The National Security and Investment Act 2021 received Royal Assent on 29 April and provides for a new investment screening system to help protect our national security. Today I am publishing three sets of documents related to the Act: a consultation on the draft statement on the use of the call-in power, made under section 3 of the Act; the draft notifiable acquisition statutory instrument; and guidance documents on the Act.
I am announcing today that the commencement date for the sections of the Act not already commenced will be 4 January 2022.
Statement on the use of the call-in power
This statement—a draft of which was previously published as the “Statement of Policy Intent”—sets out how the Secretary of State expects to use the call-in power under the Act. The call-in power enables the Government to screen qualifying acquisitions for national security risks. During the passage of the Act, the Government committed to consulting on this statement and I am launching the consultation today. The consultation is available on www.gov.uk'>www.gov.uk and will be open until 11.59 pm on 30 August.
Draft notifiable acquisition statutory instrument
The draft notifiable acquisition statutory instrument sets out the proposed descriptions of the 17 sectors of the economy that would be captured under the mandatory notification requirements set out in the National Security and Investment Act 2021. The Government have previously consulted on the mandatory notification sectors and published a response in March 2021. The draft sector definitions have been refined in response to stakeholder feedback and the draft statutory instrument has been published today on www.gov.uk'>www.gov.uk to update businesses and investors about mandatory notification requirements.
Guidance
I have today published the first set of guidance documents on the Act. The guidance will build understanding and awareness for all parties who may be affected by the Act and who may need to comply with its provisions. The Government have tested and refined these documents with an expert panel of industry representatives, which includes business representative organisations, higher education bodies, investment associations and other stakeholders, who provided important feedback.
These guidance documents are: an overview of the Act, explaining what types of acquisitions are covered, whether parties need to tell the Government about an acquisition and how the Government will investigate an acquisition; the extraterritorial application of the Act; how the Act works alongside other regulatory bodies and market practices; and guidance for higher education institutions and other research organisations.
Today I will lay before Parliament two consultation papers on competition issues which respond to proposals that have been put to the Government in recent years from a variety of stakeholders. This includes those directly commissioned by the Government from Jason Furman, my hon. Friend the Member for Weston-super-Mare (John Penrose), Lord Tyrie and the Competition and Markets Authority. The consultation periods will end on Friday 1 October.
The first document, entitled “Reforming Competition and Consumer Policy—Driving growth and delivering competitive markets that work for consumers” sets out the Government’s vision for the future of competition and consumer policy. We aim to create a competition regime that reflects the Government’s strategic priorities and intervenes quickly and effectively when markets are not working, and consumers are being harmed. It also updates consumer rights so that consumers can navigate changing and new markets with confidence. Our proposals also aim to provide easier routes for consumers and traders to resolve problems amicably on their own and ensure the Competition and Markets Authority and regulators have the powers they need to fix consumer problems, delivering our manifesto commitment to give the Competition and Markets Authority enhanced powers to tackle consumer rip-offs and bad business practices.
These proposals will create a prosperous economy where vigorous competition drives growth and productivity, where businesses that do the right thing are rewarded with greater market share so that consumers can engage in markets with full confidence they will get a good deal.
The second publication called “A New Pro-Competition Regime for Digital Markets” is a joint publication with my right hon. Friend the Secretary of State for Digital, Culture, Media and Sport. I will invite him to provide further detail on this consultation.
We today publish the Government’s combined response to the March 2021 final report of the Magnox inquiry and the June 2021 Departmental Review into the Nuclear Decommissioning Authority. The response has been co-authored by BEIS, the Cabinet Office and UK Government Investments. The Nuclear Decommissioning Authority has developed its own combined response to both the Magnox inquiry final report and the departmental review, which is also being published today.
Since it was established under the Energy Act 2004 the Nuclear Decommissioning Authority has driven a significant step change in the decommissioning of the UK’s legacy nuclear sites. The organisation’s portfolio includes 17 licenced nuclear sites, with over 15,000 people across its estate, and contributes very significantly to the Government’s levelling-up agenda. However, there is an ongoing need for the organisation to evolve to become a more resilient, efficient and effective organisation that continues to drive transformation on the ground and deliver value for money for the taxpayer.
The Magnox inquiry was an independent, non-statutory inquiry commissioned by the then Secretary of State for Business, Energy and Industrial Strategy, right hon. Greg Clark MP in 2017.
