The Energy Act 2023, which has been called the “biggest piece of energy legislation in the UK’s history”, received Royal Assent yesterday (26 October).
The Act, which has now become law, includes a number of major changes aimed at creating a more efficient energy system that can uphold the growing number of electrified technologies being added as the nation moves towards impending net zero targets.
One of the key aspects of the Act is its intention to increase competition in GB’s onshore electricity networks via a newly introduced tender process. According to the government, this will reduce costs for network operation and development and save consumers up to £1 billion off their energy bills by 2050.
Other key changes made via the Act include a specific merger regime for energy networks that will also be created under the Competition and Markets Authority, new measures for Energy Smart Appliances, an expansion of Ofgem’s merit to heat networks and new consumer protections and frameworks.
“The Energy Act is the largest piece of energy legislation in a generation. It will boost investment in clean energy technologies and support thousands of skilled jobs across the country,” said Energy Security Secretary Claire Coutinho.
“It lays the foundations for greater UK energy independence, making us more secure against tyrants like Putin, and helps us to power Britain from Britain.
“The Act also supports our new approach to make sure that families don’t feel a disproportionate financial burden as we transition to net zero and forms a central part of our efforts to keep people’s bills affordable in the long-term.”
An expansion of Ofgem’s powers and responsibilities
A welcome change is the expansion of Ofgem’s remit to include net zero targets as part of its everyday decisions. It’s expanded responsibilities also include a net zero duty, the intention to establish a Future System Operator (FSO) and Independent System Operator, Ofgem being appointed the new regulator for heat networks in GB, new business models for hydrogen transport and storage, and more.
The Future System Operator (FSO) will be a public body built on the capabilities of National Grid Electricity System Operator (ESO) as well as, where appropriate, National Grid Gas and has been touted as a means to balance the UK’s electrical systems by working together with energy supplier and networks.
Ofgem had previously called for an independent system as part of a review of Britain’s energy system’s operation in January 2021.
Jonathan Brearley, Ofgem CEO, said: “We welcome the Energy Act getting Royal Assent. It is the most significant energy legislation for a decade and a world-first in giving us a legal mandate targeting net zero.
“It 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.”