The King’s Speech 2023

Yesterdays King’s speech referenced some government plans for the energy sector, LGE breaks it down below.

Yesterday marked the official start of the parliamentary session for the next year with the King’s Speech, the first delivered by King Charles, which set out the government’s agenda for the coming year. The central focus of the agenda will be economic growth and security, alongside taking action to bring down inflation and tackle the cost-of-living crisis.

A key aspect toward achieving this for the government will be strengthening the UK’s energy security, reducing reliance on volatile international energy markets and hostile regimes, continuing record levels of investment in renewables and grid connections and continue to decarbonise at pace. The speech therefore announced legislation which would allow oil and gas companies to bid for new licenses annually in the North Sea through the North Sea Transition Authority, with the hope of offering certainty and confidence to the energy industry through providing job security for around 200,000 workers. With more than half of the 300 active oil and gas fields in the North Sea due to have ended production by 2030, the government wants to ‘max out’ the reserves in the region. The government has also added clauses that have to be met within the new licenses as part of a commitment to net-zero, including the need for the UK to be forecasted to import more energy from other countries than it produces domestically, and carbon emissions associated with UK gas production will need to be lower than emissions from imported liquified natural gas.

The move is part of the recent wider reassessment of net-zero policies from the government and is hoped to provide an electoral asset going into an election year, providing a clear dividing line between the Conservatives and Labour on energy strategy. Labour is currently committed to not granting new licenses and instead investing in renewables through its Great British Energy initiative.

It is unclear how the new licences will translate into savings on energy bills. With most of the produced gas from new sites sold onto the international market, for companies across the globe to compete for. In addition, the amounts produced will be too small to impact global supply or prices. The government themselves have admitted that the proposals will not necessarily bring down energy bills.

Campaigners have noted that a better way of achieving this would be through the government creating an adequate windfall tax and doubling down on insulation and homegrown renewables, whilst acknowledging that companies will not be obliged to supply the UK with gas extracted from the North Sea meaning shortages could still occur and the UK’s energy security be challenged.