Energy Act passed to deliver UK energy security and net zero transition

The UK government has described the Act as “the biggest piece of energy legislation in the UK’s history” and said it “will help unlock £100 billion private investment in energy infrastructure and scale up jobs and growth”.

The Act provides a framework for implementing targets set out by the UK government in the updated energy security strategy for Britain it published shortly after Russia’s invasion of Ukraine last year. That strategy envisages Britian’s energy demands being met by a mix of energy sources, but specifically targets domestic growth in renewable and nuclear energy generation.

Amy Stirling of Pinsent Masons, an expert in renewable energy projects, said the Act will help the UK scale-up power generation from offshore wind. The government is seeking to ensure that offshore wind generation capacity hits 50GW by 2030, with a specific 5GW target for floating wind by the same deadline.

Stirling said: “Within the Act there are bespoke provisions to deliver offshore wind by enabling amendments to the habitats regulations assessment regime and facilitate strategic compensation including via the Marine Recovery Fund. The devil will be in the detail and in the regulations and policies to implement the Act, but this is undoubtedly a significant step forward to unlock the offshore wind versus environment debate, and the huge decarbonisation potential of UK waters.”

Michael Freeman of Pinsent Masons, who specialises in nuclear regulation, said the Energy Act would also be welcomed by the nuclear industry.

In its revised energy security strategy, the government described nuclear as “the only form of reliable, low carbon electricity generation which has been proven at scale” and outlined its target of delivering 25% of Britain’s electricity demands from nuclear power by 2050, with plans to triple civil nuclear capacity to 24GW to achieve that.

In support of that aim, the government has established a new corporate body, Great British Nuclear (GBN), to promote, support and drive new nuclear power projects in the country.

Freeman said: “The support from government for new nuclear generation is welcome. It is interesting to see the provisions in the Energy Act 2023 that relate to Great British Nuclear and which give a further indication of how GBN will operate in practice. Further details awaited.”

The Energy Act also provides for the establishment of a ‘Future System Operator’ (FSO), a new independent public body to oversee Britain’s electricity and gas networks. The FSO will work with energy suppliers and networks to help achieve net zero, balance the UK’s electricity systems and ensure energy resilience and security. The body could also take on other roles in the future – for example in relation to distribution system operation, data, heat, transport, hydrogen, and carbon capture use and storage (CCUS).

The Act also seeks to support greater competition in onshore electricity networks through a new tender process. Pinsent Masons competition law expert, Giles Warrington, said the Act also creates “a specific merger control regime for energy networks that will be enforced by the Competition and Markets Authority”. The UK government considers that the new regime “will minimise the risk of mergers between energy network companies having detrimental effects on consumers and is estimated to save households up to £420 million over the next decade”. 

The Energy Act also updates the regulatory remit of Britain’s energy regulator, Ofgem, to ensure it considers how its decisions can support delivery of the UK’s climate change targets, and provides for a new regulatory regime for heat networks, a new licensing regime for the transport and storage of CO2, and a new framework for the development of hydrogen business models.

Stacey Collins of Pinsent Masons, who specialises in CCUS and low carbon hydrogen, said: “This is an important, and long-awaited, milestone in the UK’s journey to become a world-leader in the CCUS and low carbon hydrogen markets. We’re a step closer in terms of establishing the necessary legal, regulatory and financial framework that is necessary to deliver CCUS and low carbon hydrogen projects at commercial scale.”

“There remain significant steps like the finalisation of the CCS Network Code, as well as finalising the relevant business model agreements with project participants that are still to be realised. The UK government still has a lot more to do in order to deliver on its strategy in relation to these sectors, so we have to keep pushing forward.”