Welcome to our monthly Energy Update, bringing you all the key energy and water developments this month in one place.
This month sees the new Energy Bill being introduced to Parliament (see our summary) and a wide-ranging review of the GB electricity market arrangements. Plus take a look at our new series of UK Emissions Trading Scheme insights and let's see what the UK Government does next after the Net Zero Strategy was successfully challenged in court.
- Capacity Market
A Department for Business, Energy & Industrial Strategy (BEIS) publication summarises the responses and next steps to its consultation on potential ways to improve assurance that capacity will deliver when required as the electricity system transitions towards net zero. BEIS has also published a document outlining the Capacity Market (Amendment) (No. 2) Rules 2022 and a letter settings out the parameters for the T-1 auction for 2023 to 2024, and the T-4 auction for 2026 to 2027 delivery year.
BEIS, 18 July 2022
A Business, Energy and Industrial Strategy Committee report welcomes the Government’s May 2022 support package, saying it is no longer sufficient to respond to expected price increases come October. The Government must immediately update its support, targeting customers who are on low incomes, fuel poor, and in vulnerable circumstances, and develop a scheme to support vulnerable customers to accelerate the repayment of energy debt resulting from this crisis. The Government should consider the introduction of a social tariff for the most vulnerable customers and a relative tariff for the rest of the market.
UK Parliament, 26 July 2022
- Emissions Trading
BEIS are currently seeking views on the design of a business model for engineered greenhouse gas removal (GGR) technologies. This will help attract private investment and enable GGR projects to deploy at scale from the mid-to-late 2020s. Consultation ends: 27 September 2022.
BEIS, 5 July 2022
Addleshaw Goddard's Carbon Markets and Emissions Trading team has published a series of in-depth Insights looking at the recent UK Emissions Trading Scheme (UK ETS) consultation.
The UK Government is currently consulting on developing the UK Emissions Trading Scheme and how it can help reduce greenhouse gas emissions. In the first of a series of articles, our Carbon Markets and Emissions Trading team look at the likely cap on emissions, the extent of free allowances, and objectives for future UK ETS markets policy
The second article in our series on the UK ETS consultation looks at the impact on upstream oil and gas as the scheme may be extended to cover CO2 and methane emissions from venting.
The third article in our series on the UK ETS consultation looks at how greenhouse gas removals could play an important role in the UK reaching 'net zero' emissions by 2050 by compensating for the residual emissions from the sectors which will not be able to decarbonise completely by then.
As part of the consultation on Developing the UK Emissions Trading Scheme (UK ETS), the UK Government is seeking evidence on how emissions from agriculture and land use can be measured, reported and verified. This is relevant to funds considering investing in agricultural land for the purpose of generating carbon credits.
The UK ETS plays a large part in the UK government's strategy for decarbonising aviation. In the fifth in our series of Insights on the Developing the UK Emissions Trading Scheme consultation, we look at the chapter dealing with aviation. There are three main issues: implementing a net zero consistent cap; reviewing the free allocation policy; and the future scope of the scheme, including whether to include sustainable aviation fuels and how to link it with other international schemes.
In line with its commitment to expand the UK Emissions Trading Scheme (ETS) to new sectors of the economy, and building on the Transport Decarbonisation Plan published in 2021, the UK Government is consulting on including domestic maritime in the UK ETS by the mid – 2020s. Our insight article looks at the options the Government is proposing.
In this Insight article, we look at a consultation on how solid and gaseous biomass is treated under the UK ETS in cases where it is combusted as a fuel by energy intensive industries and power generation sectors in scope of the ETS.
As part of the consultation on Developing the UK Emissions Trading Scheme (UK ETS), the UK Government is seeking evidence on whether the UK ETS should be expanded to include waste incineration and energy from waste (EfW) plants. Is it too soon for this?
- Energy Regulation
A review of electricity market arrangements will identify reforms needed to transition to a decarbonised, cost effective and secure electricity system that will work for businesses, industry, and households. Consultation ends: 10 October 2022. Find our Insight piece on this here.
BEIS, 18 July 2022
In this paper, Ofgem have put forward their views on key aspects of GB's energy system where they consider significant reform is needed to reduce Britain’s reliance on expensive gas imports and accelerate the transition towards cleaner, more secure and affordable supplies of home-grown energy. This overlaps with the REMA consultation above.
