Energy Security Bill introduced to UK Parliament

On 6 July 2022, the Energy Security Bill, first announced as part of the Queen's Speech on 10 May 2022 (discussed in our earlier Insight), was introduced to Parliament for a first reading. 

According to the government, the Bill seeks to "bolster Britain's energy independence and security" and "propel the UK's transition to a cleaner, affordable, home grown energy system". 

The contents of the Bill are designed to build on the commitments set out in the government's Ten Point Plan for a Green Industrial Revolution, the British Energy Security Strategy and the Net Zero Strategy. 

The 26 measures contained in the Bill are intended to achieve the following three broad aims: 

• Leveraging private investment in clean technologies and promote the building of a homegrown energy system.
• Protecting consumers from unfair pricing. 
• Ensuring the safety, security and resilience of the energy system.

Clean technologies

Among the measures proposed in the Bill, which the government states will "drive an unprecedented £100 billion of private sector investment by 2030 into new British industries and [support] around 480,000 clean jobs by the end of the decade", are:

• The introduction of business models for carbon capture usage and storage (CCUS) and hydrogen designed to incentivise private investment by providing long-term revenue certainty. This will be coupled with the establishment of a regulatory framework designed to establish and scale-up CO2 transport and storage networks.
• Changes to the role of gas distribution network operators and powers to make safety regulations to enable the delivery of a large village hydrogen heating trial by 2025.
• Measures intended to boost the low-carbon heat industry through a new Low-Carbon Heat Scheme, enabling further investment in these technologies and thereby reducing costs. 

Consumer protection

Key measures in the Bill that are designed to protect consumers from both long and short term price shocks include:

• An extension to the energy price cap beyond 2023.
• A continued drive for industry progress on the smart meter rollout to aid more efficient consumer energy usage.
• Provisions to support the development of heat networks and enable heat network zoning in England. The Gas and Electricity Markets Authority (GEMA) supported by Ofgem will be appointed as the new regulator for heat networks in Great Britain to safeguard the pricing and reliability of heat for homes connected to these networks.
• The granting of powers to the Competition and Markets Authority to review energy network mergers, which the government estimates could save consumers up to £420 million over the next 10 years by protecting them from increasing network prices following mergers.

Energy security and resilience

Provisions of the Bill that are aimed at shoring up the supply of nuclear energy and oil and gas to ensure the "responsible" operation of a safe and secure energy system include:  

• Protecting downstream oil supplies to prevent fuel supply disruption, including from industrial action, "malicious protest" and for reasons of national security.
• Attracting investment in British nuclear energy by enhancing the nuclear third party liability regime.
• Measures to ensure and safeguard "responsible ownership" of the UK’s oil and gas and carbon storage infrastructure.

Osborne Clarke comment

While much of the Bill understandably addresses the more immediate problems posed by high global energy prices and threats to UK energy security, it contains important provisions designed to shift the UK along its next stage on the road to net zero.

The announcements concerning the role and markets for new technologies such as hydrogen and CCUS have been calculated to unlock significant levels of private investment, and could help to ensure the full benefits of these technologies are realised as decarbonisation targets edge ever closer. 

The need for new regulation to accompany the rise of these new technologies is another important part of the Bill, with the proposal for Ofgem to regulate the UK's heat networks plugging an important gap in consumer protection.

The Bill appears to have been broadly welcomed by energy industry commentators, though its shortfalls and gaps have also been highlighted. For example, measures designed to improve the large-scale inefficiencies of UK buildings were notably absent from the Bill's initial announcement in the Queen's Speech, and have not been remedied in the more detailed proposals. 

There are also widespread concerns about the ability of the Bill to make it through the Parliamentary process, given the tumultuous state of UK politics. A Conservative party leadership contest to replace the current prime minister is under way, with vastly differing priorities attributed to the UK's net zero ambition proffered by the candidates. Should the Bill make it onto the statute books, it will represent a significant, if not complete, step on the road to decarbonising the UK's energy supply.