The Energy Transition | Legislative changes for offshore hydrogen in new consultation and government scheme to cut non-domestic energy bills

This week we look at proposals for offshore hydrogen through a new consultation, a government scheme to cut 20% off non-domestic energy bills, and many more.

DESNZ eyes legislative changes for offshore hydrogen in new consultation

The Department for Energy Security and Net Zero (DESNZ) has launched a new consultation on regulatory proposals for offshore hydrogen pipes and storage. The consultation seeks views on extending "offshore oil and gas pipeline construction and to use consenting responsibility of the North Sea Transition Authority (NSTA) to also apply to hydrogen pipelines".

The consultation proposes to extend certain environmental and decommissioning regulations to apply to relevant hydrogen activities. The proposals include making regulations to designate hydrogen as a gas under section 2(4) of the Energy Act 2008.

The consultation further proposes to grant the NSTA powers to issue hydrogen storage licenses. DESNZ and the Offshore Petroleum Regulator for Environment and Decommissioning would be responsible for offshore environmental impact assessments and habitats assessments conducted prior to the granting hydrogen storage licenses.

The consultation raises the importance of hydrogen and its link to decarbonisation. The consultation paper suggests that "250-460TWh of hydrogen could be needed in 2050, making up 20-35 per cent of UK final energy consumption".

The consultation closes on 22 May 2023 and is open to all. DESNZ is keen to seek views from hydrogen economy stakeholders such as hydrogen producers, storage operators and gas transporters.

For further information on the role of hydrogen in the future energy system, please listen to the latest episode of our Energy Innovation podcast, "Moving to a hydrogen economy: how do we overcome the challenges?" In this episode, Osborne Clarke's energy partner, Hugo Lidbetter, interviews Steve Boughton, RWE’s UK director for hydrogen development.

UK government launches further support under Energy Bill Discount Scheme for trade-intensive businesses

The UK government launched further support under the Energy Bills Discount Scheme on 26 April. The  additional discounts are aimed at energy and trade-intensive UK businesses which have been most affected by the recent surge in global energy prices.

The relief will allow eligible businesses to apply a maximum 20% discount on wholesale energy bills produced between 1 April 2023 and 31 March 2024. Heat network operators can also apply for additional sector-specific support to ensure domestic consumers do not face disproportionately higher bills when compared to consumers supported by the Energy Price Guarantee.

Discounts could be reflected in bills from as early as June 2023, with support backdated to 1 April 2023.

Construction begins on UK’s largest solar farm

In a recent press release, Quinbrook Infrastructure Partners announced it has started construction on the UK’s "largest" solar and battery storage project. The global investment manager stated that the Cleve Hill Solar Project will generate £148 million pounds in local socio-economic benefits and will aid progression towards the UK's net zero targets.

The £450 million solar park was the first in the UK to be classed as a nationally significant infrastructure project due to its scale. The project is located in Kent and completion is expected by the end of 2024. Once operational, the site is expected to generate enough power each year to meet the needs of over 100,000 UK homes and help reduce carbon emissions by 164,450 tonnes every year.

Quinbrook is being supported by the government’s Contracts for Difference (CfD) scheme with a 15-year award under the UK's latest CfD auction. Quinbrook stated that the CfD award was the “largest received by a UK solar project” in the auction round.

Ofgem's vulnerability summit sparks discussion on UK's ongoing energy crisis

Ofgem hosted its first Vulnerability Summit on 24 April to discuss the difficulties faced in the energy sector. The summit brought together leaders in the sector to reflect on the energy prices of last winter and to explore protections for vulnerable consumers.

The CEO of Energy UK, Emma Pinchbeck, emphasised in a speech at the summit, the difficulties faced by the UK retail energy sector due to the Covid-19 pandemic and the subsequent global gas crisis. She called into question the current debt estimation of the sector, suggesting that total debt owed by consumers to suppliers has risen to between £3.5 billion and £3.6 billion, against the £2.5 billion figure estimated by Ofgem in 2022. Pinchbeck warned that suppliers are grappling with meeting the complex demands of their customers, hindering their ability to provide debt relief to those who are vulnerable. 

The chief executive of Ofgem, Jonathan Brearley, stated at the summit that prices "are easing significantly" and that the energy crisis is entering a new stage. Brearley noted that the reduction in energy prices is expected to be reflected in the price cap within the upcoming months. He cautioned that prices are unlikely to revert to pre-2021 levels, and vulnerable customers will continue to require support. Brearley called for the implementation of a new Priority Services Register system, which would create a unified registry for vulnerable customers across sectors such as energy and water.

This article was written with the assistance of Amy Lewis and Sophie Myatt, trainee solicitors.