The Energy Act 2023 received Royal Assent and passed into law on 26 October 2023. 

Coming at a time of high energy prices and increasing cost-of-living pressures, along with mounting concerns about the UK’s commitment to its net zero targets, the Government labels the Energy Act as the ‘biggest piece of energy legislation in the UK’s history’.  

The Act aims to update the legal framework of the UK’s energy sector in order to deliver those net zero commitments, increase efficiency and improve regulation, and ensure energy is affordable for households and businesses.

The changes in the Act are wide ranging, and the effects of these will be felt not just in the energy sector but more widely. A key change of the Act is the introduction of powers to enable heat network zoning in the UK, as well as a framework to regulate new heat networks. 

Heat network zoning is a key element of the UK’s net zero strategy, and new regulations will give the Government powers to implement heat zoning in the UK. New measures will allow central and local government to work with the industry to identify and designate areas where heat networks are the lowest cost solution for decarbonising heat, recognising that some areas lend themselves well to heat networks (because of building density and the availability of heat sources). Within a heat network zone, new buildings, large public sector and other large (mainly non-domestic) buildings, and domestic buildings that are already communally heated, will be required to connect to a heat network. 

The Act also appoints Ofgem as the new regulator for heat networks, allowing them to set rules on excessive pricing and improve the quality of service to consumers. It also expands Ofgem’s remit to take into account net-zero targets in its day-to-day decisions.

Other changes from the Act include:

• a new tender process for onshore electricity networks to foster competition and save costs for consumers; 
• a new merger regime for power networks to reduce the risk of mergers to consumers and drive down costs for households;
• measures to increase the use of smart meters, focusing on safety and consumer confidence, helping with the management of energy consumption for households;
• A new licencing framework for CO₂ transport and storage, helping to deliver the UK’s first carbon capture sites and supporting up to 50,000 jobs by 2030. 

The Act brings large scale changes to which local authorities, housing providers, and others with an interest in district energy and heat will need to pay close attention.  

Please get in touch if you would like to discuss how to respond to these changes.