Energy Regulatory Update (UK) – November

Our energy regulatory teams across Europe provide updates to clients on a regular basis. This newsletter contains a selection of recent UK news items of relevance to the energy transition and more generally to the energy and natural resources sector. It identifies developments of a policy or regulatory nature considered to be of interest by the contributors.

 

Energy in the Autumn Budget

The Autumn Budget speech, setting out government policy, was delivered on 26 November 2025, with the Budget 2025 document (Budget Document) published by HM Treasury immediately following. A number of energy-related items featured in the Budget, including those identified below.

 

Business energy prices

This topic is covered in numbered paragraphs 3.52 and 4.50 of the Budget Document, where it is stated that the “government will increase the generosity of the British Industry Supercharger from April 2026 and will introduce the British Industrial Competitiveness Scheme from April 2027. These will be funded by bearing down on levies and other energy system costs, such as proposals under consultation to change the indexation of legacy renewables schemes”. This was preceded by the launch by the Department for Business and Trade on 24 November of a consultation on eligibility and approach for the British Industrial Competitiveness Scheme. Eligible businesses are to be exempt from paying the indirect costs of the Renewables Obligation, Feed-in Tariffs and the Capacity Market.

 

New nuclear

The Budget Document reports on the government’s approach to nuclear power, which is to back investment, unlock innovation and remove the regulatory barriers that have slowed development and deployment. The pioneering of small modular reactors in Anglesey is discussed, as well as the moves to identify (through Great British Energy – Nuclear) potential sites for new large-scale nuclear power, building on the Industrial Strategy and funding commitments made at the summer Spending Review, including for Sizewell C which reached financial close in November 2025, allowing full-scale construction to begin, and for innovative nuclear fusion research.

The Budget Document refers to the Prime Minister’s Strategic Steer issued on 26 November, which sets clear expectations for the civil, defence, and decommissioning nuclear sectors to accelerate safe and efficient delivery through proportionate regulation and stronger collaboration. It also notes the government’s support for the principle of all of the recommendations in the Nuclear Regulatory Review 2025 (the Fingleton report) as published on 24 November. The government will present a full implementation plan within three months, and will complete the implementation within two years, subject to legislative timelines on elements requiring primary legislation. The government will also legislate to give the Office of Nuclear Regulation the ability to consider overall strategic factors such as energy and national security imperatives in the delivery of its statutory purposes.

Furthermore, the government has updated the Green Financing Framework to add nuclear energy for power generation to the list of policies eligible to be funded by green gilts and retail Green Savings Bonds. This will enable investors to continue financing the UK’s net zero objective.  The framework includes guidelines on the types of expenditure that are eligible to be financed via the UK Government Green Financing Programme.

 

Grid connection processes and reforms

Paragraph 3.60 of the Budget Document summarises the steps being taken by the government, alongside National Energy System Operator (NESO) and Ofgem, to overhaul grid connection processes, including by the following policy measures: applying new powers being sought in the Planning and Infrastructure Bill to create mechanisms to reallocate released capacity and reserve future capacity for strategically important demand projects; working with Ofgem to explore enhanced entry and membership requirements to ensure viable projects progress in the demand queue; reducing the ‘time to power’ by exploring self-build for high voltage grid infrastructure and more flexible connections where possible; and removing speculative demand in the grid connection queue.

 

Oil and gas and the North Sea Future Plan

The government has confirmed that the temporary Energy Profits Levy (EPL) will be replaced by the permanent Oil and Gas Profits Mechanism (OGPM). The OGPM will be a revenue-based system which only operates in times of high prices and will replace the EPL when it ends in 2030, or earlier if the EPL price floor triggers. The rate will be 35% with thresholds of USD90/ barrel (oil) and 90p/therm (gas). Related to this, on 26 November HM Treasury published the consultation outcome document titled ‘Oil and Gas Price Mechanism Consultation: Summary of Responses‘.

The Budget Document also reports on the new ‘North Sea Future Plan’ which was published the same day by the Department for Energy Security and Net Zero (DESNZ) – this is the government’s response to the ‘Building the North Sea’s Energy Future’ consultation launched on 5 March 2025. The plan was accompanied by a news story headed ‘North Sea Future Plan for fair, managed and prosperous transition’. As part of the plan, the government will introduce new Transitional Energy Certificates which will enable limited oil and gas production on or near to existing fields so long as this additional production does not require new exploration and is already part of or links back to existing fields and infrastructure, and is necessary for a managed, orderly and prosperous transition. The ‘Notes to Editors’ in the above news story summarise the actions taken by the government in scaling up Britain’s clean energy industries and wider industrial supply chains.

