Energy Policy & Strategy Insights

From 2025 in review to a 2026 outlook

The UK energy landscape is evolving rapidly, and for UK businesses, staying ahead of policy and regulatory changes is critical. From clean power targets to flexibility markets, the decisions being made today will shape costs, investment opportunities, and sustainability strategies for years to come.

In our recent TalkPower webinar, experts from our Policy and Strategy team shared insights into these developments. In this article, we break down the key developments that businesses should be aware of.

Clean Power 2030 - What’s happening and the progress so far

The government’s Clean Power 2030 mission remains a cornerstone of UK energy policy, aiming to cut carbon intensity to 50g CO₂/kWh by 2030. This requires a major expansion of renewables and significant upgrades to network infrastructure.

Key developments include:

• CfD auction round 7: Designed to secure new renewable projects with changes such as 20-year contracts (up from 15) and allowing bids without planning permission to boost competition.
• Transmission upgrades: Ofgem approvals under RIIO for priority projects to address decades of underinvestment, though this impacts TNUoS charges for businesses.
• Connection queue reform: NESO and Ofgem have introduced a readiness-based system to prioritise projects, replacing the first-come-first-served approach.

Progress is notable: in 2024, 70% of GB electricity came from nuclear or renewables, and carbon intensity fell to 105g CO₂/kWh, down 75% from 15 years ago.

Developments in new low carbon generation

Beyond renewables, firm low-carbon capacity is advancing. Sizewell C reached final investment decision under a Regulated Asset Base model (RAB), attracting private investors, while Rolls-Royce won the Small Modular Reactor (SMR) competition and is moving into design and site selection.

Gas with carbon capture is also gaining traction, with Net Zero Teesside achieving financial close, the UK’s first gas plant with carbon capture and storage (CCS). Meanwhile, Ofgem has launched a cap-and-floor scheme for long-duration storage, including pumped hydro and battery projects, with 70 projects competing for contracts. 

These technologies will complement renewables and ensure system stability through the 2030s.

Political consensus on net zero ends

2025 marked a clear break in political alignment on net zero. The Conservative Party and Reform now oppose the 2050 target, citing affordability concerns, while the government maintains its stance.

The debate centres on electricity costs: opposition parties argue decarbonisation drives high prices, while government points to gas price volatility. This uncertainty could affect investment confidence and policy continuity.

No zonal pricing - So what next?

After years of review, the government decided not to implement zonal pricing, citing complexity and limited benefits. The GB market will remain national, but reforms are coming:

• Network planning: Greater government role in generation and network location decisions.
• Charging changes: Potential adjustments to network charges for generators and customers.
• Balancing mechanism reform: To improve efficiency and reduce system costs.

What to look out for in 2026 and beyond

The next year will bring several milestones: the outcome of CfD Auction Round 7, new connection dates for projects in the reformed queue, and the first long-duration storage contracts. Nuclear and SMR developments will continue, alongside rapid growth in batteries, solar PV, and EV adoption.

Political debate on net zero and energy costs will likely continue to intensify, and carbon pricing alignment with the EU is on the horizon. Reforms to make electricity more competitive for electrification will also be a key focus.

Latest on new charging schemes

Government cost-control measures include:

• Supercharger uplift: Energy Intensive Industries (EII) discount on network charges rising from 60% to 90% from April 2026 (rebated in 2027).
• British Industrial Competitiveness Scheme (BICS): Additional support for ~7,000 manufacturing businesses, expected to be funded through bill increases for others.

Ofgem’s cost allocation and recovery review could also reshape how fixed costs are recovered, impacting non-domestic bills.

Non-domestic supply regulation

Regulatory change is gathering pace. DESNZ’s Ofgem’s review is expected to complete shortly, However, Ofgem is already looking at moving toward outcome-based regulation and greater use of automatic compensation. Direct regulation of Third Party Intermediaries has also been confirmed, with Ofgem set to oversee compliance under a new regime.

DESNZ is also consulting on the post 2025 smart meter rollout framework for non-domestic customers. Government is currently proposing that from 1 January 2027, energy suppliers will be required to include smart contingent terms in new fixed-term contracts, requiring relevant non-domestic customers to have, or agree to install, a smart or advanced meter. The proposals currently cover non-domestic premises in Profile Classes 1–4, with consideration to extend to larger customers.

Meanwhile, proposed changes to the GHG Protocol could require hourly matching for Scope 2 market-based reporting - a significant shift for many businesses.

Flexibility policy

Flexibility also remains a priority. The system operator (NESO), DESNZ and Ofgem have this year published a roadmap to scale flexibility for Clean Power 2030. Priorities include:

• Engaging large non-domestic customers with significant flexible loads.
• Improving data sharing and interoperability.
• Reviewing final consumption levies to reward flexibility.

Final thoughts: Why this matters for UK businesses

The next 12–24 months will be pivotal for UK energy policy. For large businesses, these changes represent both challenges and opportunities. Understanding new charging schemes and regulatory reforms will be key to controlling non-commodity costs. Aligning with Clean Power 2030 and flexibility initiatives can strengthen ESG credentials, while anticipating political shifts and market reforms will help safeguard investment decisions.

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.