The United Kingdom has ushered in a pivotal era of energy reform with the passing of the UK Energy Act 2023, which recently received Royal Assent. This far-reaching legislation is set to stimulate private investment to the tune of £100 billion in the country's energy infrastructure, with a focus on accelerating offshore wind development and introducing heightened competition to its energy networks.
The primary objective of the UK Energy Act 2023 is to create a more streamlined and cost-effective energy system in the long term, thereby ensuring affordability for energy consumers. It aims to achieve this by injecting greater competition into onshore electricity networks across Great Britain through a novel tender process, effectively curbing operational and development expenses.
This innovative approach is projected to generate savings of up to £1 billion for consumers by 2050, a promising development in the drive towards sustainable and affordable energy.
Additionally, the Energy Act establishes a dedicated merger regime for energy networks, overseen by the Competition and Markets Authority. This measure is designed to mitigate the potential negative impacts of mergers between energy network companies on consumers, ultimately estimated to deliver savings of up to £420 million for households.
Claire Coutinho, the Energy Security Secretary, affirmed the magnitude of this legislation, describing it as “the largest piece of energy legislation in a generation.” She highlighted the Act's potential to foster investment in clean energy technologies and generate employment opportunities across the nation. Furthermore, it aligns with the government's commitment to ensure that the transition to Net Zero does not impose a disproportionate financial burden on families, contributing significantly to long-term bill affordability.
The UK Energy Act 2023 is a critical component of the government's strategy to achieve Net Zero emissions by 2050 in a practical and realistic manner. It introduces an update to Ofgem's mandate, prompting the consideration of Net Zero targets in its routine decision-making processes. The legislation also paves the way for the inaugural large-scale village hydrogen heating trial, which will offer crucial insights into the role of this technology in decarbonizing heat.
A novel independent body, the Future System Operator, is to be established, ensuring that consumers have continuous access to a secure and decarbonized energy supply, a fundamental aspect of bolstering the nation's energy security. The FSO will be responsible for efficiently developing systems within the gas and electricity network while keeping consumer costs at a minimum.
Emma Pinchbeck, Chief Executive of Energy UK, lauded the legislation for instilling confidence by establishing new business models, enhancing customer protections, and providing investment frameworks across the energy sector. She emphasized the collaborative effort involving government, industry, business, and consumer groups in crafting this multifaceted Act, which is foundational to constructing a modern energy system tailored to the evolving requirements of the 21st-century energy market.
Jonathan Brearley, CEO of Ofgem, expressed the regulatory authority's readiness to drive the energy transition, unlock investment, expedite planning, and construct the requisite infrastructure for the nation's economy. He underscored the Act's significance in affording additional protection for existing and future energy customers while propelling the journey towards Net Zero at the least possible cost to households and businesses.