 

Carbon Border Adjustment Mechanism and UK ETS

The government will legislate in the Finance Bill 2025-26 to introduce the Carbon Border Adjustment Mechanism (CBAM) from 1 January 2027. The inclusion of indirect emissions within scope of the CBAM will be delayed until 2029 at the earliest. HM Revenue & Customs has updated its page on draft legislation for the CBAM and HM Treasury has updated its CBAM factsheet. DESNZ has published the combined response of the UK Emissions Trading Scheme (ETS) Authority on free allocation rules and carbon leakage – this discusses the CBAM.

 

Electrolytic hydrogen and the Climate Change Levy

Paragraph 4.178 of the Budget Document explains, in respect of the treatment of electrolytic hydrogen in the Climate Change Levy (CCL), that both electricity used in electrolysis to produce hydrogen and natural gas used as a source of CO2 in the production of sodium bicarbonate will be made exempt from the CCL. Subject to parliamentary approval, these amendments will be in force by Spring 2026. The same day, HM Treasury published the outcome to its consultation on this topic, contained in the document ‘Climate Change Levy (CCL): treatment of electrolytic hydrogen in CCL and the changing energy landscape: Consultation Response’.

 

Connections and connections reform

Demand update

On 6 November 2025, Ofgem published a ‘Demand connections update’ together with a document headed ‘Our response to the recent surge in demand connection applications, the volume of which is misaligned with the most ambitious demand forecasts’(Demand Update).

Ofgem’s Demand Update builds on NESO’s TMO4+ reforms, ie. the connections reform package approved by Ofgem on 15 April 2025 which creates a new approach to queue management, prioritising in-scope projects that are: (1) ‘ready’; and (2) (in the case of in-scope generation and storage projects) ‘needed’ under the Clean Power 2030 Action Plan. Ofgem is now turning its focus to demand connections reform.

In collaboration with government, NESO and network operators, Ofgem is exploring a range of regulatory levers to enable timely and efficient connections for demand projects. In doing so, it will:

• curate a viable queue to enable demand projects to progress to connection;

• enable faster connections through regulatory reform; and

• prioritise strategic demand connections (any action taken by Ofgem in this respect will align with the government’s already announced Connections Accelerator Service for assisting demand projects in connecting to the grid, and its measures for accelerating connections for strategically important projects using new powers in the Planning and Infrastructure Bill).

On the same day, NESO published (with Ofgem’s support) a related ‘Demand Queue Call for Input’ regarding the demand connection queue. This is aimed at customers with an existing transmission-level demand connection agreement as well as those with directly connected generation agreements that include demand technologies (ie. co-located sites). It will gather deeper insight into the composition of the demand queue to inform any regulatory change that may be required.

The reformed connections queue

On 12 November 2025, NESO published ‘Connections Reform: Britain approaches critical milestone’. This provides an update on the connections reform process.

AI data centres – connections and energy costs

On 13 November 2025, the Department for Science, Innovation and Technology published a policy paper titled ‘Delivering AI Growth Zones’. Section 2 of the paper concerns accelerating grid connections, and section 3 is on bringing down energy prices through targeted pricing support.

 

Nuclear energy

National Policy Statement – nuclear infrastructure siting approach

On 12 November 2025, DESNZ announced the publication of the draft ‘National Policy Statement for Nuclear Energy Generation EN-7’, as presented to Parliament pursuant to section 9(8) of the Planning Act 2008.

This statement enables decision makers, applicants and the wider public to understand:

• government policy on the need for nationally significant infrastructure projects (NSIPs) using nuclear fission to generate energy;

• how applications for these projects will be assessed; and

• the way in which impacts and mitigations will be judged.

This National Policy Statement EN-7 is concerned with criteria and other matters which are specific to applications for development consent to develop nuclear infrastructure. The draft EN-7 document will be designated and come into force after a 21-sitting day consideration period.

On the same day, DESNZ published the government’s response to the consultation previously held on EN-7. It also published the NPS EN-7 Appraisal of Sustainability Report and NPS EN-7 Post Adoption Statement of the Appraisal of Sustainability.

