On Tuesday 10 May 2022, the UK government unveiled its annual legislative agenda, including those laws that will help drive the energy transition towards “cheaper, cleaner and more secure energy” in the UK in the 2022-23 session of Parliament.

Promising to grow the economy and unveiling plans to boost the country’s energy security, the Queen’s Speech (the “Speech”) unveiled 38 parliamentary bills, including those highlighted here which are most relevant to the energy sector.

New energy legislation and a new National Infrastructure Bank

The announcement of an Energy Bill is undeniably significant in that it will be the first of its kind in over a decade, outlining exactly how the UK will approach achieving a fully decarbonised electricity system by 2035. The Speech emphasised the importance of this in delivering “the transition to cheaper, cleaner and more secure energy”, building on “the success of the COP26 summit in Glasgow last year”.

In light of the energy price crisis, further heightened by the Russian invasion of Ukraine, the Government presented last month its Energy Security Strategy targeting 95% of electricity coming from low carbon sources by 2030. An Energy Security Bill has been announced that will contain new powers aimed at boosting renewable energy and providing powers to introduce new business models for carbon capture and CO₂ transport and storage to enable the decarbonisation of industrial processes and uptake in production of low-carbon hydrogen. The government also intend to help support innovation and lower the cost of heat pumps over time by looking to set up a new market standard and create a trading scheme.

Additionally, Ofgem is to be confirmed as the new regulator for heat networks. The new Energy Security Bill is expected to pave the way for creating a new independent body, the Future System Operator (FSO), to oversee Britain’s energy sector overall and ensuring energy resilience on the transition to net zero. It will also include powers to enable the extension of the energy price cap beyond 2023, which will be the “best safety net for millions” according to the government as it will prevent suppliers from overcharging consumers, as well as attracting funding in private investment to support new, skilled jobs across the UK. Further, competition will be introduced in Britain’s onshore electricity networks which will encourage “investment and innovation, and enabling savings”, and seeks to facilitate a safe and cost-effective clean-up of UK legacy nuclear sites. The extension of the Energy Intensive Industries Compensation Scheme has been announced, supporting energy intensive businesses with energy costs and will further consider increasing the renewable obligation exemption for businesses by up to 100%.

Although it has been mentioned for some time, which we had first addressed in our law-now on the first National Infrastructure Strategy, the Speech stated that legislation will be brought forward to support the National Infrastructure Bank in its work on the delivery of net zero. The UK Infrastructure Bank Bill will provide direction on the kinds of investments the bank will be able to support, in particular with the aim of helping to deliver net zero and reducing fossil fuel dependence. The bank is expected to publish its first strategic plan in June 2022.

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The announcements in the Speech give legal footing to a number of the proposals announced as part of the Government’s strategies and policies, as well as more general announcements. They also give a sense of prioritisation with energy security, innovation in energy networks and systems, development of decarbonised heat, CCUS and low-carbon hydrogen sectors firmly on the agenda. Moreover, the role that the Government expects the UK Infrastructure Bank to play is an important indication of where it will channel its efforts in the coming year. Encouraging investment in low carbon infrastructure, including CO₂ transport and storage networks, will be critical.

However, there have been criticisms to this newly announced Energy Bill, including from those who believe that Government should instead be focusing on “immediate help to hard-pressed households” in the context of rising energy bills.

This next year will be crucial for advancing environmental progression, tackling both the cost of living crisis exacerbated by energy costs and ensuring the growth of renewables at the same time. Now the UK has many ambitious targets in place, the main point of focus is on ensuring effective delivery.

Authors

Munir Hassan, Head of Energy & Climate Change, CMS UK

Louise Dalton, Partner, Energy & Climate Change, CMS UK

Dalia Majumder-Russell, Partner, Energy & Climate Change, CMS UK

Juliet Stradling, Partner, Energy & Climate Change, CMS UK

This article was originally published on the CMS Law-Now site, and can be accessed here