The Energy Act 2023 (the "Energy Act") received royal assent on 26 October 2023. It represents one of the most significant changes to the UK's energy legal landscape in recent years, including establishing a new legal obligation for Ofgem to consider net zero targets when exercising its duties and adopting a range of measures to incentivise the development of new low-carbon energy infrastructure.
What does the legislation cover?
The remit of the Energy Act covers a broad list of different areas of energy policy in the UK including, but not limited to, carbon capture and storage, hydrogen production and transportation, offshore wind, sustainable aviation fuel and nuclear fusion. However, in many cases the regulatory frameworks will ultimately be determined by secondary legislation.
Heat networks to be regulated
Another area of development is the implementation of powers to enable the regulation of heat networks for the first time. As part of this, Ofgem will put in place an authorisation regime, in addition to controls relating to pricing and the quality of service provided to end users.
Impact on investment
In setting out the future of the regulatory landscape for energy, which covers a broad selection of infrastructure sectors, the UK Government has said that its aim is to provide legal certainty to investors in order to incentivise investment. However, until such time as the relevant secondary legislation is implemented, there will be many questions concerning the long-term shape of the UK's energy framework.
That being said, the infrastructure sector undoubtedly stands to benefit from a number of significant opportunities arising from the Energy Act, particularly in relation to the increased access to finance, and it remains clear that the sector's success will be a key determining factor in the UK's Net Zero targets being achieved.
Stakeholders should pay close attention to the implementation of relevant secondary legislation over the coming months, which will provide greater clarity on the regulatory mechanisms underpinning the Energy Act. The implementation of contractual mechanisms to facilitate financing opportunities will be of particular interest to infrastructure actors, while the effects of introducing competitive tendering in the onshore energy sector may also be of relevance.
You can read our detailed briefing on the Act here.
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