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The biggest piece of energy legislation in the UK’s history has become law today (Thursday 26 October), laying the foundations for an energy system fit for the future.

The Energy Act 2023 has received Royal Assent and will transform the UK’s energy system by strengthening energy security, supporting the delivery of net zero and ensuring household bills are affordable in the long-term.

The Act will deliver a more efficient energy system in the long-term, helping to keep energy costs low. It will do this by increasing competition in Great Britain’s onshore electricity networks, through a new tender process – reducing costs for network operation and development. This new model is expected to save consumers up to £1 billion off their energy bills by 2050.

A specific merger regime for energy networks will also be created under the Competition and Markets Authority. This will minimise the risk of mergers between energy network companies having detrimental effects on consumers and is estimated to save households up to £420 million over the next decade.

There are also new measures for Energy Smart Appliances to prioritise safety and give consumers the confidence to transition to smart products, helping them to manage their energy consumption and reduce their bills. A smart electricity system could reduce system costs by up to £10 billion a year by 2050.

The government is expanding Ofgem’s remit to heat networks, allowing the regulator to set rules on excessive pricing and improve the quality of service for the half a million heat network consumers across the country.

The Act includes new consumer protections and frameworks, incentivising the heating industry to invest in low-carbon heat pumps, and including powers to deliver the smart meter rollout by 2028 – which could generate total bill savings to households of £5.6 billion.

Energy Security Secretary Claire Coutinho said:

The Energy Act is the largest piece of energy legislation in a generation. It will boost investment in clean energy technologies and support thousands of skilled jobs across the country.

It lays the foundations for greater UK energy independence, making us more secure against tyrants like Putin, and helps us to power Britain from Britain.

The Act also supports our new approach to make sure that families don’t feel a disproportionate financial burden as we transition to net zero, and forms a central part of our efforts to keep people’s bills affordable in the long-term.

Minister for Nuclear and Networks Andrew Bowie said:

The Energy Act is a statement of intent to support a flourishing British nuclear and low-carbon energy sector.

It will help create of thousands of skilled jobs and deliver real benefits for people across the UK – from cleaner energy to affordable bills.

The government has listened to industry and modernised our energy legislation, creating the framework for further green growth.

The Act will help the government deliver net zero by 2050 in a pragmatic, proportionate and realistic way. It updates Ofgem’s remit so that it considers net zero targets as part of its everyday decisions and facilitates the first large village hydrogen heating trial – providing crucial evidence on the technology’s role in decarbonising heat.

The government is also introducing a licensing framework for CO2 transport and storage to help deliver the UK’s first carbon capture sites – supporting up to 50,000 jobs by 2030.

These new laws also make the UK the first country to legislate for fusion regulation, enabling developers to plan with confidence and encourage investment into this flourishing technology, and driving the UK’s ambition for a prototype fusion power plant by 2040.

Establishing a new independent body – the Future System Operator – will ensure consumers can access a secure and decarbonised energy supply, key to enhancing the country’s energy security. The FSO will be responsible for systems in the gas and electricity network developing efficiently and keeping consumer bills low.

Emma Pinchbeck, Chief Executive of trade body Energy UK, said:

As the world shifts its focus towards net zero, the energy sector needs long-term certainty to remain internationally competitive and attract private investment. This critical piece of legislation is a welcome step in delivering that confidence by establishing new business models, improved customer protections, and frameworks for investment across the energy sector.

The broad-ranging measures in this Act are part of a collaborative effort between government, industry, business and consumer groups to deliver a modern energy system fit for the changing needs of the 21st century energy market. More work remains to establish frameworks that these powers enable, but this Act will be the foundation upon which the new energy system will be built.

Ofgem CEO Jonathan Brearley said:

We welcome the Energy Act getting Royal Assent. It is the most significant energy legislation for a decade and a world-first in giving us a legal mandate targeting net zero.

It gives Ofgem the powers to drive through the energy transition – unlocking investment, accelerating planning and building the infrastructure the economy needs. This will give us security from volatile world gas markets and end our dependency on fossil fuels.

Consumers have faced a huge number of challenges in recent years, with high energy prices and cost-of-living pressures. The Act will give extra protection for existing and future customers, while powering the journey to net zero at the lowest possible cost to households and businesses.

We’re now working closely with government, consumers and sector to implement the legislation in full.

Clare Jackson, CEO of Hydrogen UK, said:

Today’s news is warmly welcomed by the UK’s low carbon hydrogen industry, and adjacent sectors who rely on hydrogen for their own decarbonisation journey.

The passing of the Bill has been a priority for the hydrogen industry as it will lay the foundations for the UK’s future hydrogen economy, by creating provisions for a Hydrogen Production Business Model, and Hydrogen Transport and Storage Business Models.

This firmly indicates to the global hydrogen economy and international investors that the UK is serious about its net zero future, and the role hydrogen can play in it.

John Pettigrew, CEO of National Grid, said:

We welcome the passing of the Energy Act into legislation. This is a crucial next step in delivering a secure, affordable and clean energy future, establishing the needed policy and governance foundations to deliver on the UK’s net zero ambitions.

In particular, establishing a Future System Operator will be critical in delivering strategic, whole system energy planning and oversight as we continue to transform our energy infrastructure.

Only by working together as an industry, with the regulator and government, can we hope to achieve an energy transition that delivers for everyone and an energy system that is clean, fair and affordable for all.