The announcement of a new Energy Bill within the Queen’s Speech yesterday (10 May) has been welcomed by the energy sector as an “encouraging sign” although concern remains over the focus on long-term technologies as opposed to moves to help mitigate the energy crisis.
“It’s really good news to see the inclusion of an Energy Security Bill in the Queen’s Speech, as we have been calling for,” said Energy UK’s director of advocacy, Dhara Vyas.
“It’s vital to have the legislation and frameworks in place that will enable delivery of the ambitious targets set out in the Prime Minister’s Ten Point Plan and Energy Security Strategy.”
The Bill includes support for a number of key technologies that could improve energy security by further domesticating generation and moving away from a reliance of fossil fuels. This includes support for nuclear fusion, Carbon Capture Usage and Storage (CCUS) and hydrogen.
“We can help customers by reducing the dependence on expensive fossil fuels that is leading to record energy bills right now through expanding sources of domestic clean power and supporting the development of low carbon technologies like Carbon Capture Usage and Storage and hydrogen on the production side, as well as those in the home like heat pumps – which will also boost our economy, create new jobs and help us reach our climate change targets,” added Vyas.
However, some have criticised the focus on longer-term technologies rather than pushing for changes that could provide relief to consumers currently. In April the price cap jumped by 54% on the back of high gas prices, which could potentially push 6.3 million households in the UK into fuel stress.
Power prices are expected to remain high throughout 2022, with the price cap again jumping in October. New analysis from Cornwall Insight ahead of the Queens Speech suggested this could hit £2595.19 for the winter period.
“The big risk with the Energy Bill is that government gets distracted with technologies like hydrogen and nuclear that might play a role but not for years to come,” said Jess Ralston, senior analyst at the Energy and Climate Intelligence Unit (ECIU).
“Steps that give immediate help to families struggling with rising energy bills, like insulation, seem to be falling by the wayside with Treasury blocking extra support and leaving the government open to criticism from voters who are feeling the pinch now.
“British renewables and home insulation are the only logical ways to both shield households from surging gas costs and isolate Putin.”
The lack of inclusion of energy efficiency measures was highlighted in the responses from many in the energy industry to the new Bill. This echoes criticism of the British Energy Security Strategy earlier this year.
Rob Doepel, EY’s UK&I managing partner for sustainability, said that for the Bill to make a significant change it needed to drive investment in renewable energy and energy efficiency in the UK now.
“The time to accelerate this investment is now so it’s vitally important that the Bill specifically details measures to bolster efforts to accelerate the energy transition and invest in technologies that can reduce and remove carbon dioxides already in the atmosphere,” he said.
“It’s also important that the Bill includes areas that were omitted from the Energy Security Strategy – namely energy efficiency measures. The government needs to a bold and set an ambitious plan for energy efficiency, with a balance of incentives for business and consumers.”
Whilst energy efficiency measures were missing, the Energy Bill did include provision to extend the price cap in a move to protect consumers.
“The extension of the Default Tariff Cap has been well sign posted particularly since wholesale energy prices started to rise so sharply in spring 2021,” explained Gareth Miller, CEO at Cornwall Insight.
“The original legislation for the cap saw it time limited and with tests for its removal. Hopefully, the conditions which have triggered its extension will pass and it will be important to judge if and when the market can be freed up for the full benefits of innovation that technology promises for consumers, producers and providers of flexibility.”
Decarbonisation of heat received a further boost from the Energy Bill, with a number of steps announced including support for the heat pump sector. As the decarbonisation of the electricity grid continues apace, there has been growing concern that heating is lagging behind as a sector.
“Tackling emissions from the way we heat our homes by boosting the market for heat pumps, giving Ofgem powers to regulate heat networks, and enabling the first ever large-scale hydrogen home heating trial are all essential and very welcome,” said David Smith, chief executive of Energy Networks Association.
“We now need the government to take further action in the Energy Security Bill by giving network companies the ability to make early, vital investment in infrastructure, and giving Ofgem a net zero mandate, which will enable a clean energy system to be delivered at best value for customers.”
Overall, the inclusion of the Energy Bill – along with the Levelling Up and Regeneration Bill which will see the planning system reformed – amidst the 38 bills unveiled yesterday is a welcome commitment from the government to support energy security and decarbonisation. But the detail of the Bill will be key, and it seems more support is still needed for sectors like energy efficiency.