A new Energy Bill was announced today (10 May) as part of the Queen's Speech, to help the UK build a more secure, homegrown energy system that is both cleaner and more affordable.
The speech – which formally starts the parliamentary year – was presented by Prince Charles in the House of Lords chamber, and set out 38 new laws.
“My Ministers will bring forward an Energy Bill to deliver the transition to cheaper, cleaner, and more secure energy. This will build on the success of the COP26 Summit in Glasgow last year,” he read.
Decarbonising heat key focus
There are ten main elements of the Bill outlined, including supporting industry to step up investment in growing the consumer market for heat pumps. The government will look to set a new market standard and create a trading scheme, with this intended to help support innovation and help lower the cost of heat pumps over time.
Heat pumps have played a increasingly important role in the government's plans to reach net zero, including featuring in both the British Energy Security Strategy and the Ten Point Plan for a Green Industrial Revolution.
The former of these was released in April amid the continuing energy crisis in the UK in an effort to improve the country’s resilience. It included the launch of a Heat Pump Investment Accelerator Competition, which is planned for later in 2022. This will be worth up to £30 million, and help Britain reduce its demand for gas.
With regards to heat decarbonisation, the Bill will also appoint Ofgem as the new regulator for heat networks in an effort to ensure consumers get a fair price and a reliable supply of heat. And it will enable the first ever large-scale hydrogen heating trial, which will inform the role of hydrogen in heat decarbonisation in 2026.
Extending the price cap
The Bill will extend the energy price cap to prevent suppliers from overcharging consumers. That cap jumped 54% in April on the back of record high power prices, predominantly driven by high gas prices.
These began to surge during the latter half of 2021, with a number of suppliers caught between the increasing wholesale prices and the inability to recover higher costs by increasing consumer bills. This was one of the main reasons behind 27 suppliers collapsing (and Bulb entering special administration) in 2021.
“It is right that we continue doing whatever we can to ease the burdens people are grappling with now, supporting the hardest hit with £22 billion of help to address the cost of living and cutting hundreds of pounds off household bills,” Prime Minister Boris Johnson said in his introduction to the Queen's Speech.
“But we must also remember that for every pound of taxpayer’s money we spend on reducing bills now, it is a pound we are not investing in bringing down bills and prices over the longer term. And that if anything, this moment makes clear our best remedy lies in urgently delivering on our mission to turbo charge the economy, create jobs and spread opportunity across the country.”
In April, chancellor Rishi Sunak unveiled three key measures to help tackle surging energy bills, including a one-off repayable £200 loan, a £150 council tax rebate and a discretionary fund. While the support was welcomed, many have criticised it for being short-sighted and failing to include measures around energy efficiency.
Glad to see Energy Security Bill in #QueensSpeech, but it will ring hollow if it fails to provide a retrofit revolution to slash bills & energy demand— Caroline Lucas (@CarolineLucas) May 10, 2022
When the 1.5C limit is close to being broken, we desperately need a #fossilfueltreaty to keep fossil fuels in the ground
Developing Britain’s electricity networks
The Bill will introduce competition in Britain’s onshore electricity networks, encouraging investment and innovation that will in turn enable savings.
There is growing concern about the networks keeping pace with the changing nature of the energy system as reports emerge of ten year connection queues. Distributed network operators have committed billions in investment for over the RIIO-2 price period to try and transform them for net zero.
“Today the government has set out some important steps to deliver a cleaner, more secure and more affordable energy system,” said David Smith, chief executive of Energy Networks Association.
“While an independent future system operator will help shape our energy system, it’s important that introducing competition into the networks will benefit customers and not hinder progression.”
As previously announced and reiterated in the Bill, a new Future System Operator is set to be created to provide strategic oversight across both the electricity and gas systems.
Nuclear, CCUS and new powers
For nuclear, the Bill will create a new pro-innovation regulatory environment for fusion energy, and facilitate the safe and cost-effective clean up of the UK’s legacy nuclear sites.
The Bill will introduce state-of-the-art business models for Carbon Capture Usage and Storage (CCUS) transport and storage, as well as low carbon hydrogen and industrial carbon capture. This will be “the starting gun on new, low-carbon technologies,” the speech stated.
There has been an increasing number of green hydrogen projects in the UK already, following the release of the government’s hydrogen strategy in August 2021, which outlined a target of 5GW of low carbon hydrogen production capacity by 2030.
Finally, the Bill will look to reduce the risk of fuel supply disruption by giving government powers to direct, require information from and provide financial assistance to core fuel sector businesses.
“We welcome the Energy Bill announced today in the State Opening of Parliament, which outlines our vital role at the heart of the future system operator, helping to deliver Britain’s energy security and independence,” Fintan Slye, executive director of National Grid ESO, said.
“This landmark legislation lays the foundations for an energy system that’s clean, reliable and fair, one that enables delivery of the government’s ambitious Energy Security Strategy and net zero commitments, including a net zero electricity system by 2035.”
The Levelling Up and Regeneration Bill
In addition to the Energy Bill, the Queen's Speech included the Levelling Up and Regeneration Bill. This will see the planning system in Britain reformed, a move that Renewable UK called “vital for hitting the UK’s target of 50GW offshore wind by 2030”.
This target was unveiled in the British Energy Security Strategy, along with increased nuclear and solar power targets, in an effort to improve the resiliency of the sector by reducing international reliance.
“It’s vital that new legislation announced in the Queen’s Speech enables us to build cheap new renewable energy more quickly, as speed is key to boosting home-grown energy and cutting bills for consumers,” said Dan McGrail, CEO of RenewableUK.
“Government has put low carbon power at the heart of Britain’s Energy Security Strategy, including a target of quadrupling offshore wind by 2030, so we need to ensure that the frameworks for planning and connecting new energy projects supports this target, as well as longer-term growth needed for net zero”.