Expert energy analysis and insight for UK businesses.
The UK Government introduced the Energy Prices Bill.
The BEIS Secretary of State announced that an independent review has been commissioned of the government’s approach to delivering its net zero target.
Ofgem issued guidance for microbusinesses on Third Party Intermediaries.
BEIS published an open letter to Gas Distribution Networks inviting them to propose outline planning projects for areas of their gas networks which would potentially be suitable for conversion to enable early deployment of hydrogen heating at scale.
Ofgem published the outcome of its market compliance assessment review which investigated how suppliers support their customers in payment difficulty.
The International Energy Agency published its World Energy Outlook 2022 in which it discusses the ongoing price shocks seen across the global energy system along with analysis on future energy trends.
The Environment and Climate Change Committee published a report warning that the UK Government's current approach to enabling behaviour change is “seriously inadequate and will result in the UK failing to meet its net zero and environment targets”.
Also covered in this Regulatory Report:
On 11 October, BEIS announced that the UK Government would introduce the Energy Prices Bill on Wednesday 12 October, putting into law support designed to help households, businesses, and others with energy costs this winter, while reducing inflation and supporting economic growth.
From the introduction of the bill, British consumers are expected to pay ‘fairer’ electricity prices resulting from the government’s new emergency intervention, which will see a typical household pay around £2,500 a year, while businesses will pay less than half of predicted wholesale costs this winter.
A new temporary Cost-Plus Revenue Limit in England and Wales was also introduced in the bill, with the aim of reducing the link between high global gas prices and the cost of low-carbon electricity. This new scheme is expected to mitigate the impact of unprecedented wholesale prices on consumers and taxpayers by introducing a revenue limit on the amount generators can make, however the precise mechanisms of the scheme are to be subject to consultation to be launched shortly. It is expected the Cost-Plus Revenue Limit will come into effect from the beginning of 2023. The bill will also legislate for a voluntary Contracts for Difference process for existing generators to take place in 2023. A voluntary contract would grant generators longer-term revenue certainty and safeguard consumers from further price rises.
Following agreement by both the House of Commons and the House of Lords on the text of the bill, it received Royal Assent on 25 October and is now an Act of Parliament (law).
On 26 September, the BEIS Secretary of State announced that an independent review has been commissioned of the government’s approach to delivering its net zero target. The government stated the review will consider how its approach to net zero can deliver economic growth and investment, and provide energy security and affordability to consumers, while minimising costs faced by businesses and consumers.
In the terms of reference, it states the commitment to become net zero by 2050 remains in place but that the changed economic outlook has led to the review. It will consider how the government can:
During the review, the appointed chair, Chris Skidmore MP, is expected to consider a range of evidence and consult with a diverse range of stakeholders. A resulting report is scheduled for submission to the government by the end of December 2022.
Then on 29 September BEIS posted the call for evidence to engage in a range of themed roundtables with businesses, industry, communities, local government, and non-governmental groups. In addition, it will be issuing a broad call for evidence, open to the public.
Following his appointment as the new Prime Minister, on 25 October it was announces that Rishi Sunak appointed Grant Shapps as Secretary of State for Business, Energy and Industrial Strategy, replacing Jacob Rees-Mogg, and Thérèse Coffey as Secretary of State for Environment, Food and Rural Affairs, replacing Ranil Jayawardena.
Notable early actions included the decision to change the expected fiscal statement to a full Budget. The date of the event was delayed from the previously scheduled 31 October to 17 November. In addition, during Prime Minister’s Questions on 26 October, the PM said that he stood by the Conservative Party’s 2019 manifesto commitment to maintain the moratorium on fracking. During the same session, it was indicated that the government would also retain the Conservative Party manifesto’s commitment ruling out the construction of new onshore wind projects in England.
In October, the government announces a number of adjustments to the Energy Bill Relief Scheme (EBRS) for non-domestic consumers. On 1 October, it confirmed the maximum discount for non-domestic customers on default, variable, and flexible purchasing arrangements. The maximum discounts to be applied this winter are £345/MWh for electricity and £91/MWh for gas. For consumers with flexible purchase contracts, the reduction will be between the monthly weighted average baseload price and the Government Supported Price. Warnings have been issued about adjusting position to benefit from the scheme. The Government Supported Price for all contracts under the EBRS are £211/MWh for electricity and £75/MWh for gas. The government subsequently announced on 10 October that it was extending the scope of support for non-domestic customers on fixed contracts agreed on or after 1 December 2021, as opposed to the previously announced 1 April 2022 cut-off.
