The Energy Act: APSE Energy View

The biggest piece of energy legislation in the UK’s history seeks to bolster energy security, stimulate new investment and protect consumers - but does it go far enough? Phil Brennan, Head of APSE Energy, investigates.

The Energy Act 2023, which received Royal Assent on 26 October this year, seeks to ensure that energy is affordable for households and businesses, while securing the UK’s energy security in the long term by making it more self-sufficient. This will be done by unlocking £100 billion of private investment in energy infrastructure, scaling up jobs, increasing growth and accelerating the development of offshore wind – helping to deliver our net zero commitments.

The main announcements include:

A specific merger regime for energy networks under the Competition and Markets Authority – this 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.

New measures for Energy Smart Appliances – prioritising safety, increasing consumer confidence, and helping them to reduce their bills. A smart electricity system could reduce system costs by up to £10 billion a year by 2050.

Expanding Ofgem’s remit to regulate heat networks - allowing the regulator to set rules on excessive pricing and improve the quality of service.

A licensing framework for CO2 transport and storage – supporting the delivery of the UK’s first carbon capture sites, and up to 50,000 jobs by 2030.

Provisions aimed at boosting the nuclear sector – enabling developers to plan new facilities and drive ambitions for a prototype fusion power plant by 2040.

Establishment of the Future System Operator – a new independent body enabling consumers to access a secure and decarbonised energy supply.

APSE Energy’s response:

This is a wide-ranging Act and the added focus to the energy sector is welcome by all those involved. However, it raises questions regarding how the situation we now find ourselves in – an energy supply that is highly vulnerable to external shocks - was allowed to develop in the first place. There are also questions around the level of ambition within this Act – does it go far enough to ensure that we do not find ourselves in the same position in the future?

The Government statement accompanying the news of the Act said “The Act will help the government deliver net zero by 2050 in a pragmatic, proportionate and realistic way.” This mirrors the wording in the Prime Minister’s speech on 20 September when announcements such as moving the ban on buying new ICE vehicles 5 years into the future and ending plans to force landlords to upgrade the energy efficiency of properties were made. These attracted significant criticism by many in the low carbon sector as a of dumbing down of ambition.

It also remains to be seen whether the Act will deliver. The investment and skills boost it promises - there is a desperate need to train the people required to take a low carbon economy forward and resources must be found to enable it. Without this, the UK will not meet its energy and climate targets.

The introduction of a merger regime for energy networks is welcome. Minimising detrimental effects on customers should include fair pricing as well as protecting them from having to pay for future costs of network upgrades. It is vital to ensure a position where energy network companies are held responsible for maintaining the network, and a merger regime will help enable this.

The elements of the Act dedicated to sectors such as hydrogen, carbon capture and storage, nuclear and infrastructure provide some certainty for those looking to invest, which is welcomed.

Overall, the strategy and ambitions set out by the Act are encouraging, but it is down to public sector organisations - including local authorities - and private companies to take the agenda forward.

If you have any questions about this briefing or want to know more about how APSE Energy can help, please contact Phil Brennan, Head of APSE Energy on 0161 772 1810 or at [email protected], Charlotte Banks, Principal Advisor at [email protected] or James Jefferson, Energy Research and Project Officer at [email protected]