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Energy Act 2023

Contents

Part 4: New Technology

Chapter 1: Low-Carbon Heat Schemes

Section 143: Low-carbon heat schemes

  1. This section provides the Secretary of State with powers to set up a scheme through secondary legislation to encourage the sale and installation of low-carbon heating technologies, such as electric heat pumps. Subsection (3)(b) allows for this to include, for instance, hybrid heat pump systems that involve both a heat pump and a fossil fuel boiler.

Section 144: Application of scheme

  1. This section provides for secondary legislation (‘the regulations’) to define the ‘participants’ who will be subject to targets under a low-carbon heat scheme, for instance companies involved in the manufacture and supply of a certain type of product. It also provides for the determination of the technologies, within the broader set established in section 143, to which those targets will apply.
  2. Subsection (5) allows the regulations to specify circumstances in which credit for activities may be carried from one period to the next; a degree of ‘banking’ and/or ‘borrowing’ of credits is sometimes a feature of such schemes.

Section 145: Setting of targets etc

  1. Building on section 144, this section makes further provision in relation to how targets for a scheme may be set in or under the regulations. In particular, it provides for targets to vary for different low-carbon heating technologies or for different weightings to be given to how different technologies or activities meet the targets.
  2. This would allow, for example, for standalone electric heat pumps to be treated differently under the scheme from hybrid heat pumps that incorporate or operate in conjunction with a fossil fuel combustion appliance, for example: a ‘0.5’ weighting for a hybrid system that comprises a heat pump and a fossil fuel boiler.

Section 146: Further provision about scheme regulations

  1. This section sets out various operational and administrative features of the scheme that the regulations may (and, in the case of determinations about meeting targets under subsection (1), must) provide for.
  2. Subsection (3) allows the regulations to specify how either scheme targets or credit for activities related to meeting targets, in the form of certificates, might be ‘pooled’ among or transferred between parties, including (in the case of certificates and transfers) parties not otherwise in scope of the scheme targets. This would allow, for instance, for the trading of certificates which parties could acquire and use as part of meeting their target for a given period, instead of carrying out relevant activities themselves. This could allow for the emergence of a market in such certificates.
  3. Subsection (4) provides for regulations to be made about the consequences or options for parties failing to meet targets under the scheme. This could include, for instance, establishing a framework of payments in lieu, sometimes referred to in similar schemes as ‘buyout’ payments.

Section 147: Administration of scheme

  1. This section is largely self-explanatory. Subsection (6) provides for limited circumstances under which scheme regulations could make amendments to primary legislation if appropriate in order to enable a public authority appointed as a scheme’s administrator to carry out its functions under the scheme.

Section 148: Enforcement, penalties and offences

  1. This section provides for the regulations to enable the administrator to conduct a range of enforcement activities. It also provides for the regulations to specify civil penalties for non-compliance with requirements of a scheme and to create criminal offences. Subsection (7) specifies that the sanction for such offences would be a fine. Non-compliance could include, for instance, failure to provide required information, failure to make payments in lieu of unmet targets, or making false or fraudulent representation to the scheme administrator.
  2. Subsection (2) provides for the regulations to specify conditions in which an administrator may treat one party’s targets or activities under the scope of the scheme as another’s. This would allow, for instance, for targets and activities towards meeting targets to be applied to a group of parties collectively, rather than at the level of individual companies or subsidiaries.

Section 149: Application of sums paid by virtue of section 146(4) or 148(3)

  1. This section is self-explanatory.

Section 150: Appeals

  1. This section is self-explanatory.

Section 151: Scheme regulations: procedure, etc.

  1. This section establishes procedural requirements for the making of scheme regulations. These depend on the matters covered in the regulations. Subsection (2) sets out when such a statutory instrument would be subject to the affirmative parliamentary procedure. This includes the creation of new offences, the amendment of primary legislation, and a class of changes that would substantially alter or extend the scope of the scheme, for instance to apply low-carbon heat targets to a new class of parties or technologies. Other statutory instruments relating to the scheme would be made under the negative resolution procedure (subsection (1)).

