hydrogen production and carbon capture revenue support contracts. The main purpose of these appointments would be to impose obligations on, and set out functions of, an allocation body in relation to administering the relevant competitive allocation process.
294. Subsection (4) confers a power on the Secretary of State to make provision in regulations about how cessation of an appointment is to take place, including any conditions or transitional provisions. This may include requiring an allocation body to give a specified period of notice when withdrawing its consent to its appointment.

Section 74: Standard terms of revenue support contracts

295. Section 74 gives the Secretary of State power to issue and, from time to time, revise standard terms for hydrogen production revenue support contracts and carbon capture revenue support contracts.
296. Subsection (4) places the Secretary of State under a duty to publish standard terms as issued or revised under this section. Subsection (5) allows the Secretary of State to designate those standard terms that may not be modified under section 78. Subsection (6) would allow for different standard terms to be issued for different categories of contract (for example, to specifically tailor for waste management projects).

Section 75: Allocation notifications

297. Section 75 sets out how an allocation body is to notify a hydrogen production or carbon capture counterparty of an allocation decision. Subsection (1) and (2) states that such a notification must specify the eligible person and such other information as may be required for the purpose of making an offer to contract. Subsection (4) allows for regulations to make further provision, including the circumstances in which a notification may or must be given and the kinds of information that must be specified in a notification.

Section 76: Allocation of contracts

298. Section builds on the power in section 75 and specifies the process by which the Secretary of State may make provision setting out detailed rules about the process for allocating hydrogen production revenue support contracts and carbon capture revenue support contracts. Subsection (1) confers a power enabling the Secretary of State to make provision in regulations setting out how hydrogen production and carbon capture revenue support contracts are to be allocated to eligible persons. Subsection (2) allows the Secretary of State to make provision in regulations conferring a power on the Secretary of State to set the rules of allocation in an "allocation framework". An "allocation framework" will be produced and published for allocation rounds. The "allocation framework" will act as a "rule book" for how allocation rounds will operate. Subsection (2)(e) confers a power enabling the Secretary of State to make provision about what may or must be included in an "allocation framework".
299. Subsection (3) confers a power enabling the Secretary of State to set out in regulations requirements on the Secretary of State.
300. Subsection (7) allows any allocation framework made to be amended, and subsection (8) provides that subsections (4) to (7) regarding allocation frameworks are subject to any provision in regulations which could set limits on what can be contained in the allocation framework.

Section 77: Duty to offer to contract following allocation

301. Section 77 sets out how a hydrogen production or carbon capture counterparty must act upon a notification from an allocation body to offer to contract. Subsection (1) and (2) place a duty on a hydrogen production and carbon capture counterparty to offer a contract to the eligible person specified in a notification and requires that this offer be on the standard terms, or on the standard terms as modified in accordance with the procedure provided for in section 78.
302. Subsection (3) confers a power on the Secretary of State to make further provision in regulations regarding matters such as how a hydrogen production or carbon capture counterparty is to apply or complete the standard terms in response to a notification and how the eligible person to whom the offer is made may enter into a contract as a result.

Section 78: Modification of standard terms

303. Section 78 enables a hydrogen production or carbon capture counterparty to agree modifications to the standard terms with low carbon hydrogen producers or carbon capture entities, on a case-by-case basis, pre-signature. These adjustments may be required because while the standard terms should be applicable for most low carbon hydrogen producers or carbon capture entities, it is not possible for the standard terms to anticipate every technology or project specific issue.
304. This flexibility is constrained in order to reduce the risk of applicants using it to negotiate improvements to the standard terms for competitive reasons. Subsection (3) specifies that a modification can only be agreed if it is both ‘minor’ and ‘necessary’, as determined by a hydrogen production or carbon capture counterparty, following any relevant provision made in regulations. Modification can also only be agreed if the standard term has not been designated under section 74(5) as a term that may not be modified under this section. Subsection (4) provides for further provision to be made in regulations, including regarding the circumstances in which an applicant may request a modification, the procedure to be followed in requesting a modification, and how a hydrogen production or carbon capture counterparty is to make a determination on such a request.

