UK Energy Law
Statutory Framework
UK energy law is constituted by a series of major statutes that have progressively restructured the sector. The Electricity Act 1989 privatised the electricity supply industry in England and Wales, breaking up the vertically integrated Central Electricity Generating Board (CEGB) into generation, transmission, and distribution companies, and establishing a wholesale electricity pool. The Gas Act 1986 similarly privatised British Gas and introduced competition in gas supply. The Utilities Act 2000 created a single regulator for gas and electricity markets, now the Office of Gas and Electricity Markets (OFGEM) .
The Energy Act 2013 introduced the Electricity Market Reform (EMR) , establishing the Contracts for Difference (CfD) regime and the capacity market. The Energy Act 2023 is the most recent major legislation, creating a new institutional architecture: the Future System Operator (FSO) — an independent public body responsible for strategic planning and system operation — and the Central System Operator (CSO) . The 2023 Act also established a hydrogen levy and amended licensing regimes for carbon capture and storage (CCS) and hydrogen transport.
OFGEM and Economic Regulation
OFGEM is the independent economic regulator for gas and electricity markets in Great Britain, operating under the Gas Act 1986 and the Electricity Act 1989 (as amended). OFGEM’s principal statutory objective is to protect the interests of existing and future consumers, with a secondary duty to contribute to the achievement of net-zero emissions. OFGEM administers licensing for generation, transmission, distribution, and supply; enforces compliance with licence conditions; sets price controls for the natural monopoly network companies (RIIO framework — Revenue = Incentives + Innovation + Outputs); and oversees retail market competition. The British Gas Trading Ltd v. OFGEM (2021) litigation concerned the scope of OFGEM’s enforcement powers in the wholesale energy market.
UK Emissions Trading Scheme (UK ETS)
Following Brexit, the UK established its own UK Emissions Trading Scheme (UK ETS) under the Greenhouse Gas Emissions Trading Scheme Order 2020 (SI 2020/1265), replacing the UK’s participation in the EU ETS. The UK ETS covers energy-intensive industries, power generation, and aviation, with a cap that declines in line with the UK’s net-zero trajectory. The UK Emissions Trading Scheme Authority, comprising the UK Government, Scottish Government, Welsh Government, and DAERA (Northern Ireland), administers the scheme. The free allocation of allowances to industrial sectors at risk of carbon leakage is allocated under the UK ETS free allocation regulations. In 2023, the UK ETS cap was reduced by 30% to align with the Carbon Budget Delivery Plan.
Contracts for Difference (CfD) Regime
The Contracts for Difference (CfD) regime, established under the Energy Act 2013 and implemented through the Electricity Market Reform (CfD) Regulations 2014, is the primary mechanism for supporting low-carbon electricity generation in the UK. CfDs are private law contracts between eligible generators and the Low Carbon Contracts Company (LCCC) , a counterparty owned by the Secretary of State. Generators receive a strike price determined through competitive auctions; when the wholesale electricity price (reference price) falls below the strike price, the LCCC pays the difference, and generators repay when the reference price exceeds the strike price. The CfD regime has been allocated through allocation rounds — the fifth round (AR5) in 2023 awarded contracts to solar, onshore wind, and tidal stream projects. The scheme has been central to reducing the cost of offshore wind, with strike prices falling from £140/MWh in AR1 (2015) to £37/MWh in AR4 (2022).
Capacity Market
The Capacity Market (CM) , also established under the Energy Act 2013, ensures security of electricity supply by paying capacity providers to maintain reliable capacity. Capacity agreements are awarded through capacity auctions: the T-4 auction procures capacity four years ahead, and the T-1 auction for the following year. The CM has been subject to multiple legal challenges, including Tempus Energy Ltd v. European Commission (T-793/14, 2016), which resulted in the European Commission suspending CM payments pending a state aid investigation. Following the UK’s withdrawal from the EU, the Capacity Market continues under domestic rules, with the Capacity Market (Amendment) Regulations 2022 reforming the emissions limit criteria to align with net-zero objectives.
Nuclear Regulation and the ONR
The Office for Nuclear Regulation (ONR) is the independent regulator for nuclear safety, security, and safeguards in the UK, established under the Energy Act 2013. The ONR administers the nuclear site licensing regime under the Nuclear Installations Act 1965, requiring a licence for any site used for nuclear reactor operation, fuel reprocessing, or waste storage. The UK’s nuclear regulatory framework also includes: the Nuclear Security Regulations 2003 (implementing the Convention on Physical Protection of Nuclear Material); the Carriage of Dangerous Goods and Use of Transportable Pressure Equipment Regulations 2009 for nuclear material transport; and the Environmental Permitting Regulations 2016 for radioactive discharges. The generic design assessment (GDA) process, administered by the ONR and the Environment Agency, assesses new reactor designs before site-specific licensing — the AP1000 (Westinghouse), EPR (EDF/Areva), ABWR (Hitachi-GE), and HPR1000 (CGN/EDF) have all undergone GDA.
Net Zero Strategy and Climate Law
The Climate Change Act 2008 (as amended in 2019) establishes the UK’s legally binding target of achieving net-zero greenhouse gas emissions by 2050, with an interim target of a 78% reduction by 2035 compared to 1990 levels. The Act creates a framework of five-year carbon budgets set at least 12 years in advance, advised by the independent Climate Change Committee (CCC) . The Net Zero Strategy (2021), updated in the Powering Up Britain (2023) and Mission Zero (2023) documents, sets out sectoral pathways for decarbonisation across power, transport, heat, industry, and agriculture. The Heat and Buildings Strategy and Hydrogen Strategy are supporting sub-strategies. The Friends of the Earth v. Secretary of State for Business, Energy and Industrial Strategy (2022) upheld the adequacy of the government’s Net Zero Strategy, but Plan B Earth v. Secretary of State (2022) challenged the compatibility of UK climate targets with the Paris Agreement.
North Sea Oil and Gas Regulation
The regulation of oil and gas in the UK Continental Shelf (UKCS) is governed by the Petroleum Act 1998 and the Energy Act 2016, which established the Oil and Gas Authority (OGA) — renamed the North Sea Transition Authority (NSTA) in 2022. The NSTA administers petroleum licences (licence rounds for exploration and production), approves field development plans, and enforces obligations under the Maximising Economic Recovery Strategy (MER UK). The North Sea Transition Deal (2021), agreed between the UK Government and the offshore oil and gas industry, sets out a sectoral decarbonisation pathway including emissions reduction targets for production, investment in CCS and hydrogen, and a commitment to reduce flaring and venting. The Greenpeace Ltd v. Secretary of State (2023) challenge to the Cambo oil field consent raised questions about the compatibility of new oil and gas licensing with net-zero obligations and the Finch (2023) Supreme Court decision on downstream emissions in environmental impact assessment.