The Queens speech and its proposed energy bill
18 May 2022
Last Tuesday’s Queen Speech outlined the Government’s priorities for the next parliamentary session, one of which will be to introduce an Energy Security Bill which, ministers say, would deliver the transition to cheaper, cleaner, and more secure energy. While much attention is likely to be focused on the Bill’s plan to extend the price cap beyond 2023, there were also important proposals that will impact the future for energy infrastructure in the country.
The Government says it wants to attract billions of pounds in private investment, and support tens of thousands of new, skilled jobs across the UK. The plans are aimed at building a more secure, homegrown energy system that is cleaner and more affordable. Helping nurture new, cleaner technologies will therefore be vital if the government’s energy transition targets are to be met.
The Bill will implement a significant change to the regulatory framework, with plans to establish a new Future System Operator, providing strategic oversight across electricity and gas systems. The Government says this will drive progress towards net zero, energy security and minimising consumer costs.
While no further details were given at this stage, last month the Government said the move to create such a publicly-owned organisation would play an important role in coordinating and ensuring strategic planning across the sector. Balancing the UK’s energy supply and demand needs has become more complex in recent years thanks to the country’s increasing reliance on sometimes intermittent wind and solar energy, coupled with the phasing out of some fossil fuel generation. Meanwhile the commitment to net-zero has made strategic planning for the future more important than ever.
The move to create the new body would effectively bring into the public sector some of the responsibilities that have in the past been carried out by National Grid. Other final details about the operator’s role and responsibilities are still to be revealed.
The Bill will also set out the regulatory framework for the Government's "state-of-the-art" business models for Carbon Capture Usage and Storage (CCUS), and low carbon hydrogen, which the Government has said will "fire the starting gun" on new, low-carbon technologies. While other clean energy technologies are becoming more mature, carbon capture and low carbon hydrogen are still in their infancy, and the Government is seeking to stimulate greater private sector involvement in the sector. By aiming to offer a secure return over a number of years, it’s hoped the financing models will create greater certainty for the private sector about the returns from any investment. While the Government has for some time now been developing the CCUS business model, and more recently the low carbon hydrogen business model, the mapping out of the required regulatory framework will mark a significant step taking forward these technologies.
Other areas that are to be addressed in the Energy Security Bill include giving Government the power to give directions to core fuel sector businesses to ensure the resilience and continuity of fuel supply, appointing Ofgem as the new regulator for heat networks, and creating a new pro-innovation regulatory environment for fusion energy. The Government says it will also facilitate the safe and cost-effective clean-up of the UK's legacy nuclear sites, and introduce competition in Britain’s onshore electricity networks.
For infrastructure developers and investors, the Energy Security Bill as a whole signals the Government's commitment to facilitating investment in new technologies, and create a regulatory framework by which the UK can aim to secure its energy requirements and meet the timetable for net-zero emissions. However, while the Government has set the general direction of travel, and has made significant progress in many of the key policy areas, there are still many critical details that will need to be worked through in the coming months and years. The precise regulatory scope and functioning of the Future System Operator will need to be agreed, for example. Nonetheless, the Bill is an important step in taking forward the Government's energy vision, first outlined in the Energy White Paper of December 2020 and more recently in the Energy Security Strategy.