Section 79: Sections 75 to 78: supplementary

305. Section 79 confers a power enabling the Secretary of State to, when making provision under the powers in sections 75 to 78, make further provision enabling the determination of a matter on a competitive basis and calculations or determinations to be made under regulations, including by such persons and in accordance with such procedure as is specified.

Section 80: Licence conditions regarding functions of certain allocation bodies

306. Subsection (1) inserts provisions into section 7B of the Gas Act 1986 which specify that a gas system planner licence, under section 7AA of the Gas Act 1986, may include conditions for or in connection with the purpose of facilitating or ensuring the effective performance (whether in relation to Northern Ireland or any other part of the United Kingdom) of hydrogen production allocation body functions under Chapter 1 of Part 2 of this Act, at times when the hydrogen production allocation body holds a licence under Section 7AA.
307. Subsection (2) sets out that where GEMA proposes to modify a gas system planner licence under Section 23 of the Gas Act 1986 by adding, removing or altering a condition such as is mentioned in Section 7B(5ZA) of the Gas Act 1986 (as inserted by subsection (1) of this section) and that condition relates to functions of a hydrogen production allocation body that are exercisable in relation to Northern Ireland, GEMA must notify the Department for the Economy in Northern Ireland in accordance with section 23 of the Gas Act 1986.

Section 81: Further provision about designations

308. Under subsection (1) the designation of a person as a revenue support counterparty can be revoked by the Secretary of State. Designation will also cease to have effect if a revenue support counterparty elects to withdraw its consent and gives at least three months prior written notice to the Secretary of State of that withdrawal.
309. Subsections (2) and (4) deal with the continuity of counterparties.

Section 82: Application of sums held by a revenue support counterparty

310. Subsection (1) enables the revenue support regulations to make provision about the allocation of sums in circumstances where a revenue support counterparty is unable to fully meet its liabilities under a revenue support contract. In making such provision, the Secretary of State must have regard to the principle that sums should be apportioned in proportion to the amounts which are owed (subsection (3)).
311. Subsections (4) and (5) enable the revenue support regulations to make provision about the use of sums a revenue support counterparty holds and for the circumstances where monies received should or should not go to the Consolidated Fund.

Section 83: Information and advice

312. Section 83 enables the revenue support regulations to make provision to ensure that information and advice required for the functioning of the schemes is provided to the bodies requiring it at appropriate points, including from parties to revenue support contracts, the Gas and Electricity Markets Authority, relevant market participants, and any other person specified in revenue support regulations. It enables revenue support regulations to make provision governing the use and protection of information so received to ensure it is handled in an appropriate manner.
313. It will also allow the Secretary of State to monitor the schemes and for the Secretary of State to require advice from various bodies, including a revenue support counterparty, a hydrogen levy administrator, the Gas and Electricity Markets Authority, and an allocation body for making decisions about the running of the schemes.

Section 84: Enforcement

314. Section 84 deals with the enforcement of requirements under revenue support regulations and regulations under section 73.
315. Subsection (1) enables regulations to make provision for the obligations of certain relevant market participants provided for by revenue support regulations to be enforceable by the GEMA in Great Britain as if they were relevant requirements under sections 28 to 30 of the Gas Act 1986. Similarly, in the case of Northern Ireland, the section makes provision for the obligations of certain relevant market participants to be enforceable by the Northern Ireland Authority for Utility Regulation (NIAUR) as if they were relevant requirements under Part 6 of the Energy (Northern Ireland) Order 2003. Subsection (2) makes clear that enforcement includes enforcement under the terms of a licence. This means that a breach can be treated, in effect, as if it were a breach of a licence condition, thus allowing the GEMA and/or NIAUR to use its relevant enforcement powers such as issuing an order to secure compliance, imposing financial penalties and licence revocation.
316. Subsections (3) and (4) enable regulations to make provision for requirements that may be imposed on the holder of a gas system planner licence (expected to be the Independent System Operator and Planner) as hydrogen production allocation body by or under revenue support regulations or regulations under section 73 (including requirements in respect of functions of the body that relate to Northern Ireland) to be enforceable by the GEMA as if they were relevant requirements under Sections 28 to 30 of the Gas Act 1986.

