Legalize / United Kingdom / Public General Act

Energy Act 2013

Type Public General Act

Publication 2013-12-18

State In force

Department Statute Law Database

Source legislation.gov.uk

Reform history JSON API

PART 1 — Decarbonisation

Decarbonisation target range

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(1) It is the duty of the Secretary of State to ensure, in respect of each year in relation to which a decarbonisation target range is set, that the carbon intensity of electricity generation in the United Kingdom is no greater than the maximum permitted level of the decarbonisation target range.

(2) The Secretary of State may by order (“a decarbonisation order”) set or amend a decarbonisation target range in relation to a year.

(3) A “decarbonisation target range”, in relation to any year, means a range for the carbon intensity of electricity generation in the United Kingdom.

(4) Section 4 makes further provision in relation to subsection (3).

(5) The earliest year in relation to which a decarbonisation target range may be set is 2030; and the first decarbonisation order may not be made before the date on which the carbon budget for the budgetary period which includes the year 2030 is set by virtue of the duty of the Secretary of State under section 4(2)(b) of the Climate Change Act 2008.

(6) A decarbonisation order may amend a decarbonisation target range only if it appears to the Secretary of State that significant changes affecting the basis on which the decarbonisation target range was set (or previously amended) make it appropriate to do so.

(7) The Secretary of State may not revoke a decarbonisation order unless, in respect of each year in relation to which the order sets a decarbonisation target range, a decarbonisation target range remains in effect.

(8) A decarbonisation order may—

(a) amend section 23(4) of the Climate Change Act 2008 (alteration of budgetary periods) so that after “Act” there is inserted “ or sections 1 to 4 of the Energy Act 2013 ”;

(b) repeal section 5 of the Energy Act 2010 (reports on decarbonisation and CCS progress).

(9) Provision made by virtue of subsection (8) may also—

(a) include incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings.

(10) A decarbonisation order is to be made by statutory instrument and a statutory instrument containing a decarbonisation order may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(11) Before laying before Parliament a draft of a statutory instrument containing a decarbonisation order the Secretary of State must consult the Department of Enterprise, Trade and Investment, the Scottish Ministers and the Welsh Ministers.

Matters to be taken into account

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(1) The following matters must be taken into account by the Secretary of State in setting or amending a decarbonisation target range.

(2) The matters are—

(a) scientific knowledge about climate change;

(b) technology relevant to the generation and storage of electricity and to the demand for and use of electricity;

(c) economic circumstances, and in particular the likely impact on the economy and the competitiveness of particular sectors of the economy;

(d) fiscal circumstances, and in particular the likely impact on taxation, public spending and public borrowing;

(e) social circumstances, and in particular the likely impact on fuel poverty;

(f) the structure of the energy market in the United Kingdom;

(g) differences in circumstances between England, Wales, Scotland and Northern Ireland;

(h) circumstances at European and international level;

(i) the duties of the Secretary of State under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets).

Further duties of the Secretary of State

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(1) As soon as is reasonably practicable after a decarbonisation order is made, the Secretary of State must lay before Parliament a report setting out proposals and policies for fulfilling the duty in section 1(1).

(2) Before laying the report under subsection (1), the Secretary of State must consult the Department of Enterprise, Trade and Investment, the Scottish Ministers and the Welsh Ministers; and the Secretary of State must send a copy of the report to them.

(3) The Secretary of State must in respect of each year—

(a) beginning with the year after the first year in which a decarbonisation order is made, and

(b) ending with the final year in relation to which a decarbonisation target range is set,

lay before Parliament a statement of the carbon intensity of electricity generation in the United Kingdom in relation to that year.

(4) Section 4 makes further provision in relation to subsection (3).

(5) The statement must include—

(a) a summary of the means by which the carbon intensity was calculated;

(b) in any statement after the first, a declaration of whether the carbon intensity has decreased or increased since the previous statement.

(6) In respect of any year in relation to which a decarbonisation target range is set, the statement must also include—

(a) a declaration that the carbon intensity in relation to that year was no greater than the maximum permitted level of the decarbonisation target range, or

(b) the reasons why the carbon intensity in relation to that year was greater than the maximum permitted level of the decarbonisation target range.

