UK government proposes new bill to improve energy security

The UK government has introduced a new Energy Bill, which is designed to increase energy security. The bill was introduced during the Queen’s Speech to to both Houses of Parliament at the State Opening of Parliament 2015 on 27 May 2015.

Energy Bill

Purpose

  • Ensure there will be affordable and reliable energy for businesses and families.
  • Give the Oil and Gas Authority (OGA) the powers it needs to become a robust, independent and effective regulator, and enable it to maximise the economic recovery of oil and gas from UK waters.
  • Change the law in line with the manifesto commitment to give local communities the final say on wind farm applications.

Benefits

  • Increasing industry collaboration, driving down costs for consumers and attracting further investment to improve the overall competitiveness of the UK Continental Shelf (UKCS).
  • Bringing revenue to the UK contributing to economic growth and creating jobs.
  • Maximising the economic recovery of offshore oil and gas reserves, prolonging the life of the basin and helping to ensure our energy security.
  • Ensuring local planning authorities have consenting powers for all onshore wind farms.

Main elements

Establish the Oil and Gas Authority (OGA)
  • The bill would formally establish the OGA as an independent regulator, which would take the form of a government company, charged with the asset stewardship and regulation of domestic oil and gas recovery.
  • The bill would transfer the Secretary of State for Energy and Climate Change’s existing regulatory powers to the OGA. The Secretary of State’s regulatory functions in relation to the environment would not be transferred.
  • The bill would give the OGA additional powers including access to company meetings; data acquisition, retention and transfer; dispute resolution and sanctions.
  • The bill would increase the scope of fees and charges to target the costs of the OGA more closely to those who directly benefit from its services and functions.
Fee Schemes for Environmental Regulation of Offshore Oil and Gas
  • The bill would introduce provisions in relation to charges for the regulator’s services to the industry.
Onshore Wind
  • The bill would make legislative changes to remove the need for the Secretary of State’s consent for any large onshore wind farms (over 50 MW).
  • This, in effect, would devolve powers out of Whitehall by transferring the existing consenting powers, in relation to onshore wind, to local planning authorities.
  • This will mean that in future the primary decision maker for onshore wind consents in England and Wales will be the local planning authority. These changes will be supported by changes to the national planning policy framework to give effect to the manifesto commitment that local communities should have the final say on planning applications for wind farms.
  • These changes would not impact on the planning regime in Scotland and Northern Ireland.
  • The commitment to end new subsidy for onshore wind farms will be delivered separately, and DECC will be announcing measures to deliver this soon.

Energy Security

“The UK is one of the most energy secure countries in the world. The government is committed to keeping the lights on and powering the UK economy. To ensure secure supplies in the medium term, we are investing in new energy infrastructure and we have a capacity auction, which will ensure security of electricity supply from 2018/19 onwards. A further measure to be introduced is:

  • Delivering more secure and diverse energy supplies in the UK, through the proposed Energy Bill.

Investing in domestic oil and gas production is important because it helps reduce our reliance on imports of oil and gas. In 2014 oil produced on the UK Continental Shelf (UKCS) was equivalent to around 56% of UK oil demand, and domestic gas was similar. This approach ensures our resilience to energy disruption is improved and helps make a significant contribution to our economy.

Oil currently constitutes 41% of the UK Energy mix and is the main energy source for transport (97%). Gas constitutes around 34% of the UK Energy mix and is an important fuel in domestic and commercial heating, industrial processes, and electricity generation. The UK has enjoyed extremely good security of oil and gas supplies to date sourced mainly from the UK Continental Shelf and also from a diverse range of international sources.

Given the right business conditions, which promote investment, the UK’s Oil and Gas industry can continue to supply a significant proportion of our needs to 2020 and beyond.

The government is also working with National Grid to put in place an effective plan to secure electricity supplies. We will continue to reform the electricity market to ensure the necessary investment is made to transition to a low carbon electricity system at the lowest cost to consumers, whilst maintaining security of supply.

Together, these measures support the government’s approach to ensure that UK homes and businesses can rely on affordable and secure energy supplies, specifically by:

  • Ensuring we have a resilient power supply in the event of major disruption, regardless of whether it is due to cyber-attack or any other cause.
  • Continually assessing the risks to security of supply and system stability across GB. National Grid has the right tools in place to deal with even the toughest system conditions, including plant being unavailable.
  • Addressing issues of electricity supply and demand. We ran a successful capacity auction last winter which brought forward new investment at good value for money; and National Grid’s New Balancing Services meant we maintained a healthy capacity margin throughout; contrary to some press forecasts late last year.
  • In the medium term, the capacity auction mechanism will ensure we have enough capacity on the system to meet peak demand.
  • To ensure our energy security, we are also investing in new energy infrastructure such as new nuclear and new renewables, as well as exploring for gas.”

Commentary

Commenting on the proposals of the Queen’s Speech, Energy Networks Association Chief Executive, David Smith, said:

“We look forward to the introduction of an Energy Bill which provides greater stability for investment. It is encouraging to see the improved role for the Oil and Gas Authority, which indicates a continued commitment and recognition for the long term role for gas. However, the changes around onshore wind could risk introducing a level of instability for network planning and it is important that this is avoided.

“It is also right that the Government highlights efforts to ensure resilient, secure and affordable supplies as part of our low carbon transition. Network planning and development for smart grids, the increase of low carbon technologies and the work being lead through ENA as part of the next round of Climate Change Adaptation are all part of meeting these challenges.”

The CEO of io oil & gas consulting, Dan Jackson, commented:

“io welcomes the government’s proposal to give the Oil and Gas Authority (OGA) greater powers to reinvigorate exploration and production and ensure a bright industry future. It demonstrates the government’s commitment to maximise the economic recovery of oil and gas as an important part of the energy mix.

“North Sea operations are crucial for global output and there is an estimated 24 billion bbls of oil remaining. io’s view is that the market is open to readjusting and developing better ways to challenge and increase that amount.”


Adapted from press releases by Rosalie Starling

Published on 28/05/2015


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