Ofgem, 8 July 2022
Our Insight piece looks at the Energy Security Bill (known as the Energy Bill 2022) which was introduced to Parliament on 19 July 2022 and makes provisions about energy production and security and the regulation of the energy market. The Bill's provisions relate to 26 separate energy-related measures and is structured around three ‘key pillars’ which includes: leveraging investment in clean technologies; reforming the UK's energy system and protecting consumers; and maintaining the safety, security and resilience of the energy systems across the UK.
BEIS guidance intended to help developers of new build downstream gas and electricity infrastructure understand the scope of the National Security and Investment Act 2021.
BEIS, 20 July 2022
Incentive on Connections Engagement (ICE) consultation on the Distribution Network Operators' 2022 submissions
Ofgem are seeking views on how well the distribution network operators (DNOs) engage with their large connections stakeholders to ensure they are delivering a service that meets customer's needs. Consultation ends: 16 August 2022.
Ofgem, 19 July 2022
Consultation on Ofgem's minded-to decision and draft impact assessment on the initial findings of the Electricity Transmission Network Planning Review
An Ofgem document explaining their minded-to decision on the initial findings of their Electricity Transmission (ET) Network Planning Review. Alongside this, Ofgem have also included their draft Impact Assessment which analyses the potential impacts of replacing current ET network planning processes with the Centralised Strategic Network Plan model.
Ofgem, 8 July 2022
Ofgem are consulting on modification to the Strategic Innovation Fund (SIF) Governance Document to reflect the lessons learned following round 1 of the SIF in 2021. Consultation ends: 4 August 2022.
Ofgem, 6 July 2022
Ofgem has launched a consultation on its Draft Determinations for the RIIO-ED2 price control. The next price control will cover the five-year period from 1 April 2023 to 31 March 2028. The consultation ends on 25 August 2022 with the expectation that Ofgem will confirm its Final Determinations for RIIO-ED2 by December 2022.
Ofgem, 29 June 2022
On 20 July 2022, BEIS published a Hydrogen Strategy update to the market which summarises government hydrogen policy developments and schemes since the original Hydrogen Strategy was published a year ago.
On 20 July 2022, BEIS published a hydrogen sector development action plan highlighting the nature and scale of opportunities across the hydrogen economy in the UK. It focuses on four key areas: investment, supply chains, jobs and skills, and exports. It sets out actions the government and industry are taking in those areas to maximise the benefits from scaling up the UK hydrogen economy. The action plan also sets out how the government will monitor and evaluate the development of the hydrogen sector.
A BEIS publication provides the Government's response to the consultation on its proposed approach to allocating Hydrogen Business Model and Net Zero Hydrogen Fund support through a joint allocation process for electrolytic hydrogen projects. Alongside the response, BEIS also published guidance setting out the key criteria for the 2022 Hydrogen Business Model (HBM) / Net Zero Hydrogen Fund (NZHF) Electrolytic Allocation Round, which opened the same day.
BEIS, 20 July 2022
This BEIS report analyses the supply chain requirements to support hydrogen production, transmission, distribution and storage, and the manufacture of fuel cells over the period to 2050 in the UK.
BEIS, 20 July 2022
On 19 July 2022, the Department for Transport (DfT) published its response to proposals to alter the Renewable Transport Fuels Obligation (RTFO) to increase carbon savings on land, air and at sea. The response indicated:
- amending the Renewable Transport Fuel Obligations Order 2007 (SI 2007/3072) to include a definition of additionality. It will help to improve flexibility when determining the eligibility of hydrogen and other renewable fuels of non-biological origin when produced from renewable energy; and
- proceeding with reclassifying hydrogen produced from biomethane reformation without substantial carbon capture and storage (CCS) to be eligible for standard renewable transport fuel certificates (RTFCs) only from 1 January 2023. Draft guidance will also be published.
DfT, 19 July 2022
- Net Zero
The High Court has given its decision in R (Friends of the Earth and others) v Secretary of State for Business, Energy and Industrial Strategy  EWHC 1841 (Admin), finding that the Government had failed to comply with his obligations under the Climate Change Act 2008 s.13 and s.14 in relation to its Net Zero Strategy. A new strategy must be published within 8 months.
BAILII, 18 July 2022
The post-implementation review of Part 3 of the Energy Act 2013 (EA 2013) was commissioned in March 2021 by the Secretary of State for Business, Energy and Industrial Strategy, as required by Section 118 of the EA 2013. The review concluded in March 2022, and the full report has been laid in Parliament.
BEIS, 21 July 2022
The Science and Technology Committee has launched a call for evidence as part of its inquiry into examining the Government’s approach to developing new nuclear power.