Section 152: Interpretation of Chapter 1

  1. This section is self-explanatory.

Chapter 2: Hydrogen Grid Conversion Trials

Section 153: Modifications of the gas code

  1. The provisions in this section only apply to a hydrogen heat grid conversion trial, which is defined in subsection (1).
  2. Section 153 makes certain modifications to the Gas Act 1986. These modifications build on the existing provisions in the Gas Act 1986, in particular on powers of entry, and seek to enable the safe and effective delivery of the hydrogen heat village trial.
  3. Subsections (2) to (5) make modifications to the Gas Act 1986 so that the person running the trial has clear grounds to enter private properties to:
    1. carry out any essential works for the purposes of the trial, including safety measures such as replacing appliances and installing and testing safety valves,
    2. undertake inspections and tests for the trial such as safety checks, and
    3. disconnect the gas supply in a property.
  4. The section also modifies the Rights of Entry (Gas and Electricity Boards) Act 1954 so that the provisions in that Act which relate to a relevant power of entry apply as though references to a gas operator include a person conducting the trial.
  5. Gas Distribution Network operators (GDNs) already have powers of entry into properties, which we are extending in a very limited way specifically to conduct necessary activities to set up and deliver a safe trial. These powers will only be used as a last resort, for example to inspect and test pipes and valves to ensure consumer safety. They will ensure that consumers in the trial area can be safely connected to hydrogen instead of natural gas. The existing rules on powers of entry will apply, which require the GDN to obtain a warrant from a Magistrate’s court to use these powers.

Section 154: Regulations for protection of consumers

  1. Subsection (1) provides the Secretary of State with a power to make regulations by statutory instrument to require a person conducting the trial to follow specified steps to ensure consumers are appropriately informed about the trial and the need for them to be disconnected from their gas supply before it happens.
  2. This section also provides the Secretary of State with a power to make regulations to introduce consumer protections for people who are, or are likely to be, affected by the trial. A list of example provisions is provided in subsection (5).

Chapter 3: Miscellaneous

Section 155: Power to modify Gas Act 1986 in relation to hydrogen

  1. Subsection (1) of section 155 gives the Secretary of State the power to make regulations that provide for any provision of the Gas Act 1986 not to apply or to apply with modifications, in relation to the production, transportation, storage or use of hydrogen. Subsection (2) provides that this power may be exercised by amending the Gas Act 1986.
  2. Subsection (3) provides that this power may only be exercised for the purpose of facilitating or promoting the production, transportation, storage or use of hydrogen.
  3. Subsection (4) requires the Secretary of State, before exercising this power, to consult the GEMA and such other persons as the Secretary of State considers appropriate.

Section 156: Fusion energy facilities: nuclear site licence not required

  1. Section 156 amends the Nuclear Installations Act 1965 to confirm the exclusion of fusion energy facilities from nuclear site licencing requirements.
  2. This section also defines the term "fusion energy facility."

Section 157: Treatment of recycled carbon fuel and nuclear-derived fuel as renewable transport fuel

  1. Section 157 provides for recycled carbon fuels and fuels derived from nuclear energy to be able to be treated as a renewable transport fuel for the purposes of renewable transport fuel orders, as described in Chapter 5 of Part 2 of the Energy Act 2004.
  2. This section also defines the terms ‘recycled carbon fuel’ and ‘nuclear-derived fuel’.

Section 158: Revenue certainty scheme for sustainable aviation fuel producers: consultation and report

  1. Section 158 requires the government to carry out a public consultation about how to design and implement a revenue certainty scheme for sustainable aviation fuel producers. The section requires that the consultation is launched within 6 months of royal assent and that the Secretary of State lay a report on progress within 18 months.

Section 159: Renewable liquid heating fuel obligations

  1. Section 159 enables the Secretary of State to make regulations imposing on off gas grid heating fuel suppliers an obligation in respect of renewable liquid heating fuel that corresponds to the renewable transport fuel obligation (RTFO) provided for in the Energy Act 2004. The RTFO obligates specified suppliers of relevant transport fuels to produce evidence showing that within a specified period a specified amount of renewable transport fuel was supplied within the UK.
  2. Accordingly, the obligation provided for under this section would require specified off-gas-grid heating fuel suppliers to produce evidence that within a specified period a specified amount of renewable liquid heating fuel was supplied within the UK (the "Renewable Liquid Heating Fuel Obligation" or "RLHFO"). The section would allow the required amount of fuel to be supplied either by the obligated supplier directly, or (wholly or partly) by other suppliers.
  3.  Subsection (2) provides that the regulations can make provision connected with the RLHFO which corresponds to provision made by, or that may be made under, Chapter 5 of Part 2 of the Energy Act 2004 (which provides for the RTFO). This enables the regulations made under this section to provide for operational arrangements relating to the administration and enforcement of the RLHFO.
  4. Subsection (3) requires that the Secretary of State must consult such persons as the Secretary of State considers appropriate before making regulations under this section.
  5. Subsection (4) states that the power to make regulations under this section is subject to the affirmative resolution procedure.

Section 160: Climate Change Act 2008: meaning of "UK removals"

  1. Section 160 amends the Climate Change Act 2008 to expand the types of greenhouse gas removals (GGR) which count towards UK carbon budgets. The scope will be expanded beyond solely GGR removal processes methods based in the land-use sectors to include a broader range, including ‘engineered’ methods such as Direct Air Carbon Capture and Storage (DACCS) and Bioenergy with Carbon Capture and Storage (BECCS).

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