Historic legislation aims to revolutionise the UK’s energy system
The Energy Act 2023, the most significant piece of energy legislation in the UK’s history, became law on October 26, 2023 having received Royal Assent. The Act aims to transform the UK’s energy system by enhancing energy security, supporting the achievement of net-zero emissions, and ensuring long-term affordability of energy bills for households and businesses.
The Act will impact various areas of energy, including energy security, net zero emissions, competition in onshore electricity networks, energy network mergers, safety measures for smart appliances, heat networks, low-carbon heat pumps, and the smart meter rollout.
The government also says it will help unlock £100 billion private investment in energy infrastructure and scale up jobs and growth.
A key aim is to create a more efficient energy system in the long run, by enabling increased competition in Great Britain’s onshore electricity networks through a new tender process. This process is expected to reduce costs for network operation and development, potentially saving consumers up to £1 billion off their energy bills by 2050.
The legislation also establishes a specific merger regime for energy networks under the Competition and Markets Authority, aiming to prevent fallout on consumers from mergers between energy network companies. This measure is estimated to save households up to £420 million over the next decade.
New measures for Energy Smart Appliances have also been addressed to prioritise safety and encourage consumers to transition to smart products, which could help manage energy consumption and reduce bills. A smart electricity system could decrease system costs by up to £10 billion a year by 2050.
The government is also extending Ofgem’s authority to heat networks, enabling the regulator to set rules on excessive pricing and improve service quality for the half a million heat network consumers across the country.
New consumer protections and frameworks have also been introduced, incentivising the heating industry to invest in low-carbon heat pumps and granting powers to complete the smart meter rollout by 2028, which could generate total bill savings to households of £5.6 billion.
Emma Pinchbeck, chief executive of trade body Energy UK, said:
“As the world shifts its focus towards net zero, the energy sector needs long-term certainty to remain internationally competitive and attract private investment. This critical piece of legislation is a welcome step in delivering that confidence by establishing new business models, improved customer protections, and frameworks for investment across the energy sector.
“The broad-ranging measures in this Act are part of a collaborative effort between government, industry, business and consumer groups to deliver a modern energy system fit for the changing needs of the 21st century energy market. More work remains to establish frameworks that these powers enable, but this Act will be the foundation upon which the new energy system will be built.
Ofgem CEO Jonathan Brearley said:
“The Energy Act gives Ofgem the powers to drive through the energy transition – unlocking investment, accelerating planning and building the infrastructure the economy needs. This will give us security from volatile world gas markets and end our dependency on fossil fuels. Consumers have faced a huge number of challenges in recent years, with high energy prices and cost-of-living pressures. The Act will give extra protection for existing and future customers, while powering the journey to net zero at the lowest possible cost to households and businesses. We’re now working closely with government, consumers and sector to implement the legislation in full.
Clare Jackson, CEO of Hydrogen UK, said:
“[The Energy Act] is warmly welcomed by the UK’s low carbon hydrogen industry, and adjacent sectors who rely on hydrogen for their own decarbonisation journey. The passing of the Bill has been a priority for the hydrogen industry as it will lay the foundations for the UK’s future hydrogen economy, by creating provisions for a Hydrogen Production Business Model, and Hydrogen Transport and Storage Business Models. This firmly indicates to the global hydrogen economy and international investors that the UK is serious about its net zero future, and the role hydrogen can play in it.”
John Pettigrew, CEO of National Grid, said:
“This is a crucial next step in delivering a secure, affordable and clean energy future, establishing the needed policy and governance foundations to deliver on the UK’s net zero ambitions. In particular, establishing a Future System Operator will be critical in delivering strategic, whole system energy planning and oversight as we continue to transform our energy infrastructure. Only by working together as an industry, with the regulator and government, can we hope to achieve an energy transition that delivers for everyone and an energy system that is clean, fair and affordable for all.”