DESNZ will publish a ‘Supplementary Information’ document alongside the new EN-7 document shortly, to aid developers navigating the planning framework.

Sizewell C and the regulated asset base

1. The Nuclear Energy (Financing) Act 2022 allows for the implementation of a regulated asset base (RAB) model for nuclear energy generation. Where private investment is needed in public projects, the RAB model is one possibility for attracting that investment. It enables investors to receive a regulated return on investment during both construction and operation (over the lifetime of the asset), lowering the cost of capital and thereby reducing the overall cost to electricity consumers of the support that is given to the project under the RAB model.

1. On 4 November 2025, the day when it was reported in the press that financial close of the Sizewell C project had occurred, Ofgem published the ‘Notice of the Day-1 RAB amount and related figures, pursuant to the Electricity Generation Licence: Special Conditions for Nuclear Generator’. This notice has been issued by the Secretary of State for Energy Security and Net Zero to Ofgem, and relates to Sizewell C Limited (designated pursuant to section 2 of the Nuclear Energy (Financing) Act 2022).

1. On the same day, the Low Carbon Contracts Company (LCCC) published a news item headed ‘New nuclear project will deliver low carbon power and long-term value for consumers’. This reports that LCCC has signed the revenue collection contract for Sizewell C, marking a major milestone in the delivery of Great Britain’s first nuclear project supported through the RAB model.

Further information is available on LCCC’s ‘Regulated Asset Base’ page.

 

National Policy Statements for energy infrastructure

Background

The energy National Policy Statements (NPSs) (ie. EN-1 to EN-5) set out the government’s policy for delivery of energy infrastructure. They are designated under the Planning Act 2008 to provide guidance for decision-makers when determining applications for development consent in relation to NSIPs.

In July 2024, the government launched a review of the energy NPSs to ensure that they reflect the government’s energy priorities. These priorities were set out in the Clean Power 2030 Action Plan of 13 December 2024 and in the government’s response of 12 December 2024 (updated 27 February 2025) to the consultation on the National Planning Policy Framework (NPPF), which included the commitment to reintroduce onshore wind into the NSIP regime.

Following the review of the energy NPSs, the government drafted updates to EN-1 (the overarching energy NPS), EN-3 (renewable energy infrastructure) and EN-5 (electricity networks) (no updates were made to EN-2 or EN-4 as a result of the review). The government then held a public consultation on the proposed updates to EN-1, EN-3 and EN-5.

Revisions to EN-1, EN-3 and EN-5

On 13 November 2025, DESNZ published its response to the consultation launched on 24 April 2025 on EN-1, EN-3 and EN-5. The outcome is that the government intends to proceed with the three draft energy NPSs consulted upon but with some revisions. Along with the response, DESNZ published the three revised draft NPSs (which relate to England and Wales) as below:

• Overarching NPS for Energy (EN-1);

• NPS for Renewable Energy Infrastructure (EN-3); and

• NPS for Electricity Networks Infrastructure (EN-5).

They have been laid in Parliament pursuant to section 9(8) of the Planning Act 2008 and will come into force following a 21-sitting day consideration period, at which point they will be published on Gov.UK. They will replace the previous versions of  EN-1, EN-3 and EN-5 (which came into force on 17 January 2024). The revised NPSs are all dated December 2025 on their covers.

Revised NPS for Renewable Energy Infrastructure (EN-3) includes sections on:

• biomass and energy from waste;

• offshore wind and offshore transmission infrastructure;

• pumped hydro storage;

• solar photovoltaic generation;

• tidal stream energy; and

• onshore wind.

The NPSs were published with further documents available on the consultation outcome page on Gov.UK, including the:

• ‘NPS for Energy – Update 2025: Habitats Regulations Assessment’; and

• ‘NPS for Energy – Update 2025: Appraisal of Sustainability’.

• The ‘NPS for energy infrastructure collection’ page has been updated.

 

Carbon capture and storage

Industrial carbon capture

On 21 November 2025, DESNZ updated its ‘Carbon capture, usage and storage (CCUS) business models’ page with the following: the Industrial Carbon Capture (ICC) Business Models Update; the ICC front end agreement template (with a comparison against the previous template from October 2023); the ICC standard terms and conditions (with a comparison); the Waste ICC front end agreement template (with a comparison); and the Waste ICC standard terms and conditions (with a comparison). The development of business models for industrial carbon capture is intended to unlock private investment and scale up the deployment of carbon capture, usage and storage (CCUS) at industrial and waste management facilities in the UK.