(7) The statement required by subsection (3) must be laid before Parliament not later than the 31st March in the second year following the year in respect of which the carbon intensity is being stated.

(8) The Secretary of State must send a copy of the statement required by subsection (3) to the Department of Enterprise, Trade and Investment, the Scottish Ministers and the Welsh Ministers.

Meaning and calculation of “carbon intensity of electricity generation in the United Kingdom”

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(1) In sections 1 and 3, “carbon intensity of electricity generation in the United Kingdom” means grams of carbon dioxide equivalent emissions, measured per kilowatt hour of electricity generated in the United Kingdom (calculated consistently with international carbon reporting practice).

(2) For the purposes of subsection (1)—

(a) “carbon dioxide equivalent” means a gram of carbon dioxide or an amount of any other greenhouse gas with an equivalent global warming potential (calculated consistently with international carbon reporting practice);

(b) “the United Kingdom” includes—

(i) the territorial sea adjacent to the United Kingdom, and

(ii) any area for the time being designated by an Order in Council under section 84(4) of the Energy Act 2004 (a “Renewable Energy Zone” for the purposes of that Act).

(3) In this section—

(a) “greenhouse gas” has the meaning given by section 92(1) of the Climate Change Act 2008;

(b) “international carbon reporting practice” has the meaning given by section 94(1) of that Act.

(4) But the Secretary of State may by order make further provision about—

(a) the meaning of “carbon intensity of electricity generation in the United Kingdom” (including, in particular, the meaning of “the United Kingdom”);

(b) the means by which the carbon intensity is to be calculated;

and subsections (1) to (3) are subject to provision made by any such order.

(5) An order under this section is to be made by statutory instrument and a statutory instrument containing such an order may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(6) An order under this section may—

(a) include incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings;

(d) make provision subject to exceptions.

(7) Before laying before Parliament a draft of a statutory instrument containing an order under this section the Secretary of State must consult the Department of Enterprise, Trade and Investment, the Scottish Ministers and the Welsh Ministers.

PART 2 — Electricity Market Reform

CHAPTER 1 — General considerations

General considerations relating to this Part

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(1) In exercising the function of making—

(a) regulations under section 6;

(b) an order under section 23;

(d) regulations under section 27;

(e) a modification under section 37;

(f) a modification under section 45;

(g) an order under section 46;

the Secretary of State must have regard to the matters mentioned in subsection (2).

(2) The matters are—

(a) the duties of the Secretary of State under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets);

(b) the duty of the Secretary of State under section 1(1) of this Act (decarbonisation target range);

(d) the likely cost to consumers of electricity;

(e) the target set out in Article 3(1) of, and Annex 1 to, the renewables directive (use of energy from renewable sources).

(3) In subsection (2)(e) “the renewables directive” means Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources.

(4) The Secretary of State must before 31st December in each year, beginning with 2014, prepare and lay before Parliament a report setting out how the Secretary of State has carried out during the year the functions under this Part of this Act.

(5) The Secretary of State must publish the report and send a copy of it to the Department of Enterprise, Trade and Investment, the Scottish Ministers and the Welsh Ministers.

CHAPTER 2 — Contracts for Difference

Regulations to encourage low carbon electricity generation

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(1) The Secretary of State may for the purpose of encouraging low carbon electricity generation make regulations about contracts for difference between a CFD counterparty and an eligible generator.

(1A) The reference in subsection (1) to encouraging low carbon electricity generation includes encouraging the continuation of, or an increase in, low carbon electricity generation by existing generating stations.

(2) A contract for difference is a contract—

(a) certain payments under which are to be funded by electricity suppliers (see further section 9), and

(b) which a CFD counterparty is required to enter into by virtue of section 10 or 14;

and such a contract is referred to in this Chapter as a “CFD”.

(3) For the purposes of this Chapter—

“CFD counterparty” is to be construed in accordance with section 7(2);

“eligible generator” is to be construed in accordance with section 10(3);

“low carbon electricity generation” means electricity generation which in the opinion of the Secretary of State will contribute to a reduction in emissions of greenhouse gases;

“regulations” means regulations under this section.

(4) In subsection (3) “greenhouse gas” has the meaning given by section 92(1) of the Climate Change Act 2008.

(5) The provision which may be made by regulations includes, but is not limited to, the provision described in this Chapter.