Section 85: Consultation

317. Subsections (1) to (3) require that the Secretary of State must consult the Department for Economy in Northern Ireland, and Scottish and Welsh Ministers before making or amending revenue support regulations, where the matter being consulted on is within the legislative competence of the relevant devolved legislature. In addition, the Secretary of State must consult such other persons as he or she considers appropriate. The Secretary of State must consider representations duly made within a period of not less than 28 days and not withdrawn.
318. Subsection (4) requires that before making regulations under section 73(1) (power to appoint allocation bodies) the Secretary of State must consult the Department for Economy in Northern Ireland, and Scottish and Welsh Ministers, where the matter being consulted on is within the legislative competence of the relevant devolved legislature. The Secretary of State must consider representations duly made and not withdrawn.
319. Subsections (5) to (7) require that before publishing standard terms under section 74, the Secretary of State must consult the Department for Economy in Northern Ireland, and Scottish and Welsh Ministers, where the matter being consulted on is within the legislative competence of the relevant devolved legislature.

Section 86: Transfer schemes

320. Section 86 sets out the process by which the property, rights and liabilities of a revenue support counterparty, hydrogen levy administrator or allocation body may be transferred from one revenue support counterparty, hydrogen levy administrator or allocation body to another, should this prove necessary. This could prove necessary either because one of these bodies no longer wishes to continue in role, or because it has become inappropriate for them to be continue in one of these roles. It also sets out the process by which property, rights and liabilities of a hydrogen levy administrator are transferred to the Secretary of State, should this prove necessary. A scheme may provide for compensation for any property that is required to be transferred, where this is appropriate.

Section 87: Modification of transfer schemes

321. Section 87 enables the Secretary of State to modify transfer schemes. Modifications made after a transfer has taken effect may only be made by agreement with the transferor and/or transferee affected by the modification. Modifications come into effect on a date decided by the Secretary of State. That date may be the date on which the original transfer scheme took effect.

Section 88: Shadow directors, etc

322. Section 88 makes it clear that, in exercising their regulatory controls over a revenue support counterparty, neither the Secretary of State nor an allocation body are to be deemed to be in any way managing or controlling a counterparty in such a way that would class them as, for example, "shadow directors". Similar provisions apply in respect of the Secretary of State’s exercise of regulatory controls over a hydrogen levy administrator and an allocation body.

Section 89: Modifications of licences etc for purposes related to levy obligations

323. Section 89 sets out the Secretary of State’s power to make modifications of certain licences as well as documents maintained in accordance with those licences or agreements that give effect to such documents for the purpose of facilitating or supporting the administration and enforcement of a hydrogen levy.
324. Subsection (1) provides the Secretary of State with a power to modify gas transporter licences of energy market participants in Great Britain. The provisions also enable the Secretary of State to modify the standard conditions of such licences as well as documents maintained in accordance with the conditions of such licences (such as industry codes) or agreements that give effect to such documents. Subsection (2) provides a similar power in respect of Northern Ireland, enabling the Secretary of State to modify licences to convey gas. The provisions also enable the Secretary of State to modify the standard conditions of such licences as well as documents maintained in accordance with the conditions of such licences (such as industry codes) or agreements that give effect to such documents.
325. Subsection (3) specifies that the Secretary of State can only make such modifications for the purpose of facilitating or supporting the administration and/or enforcement of a hydrogen levy.
326. Subsections (4) and (5) provide further clarity regarding the types of modifications that the Secretary of State can make using the powers under subsections (1) and (2).
327. Subsections (7) and (8) set out duties of the GEMA and NIAUR with respect to any modifications of standard licence conditions made by the Secretary of State under the powers in subsections (1) and (2). Subsection (9) sets out the consultation requirements in relation to this section. Before making a modification, the Secretary of State must consult the holder of any licence being modified, and such other persons, as the Secretary of State considers it appropriate to consult.

