The Energy Act has been billed by the government as the ‘biggest piece of energy legislation in the UK’s history’. The aim of the Act is to lay a solid foundation for the future of the energy market in the UK. The Act represents the latest version of Great Britain’s recent energy laws[i] and forms part of the government's plan to reach net zero by 2050.
Given the nature of the energy market at the moment, it is not a surprise that the Act is incredibly wide ranging. In this first in a series of articles on the Act, we set out its overall structure, and the broad range of areas covered.
The Act seeks to govern not just the traditional energy markets of oil, gas and nuclear, but also the newer and emerging markets such as renewable energy, nuclear fusion and hydrogen, as well as carbon capture and storage; to this end, it should be applauded. The Act also includes, among other things, new provisions regarding market reform and consumer protection.
By passing the Act, the government is trying to address the energy trilemma of security of supply, affordability of pricing and sustainability of source.
Recent world events have highlighted the reliance we place on the supply of energy from a few key locations. To improve security of supply, the Act gives the Secretary of State for Energy Security and Net Zero powers to impose obligations on energy companies to take such actions as thought necessary to ensure the resilience of supply of certain core fuels. In addition, by improving government support and regulation for new and emerging energy markets, it is hoped that this will lead to increased investment in, and greater capacity for energy generation at a national level, thereby reducing our reliance on foreign energy supplies, as well as increasing our use of cleaner energy.
The Act also gives new powers and responsibilities to the energy regulator, Ofgem, which are designed to improve consumer protection from unfair pricing, and increase competition within the energy sector. The government’s aim in doing this is to allow the consumer to benefit from a reduction in energy costs, as well as improve confidence in energy smart appliances to help consumers reduce their energy consumption.
The Act received royal assent on 26 October 2023; however, the commencement provisions mean that, for many of the provisions, secondary legislation is required before they will come into force. Under the Act the Secretary of State is given wide ranging powers to implement many provisions via new regulations. It is therefore difficult to surmise in any meaningful way exactly how the Act will impact businesses in the energy sector.
From the content of the legislation, however, a few notable provisions can be determined:
In summary, the Act is an ambitious piece of legislation which looks to cover a wide range of energy markets. The framework it provides promises improved regulation and confidence in these emerging energy markets, as well as increased competition to ensure consumers are better protected.
However, the Act only provides the framework from which regulations, to be created by the Secretary of State, can hang. It is therefore a waiting game to see how these provisions will play out in practice. That said, investors are waiting for clear regulations to make certain energy investments ‘bankable’, yet over-regulating may dissuade the investors; the Secretary of State therefore needs to strike a mercantile balance.
[i] See for example: Electricity Act 1989, Gas Act 1986, Energy Acts of 2004, 2010, 2013 and 2016.