On 1 November, rules, guidance, and scheme documents relating to the EBRS were published.
On 17 October, the Chancellor of The Exchequer announced that support under the Energy Price Guarantee would be reviewed after six months, with a HM Treasury-led review launched to consider how it may support households and businesses with energy bills after April 2023.
Under the Renewables Obligation (RO) there is an annual obligation for electricity suppliers to present to Ofgem a specified number of Renewables Obligation Certificates (Rocs) per MWh of electricity supplied to their customers during each obligation period (1 April-31 March).
In an update, issued on 30 September, it was stated that the number of Rocs that electricity suppliers are required to produce during the 2023-24 obligation period will be 0.469 Rocs per MWh in GB (England, Wales and Scotland) and 0.184 Rocs per MWh in Northern Ireland.
On the issue of the exemption for Energy Intensive Industry (EII), BEIS’s latest outturn figures for 85% exempt electricity supplied to eligible EIIs in 2021/22 is 11.5TWh. The forecast for 2023-24 on the basis of an 85% exemption is 11.4TWh. It adds that the British Energy Security Strategy, published in April 2022, set out a commitment to consult on raising the exemption for EIIs from the indirect costs of the RO to up to 100%. BEIS launched a consultation for England and Wales which ran from 12 August to 16 September 2022, with a separate consultation carried out by the Scottish Government carried from 22 August to 23 September 2022. The announcement adds that should those responses set out an intention to increase the extent of the existing exemption then BEIS will include an estimate of the revised obligation level which would apply from 1 July 2023 through to 31 March 2024.
In the week commencing 10 October, Ofgem issued guidance for microbusinesses on Third Party Intermediaries (TPIs). This came following the outcome of its Microbusiness Strategic Review, which concluded in March 2022 with a refined package of reforms to improve how microbusinesses are treated in the energy market. It introduced a requirement under Standard Licence Condition (SLC) 20 for suppliers to only work with brokers signed up to a qualifying Alternative Dispute Resolution (ADR) scheme, due to come into effect from 1 December 2022, as well as modifying SLC 7A which took effect on 1 October and aims to ensure there is more clarity around microbusiness contracts and transparency of brokerage costs.
On 12 October, Ofgem issued guidance for microbusinesses on the ADR scheme for TPIs and on 14 October, Ofgem published guidance for microbusinesses on what they need to know about TPIs.
On 27 October, BEIS published an open letter to Gas Distribution Networks (GDNs) inviting them to propose outline planning projects for areas of their gas networks which would potentially be suitable for conversion to enable early deployment of hydrogen heating at scale.
This will contribute to the development of plans for a pilot hydrogen heated town which could potentially be implemented by 2030, subject to the government’s strategic decisions on the role of hydrogen in heating expected in 2026.
The letter provides guidance to GDNs on what should be included in outline plans, and how to apply for funding from BEIS to contribute to the costs of developing them. As the government has an objective to deliver plans for the possible pilot hydrogen town by 2025, the letter requests that the outline planning projects are completed by March 2024.
On 27 September, Ofgem published the outcome of its market compliance assessment review which investigated how suppliers support their customers in payment difficulty.
The 17 domestic suppliers investigated were split into four categories depending on the severity of the weaknesses identified. One supplier was found to have no issues, eight were found to have minor weaknesses, five had moderate weaknesses, and three were identified to have severe issues with their processes.
Some of the issues found by the regulator included a lack of adequate training materials for staff and a lack of evidence for policies or processes to identify thresholds for payment plans. Ofgem put forward a number of improvement actions for suppliers to take, including proactively identifying customers in payment difficulty so support is available, and ensuring payment rates are set based on a customer’s circumstances and ability to pay. The regulator is now engaging with suppliers to ensure compliance.
On 27 October, the International Energy Agency (IEA) published its World Energy Outlook (WEO) 2022 in which it discusses the ongoing price shocks seen across the global energy system along with analysis on future energy trends.
Within its report, the IEA presents three scenarios based primarily on the assumptions made on government policies. The Stated Policies Scenario (STEPS) shows the trajectory expected from today’s policy settings. The Announced Pledges Scenario (APS) assumes that all aspirational targets announced by governments are met on time and in full, including their long-term net zero and energy access goals. The Net Zero Emissions by 2050 (NZE) Scenario maps out a way to achieve a 1.5°C stabilisation in the rise in global average temperatures, alongside universal access to modern energy by 2030.