Section 90: Electricity system operator and gas system planner licences: modifications

328. Subsections (1) and (2) provide the Secretary of State with a power to modify the electricity system operator licence and the gas system planner licence (as well as documents maintained in accordance with those licences or agreements that give effect to such documents) for the purpose of facilitating or ensuring the effective performance of functions of hydrogen production allocation bodies and other related functions under Chapter 1 of Part 2 of the Act.
329. Subsections (4) and (5) specify that modifications under subsections (1) and (2) may only make provision in relation to times when the person holding the licence is a hydrogen production allocation body, including consequential or transitional provision in relation to times when it is no longer the case that the person holding the licence is a hydrogen production allocation body.
330. Subsection (6) provides further clarity regarding the types of modifications that the Secretary of State can make using the powers under subsections (1) and (2).
331. Subsection (7) sets out the consultation requirements in relation to this section. Before making a modification, the Secretary of State must consult the holder of any licence being modified, the GEMA, and such other persons as the Secretary of State considers it appropriate to consult. Subsection (8) enables the requirement in subsection (7) to be satisfied by consultation before, as well as after, the passing of this Act.

Section 91: Sections 89 and 90: supplementary

332. Section 91 deals with the Parliamentary procedure for modifications made using sections 89 and 90 and makes supplementary provisions regarding the scope of those modification powers, as well as relevant consequential amendments to existing legislation.
333. Subsections (2) to (7) specify that, before making modifications under these powers, the Secretary of State must lay a draft of the modifications before Parliament, where they will be subject to a procedure analogous to the draft negative resolution procedure used for statutory instruments.
334. Subsections (8), (9), and (12) further clarify the scope of the modification powers.
335. Subsection (10) sets out a requirement on the Secretary of State to publish details of any modifications made under the powers.
336. Subsection (13) makes consequential amendments to section 81 of the Utilities Act 2000.

Chapter 2: Decommissioning of Carbon Storage Installations

Section 92: Financing of costs of decommissioning etc

337. Section 92 gives the Secretary of State a power to make regulations regarding the provision of security for decommissioning costs associated with CCUS transport and storage networks. These regulations may include provisions about (amongst other things): the estimation of decommissioning costs; and the management of decommissioning funds, as security for these costs.

Section 93: Section 92: supplementary

338. Section 93 sets out supplementary provisions which may be included in any regulations made under section 92: Financing of costs of decommissioning etc, such as provisions on supplying information and enforcement, and sets out the parliamentary procedure for any such regulations.

Section 94: Regulations under section 92(1): procedure with devolved authorities

339. Section 94 sets out a procedure for consultation with devolved authorities, where regulations under section 92 contain provision within devolved competence.

Section 95: Provisions relating to Part 4 of the Petroleum Act 1998

340. The decommissioning of offshore installations and pipelines used for carbon dioxide storage purposes is covered by Part 4 of the Petroleum Act 1998, as modified by section 30 of the Energy Act 2008 ("Modified Part 4 PA"). This section amends section 30 of the Energy Act 2008, including: amending the definition of carbon storage installation; clarifying that notices, requiring the recipient to submit a decommissioning programme, may be served on those with a licence under section 18 of the Energy Act 2008; and enabling further modifications to Modified Part 4 PA, in relation to the establishment of decommissioning funds to meet decommissioning costs, as set out in section 92: Financing of costs of decommissioning etc. This section also includes an amendment to section 29(6) of the Petroleum Act 1998.

Section 96: Change of use relief: installations

341. Sections 30A and 30B of the Energy Act 2008 make provision for a person to qualify for change of use relief on installations and submarine pipelines converted for CCS demonstration projects (the latter term having the meaning given in section 7 of the Energy Act 2010). This relief removes the ability for the Secretary of State, in some circumstances, to take the following steps under Part 4 of the Petroleum Act 1998:
     • issue a notice under section 29(1) (requiring the submission of an abandonment programme for an installation), or
     • to impose a decommissioning obligation under section 34.

