The Energy Bill is back in Parliament – here’s what’s new

Following on from the British Energy Security Strategy in spring 2022, which significantly increased targets for deploying offshore wind, blue and green hydrogen and nuclear, then-Energy-Secretary Kwasi Kwarteng introduced a new Energy Security Bill designed to enact many of the changes necessary to deliver the Strategy.

Following the resignations of Boris Johnson and Liz Truss as Prime Minister, the Bill was hauled in for review and an updated version – simply called the Energy Bill – was set out in December 2022 once Rishi Sunak was firmly in post.

In recent weeks, the Bill has made its way through the House of Lords, where heated debates took place and significant amendments proposed. It is now back in the House of Commons, with a detailed line-by-line examination on the cards for the coming weeks.

Here, we outline the key inclusions in the new Bill in its current form.

An effective ban on coal mining in the UK

Last month, Liberal Democrat peers in the House of Lords tabled an amendment to the Bill which decrees that, within six months of the Bill receiving Royal Assent, the Government must ban the opening or licencing of any new coal mines in the UK.

The amendment was maintained after a close vote, with Labour and crossbencher peers supporting the Lib Dems.

The Commons will have to table another amendment if they wish to override this, which may well be the case, given the recent approval of the UK’s first deep coal mine in more than three decades. Michael Gove gave the green light for the mine in Cumbria, which will produce coal for use in the steel industry, late last year.

Members of the Climate Change Committee (CCC), the UK Government’s independent advisory body on climate, have condemned the decision and argued that it contradicts both the UK’s domestic emissions targets and its commitment to the Paris Agreement on the international stage.

Tighter targets on flaring

Chris Skidmore MP’s Net-Zero Review recommended that routine gas flaring should be banned by 2025, five years earlier than under current plans. The Government initially declined to adopt this recommendation, stating that oil and gas firms would find even the 2030 ban “challenging” to meet.

But the hand of Government may yet be forced; the Lords approved an amendment to the Energy Bill that would require a 2025 target to be set for the end of flaring.

More than two-dozen environmental organisations have publicly called on the Commons to uphold the amendment, including the Campaign to Protect Rural England and the Clean Air Task Force.

Earlier this year, the International Energy Agency (IEA) stated that oil and gas firms have “no excuse” for not taking action to cut methane emissions, by taking measures like reducing flaring. It highlighted that action is cheaper than inaction, especially given the current high wholesale prices of gas.

A net-zero remit for Ofgem

Another Net-Zero Review recommendation that the Government initially kiboshed was giving Ofgem a net-zero remit. Energy Efficiency Minister Lord Callanan had argued that this would not be a necessary move, but Skidmore has maintained that it is one of his Review’s most crucial recommendations.

Once again, the Lords have intervened. Baroness Hayman, Lord Hollick, Baroness Altmann and Lord Teverson tabled an amendment to grant Ofgem a statutory net-zero remit last month.

Ofgem has stated: “Our duty to protect the interests of current and future consumers and ensure sustainable development of the energy sector, is entirely consistent with the net zero mandate.”

As above, MPs will have to table another amendment of their own if they wish to override the Lords.

A potential hydrogen ‘levy’ on building heating

The Bill proposes powers for the Government to introduce a new levy on consumer bills to fund the development of hydrogen. Funding raised would be used to support the Government’s target of hosting 10GW of low-carbon hydrogen production by 2030, plus the delivery of related hydrogen storage and transportation infrastructure.

A cost of the levy has not been confirmed. Figures as high as £200 have been floated in the mainstream media, but trade body Hydrogen UK has stated that the amount is likely to be far lower. The Bill does, however, state that the levy would apply from 2025 and cover all revenue support for hydrogen production projects.

Lords and MPs from all parties have criticised the plans on the grounds that they would increase costs for consumers at an inopportune moment. Green groups have also questioned why, if hydrogen is best-suited for non-dometic uses such as industrial heating, households should foot the bill.

We can expect to see more heated debates on this levy in the near future.

North Sea carbon storage mapping

One amendment that has been made in the Commons – and has been bigged up by the Government’s media teams – will grant the North Sea Transition Authority new powers to regulate the growing carbon storage sector. The Authority, if the Bill is passed in its current form, will have powers to obtain information and samples from organisations with carbon storage licences.

This information will be used to develop a map of the geology underground in the North Sea, enabling strategic decision-making and unlocking investment in carbon storage. The Government estimates that there is enough space beneath the UK’s oceans to store up to 78 billion tonnes of CO2e – equivalent to more than 150 years’ worth of UK emissions.

Last summer, the North Sea Transition Authority hosted the UK’s first licencing round for plots of land for carbon storage.

What happens next?

In the coming weeks, MPs will conduct a detailed line-by-line analysis of the Bill. There will then be chances for new amendments to be proposed by MPs through the report stage.

A third and final reading of the Bill will then be undertaken before amendments are considered one final time. The Bill will then be sent to the King, who will grant Royal Assent.