Energy Bill: From turbines to hydrogen, how is our energy system getting ready for net zero?

What is the latest with the Government's flagship legislation, the Energy Bill?

By Jess Ralston

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The Government’s flagship Energy Bill passed and received Royal Assent to become law on 26th October 2023. It is the biggest piece of legislation in the sector in decades and will be crucial to overhauling the UK’s energy system to become compatible with net zero.

But there have been several flashpoints, most notably over consent for building onshore wind turbines. The power system needs to rapidly decarbonise, according to the Government’s own advisors the Climate Change Committee, but renewables power generators currently face hurdles in the form of tight regulations and high costs. The Energy Bill is the Government’s opportunity to loosen the rules and boost the net zero economy.

With the Inflation Reduction Act in the US and similar subsidy schemes in the EU luring manufacturers to build there, the Bill is Britain’s chance to remain competitive in clean energy.

What are the key changes in the Energy Bill?

Onshore wind

Britain has the second largest offshore wind market in the world after China but has been hamstrung when it comes to building the turbines on land. Planning rules imposed by David Cameron in 2015 meant a single local objection could tank a project. Since then, just 20 onshore turbines have received planning permission, 2.7% of the number passed in the five years before.

The de facto ban has left households relying on Russian pipelines for power. And, from the start of the gas crisis sparked by the war on Ukraine, to 2024, each bill payer will be an average of £4,400 out of pocket. This seems bizarre given Ukraine has installed around 20 onshore turbines since the war with Russia began, some just 60 miles from the front line.

Onshore wind projects supplying cheap, renewable, domestically sourced power can cut bills and boost energy security. They enjoy widespread popularity, with three-quarters of Britons (including Conservatives) supporting new onshore windfarms in their area and saying they would be proud of their MP for backing one. Meanwhile gas is expected to stay two to three times higher than pre-crisis levels for the foreseeable future. And windfarm nimbyism reflects a small fraction of the population.

There will be new planning rules for building windfarms and Rishi Sunak has said a single objection will no longer derail a project. But in a first for building regulations, councils must prove that windfarms have local support. No other form of infrastructure has to meet this standard. The move poses the risk that the minority who have blocked clean energy progress in the past will still be able to sink windfarms.

Britain’s onshore wind capacity must double by 2030 to meet its net zero target. But industry insiders have said the reformed regulations will not inspire sufficient confidence to plan windfarms on England’s land and further amendments to change this in the Energy Bill were not taken on by Government.

Hydrogen for heating

The Government plans to go ahead with investigating hydrogen for heating. Heating accounts for more than a fifth (22%) of the UK’s carbon emissions so replacing the old gas boilers with a green alternative is a key concern and Westminster hopes that alternative could be hydrogen.

But pilot schemes have run into local opposition. Plans for a village-wide test in Whitby, Cheshire, were ditched in the face of resident pushback. And the second village mooted for the trial, Redcar, is now facing similar local objections. However, a new neighbourhood trial will begin in Fife in 2024, which should be followed by a large village trial in 2025. And gas companies will be given the powers to go in and turn off the existing heating in homes to make it safe to run trials, showing the Government may be determined to push ahead.

But industry experts doubt hydrogen is the solution for domestic heating, although it could be key to decarbonising heavy industry. Because of the cost and the infrastructure required, hydrogen is less appealing for heating homes compared to alternatives such as heat pumps.

The proposed £120 annual levy on energy bills to fund hydrogen production has also been scrapped, with MPs saying it shouldn’t be up to the public to foot the bill. Instead, gas shippers – those who move gas around the country – will front the cash. This means that significant amendments that would allow the levy to progress in this form have been included in the Bill.

Energy efficiency

Alongside alternative sources of power and clean energy generation, ministers are eager to explore how Britain can consume less. MPs led by Caroline Lucas called for the creation of an Energy Demand Reduction Delivery Plan. The plan would have had targets for aviation, surface transport, shipping, manufacturing and construction, buildings and agriculture, with each sector to reduce the amount of energy they use, all monitored by the Climate Change Committee. But this doesn’t appear to have made it through to the final version of the Bill.

Britain also has to address its housing stock to meet its net zero commitment. The UK has the oldest and leakiest homes in Europe and, in the private rented sector at least, a tightening of standards will stop energy flowing out through roofs and walls.

One Energy Bill amendment called for all tenancies to have an Energy Performance Certificate (EPC) of C by the end of 2028 – just a confirmation of the Government’s pre-existing ‘target’. Councils would have powers to inspect landlords’ properties to check they comply. All works undertaken to meet the standard would have been capped at £10,000, but the penalty for not complying would be £30,000.

The amendment was not included in the Bill and since, the Prime Minister has sensationally scrapped these private rented sector standards altogether in his net zero speech – saying they will ‘never’ be introduced.

This will be a bitter pill for private tenants to swallow, who now may be left colder and poorer in sub-standard homes.

Heating and biofuels in off gas grid homes

Some rural homes in Britain are off the gas grid and have mainly been running on oil boilers, which ministers planned to ban from being installed from 2026. The PM pushed this back to 2035 recently. But George Eustice, a former environment secretary, called for people to be allowed to carry on using the boilers as long as they run on 'clean’ biofuels such as hydrogenated vegetable oil. This was included in the Bill, but there are concerns the lingering use of oil boilers will delay the heat pump rollout.

It's not clear how much biofuels will cost, or how clean they will really be. It’s a drop-in solution touted by the liquid fuel companies that want to keep on selling their wares. How beneficial it will be for the customer, with costs and availability unknown, remains to be seen but it is likely that the household would have to pay a few hundred pounds just to convert their existing boiler.

So, many people are left wondering whether this delay to heat pumps is worthwhile, or just giving into the lobbyists.

A response to the Inflation Reduction Act?

The behemoth Energy Bill comes a year into America’s Inflation Reduction Act (IRA), which has supercharged investment in net zero industries. Businesses operating in renewable power generation, building turbines and heat pumps, and exploring hydrogen and carbon capture can choose to relocate, finding more favourable conditions across the Atlantic.

The Energy Bill was the opportunity to lure them back, showing the UK can rid itself of stifling regulations, commit to decarbonisation and boost the net zero economy. But, with builders still hamstrung over onshore wind, and limited support for the heat pump rollout and energy efficiency, it may have missed the mark.