342. This section makes amendments to section 30A of the Energy Act 2008, broadening the scope of change of use relief: so that it applies to eligible CCS installations more generally; and amending the trigger point to qualify for such relief.

Section 97: Change of use relief: carbon storage network pipelines

343. Similar to section 96: Change of use relief: installations, this section makes amendments to section 30B of the Energy Act 2008, broadening the scope of change of use relief: so that it applies to eligible carbon storage network pipelines more generally; and amending the trigger point to qualify for such relief.

Section 98: Change of use relief: supplementary

344. This section gives the Secretary of State a power to make regulations regarding the provision of information where this relates to change of use relief. This section also makes a consequential amendment to section 105 of the Energy Act 2008.

Chapter 3: Strategy and Policy Statement

Section 99: Designation of strategy and policy statement

345. While day-to-day regulatory decisions will be made independently by the economic regulator, policy direction for CCUS will continue to be directed by the Government. This section provides that the Secretary of State may designate a strategy and policy statement for CCUS. Such a statement would set out the strategic priorities for CCUS policy; the particular outcomes to be achieved as a result of the implementation of that policy; and the roles and responsibilities of persons who are involved in implementing that policy or who have other functions that are affected by it.

Section 100: Duties with regard to considerations in the statement

346. Section 100 imposes a duty on the economic regulator to have regard to specified matters when carrying out functions and provides that the economic regulator and the Secretary of State must carry out their respective CCUS-related functions under Parts 1 and 2 of this Act in the manner considered best calculated to further the delivery of the policy outcomes set out in the CCUS strategy and policy statement.

Section 101: Review

347. Section 101 establishes timeframes and circumstances for reviewing a CCUS strategy and policy statement. CCUS strategy and policy statements should be reviewed no more frequently than once a Parliament to ensure a stable and predictable regulatory landscape for investors, unless the circumstances specified in this section have occurred. These circumstances include that a general election has taken place, or that there has been a material change in CCUS policy.

Section 102: Procedural requirements

348. Section 102 establishes procedural and consultation requirements which the Secretary of State must observe in developing and publishing a strategy and policy statement for CCUS and before the Secretary of State may designate it. This follows a similar procedural precedent for designating a strategic and policy statement under Part 5 of the Energy Act 2013 and is also intended to enable a single strategy and policy statement which covers both energy and CCUS policy but relies on the powers in both the Energy Act 2013 and this Act, if appropriate.
349. The consultation requirements under this provision apply to a strategy and policy statement before it is designated and in respect of any amendments that are proposed to a strategy and policy statement following a review under section 101. It is the Government’s intention that for an initial strategy and policy statement, and for subsequent material amendments that may be proposed as a result of the review process set out in section 101, that in addition to the required consultees set out at section 102(4), further consultation as provided for at section 102(5)(b) would follow the Government’s consultation principles. 1

Chapter 4: Carbon Dioxide Storage Licences

Section 103: Specified provisions in carbon dioxide storage licences

350. Section 103 sets out that amendments will be made by Schedule 6 to the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010 in order to introduce new ex-ante (before the event) powers for the Oil and Gas Authority (OGA) regarding the change of control of a company in relation to all Carbon Storage Licensees. This is to ensure that the governance, technical and financial capability of a Licensee in possession of a Carbon Storage Licence is not undermined by an undesirable change of control. This is to replace the OGA’s existing ex-post (after the event) powers to intervene after the change of control of a Licensee.

Section 104: Content of storage permits under carbon dioxide storage licences

351. Section 104 amends regulation 8 of the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010 to allow the revocation of storage permits under Carbon Dioxide Storage Licences for breach of the change in control provisions by the operator.

Section 105: Offences relating to carbon dioxide storage licences

352. Section 105 amends section 23 of the Energy Act 2008 ("section 23") regarding existing offences in relation to Carbon Storage Licensees. This is to ensure that relevant Licensees do not commit an offence under that legislation in relation to the change of control of a company, in circumstances where prior consent from the OGA has not been obtained.

