Energy Security Bill opens door to price cap extension

The government has confirmed that the retail price cap will be extended beyond 2023 in the first energy bill for nearly a decade, which also contains emergency powers to ensure the resilience and continuity of fuel supplies.

The Energy Security Bill, which was announced in the Queen’s Speech in Tuesday (10 May), will contain powers to enable the extension of the price cap , which the government described as the “best safety net for millions”.

The Queen’s Speech said the bill will also give the government the power to “give directions to, require information from, and provide financial assistance” to “core fuel sector” businesses in a bid to reduce the risk of disruption to fuel supply.

In addition, background briefing notes for the Queen’s Speech said the legislation will contain measures to:

• Introduce business models for Carbon Capture, Usage and Storage transport and storage, low-carbon hydrogen and industrial carbon capture
• Stimulate investment in heat pumps by providing for a new market standard and trading scheme for the devices
• Appoint Ofgem as the new regulator for heat networks
• Enable the first ever large-scale hydrogen heating trial, which will inform future decisions on the role of hydrogen in heat decarbonisation that are due to be made by 2026
• Introduce competition in Britain’s onshore electricity networks
• Establish the new Future System Operator, which is designed to provide strategic oversight of the both the electricity and gas system
• Create a new regulatory environment for fusion energy, while facilitating the safe, and cost-effective clean-up of the UK’s legacy nuclear sites

The background notes said the bill is designed to support a low-carbon energy system and increase the UK’s energy security by reducing dependence on gas over the long term.

“This will ensure we are not dependent on a foreign country to keep our homes warm and lit,” they explained. “This is not only a matter of tackling climate change, it is a matter of national security.”

The Queen’s Speech also included proposed legislation to place the government’s new National Infrastructure Bank, which is already up and running at its headquarters in Leeds, onto a statutory footing.

However, commentators expressed disappointment that there is not more detail on measures to promote network infrastructure, which will support the roll out of renewable power, and energy efficiency.

David Smith, chief executive of Energy Networks Association, said: “While an independent future system operator will help shape our energy system, it’s important that introducing competition into the networks will benefit customers and not hinder progression.

“We now need the government to take further action in the Energy Security Bill by giving network companies the ability to make early, vital investment in infrastructure, and giving Ofgem a net zero mandate, which will enable a clean energy system to be delivered at best value for customers.”

Jess Ralston, senior analyst at the Energy and Climate Intelligence Unit, said:“ The big risk with the energy bill is that government gets distracted with technologies like hydrogen and nuclear that might play a role but not for years to come.

 “Steps that give immediate help to families struggling with rising energy bills, like insulation, seem to be falling by the wayside with Treasury blocking extra support and leaving the government open to criticism from voters who are feeling the pinch now.

“British renewables and home insulation are the only logical ways to both shield households from surging gas costs and isolate Putin.”

Simon Virley, head of energy and natural resources at KPMG, said: “The measures set out today in the draft Energy Security Bill are all welcome steps to building a low carbon economy over the longer term.  But there is nothing in the draft bill that will help consumers with the cost of living crisis in the short term, or help improve energy efficiency, which is the most cost effective way to permanently reduce energy bills, lower carbon emissions and reduce our dependence on imported oil and gas.”

Energy UK’s director of advocacy, Dhara Vyas, said “It’s welcome to see the proposals for greater consumer protection for customers of heat networks and the focus on transmission and connections, which will be essential for supporting the planned expansion of low carbon generation and storage.

“We look forward to working through the detail, as the energy industry is ready to deliver an affordable, clean power system that will benefit consumers and the UK economy.”

Stew Horne, head of policy at Energy Saving Trust, said: “Today’s announcement of an Energy Security Bill provides the opportunity for a much-needed update to legislation that has been in place for almost ten years, during which time the UK has significantly strengthened its decarbonisation commitments. This bill will be another important step on the path to achieving net zero, but action needs to go further and faster.

“We welcome the commitment to decarbonising heat through the regulation of heat networks and a new market standard and trading scheme to help encourage faster uptake of heat pumps. We would also like to see government moving policy costs from electricity bills to reduce running costs for consumers.”

“The introduction of the Future System Operator will enable positive change to the energy system by transforming the UK’s energy grid which, alongside expansion of renewable energy generation, will accelerate progress to a low carbon economy.”

“However,” he added, “there is still more the bill should include, such as a greater commitment to improving the energy efficiency of UK homes – including an ambitious timeline for the introduction of mandatory Minimum Energy Efficiency Standards across all tenures.

“In addition, as households continue to feel the effects of rising energy bills, we welcome the new legislation that will extend the energy price cap to protect consumers, but there is also an urgent need to provide immediate help to people struggling with the ongoing cost-of-living crisis now.”