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Legislation Update: The Energy Security Bill

After another tumultuous week in British politics which saw Prime Minister Boris Johnson forced to announce his resignation following an exodus of ministers, political focus has shifted, once again, from the day-to-day workings of government to the upcoming Conservative leadership contest.
Nevertheless, within the deluge of chaos, a significant piece of legislation saw its introduction before Parliament: The Energy Security Bill. Announced as part of the Queen’s Speech, the Bill seeks to codify the measures outlined in the British Energy Security Strategy by driving £100 billion of private sector investment by 2030 into new British industries designed to propel the transition to Net Zero. Such investment is also predicted to create 480,000 green jobs by the end of the decade.

Fundamentally, the Bill intends to rapidly diversify the UK’s energy system with home-grown supply and low carbon technologies, a strategy which simultaneously responds to the perils of remaining dependent on the import of fossil fuels from authoritarian regimes, as the war in Ukraine continues to illustrate. The Bill also makes reference to the energy efficiency of UK homes as vital in the reduction of emissions, noting that in 2008 only 9% of UK homes had an Energy Performance Certificate of C or above – a figure now standing at 46%. Lowering the cost for consumers and catalysing private investment thereby serves as a dual strategy of the Bill.

The Secretary of State for Business, Energy & Industrial Strategy, Kwasi Kwarteng MP, welcomed the legislation as ‘the biggest reform of our energy system in a decade.’, with plans to ‘slash red tape’, boost investment, and increase the UK’s ‘global market share’ of new technologies.[1] Kwarteng continued that the legislation would create an ‘affordable, home-grown energy system’ to ensure ‘we are no longer held hostage by rogue states and volatile markets’. Significantly, and in likely reference to the so-called Red Walls seats of de-industrialised northern communities, Kwarteng stated that implementation of the measures set out in the Bill would ‘reindustrialise our economy and protect the British people from eye-watering fossil fuel prices into the future.’

The Bill contains many policies and objectives, including:[2]

  • Introduction of business models for carbon capture usage and storage (CCUS)
  • Establishment of economic regulation and licensing framework to deploy CO2 transport and storage networks
  • Delivery of a large village hydrogen heating trial to inform strategic decision-making on the role of hydrogen in heat decarbonisation
  • Scale up of heat pump manufacturing and installation with a market-based mechanism for the low-carbon heat industry
  • Introduction of multi-purpose interconnectors as a licensable activity to reduce the number of cabling, landing points, and substations required
  • Reclarification of electricity storage, such as batteries and pumped hydro storage, as a distinct subset of electricity generation, to remove obstacles to innovation
  • Reform of energy codes by overhauling how technical and commercial rules of the energy system are governed
  • World-first legislation on fusion regulation.

For consumers, the Bill expands on and supersedes the Energy Act 2013, including by:

  • Extending the energy price cap beyond 2023
  • Creating a Future System Operator with responsibilities in both the electricity and gas systems to ensure efficient energy planning, the enhancement of energy security, and the reduction of cost to consumers
  • Placing requirements on smart appliances to protect consumers from cyber threats
  • Empowering the Competition and Markets Authority to review any relevant energy network company mergers under the Energy Network Special Merger Regime
  • Appointing Ofgem as the new regulator for heat networks to protect consumers
  • Enabling heat network zoning to identify areas where there is provision for the lowest cost solution to heating buildings.

To ensure the resilience of the UK’s energy system, safety and security measures are also being adopted, including:

  • Measures to downstream oil security, such as oil terminals, to prevent fuel supply disruption
  • Removal of barriers to nuclear investment by enhancing the nuclear third-party liability regime
  • Facilitating the safe and cost-effective clean-up of the UK’s nuclear sites by licensing a disposal facility below the seabed and bringing forward the final delicensing and re-use of nuclear sites
  • Maximising cost recovery from the regulation of offshore oil and gas decommissioning activities, in line with the polluter pays principle.

Ultimately, as the 2022 Conservative and Unionist Party leadership election begins in earnest, political willpower and energy will naturally shift away from the day-to-day business of Parliament, meaning that legislation like the Energy Security Bill may find itself delayed. Nevertheless, regardless of who emerges as Johnson’s successor, the Conservatives are likely to remain committed to the policies of Net Zero. Indeed, at the forefront of the 2019 Manifesto was a commitment to:

Reaching Net Zero by 2050 with investment in clean energy solutions and green infrastructure to reduce carbon emissions and pollution.’[3]

With the energy price cap due to rise in October, Russia’s invasion of Ukraine continuing to advance, and inflation set to rise even further by the end of the year, the new Prime Minister will find the pursuit of energy security vital to his or her premiership from the get-go. Advancing The Energy Security Bill through Parliament and enacting the British Energy Security Strategy will therefore remain imperative for the next administration.

Just as Johnson dutifully followed Theresa May’s pivot to reaching Net Zero by 2050, the next prime minister will almost certainly continue along the same pathway. As Johnson once infamously noted before the UN General Assembly, in a tongue-in-cheek remark on Kermit the Frog, ‘[I]t is easy…it’s lucrative and it’s right to be green.’

[1] GOV.UK, Plans to bolster UK energy security set to become law, Department for Business, Energy & Industrial Strategy, 6 July 2022, https://www.gov.uk/government/news/plans-to-bolster-uk-energy-security-set-to-become-law

[2] https://www.gov.uk/government/publications/energy-security-bill-factsheets

[3] The Conservative and Unionist Party Manifesto 2019, Get Brexit Done, Unleash Britain’s Potential, My Guarantee, https://www.conservatives.com/our-plan/conservative-party-manifesto-2019, p.2.