Consultation ends: 30 September 2022.
UK Parliament, 19 July 2022
The Secretary of State has granted development consent for the construction and operation of the Sizewell C nuclear power station based near Leiston, Suffolk. The Secretary of State decision letter concludes that the 'very substantial and urgent need for the proposal outweighs the harms, and that development consent should therefore be granted'.
National Infrastructure Planning, 20 July 2022
- Oil & Gas
An Act to make provision for, and in connection with, imposing a charge on ring fence profits of companies. HMRC have also published a tax information and impact note focusing on the levy, which applies to profits arising on or after 26 May 2022 to companies within the ring fence corporation tax regime.
UK Parliament & HMRC, 11 July 2022
Article 2 of this Order establishes, under section 22 of the Petroleum Act 1987, safety zones having a radius of 500 metres from the specified point around the 10 installations (which are subsea installations) specified in the Schedule to this Order stationed, or to be stationed, in waters to which section 21(7) of the Act applies (These include territorial waters and waters in areas designated under section 1(7) of the Continental Shelf Act 1964).
In force: In accordance with article 1(2).
A document outlining Ofgem’s administration of the Green Gas Levy (GGL). It provides details of the obligations for new, current and former licenced gas suppliers and supersedes the version published on 26 January 2022.
Ofgem, 5 July 2022
A publication analysing responses received to the Scottish Government's consultation on its draft Onshore Wind Policy Statement and its ambition to secure an additional 8-12 GW of installed onshore wind capacity by 2030.
Scottish Government, 26 July 2022
A Maritime and Coastguard Agency consultation seeks views on the review of Marine Guidance Note (MGN) 372 Safety of Navigation: Offshore Renewable Energy Installations (OREIs): Guidance to mariners operating in the vicinity of UK OREIs. Consultation ends: 19 August 2022.
Maritime and Coastguard Agency, 15 July 2022
Welsh Government guidance supporting the target for at least 1 gigawatt of renewable electricity and heat capacity to be locally owned by 2030 and the expectation for all new energy projects to have at least an element of local ownership from 2020.
Welsh Government, 29 June 2022
- Smart Networks
The Energy Digitalisation Strategy, developed by the Government, Ofgem and Innovate UK in coordination with the energy sector, sets out a vision and suite of policies to digitalise the energy system. Digitalisation will enable millions of low carbon assets, including solar PV, electric vehicles and heat pumps, to be optimised across the energy system.
BEIS, Ofgem & Innovate UK, 19 July 2022
Consultation on delivering a smart and secure electricity system: the interoperability and cyber security of energy smart appliances and remote load control
A BEIS consultation seeks views on seeking views on a range of proposals that will impact appliances and organisations with a role in controlling electricity usage. Consultation ends: 28 September 2022.
BEIS, 6 July 2022
The Government has announced new plans to help safeguard England’s precious protected sites by driving down nutrient pollution and allowing for the construction of sustainable new homes. The plans announced will see a new legal duty on water companies in England to upgrade wastewater treatment works by 2030 in ‘nutrient neutrality’ areas to the highest achievable technological levels and a new Nutrient Mitigation Scheme established by Natural England, helping wildlife and boosting access to nature.
Department for Environment, Food & Rural Affairs (DEFRA), Department for Levelling Up, Housing and Communities & Natural England, 20 July 2022
The Government has committed to improving reservoir safety through reforms to the regulatory regime and modernisation of the Reservoirs Act 1975 as it accepted all of the recommendations of the second part of an independent review by Professor David Balmforth.
DEFRA, 20 July 2022
An Ofwat decision document sets out changes to its Wholesale Retail Code which proposes to remove the requirement for the Code Change Committee to review and approve a list of documents created by the market operator. The recommended date of implementation is 26 August 2022.
Ofwat, 14 July 2022
An Ofwat consultation seeks views on its draft methodology for the upcoming Price Review (PR24) with a focus on securing better outcomes for customers and the environment. PR24, which will cover the period 2025-2030, will drive water companies to step up to deliver in the face of urgent challenges on the environment and climate change. The review will push companies to find new and innovative ways of delivering affordable, reliable and resilient services for all. Consultation ends: 7 September 2022.
Ofwat, 7 July 2022
In response to a written question asking about plans to take steps to help prevent excessive water abstraction in areas with high water stress, the DEFRA states that new Water Resources Management Plans will be consulted on at the end of 2022.
DEFRA, 28 June 2022