This is the first in a series of posts on the Energy Act 2023 (the Act), which received Royal Assent on 26 October 2023. It provides some general comments and a very brief overview of the Act’s contents.
A lot has happened in UK energy policy since we first wrote about the Bill which has now become the Act on its introduction into Parliament in July 2022. Some of this has involved the development of policies legislated for in the Act. However, arguably the most conspicuous and dramatic regulatory developments have had no direct link to what is in the Act. In particular, the UK government:
- responded to last year’s energy affordability crisis with the very rapidly passed Energy Prices Act 2022 and a raft of related secondary legislation and other instruments, together comprising probably the largest ever short-term intervention in UK energy markets;
- introduced a five-year “windfall tax” (the “electricity generator levy”) on those electricity generators considered to be benefiting unduly from the influence of high wholesale gas market prices on the wholesale price of electricity (in Part 5 of the Finance (No. 2) Act 2023); and
- launched a wide-ranging Review of Electricity Market Arrangements (REMA). This aims to ensure that, in the longer term, the framework of revenue support and other incentives that shape the wholesale electricity sector and its operation deliver the power sector’s contribution to the attainment of net zero goals in a secure and cost-effective way.
The challenges that the Act seeks to address remain untouched by any of this. However, like REMA, the Act is firmly focused on the decarbonisation of the UK economy: a goal whose attainment gets no easier overall, even as it becomes both inexorably more urgent and more readily achievable in technical terms. Much of the Act puts in place frameworks to support, incentivise or regulate new technologies whose adoption has the potential to reduce UK greenhouse gas emissions.
What does the Act cover?
It is not easy to get an overview of what the Act covers just by looking at it. The table of contents alone is 18 pages long and provisions on related topics are not always located next to each other.
We have therefore included a very simple and high-level summary of the subject-matter of the Act below, dividing the Act’s contents into six main areas. Each of the subsequent posts in this series will look in more detail at what the Act does in one of these areas. Once they are published, each will be accessible from the table below by clicking on the corresponding subject heading.
|Carbon capture, usage and storage||Hydrogen|
|Electricity and gas sector governance||Heat and energy efficiency|
|Nuclear||Other technologies and subsectors|
Some key features
Sheer scale: At more than 450 pages, the Act is by some distance the longest piece of primary legislation on energy topics in UK history. None of its predecessors have covered such a wide range.
Breaking new ground: Earlier consultations about some of the policies legislated for in the Act have made them familiar, but this should not lead us to underestimate its novelty. In many cases, the Act’s provisions are the first-ever UK legislation on the topics it covers. Other “firsts” include providing for the taking back into public ownership of a strategic part of the privatised electricity sector.
New technologies: Facilitating the deployment of new, or newly commercialised, technologies has been a recurrent theme in UK energy legislation for more than 200 years, but usually only one at a time. The Act goes a long way towards legislating for two completely new industries (CCS and low-carbon hydrogen), as well as facilitating major technological shifts in relation to both the generation of (particularly nuclear) power and its consumption (the provisions on smart appliances and load control).
Regulating our way to net zero: Technologies come and go, but the enduring feature of energy markets (other than the commodity trade in fossil fuels) is how they depend on and are shaped by regulation. The strong preference of UK energy policymakers is still for market-based solutions, but the Act also reflects an assumption that all significant progress towards the ultimate goals of UK energy and climate policy depends on the creation of new, or changes to existing, regulatory frameworks (often including the provision of publicly funded financial support).
A “whole UK” Energy Act: The majority of provisions of most UK Energy Acts relate to subjects such as the regulation of the electricity system, that is “reserved” to the UK Parliament in Westminster. The Act bucks that trend. It reflects an expansion of “energy policy” (as embodied in primary legislation) into areas within the competence of the UK’s devolved administrations, beyond what were seen as the areas of strategic national importance from an energy sector perspective (and thus “reserved”) when the devolution Acts for Northern Ireland, Scotland and Wales were passed 25 years ago. As a result, the Act contains a lot of procedural provisions governing the interaction between the UK government and devolved administrations in relation to the exercise of powers that the Act gives to UK Ministers’ powers in these areas. It will be interesting to see how these work in practice.
A “skeleton Act”/work in progress? Though lengthy, the Act is just the start of its own agenda. The detail of most of its policies remains to be worked out under the hundreds of individual provisions conferring on Ministers or others power to make regulations, rules schemes and frameworks.
Want to know more?
Our Energy team worked with the UK government’s Department for Energy Security and Net Zero (and its predecessor, BEIS) on parts of the Act and has market-leading expertise in most of the areas that it covers. Please get in touch if you would like to know more.