The Content Coms view: What’s on the energy horizon for 2023?

2022 was a remarkable year for energy. Price hikes, war, supply restrictions. It all shone a light on just how precarious the world and the UK’s power can be, but also highlighted how efficiency and decarbonisation offer geopolitical, not just environmental wins. We asked our Energy Team about their predictions for events that will lead change in 2023.

1. MEES

In 2023, commercial energy rules are changing. The Minimum Energy Efficiency Standards (MEES), established in The Energy Efficiency (Private Rented property) (England and Wales) Regulations 2015, were first implemented in April 2018 and currently require that landlords granting a new lease of a commercial premises must hold an energy performance certificate (EPC) with a rating of E or above, unless they have registered a valid exemption.

But from 1 April 2023, the regulations are tightening and it will become unlawful for a landlord to “continue to let” a sub-standard property unless they have made all possible cost-effective energy efficiency improvements prescribed by MEES or unless one of the exemptions applies.

Our recommendations are that landlords act fast to check the MEES rules in detail, and make the maximum improvements they can for reputational and environmental wins too.

Perhaps more importantly, April 2023 should usher in a wider sense of long term energy efficiency across commercial letting. With energy prices and rising costs for businesses or private tenants, efficiency should be welcomed.

2. Business energy subsidies up in smoke

The UK will scale back energy subsidies for businesses for the next financial year by about 85 per cent to 5.5 billion pounds ($6.7 billion), after the government described the current level of support as unsustainably expensive.

The current six-month programme of energy support will expire at the end of March: it was predicted to cost 18.4 billion pounds when the government’s budget watchdog published forecasts in November.

The government said most businesses would receive a discount on their energy bills of up to 6.97 pounds per megawatt hour (MWh) for gas and 19.61 pounds per MWh for electricity between April 2023 and March 2024.

This is a different and less generous structure than the current programme, where the government set a maximum business tariff of 75 pounds per MWh for gas and 211 pounds per MWh for electricity, and compensates energy suppliers in case of higher wholesale rates.

It all means opportunities to save through energy efficiency from March are likely to be ever more important, and predictions on energy prices are key too.

The Chancellor of the Exchequer, Jeremy Hunt, has said wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine. Other analysts do appear to agree prices should be on the way down, but this of course depends on the ongoing geopolitical situation in Ukraine.

The Guardian says wholesale gas prices are down more than 50 per cent on last summer’s peak, but Russia might resort to nuclear weapons in its war with Ukraine. China might decide to invade Taiwan. If so, all the forecasts being made for the coming year would be hastily revised.

3. UK capacity market

Government is consulting on some big changes to the capacity market, with the consultation closing on 3 March 2023.

The idea is to create a greater incentive for investment in low carbon technologies central to homegrown energy, a step in the government’s long term plan to enhance energy security and deliver a Net Zero power system.

Options on the table include new contracts for low carbon technologies to incentivise their participation in capacity market auctions.

Greener, flexible technologies may in future be able to compete in auctions by offering multi-year contracts for low carbon flexible capacity, such as smart ‘demand side response’ technologies and smaller-scale electricity storage, supporting the move towards delivering secure energy in the long term.

Also, a proposed new lower emissions limit in the capacity market will kick in for new build plants from 1 October 2034, meaning all new oil and gas plants receiving long term agreements through the market will be obliged to lower emissions, through decarbonising their capacity by introducing carbon capture, hydrogen and other low carbon methods.

RenewableUK’s Chief Executive Dan McGrail said: “It’s vital that we decarbonise our electricity system completely by 2035, so this consultation represents an important step forward in that process. We need to incentivise more investment in new low carbon flexibility in our modern energy system based on renewable technologies including wind, solar, tidal stream and green hydrogen.”

It will be intriguing to see which changes the consultation eventually turns into law.

4. Renewables U turn

Just before Christmas, the UK Government announced it would consult on whether national planning policy frameworks should be changed to make onshore wind farm development easier in regions where local communities would support new arrays.

This consultation is due by the end of April 2023. Vattenfall’s Head of UK onshore development Frank Elsworth told EDIE: “If this is a genuine move which will put onshore wind on a level playing field with other infrastructure in England, it will send a very positive signal that the Government is serious about harnessing the benefits which onshore development can unleash for the environment, the economy and communities.”

Again, watch this space. Will wind make up a bigger and bigger proportion of UK energy?

5. The Net Zero Review

Depending on its content, the Net Zero Review could be the biggest thing in 2023 for UK energy. Bloomberg says Government is set to publish the Net Zero Review in early 2023. Exact dates are tough to find, but the review is coming soon.

The review should give businesses “clearer direction” on their pathway to Net Zero as well as more practical support to cut emissions.

Dan Altman from BEIS has told EDIE the Net Zero Review will result in around 60 recommendations, which, as a whole, are “very business-focussed”.

It’s impossible to imagine these won’t impinge on energy through the next year and beyond. It appears very much a case of watch this space on many, many fronts.