Its purpose was to review the procurement and subsequent termination of a management contract for decommissioning the Magnox nuclear power stations. An interim report was published in October 2017 with a number of initial findings and the March 2021 final report contained a total of 57 recommendations. These recommendations centred around future commercial assurance, oversight of governance procedures and organisational culture change.
Energy Digitalisation and Smart Technology Strategies
I am pleased to announce the latest steps the Government are taking to decarbonise our electricity system, to meet our net zero target by 2050, delivering on commitments made in the Energy White Paper.
First, the Government have today published a new smart systems and flexibility plan, jointly with Ofgem. Technologies such as energy storage, interconnection and smart charging of electric vehicles are essential to balance supply and demand as we deploy more intermittent renewables to power our buildings and vehicles. Flexibility reduces the amount of generation and network we need to build, and costs for energy consumers—flexibility could reduce the cost of the system by up to £10 billion by 2050. It is critical for energy security as we shift away from unabated gas over the next decade. System flexibility is therefore fundamental in reducing emissions to net zero by 2050.
The transition to a smarter and more flexible energy system is also an opportunity. It will be delivered by UK businesses and will benefit consumers across the country. It will create nationwide jobs, potentially 24,000 by 2050, and drive investment across the UK. The UK is a global leader in smart systems and there is significant export potential—which could contribute as much as £2.7 billion per year to the UK economy by 2050—for the solutions that we will need to deploy at home. As nations confront the challenge of climate change, markets for new green products and services will spring up around the world. Taking action now will help position UK companies and our world-class research base to seize the business opportunities which will flow from it, creating jobs and wealth for our country.
I am pleased to announce the launch of the consultations on the future system operator (FSO) and the energy codes governance reform. This is a key step that will contribute towards helping us achieve the Government’s net zero targets and our commitment in the Energy White Paper,
“to ensure that the institutional arrangements governing the energy system are fit for purpose for the long term, consulting in 2021 over organisational functions, including system operation and energy code governance”.
Net zero is an unprecedented challenge for our economy and society—and the energy system at its heart. It has created the need for new technical roles and responsibilities in the electricity and gas systems to drive decarbonisation while minimising costs and maintaining resilience. We will require an organisation with the mandate, whole-system perspective, and engineering capability to fulfil the new and enhanced roles effectively, and the organisational design, incentives, and accountability to fulfil them impartially in the best interests of consumers.
The future system operator (FSO) consultation sets out the case for an expert, impartial, cross-vector FSO to ensure the energy system drives progress towards net zero. The system operators are in a unique position at the heart of their respective systems, both to keep each system operating in real time day to day and to be forward-looking. To help us achieve net zero, we propose bringing the electricity system operator (ESO) and the forward-looking elements of the gas system operator (GSO) together in a new entity, which will enable the systems to be transformed. The consultation also sets out the potential roles that could fall to the new organisation and presents two potential organisational templates which might be adopted. Finally, it sets out considerations on implementation.
I will place copies of the section 3 statement for consultation, the section 3 statement consultation document and the draft notifiable acquisition SI in the Library of both Houses.
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Both consultations invite views from consumers, businesses, civil society, think- tanks, academics, public authorities, and the devolved Administrations to ensure our new approach works for the UK economy and supports growth and productivity in markets in every part of the country.
Subject to the outcomes of the consultations, the Government will bring forward legislation to implement reforms.
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The departmental review into the Nuclear Decommissioning Authority, conducted by an independent team within BEIS, was published in June 2021, with a total of 26 recommendations. These centred around the form and function of the Nuclear Decommissioning Authority, its oversight by Government and their internal governance, organisational health and operational effectiveness.
I am grateful to Mr Holliday and his team and to the independent departmental review team for their comprehensive and rigorous work, which is reflected in the reports.
Since the publication of the Magnox Inquiry interim findings, significant progress has already been made to strengthen and simplify the organisation of the Nuclear Decommissioning Authority estate. This includes the replacement of management contracts with direct subsidiary arrangements to support improved efficiencies across the estate and improvements to the governance of assurance and approval decisions, especially in the area of commercial assurance. There has been a complete overhaul of the Nuclear Decommissioning Authority leadership team since the 2017 Magnox procurement and the Government have also enhanced its oversight arrangements for the organisation. The recommendations from the reviews complement the progress made and propose further improvements.