Notably, the STEPS is the first WEO scenario based on prevailing policy settings that forecasts a definitive peak in global demand for fossil fuels. In the scenario, coal demand is expected to peak in the next few years, natural gas demand reaches a plateau by the end of the decade, and oil demand reaches a high point in the mid‐2030s before falling slightly.
The IEA states that stronger policies will be essential to drive the increase in energy investment that is needed to reduce the risks of future price spikes and volatility.
The Environment and Climate Change Committee published a report on 12 October warning that the UK Government's current approach to enabling behaviour change is “seriously inadequate and will result in the UK failing to meet its net zero and environment targets”.
The report identifies that an estimated 32% of emissions reductions up to 2035 require decisions by individuals and households to adopt low carbon technologies and choose low-carbon products and services, as well as reduce carbon-intensive consumption.
Written evidence submitted to the report highlights the current gap between estimates of the average UK individual lifestyle carbon footprint (8.5 tonnes CO2 per year) and footprints consistent with emissions reduction targets for 2030 (2.5 tonnes) and 2050 (0.7 tonnes).
The committee states it examined evidence concerning the ways in which people can be encouraged to change their behaviours and the action the government has been taking to do that. It views that while the government has introduced some policies to help people adopt new technologies – such as electric vehicles – these “have not been replicated in other policy areas and there is a reluctance to help people to cut carbon-intensive consumption”.
Citing views that future technological innovations cannot be relied upon to deliver all the necessary emissions reductions, the committee recommends that the government learns from examples of where it has enabled behaviour change allowing it to enable people to make the necessary shifts in the key areas of travel, diet, consumption, and energy usage.
The report issues several recommendations to government, including that it should launch a public engagement campaign to build support for helping people to adopt new technologies and reduce carbon-intensive consumption.
On 13 October, Climate Change Committee (CCC) published a report titled Voluntary Carbon Markets and Offsetting in which it highlights that businesses are turning increasingly to offsetting to reach net zero. The organisation states that offsets can mask insufficient efforts from firms to cut their own emissions, often delivering less than claimed, and they may push out other environmental objectives in the rush to capture carbon.
The CCC derived that the current shortcomings of voluntary carbon markets and offsetting can be overcome with stronger governance to ensure high-intensity carbon credits and suggest that clearer guidance for businesses is needed to encourage them to cut their own emissions, before turning to offsets.
On 21 September, Citizens Advice published a report Insulation Nation: The roadmap to a future of affordable energy bills, setting out how households across England and Wales can benefit from energy efficiency measures.
Calling for drastic improvements to the energy efficiency of UK homes, three key findings from the report include that some families are seeing up to 30% of their energy bill go straight out of the window due to draughty, inefficient homes; that households would save a total of £8.1bn per year if all homes were at Energy Performance Certificate (EPC) rating C; and that 44% of homeowners are actively considering improving their homes, with cost being the main reason for those that are not.
BEIS announced on 29 September a £1.5bn plan to improve energy efficiency in low-income households through the “Help to Heat” scheme, in addition to existing government support. The funding will see “around 130,000” social housing and low-income properties in England upgraded. It stated that only 46% of UK households have an Energy Performance Certificate score of C or above. The upgrades, which include installation of external wall and loft insulation, energy efficient doors and windows, heat pumps, and solar panels, will save each property an estimated £400-£700 a year.
This is the third scheme being offered by the government along with the Social Housing Decarbonisation Fund (SHDF) and the Home Upgrade Grant (HUG) which focus on social housing with low energy efficiency and those in fuel poverty living off the gas-grid, respectively. The total costs of these schemes add up to £12bn of funding that the government is spending on improving home efficiency.
On 5 October, Zap-Map announced that it has worked with law firm TLT to investigate where, when and how UK consumers are charging electric vehicles (EVs). It has published a report which analyses survey data, sharing insights into the public charging network and funding landscapes.
The report found that around 90% of EV drivers use public charging points, with most using the public network on a more or less monthly basis, while some use it much more frequently and others less so. It also found that the network is being used for “en route” charging and these tend to be ultra-rapid charge points. There use has increased in 2022 with 37% of Zap-Map users state that they are using them.