Section 106: Power of OGA to require information about change in control of licence holder

353. Section 106 inserts a new section 29A into the Energy Act 2008 to provide powers to the OGA to request information required by it to exercise its functions in relation to a change or potential change of control of a Carbon Storage Licensee.

Chapter 5: Carbon Storage Information and Samples

Section 107: Chapter 5: key definitions

354. Section 107 provides key definitions for the purposes of the following chapter, to ensure an effective understanding of all carbon storage information and samples provisions.

Section 108: Retention of information and samples

355. Section 108 provides power for the Secretary of State to make regulations regarding the retention of information and samples by carbon storage licensees.
356. Before making regulations, the Secretary of State is required to consult the relevant carbon storage licensing authorities (established in section 18 of the Energy Act 2008) in respect of any areas where such regulations would apply.

Section 109: Preparation and agreement of information and samples plans

357. Section 109 provides requirements for the preparation and agreement of information and samples plans for the purposes of dealing with what will happen to carbon storage information and samples following changes in responsible persons in respect of different licence events; for example, where there has been a change of control of a company. 

Section 110: Information and samples plans: supplementary

358. Section 110 provides further details regarding information and samples plans requirements under section 109.

Section 111: Information and samples coordinators

359. Section 111 places requirements upon carbon storage licensees and exploration operators to appoint an individual as an Information and Samples Coordinator. 
360. An Information and Samples Coordinator is responsible for monitoring the compliance of the licensee and exploration operator with any obligations imposed by or under sections 110 and 111.

Section 112: Power of OGA to require information and samples

361. Section 112 establishes powers for the OGA to require their carbon storage licensees (and certain other persons) to report any carbon storage information or samples they currently hold (or that are held on their behalf) to the OGA, in support of their regulatory functions.
362. It is intended that the OGA will utilise this power once detailed requirements for the retention of information and samples have been established in regulations under section 108.

Section 113: Prohibition on disclosure of information or samples by OGA

363. Section 113 places a prohibition upon the disclosure of any information and samples by the OGA that were obtained under reporting requirements in section 112. It also places a prohibition upon the disclosure of information and samples by the OGA that was obtained under section 124, the power to obtain information for the purposes of an investigation into whether a person has failed to comply with one of the sanctionable requirements under this Chapter.
364. This section also introduces Schedule 7, which provides exceptions to the prohibition on disclosure.

Section 114: Power of Secretary of State to require information and samples

365. Section 114 provides power for the Secretary of State to require information and samples held by or on behalf of the OGA to be provided to the Secretary of State for certain specific purposes.
366. This section reflects the equivalent powers established for the petroleum industry under section 11 of the Energy Act 2016.

Section 115: Power of OGA to give sanction notices

367. Section 115 provides powers for the OGA to give sanction notices to persons who have failed to comply with the carbon storage information and samples requirements imposed by or under this Chapter.

Section 116: Enforcement notices

368. Section 116 sets out what an enforcement notice (which can be given by the OGA under powers in section 115) is and what information it should contain.

Section 117: Financial penalty notices

369. Section 117 provides for financial penalty notices (which can be given by the OGA under powers in section 115). It sets out what such a notice should contain, sets out some procedural requirements, provides for a statutory maximum penalty and requires the OGA to issue guidance concerning how it will determine the amount of the financial penalty.
370. Any financial penalties are to be paid into the Consolidated Fund.
371. Subsection 10 establishes power for the Secretary of State, by regulations, to amend the financial penalty to a maximum value of £5 million.

Section 118: Revocation notices

372. Section 118 provides for revocation notices, which can be given by the OGA under powers in section 115.
373. This section enables the OGA to terminate a carbon storage licence or permit, for the failure to comply with a requirement imposed by or under this Chapter.

Section 119: Operator removal notices

374. Section 119 provides for operator removal notices, which can be given by the OGA under powers in section 115.
375. This section places a requirement upon the licensee to remove an exploration operator for their failure to comply with a requirement imposed by or under this Chapter.

Section 120: Duty of OGA to give sanction warning notices

376. Section 120 establishes a duty requiring the OGA to give a sanction warning notice where it proposes to give a sanction notice under powers in section 115.  

