The Energy Act 2023 is a historic piece of legislation in the UK, aiming to transform the energy system for a sustainable future. It received Royal Assent on 26 October 2023, and is designed to enhance energy security, promote net-zero emissions, and ensure long-term affordability for households. It’s project to save consumers up to £1 billion off their energy bills by 2050.
Key inclusions in the Energy Act include:
- Net-zero remit for Ofgem: The act includes a provision for regulator Ofgem to have a net-zero remit. This means Ofgem is mandated to consider the goal of achieving net-zero emissions in its regulatory decisions, aligning with the UK’s climate targets.
- Heat transition: Ofgem is now the official regulator for heat networks in the UK. This is a crucial development as heat networks serve around half a million buildings and will play a pivotal role in reducing fossil fuel boiler use.
- Carbon Capture and Storage (CCS): While not the principal purpose of the act, it outlines important steps for scaling up carbon capture and storage technologies, a key component in reducing industrial emissions.
- Hydrogen: The act introduces measures to fast-track the introduction of a business model for hydrogen transport and storage. The government targets 10GW of domestic hydrogen production capacity, with at least 5GW being renewable, by 2030.
- Nuclear energy: The act aims to increase the UK’s nuclear capacity to up to 24GW by 2050, utilizing a combination of large projects and Small Modular Reactors (SMRs). It grants power to designate a new publicly owned company, great British nuclear, to oversee the government’s involvement in nuclear projects.
- Aviation fuel: The act supports the UK’s jet-zero strategy, targeting net-zero emissions for domestic flights by 2040 and international flights by 2050. It introduces mechanisms for Sustainable Aviation Fuel (SAF) producers to ensure a reduction in emissions.
- Community energy: While there was a push to include clauses supporting community-owned renewable energy projects, the act ultimately does not provide new support for community energy initiatives.
- Cost efficiency: The act emphasizes cost efficiency, introducing measures to increase competition in onshore electricity networks. This is expected to save consumers up to £1 billion on energy bills by 2050.
- Merger regime for energy networks: A specific regime will be established to regulate mergers between energy network companies, safeguarding consumers and potentially saving households up to £420 million over the next decade.
- Energy smart appliances: The act encourages the use of energy smart appliances with a focus on safety. This move is expected to reduce system costs by up to £10 billion annually by 2050.
- Expansion of Ofgem’s remit: Ofgem’s authority now extends to cover heat networks, allowing for better pricing and service quality for approximately half a million consumers.
- Consumer protections and frameworks: The act introduces new consumer protections and frameworks, incentivizing the heating industry to invest in low-carbon heat pumps and supporting the smart meter rollout by 2028.
Overall, the Energy Act 2023 marks a significant milestone in the UK’s efforts to transition to a more sustainable and resilient energy system, with measures spanning across various key areas of the energy sector.