On 6 July 2022, the Government outlined new measures via the Energy Security Bill which are designed to propel the UK’s transition to a cleaner, more affordable, homegrown energy system. The Bill also aims to further boost the country’s energy security and provide enhanced protections to consumers.
Initially announced as part of the Queen’s Speech, the Energy Security Bill was introduced into Parliament by Business and Energy Secretary, Kwasi Kwarteng, at the start of last month and it is said to be “the most significant piece of energy legislation in a decade, with 26 measures”.
As fate would have it, the introduction of the Bill was overshadowed by the resignation of 37 ministers and Members of Parliament on the same day, which ultimately proved to mark the beginning of the end of Boris Johnson’s time as Prime Minister.
Upon introducing the Bill into Parliament Kwasi Kwarteng commented:
“To ensure we are no longer held hostage by rogue states and volatile markets, we must accelerate plans to build a truly clean, affordable, home-grown energy system in Britain.
“This is the biggest reform of our energy system in a decade. We’re going to slash red tape, get investment into the UK, and grab as much global market share as possible in new technologies to make this plan a reality.
“The measures in the Energy Security Bill will allow us to stand on our own two feet again, reindustrialise our economy and protect the British people from eye-watering fossil fuel prices into the future.”
With manufacturers and supply chain businesses already feeling the financial burden of increased energy costs, as well as the pressure to ‘go green’, businesses in the sector could be forgiven for any sense of reluctance towards further energy considerations.
However, amongst the perceived green pressures and additional red tape, there are hopefully prospects of cost savings and development opportunities.
What does the Energy Security Bill propose?
In essence, the Bill’s 26 measures are proposed to achieve three aims:
1. Leverage private investment in clean technologies and build a homegrown energy system
The Bill is designed to drive £100 billion of private sector investment by 2030 into new British industries that will help expand the UK’s domestic energy supply, including offshore wind, green hydrogen production, and carbon capture, and create roughly 480,000 green jobs by the turn of the decade.
The Government has said that it is “determined to ensure Britain secures a ‘first mover advantage’ in seizing the global market share in these technologies, helping to attract new private capital into the UK which will create jobs and reindustrialise parts of the country.”
The Bill will:
“14. Accelerate the growth of low carbon technologies including carbon capture usage and storage (CCUS) and hydrogen by introducing state-of-the-art business models, attracting private investment by providing long-term revenue certainty. Together with the measures on CO2 transport and storage, this will put the country on a path to seize market share and grow the economy.
- Establish the economic regulation and licensing framework to enable the set-up and scale-up of the first-of-a-kind CO2 transport and storage networks.
- Enable the delivery of a large village hydrogen heating trial by 2025, providing crucial evidence to inform strategic decisions in 2026 on the role of hydrogen in heat decarbonisation. Two potential locations for this have already been announced in Whitby, in the Ellesmere Port area, and Redcar.
- Help establish a market-based mechanism for the low-carbon heat industry to step up investment and lower the cost of electric heat pumps, while scaling up domestic manufacturing and installation.
- Through the Bill, the UK will be the first country in the world to legislate for fusion energy, providing clarity on the regulatory regime for fusion energy facilities and removing uncertainty for the fusion industry.”
2. Ensure the safety, security, and resilience of the UK’s energy system
The oil, gas and nuclear energy sectors will continue to play a part in the country’s energy supply for at least the medium term. Consequently, the Energy Security Bill outlines measures that will tackle various issues relating to these sectors.
In respect of oil and gas, the Bill will update existing environmental legislation to make sure that offshore oil and gas environmental regulatory regimes continue to maintain a high standard concerning habitat protection and pollution response.
Further, it will change the control of oil and gas industry participants to “ensure that the UK’s oil and gas and carbon storage infrastructure remains in the hands of companies with the best ability to operate it”. Currently, the North Sea Transition Authority is not able to prevent objectionable changes of ownership and control of petroleum and carbon storage Licensees before they occur but the Bill will change this. It will permit the NSTA to recognise and stop a potentially undesirable change of control before it takes place.
3. Reform our energy system to protect consumers from unfair pricing
The Bill extends the energy price cap beyond 2023, which limits the amounts that energy suppliers can charge consumers for each unit of gas and electricity and the daily standing charge.
It will establish a new independent Future System Operator. This Operator will take a whole-system view to plan the UK’s energy system and will look across electricity, gas, and other emerging sectors. This includes hydrogen and carbon capture, utilisation, and storage (CCUS) and will support and maintain energy security and limit consumer costs going forwards.
Additionally, the Competition and Markets Authority (CMA) will be able to review any relevant energy network company mergers via the Energy Network Special Merger Regime which will help to protect consumers from increasing costs should any energy network company mergers take place. According to the Government, this could save consumers up to £420 million over 10 years. That should be good news for manufacturers, who are set to feel the effects of consumer spending reductions due to rising living costs.
Comment
It remains to be seen if the measures outlined in the draft legislation will go far enough to support manufacturers, suppliers, and the country’s move towards a cleaner, more affordable, homegrown energy system.
Since the draft legislation was published critics have pointed out that it mimics the main areas outlined in the recent British Energy Security Strategy, and that certain measures do not go far enough to limit climate change, particularly regarding onshore wind, solar power, and energy efficiency.
That said, the Bill does seem to present opportunities for those manufacturing businesses that are prepared to embrace cleaner energy solutions or those that are aiming to supply the energy sector, with the largescale infrastructure changes that are envisaged.
The second reading of the Bill took place in the House of Lords on 19 July 2022. The Committee stage will begin on 5 September 2022.
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Simon Key is a Partner in our Dispute Resolution team, specialising in manufacturing and business disputes.
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