Section 121: Publication of details of sanctions

377. Section 121 provides for the OGA to publish details of any sanction notices given under powers in section 115.
378. The details allowed to be published exclude those considered to be commercially sensitive, not in the public interest, or otherwise inappropriate to publish.

Section 122: Subsequent sanction notices

379. Section 122 enables the OGA, in certain circumstances, to give more than one sanction notice in respect of the same failure to comply, under powers in section 115.

Section 123: Withdrawal of sanction notices

380. Section 123 enables the OGA to withdraw any sanction notice they have given under section 115 and requires the OGA to notify the relevant persons to whom the notice was given that the notice has been withdrawn.

Section 124: Sanctions: information powers

381. Section 124 provides powers for the OGA to require specified documents and information to support an investigation into the decision to give a sanction notice, or on what terms one should be given, under powers in s ection 115.

Section 125: Appeals

382. Section 125 introduces Schedule 8 (Carbon storage information and samples: appeals), with a purpose of ensuring the right of appeal for carbon storage licence holders against any decisions made by the OGA in relation to the enforcement of sanctionable requirements under this Chapter.
383. Any appeals would be made to the first-tier tribunal.

Section 126: Procedure for enforcement decisions

384. Section 126 establishes requirements for the OGA to determine and publish the procedure it proposes to follow in their decision-making to give sanction notices under section 115.

Section 127: Interpretation of Chapter 5

385. Section 127 provides further definitions to aid the interpretation of provisions in this Chapter, cross-referencing the relevant existing legislation, where appropriate.

Chapter 6: General

Section 128: Access to infrastructure

386. Section 128 enables the Secretary of State to make regulations regarding access to CO2 transport and storage infrastructure, and that these regulations may amend, revoke, or replace or make provision similar or corresponding to, the Storage of Carbon Dioxide (Access to Infrastructure) Regulations 2011 (S.I. 2011/2305) and the Storage of Carbon Dioxide (Access to Infrastructure) Regulations (Northern Ireland) 2015 which govern access rights to CO2 transport and storage infrastructure.
387. Regulations made under this power may confer functions on any person and may make provision regarding enforcement in relation to access rights. In relation to enforcement, regulations may create criminal offences or impose civil penalties, and may confer jurisdiction on a court or tribunal. Where regulations impose a civil penalty, they must also provide for a right of appeal against the imposition of the penalty.

Section 129: Financial assistance

388. Section 129 makes provision for the Secretary of State to incur expenditure and provide financial assistance for the purpose of encouraging, supporting or facilitating:
     • The transportation of carbon dioxide,
     • The storage of carbon dioxide,
     • Carbon dioxide capture facilities, which operate (or are to operate) in association with facilities for either or both of transport and storage of carbon dioxide,
     • Low carbon hydrogen production,
     • The transportation of hydrogen, and
     • The storage of hydrogen.

389. The main purpose of this power is to enable the Government to incur such costs or liabilities and provide such financial assistance as the Secretary of State considers necessary and proportionate to incentivise investment in, and facilitate the delivery of carbon capture, transportation and storage of carbon dioxide and hydrogen, and low carbon hydrogen production. Financial assistance in relation to carbon capture and storage may include, for example, support for industrial carbon capture, waste carbon capture, bioenergy with carbon capture or direct air capture.
390. The scope of the financial assistance power in this Part of the Act allows for financial support to be provided for a range of CCUS activities, should such support be considered appropriate. This compares to the narrower scope of the economic regulation and licensing framework in Part 1 of the Act, which is concerned, initially, with the licensing of pipeline transportation of carbon dioxide for geological storage, given the natural monopoly characteristics of these transport and storage assets.
391. Subsection (2) and (3) contain specific examples of where the Secretary of State may incur expenditure. Financial assistance may be provided by way of grants, loans, guarantees or indemnities or by the provision of insurance, or in any other form, and may be provided subject to conditions or provided under a contract.
392. For the purpose of this section, subsection (6) makes provision about the interpretation of certain terms.