Both reviews that are being responded to today contain further valuable lessons for the Nuclear Decommissioning Authority and for the Government. We take the recommendations very seriously and have considered them with great care. The responses will give stakeholders confidence of the depth of reach and robustness with which the learnings from the reports will have an impact on the Nuclear Decommissioning Authority.
The Government and the Nuclear Decommissioning Authority will prioritise the implementation of the commitments within these responses as we continue to deliver against the UK’s critical nuclear decommissioning challenges.
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The new smart systems and flexibility plan sets out how we will drive flexibility across the system, including a vision, analysis and suite of actions, focusing on:
Facilitating flexibility from consumers
Removing barriers to flexibility on the grid
Developing markets for flexibility, and
Improving monitoring of flexibility.
Secondly, the Government have published the UK’s first energy digitalisation strategy, jointly with Ofgem and Innovate UK. Energy system digitalisation is essential to enabling millions of assets—including solar panels, heat pumps, batteries and electric vehicles—to be optimised across our energy networks. A digitalised system will spur innovation, remove barriers to new entrants, facilitate new consumer offers and services, and enable system flexibility.
The energy digitalisation strategy sets out a vision and suite of actions to achieve this, focusing on:
Providing leadership and co-ordination to the sector
Incentivising the sector to digitalise, and
Supporting the development of digital tools and infrastructure.
These documents have been produced in close co-ordination with the energy sector.
Thirdly, the Government have published a call for evidence on de-risking large-scale, long-duration electricity storage. Large-scale and long-duration storage can provide additional benefits to other forms of flexibility, in particular by storing energy over long periods of low wind. The Government have developed a call for evidence from industry, investors and other stakeholders on the barriers and financing challenges that this type of storage faces, and how these barriers might be mitigated while minimising distortions in the market. This is the first stage in deciding whether a bespoke de-risking mechanism, such as a “cap and floor” regime is needed to accelerate deployment of this technology on the system.
Fourthly, the Government have published a call for evidence on the barriers to widespread deployment of vehicle-to-grid (and similar) technologies. Vehicle-to-grid technologies enable electric vehicles to balance the system by exporting electricity in return for payment when electricity is scarce—and reimporting it when it is abundant. The Government have developed a call for evidence to gain wider market views on the timescales, opportunities, and barriers as well as invite discussion on potential solutions to the widespread deployment of these technologies. The feedback will aid in creating a policy strategy for this area, help to design future innovation competitions and show the Government’s ongoing commitment to an area where the UK is a global leader.
I will place copies of the 2021 smart systems and flexibility plan and its appendices—appendix I: electricity system flexibility modelling, and appendix II: smart systems and flexibility plan monitoring framework—the energy digitalisation strategy, the call for evidence on facilitating the deployment of large-scale and long-duration storage, and the call for evidence on the role of vehicle-to-X technologies in a net zero energy system in the Libraries of both Houses.
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Today, we are also launching a consultation on the design and delivery of the energy codes reform. The energy codes are the detailed technical and commercial rules of the gas and electricity system, which cover wholesale, transmission, distribution, and retail. Many of the codes were designed pre-privatisation which has resulted in a code governance framework that is complex, fragmented and lacks incentives to innovate, despite our urgent need for a more unified, flexible and dynamic approach.
Building on a consultation from 2019, we have now developed two governance models further and will be consulting on our preferred option of designating Ofgem as a strategic body over the energy codes, alongside separate code managers. As the strategic body, Ofgem would assess and respond to relevant Government policy and priorities to ensure these are reflected in codes. It would also select and license code managers, who would replace the existing code administrators and take on most of the roles that are currently held by industry-led code panels. However, crucially, we expect that industry input will remain key to the code change process, including though new stakeholder advisory forums.
To help us develop our view on these reforms, we are seeking views on where improvements could be made to existing arrangements. Our final position will be shaped by the outcomes of these consultations.
These energy system governance reforms are intended to apply only to England, Scotland and Wales. Energy is generally devolved in Northern Ireland and so the scope of the review and proposed reforms do not apply to NI’s energy system governance, system operator or energy regulator.
I will place copies of both the future system operator consultation and energy codes consultation in the Libraries of both Houses.