Energy Act 2023 – An update from the UK

published on 30 November 2023

Formerly known as the Energy Security Bill, the Energy Act 2023 came into force in the UK on 26 October 2023, most of the schemes and rules that we have seen in the UK regarding the energy market and industry stem from the Energy Act 2013. Both pieces legislation were covered in our talk on the Energy market in the UK during the Branchentreffen in Nuremberg. The Energy Act 2023 deserves some further focus.

The Energy Act 2023 brings new features to the energy market, one of which is the creation of Powers to facilitate the transfer of many of the functions of National Grid Electricity System Operator (NGESO) to an Independent System Operator and Planner (ISOP). A future system operator (“FSO”, this FSO will look also into the longer term planning of the system of electricity and gas and analysis of its future needs.

The law sets out that the FSO shall:

Be a public corporation, licensed and regulated by Ofgem and funded by consumers through price control arrangements.
Assume the main existing roles of NGESO and the longer term planning, forecasting and market strategy functions in respect of gas (but not real-time gas system operation or network emergency coordinator functions).
Have a statutory advisory duty that looks at the whole system, considering interactions across electricity, gas and other emerging energy markets, both on and offshore, and between transmission and distribution systems.
Have statutory duties that include facilitating net zero, ensuring security of supply and ensuring an efficient, co-ordinated and economical gas and electricity system as primary duties, while considering at the same time competition, innovation, impacts on customers and whole system impacts.
Be subject to a new strategy and policy statement, alongside Ofgem

The Energy Act 2023 also conveys powers to licence bodies who manage the energy industry documents (code managers) and direct changes to the codes.

As a result of this, the outlook for PPA’s (Power Purchase Agreements) may change along with the trading system for the sale of electricity in the UK, the aim of this legislation is to help better prepare the UK for the future, including strengthening security of supply where the vulnerability of the supply of energy to the UK has been highlighted by the continuing war in Ukraine.

If you would like to discuss the UK Market for renewable energy or the legal requirements of the UK Energy Market, our team of lawyers, tax advisors and consultants will be happy to help. Please contact us to discuss further.