Described as the most extensive energy legislation ever introduced in the UK, the Energy Act 2023 received Royal Assent yesterday (Thursday 26th October). The new legislation brings several changes to the UK’s energy strategy and existing market, as well as an expansion in scope for regulator Ofgem. National Grid ESO has also described the act as a key part in the process of establishing the Future System Operator (FSO), a new independent body that will take responsibility for strategic planning across the UK’s energy network.
The Act includes provisions designed to enhance the UK’s energy security, promote net zero emissions and deliver long term energy affordability. Here, Powerstar summarises some of the key changes brought in by the Energy Act 2023.
One of the most significant changes is the establishment of a ‘fully independent system operator’ tasked with transforming the UK’s energy system and reducing energy bills. The Future System Operator (FSO) will focus on delivering an efficient, flexible system that is better able to support the low-carbon, low-cost energy system that will be needed to meet the UK’s net zero ambitions.
The Energy Bill sets out a requirement for the FSO to carry out duties in a way that is best calculated to promote net zero objectives, as well as ensuring security of supply for both electricity and gas. The FSO will undertake strategic network planning to better integrate both existing and new forms of energy generation, as well as shoring up energy resilience across the system.
Energy market regulator Ofgem will have its remit expanded to include heat networks, which now provide heating for around half a million domestic and business consumers across the UK. Also known as district heating, heat networks supply heat from a central source to individual consumers via an underground pipe network, eliminating the need for individual boilers and heaters. Central heat can be generated using a diverse range of methods, including heat from industrial processes, biomass, combined heat and power, heat pumps and others. Ofgem will now regulate this market, setting new rules on excessive pricing and ensuring quality of service.
Another new task for Ofgem is their inclusion in the administration of net zero targets first outlined by the Climate Change Act 2008. Under the change, the Gas and Electricity Markets Authority (the governing body of Ofgem) will be required to consider how any decisions it makes will support the government’s net zero commitment.
The Act introduces as new tender process intended to increase competition across the UK’s onshore electricity networks. Network infrastructure projects will enter a tender process like that already established for offshore transmission, reducing costs to end users for network operation and development. The Act predicts a saving of up to £1 billion per year for energy bill payers by 2050.
The flexibility provided by energy storage is crucial to a successful energy transition, with the potential to save up to £10 billion annually by 2050. The Energy Act 2023 amends an existing definition of energy storage, first set way back in 1989, to clarify that storage is considered a distinct subset of energy generation. This is hoped to remove current ambiguities and provide greater clarity over the treatment of energy storage within existing and future frameworks.
Powerstar have previously highlighted issues around the UK’s aging transmission and distribution networks, the cost of upgrading them and the impact they can have on end users. The introduction of a new tender process to potentially reduce the cost of these upgrades, as well as a new independent body to oversee the system, has the potential to unlock new green energy projects and support the UK’s net zero ambitions.
The changes laid out by the Energy Act will take time to implement, and in the meantime, it is vital that individual businesses and organisations keep their own energy procurement, net zero obligations and power resilience in focus. To find out more about how Powerstar’s solutions can support each of these separate energy management objectives, speak to one of our team now.
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