UK Energy Act 2023: Environmental commitments for offshore wind

On 26 October 2023, the Energy Act 2023 (the Act), the largest piece of primary energy legislation in over a decade, received Royal Assent and became law. The breadth of the Act is impressive, covering areas such as energy infrastructure, energy efficiency, regulation of nascent technologies such as CCUS and hydrogen production and strengthening the regulatory landscape around more established sectors including offshore wind and oil and gas.

Over a series of briefings, our energy experts at Norton Rose Fulbright will look at the impact of the Act across several areas. In this update, we consider the new environmental commitments introduced by the Act for the offshore wind sector and their expected impact on future offshore wind projects.

Supporting ambitious government targets to deliver up to 50 GW of offshore wind by 2030 (with up to 5 GW coming from floating offshore wind), the Act provides the foundation to aid the acceleration of deployment of offshore wind whilst continuing to protect the marine environment – a key issue of concern for the industry over the past few years. 

The Act delivers the UK government’s Offshore Wind Environmental Improvement Package (OWEIP) initiative, aimed at significantly reducing the offshore wind consenting process – long seen as a barrier to the much-needed acceleration of new offshore wind development, whilst ensuring the critical protection of the marine ecosystems surrounding such developments.

Part 13, Chapter 1 of the Act enshrines the key elements of OWEIP by introducing:

• new powers to tailor Habitat Regulation Assessments (HRAs) needed before an offshore wind farm is consented – identified as once of the primary causes of offshore wind consenting delays;
• new strategic compensatory measures, enabling collaborative work between developers and the UK government to compensate for negative environmental effects that cannot be avoided or mitigated; and
• a new Marine Recovery Fund (MRF) to help deliver these strategic measures.

HRA Assessment tailoring power

The Act enshrines powers for the relevant appropriate authority (see below) to make provision, by way of regulations (the detail of which is yet to be seen), to tailor the assessment process to ensure environmental protection (and any required compensatory measures) are dealt with early in the consenting process. These powers extend to specifying matters to be dealt with under the assessment, the procedure to be followed, authorising, or requiring the supply of information, and when and how compensatory measures may be provided under an assessment as part of the HRA process.

The Act requires the various appropriate authorities, which are the Secretary of State for England, Scottish Ministers for Scotland, Welsh Ministers for Wales and DAERA for Northern Ireland, to consult not only with each other but with various other organisations including the Marine Management Organisation, the Joint Nature Conservation Committee and Natural England, prior to the making of any such regulations.

Streamlining the existing assessment process, which promises to speed up consenting and, ultimately, the deployment of offshore wind projects, will be a welcome relief to developers in the sector. 

However, as the detail of these new regulations (and any associated guidance) is yet to be seen, the effectiveness of these new powers and the practical impact on new projects is yet to be evaulated. Nor is it clear from the detail of the Act whether industry’s call for further alignment between the Crown Estate, HRA and the wider planning processes, as well as the Contracts for Difference (CfD) allocation, has been heeded.

Strategic compensatory measures and Marine Recovery Fund

The Act introduces the legal mechanism to use strategic compensatory measures to discharge obligations to compensate for the environmental effects of offshore wind farm development(s) on the national site network  (as defined under the Conservation of Habitats and Species Regulations 2017 (S.I. 2017/1012)) and/or in a protected marine conservation area. 

It also enables relevant public authorities to work collaboratively across sites, enabling developers to discharge obligations to compensate for specific impacts with strategic measures, including delivering the same through payment into an MRF.

The concept of the MRF was first proposed under the OWEIP and the Act now implements this policy proposal. The MRF (of which there may be more than one) will be funded by industry to support the delivery of strategic compensatory measures for any adverse environmental impacts of an offshore wind developments. These centrally controlled strategic funds promise to provide the basis for effective discharge of compensatory measures by the industry.

Despite ambitions to have an MRF operational and able to receive payments from late 2023, the Act imposes no timetable for the making of any supporting regulations and the detail of such regulations is, again, yet to be seen.

From an industry perspective, these positive developments signal a wider strategic shift in policy making which demonstrates the UK government’s awareness that offshore wind projects are not developed in a vacuum. The Act recognises and enables an industry wide approach, including risk sharing mechanisms, to best position the UK to achieve its net zero objectives.