(6) Regulations may—

(a) include incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings;

(d) make provision subject to exceptions.

(7) Regulations are to be made by statutory instrument.

(8) An instrument containing regulations of any of the following kinds may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament (in each case, whether or not the regulations also make other provision)—

(a) the first regulations which make provision falling within each of the following—

(i) section 14;

(ii) section 15;

(iii) section 19;

(iv) section 20;

(aa) the first regulations made after the passing of the Energy Prices Act 2022 which make provision falling within each of the sections mentioned in paragraph (a);

(b) regulations which make provision falling within—

(i) section 9;

(ii) section 10;

(iii) section 12;

(iv) section 13;

(v) section 17;

(vi) section 18;

(vii) section 21;

(viii) section 22;

(ix) section 23.

(9) Any other instrument containing regulations is subject to annulment in pursuance of a resolution of either House of Parliament.

(10) If, but for this subsection, an instrument containing regulations would be treated for the purposes of the standing orders of either House of Parliament as a hybrid instrument, it is to proceed in that House as if it were not a hybrid instrument.

Designation of a CFD counterparty

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(1) The Secretary of State may by order made by statutory instrument designate an eligible person to be a counterparty for contracts for difference.

(2) A person designated under this section is referred to in this Chapter as a “CFD counterparty”.

(3) A person is eligible if the person is—

(a) a company formed and registered under the Companies Act 2006, or

(b) a public authority, including any person any of whose functions are of a public nature.

(4) A designation may be made only with the consent of the person designated.

(5) The Secretary of State may exercise the power to designate so that more than one designation has effect under this section ...

(6) A designation ceases to have effect if—

(a) the Secretary of State by order made by statutory instrument revokes the designation, or

(b) the person withdraws consent to the designation by giving not less than 3 months' notice in writing to the Secretary of State.

(7) At any time after the first designation has effect, the Secretary of State must, so far as reasonably practicable, exercise the power to designate so as to ensure that at least one designation has effect under this section.

(8) Schedule 1 (which makes provision about schemes to transfer property, rights and liabilities from a person who has ceased to be a CFD counterparty to a person who is a CFD counterparty) has effect.

(9) As soon as reasonably practicable after a designation ceases to have effect the Secretary of State must make a transfer scheme under Schedule 1 to ensure the transfer of all rights and liabilities under any CFD to which the person who has ceased to be a CFD counterparty was a party.

(10) Regulations may include provision about the period of time for which, and the circumstances in which, a person who has ceased to be a CFD counterparty is to continue to be treated as a CFD counterparty for the purposes of the regulations.

Duties of a CFD counterparty

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(1) A CFD counterparty must act in accordance with—

(a) any direction given by the Secretary of State by virtue of this Chapter;

(b) any provision included in regulations.

(2) A CFD counterparty must exercise the functions conferred by or by virtue of this Chapter to ensure that it can meet its liabilities under any CFD to which it is a party.

(3) In this Chapter “national system operator” means the person designated as the Independent System Operator and Planner under section 162 of the Energy Act 2023.

Supplier obligation

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(1) Regulations must make provision for electricity suppliers to pay a CFD counterparty for the purpose of enabling the counterparty to make payments under CFDs.

(2) Regulations may make provision for electricity suppliers to pay a CFD counterparty for the purpose of enabling the counterparty—

(a) to meet such other descriptions of its costs as the Secretary of State considers appropriate;

(b) to hold sums in reserve;

(3) In subsection (2)(a) “costs” means costs in connection with the performance of any function conferred by or by virtue of this Chapter.

(4) Regulations may make provision to require electricity suppliers to provide financial collateral to a CFD counterparty (whether in cash, securities or any other form).

(5) Regulations which make provision by virtue of subsection (1) for the payment of sums by electricity suppliers must impose on the CFD counterparty a duty in relation to the collection of such sums.

(6) Provision made by virtue of this section may include provision for—

(a) a CFD counterparty to determine the form and terms of any financial collateral;

(b) a CFD counterparty to calculate or determine, in accordance with such criteria as may be provided for by or under the regulations, amounts which are owed by an electricity supplier or are to be provided as financial collateral by an electricity supplier;

(d) the enforcement of obligations arising under such notices.

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