Energy Policy and Strategy Insights

The UK’s energy landscape is evolving rapidly, with policy shifts, regulatory developments, and clean energy goals shaping the sector. In our recent TalkPower webinar, experts from our Net Zero Policy and Strategy team shared insights into these developments. Here’s some of the key take aways we shared, that businesses should be aware of.

Policies – A new government, a fresh approach

With a change in government following the recent general election, the UK’s energy priorities are evolving. Ed Miliband and Claire Coutinho have swapped roles, and the new government has set its sights on accelerating decarbonisation with the Clean Power 2030 target. This plan focuses on boosting renewable energy investment and fast-tracking infrastructure development. 

To support this, the government has expanded the recent Contracts for Difference (CfD) auction and is introducing planning reforms to speed up renewable projects. Additionally, the launch of Great British Energy and the National Wealth Fund aims to drive further energy investment. However, questions remain about how these initiatives will operate and where priorities will lie.   Alongside this the move towards net zero is becoming increasingly political, with some opposition parties increasingly raising concerns over feasibility and costs.

What does Clean Power 2030 really mean?

In December 2024, the government published its Clean Power 2030 Action Plan, reaffirming its goal of achieving a clean power system by 2030. Clean Power is not being defined as an electricity system without any fossil fuel generation or carbon emissions. Instead, the target seeks to limit unabated gas generation to no more than 5%, ensuring the total volume of clean power generation matches or exceeds GB demand consumption, and reducing power sector CO2 emissions to below 50gCO2/kWh (down from approximately 125gCO2/kWh in 2024). To achieve this, the UK needs to 

• Rapidly scale up renewable energy projects.
• Invest heavily in energy storage and grid infrastructure.
• Invest an estimated £40 billion per annum in the electricity sector over the next few years.

Grid expansion and reforming connection queues

Expanding the UK’s transmission network is essential to meeting Clean Power 2030 goals. The government is implementing recommendations from the Nick Winser Review, focusing on speeding up the planning process and delivery of new grid projects. A key part of this effort is Ofgem’s ASTI (Accelerated Strategic Transmission Investment) framework, which aims to accelerate delivery of crucial transmission upgrades. 

One of the biggest challenges, however, is the transmission network connection queue, with over 700GW of projects now waiting for access to the grid. Many of these applications are speculative, causing delays for projects that are ready to go. To address this, the National Energy System Operator (NESO) is shifting from a first-come, first-served model to a first-ready, first-connected approach, prioritising projects with secured planning and ability to move to deployment. 

Review of Electricity Market Reform (REMA): A new approach?

The Review of Electricity Market Arrangements (REMA) has been a hot topic in 2024, as the UK looks to adapt its electricity market to a growing share of renewables. 

One key decision under consideration is whether to switch to zonal pricing, where wholesale electricity prices would vary by region, or to retain a reformed national wholesale market. Zonal pricing would be a significant and complex shift affecting generators, suppliers, customers, and traders. It would take many years to implement as decisions would be needed on the number and location of zones and arrangements for trading power across zones, with associated changes to law and electricity market regulations. Additionally, reforms to the Balancing Mechanism and the Contracts for Difference Scheme are being explored. The government plans to make key decisions by summer 2025, so stay tuned for further updates.

Energy Prices: What’s ahead?

Despite coming down from the peak of the 2021-2022 energy crisis, power prices remain higher than pre-crisis levels - this is largely due to higher gas prices, which are themselves a consequence of ongoing geopolitical uncertainties and greater use of Liquified Natural Gas (LNG). Looking ahead, forecasts of future power prices vary and many factors, including growth in renewable generation, evolution of gas and carbon prices, and government/regulatory decisions on policy and network costs will all impact on the price of energy, making it challenging to predict future costs with certainty.

For businesses and consumers alike, understanding these market trends and potential fluctuations will be crucial as the energy system evolves. Factors such as supply chain disruptions, shifts in energy demand, and broader political events will all play a role in shaping market outcomes.

Carbon Pricing & Emission Trading: Where next?

The UK Emissions Trading Scheme (ETS) is an important element of the policy mix for driving decarbonisation. However, with current carbon prices in the scheme being relatively low, its impact on large-scale emissions reduction has been limited. There’s growing discussion around whether the UK should reform its ETS or link it with the EU ETS to strengthen price signals and incentivise cleaner energy investments.  Recently the UK government has indicated it is interested in exploring linkage with the EU ETS – of course progress on that will also depend on the European position. 

More generally, as the electricity sector continues to rapidly decarbonise, attention will shift toward emissions from industry, transport, and agriculture. Future policies targeting these sectors will be crucial in achieving the UK’s wider net zero goals.

The Domestic & Business Energy Market: What’s changing?

In the domestic market, regulators remain focused on consumer protection, including via the Standard Variable Tariff price cap. In 2024 we have seen the ban on acquisition only tariffs extended, and the debate continues on the best way to support vulnerable customers during a time of relatively high energy prices. A review of Ofgem’s role, launched by DESNZ at the end of 2024, could in time lead to significant regulatory changes for both households and businesses.

For businesses, new rules now require energy suppliers to engage only with Third-Party Intermediaries (TPIs) that are part of an approved redress scheme. This move aims to enhance transparency and fairness for small business customers, with further reforms—including potential new TPI regulations—expected in 2025.

The current smart meter framework is set to expire at the end of 2025, alongside existing rollout targets for suppliers. The government is expected to outline its plans for the future of smart metering beyond this deadline. With increasing emphasis on energy efficiency and data-driven consumption management, there has never been a better time to adopt a smart meter.

What’s Next? Flexibility, energy efficiency & net zero

A cleaner, more flexible energy system needs major investment in storage and grid scale flexibility – as well as a clear route for smaller domestic and business consumers to be able to offer flexibility to the system – for example through reducing demand at peak times and/or smarter charging of electric vehicle fleets. 

Beyond flexibility, energy efficiency and heating remain high on the agenda. The government has pledged increased funding to decarbonise homes and industrial infrastructure, with a comprehensive spending review expected to outline further support measures.

A new industrial strategy is also on the horizon, likely to focus on a range of sectors with strong growth potential, including clean energy industries.  This will likely aim to boost investment in UK infrastructure, skills and manufacturing in these high growth potential sectors. 

Final Thoughts

The UK energy sector is undergoing one of the most significant transformations in its history. From emerging technologies and evolving market structures to the push for greater flexibility, the landscape is shifting rapidly. While achieving net zero will require continued policy innovation, technological investment, and industry collaboration, it also presents huge opportunities, both in terms of sustainability and economic growth. 

EDF Business Solutions remains committed to helping customers navigate these changes while reaching their energy and sustainability goals.  Get in touch with one of the team at EDF LetsTalkPower@edfenergy.com.