Carbon storage 

On 27 November 2025, DESNZ published a technical guide for the carbon dioxide storage industry titled ‘The consenting lifecycle of marine geological carbon dioxide stores’.

The next day DESNZ launched a consultation seeking views on the Storage of Carbon Dioxide (Access to Infrastructure) Regulations 2011 to assess their effectiveness and how they may need to be amended to reflect the policy environment CCUS now operates in. It is part of a wider effort to progress areas that could help the UK transition to a self-sustaining CCUS market. The consultation document is titled ‘CCUS: Ensuring fair access to CO2 infrastructure’.

Carbon dioxide transport and storage – special administration

The Carbon Dioxide Transport and Storage (Licensed Operators) Administration (England and Wales) Rules 2025 (No. 1135) came into force on 19 November 2025 - there is an accompanying explanatory memorandum. As noted in the memorandum, Chapter 4 of Part 1 (Licensing of carbon dioxide transport and storage) of the Energy Act 2023 makes available a special administration regime for carbon dioxide transport and storage (T&S) companies (a T&S company is one which holds a licence under section 7 of the Energy Act 2023). The above statutory instrument sets out the detailed rules and procedures of the special administration regime which applies to T&S companies. The territorial extent and application of this instrument is England and Wales only. It is intended that a further instrument will follow in due course which will extend and apply to Scotland.

Capacity market

On 3 November 2025, DESNZ announced a consultation on the Capacity Market (CM) scheme in Great Britain titled ‘Proposal regarding locational changes of Capacity Market Units’ – this is on proposed changes to the rules to disallow any CM Units (CMUs) for New Build or CMUs for Demand Side Response (DSR) from changing the location of a generating unit or DSR CMU component after prequalification (prequalification is the process set out in the CM Rules for the Delivery Body to confirm whether a CMU may bid in a capacity auction - a CMU must meet the requirements specified in the CM Regulations and the CM Rules to be prequalified). Removing the ability for New Build projects to change their address would provide greater assurances that applicant CMUs represent genuine New Build CMUs that can contribute to GB’s security of supply. Allowing location changes after an auction introduces a risk that the CMU ultimately delivered is no longer the same project that secured the agreement. The proposed change also better reflects the intent of the CM that projects should be viable at the point of prequalification.

Critical Minerals Strategy and the clean energy transition

Clean energies are dependent on a steady supply of critical minerals. This is one of the factors behind the government’s announcements of 22 November 2025 summarised in its press release headed ‘From smartphones to fridges: UK to end overreliance on imports of critical minerals’. This relates to the launch that day of the UK’s new Critical Minerals Strategy, which sets out an ambition to produce 10% of UK’s mineral needs domestically, and 20% through recycling by 2035. The strategy will see the government work with the sector to harness the UK’s capability in critical minerals (earmarked as a foundational sector in the modern Industrial Strategy of summer 2025), with Europe’s largest lithium deposit in Cornwall, one of the largest sources of tungsten globally, one of the largest nickel refineries in Europe in Clydach, Swansea, and the only Western source of rare earth alloys used in the magnets found in wind turbines, amongst others.

Heat network consultations

The Energy Act 2023 named Ofgem as the future regulator for heat networks in Great Britain (see Chapter 1 in Part 8). Its most recent Forward Work Programme (available on its Forward Work Programme page) outlines the work it is doing in 2025 and 2026, including how it is preparing for its new regulatory responsibilities and the implementation of the regulatory regime in January 2026.

On 3 November 2025, Ofgem published a new consultation on the consolidated suite of heat network general authorisation conditions (ie. the regulatory rules) – this comprises the main consultation document and supporting documents, as follows:

• Heat networks regulation: authorisation conditions;

• General authorisation conditions determined under The Heat Networks (Market Framework) (Great Britain) Regulations 2025; and

• Appendix 1 Notice of Authorisation Conditions.

The above consultation follows and builds on a series of separate consultations on the same subject matter (ie. on the proposals for the incoming heat network regulatory regime) as held over the last year (all as listed with links on Ofgem’s consultation page of 3 November 2025).

The consultation of 3 November 2025 brings together the draft authorisation conditions Ofgem is intending to introduce and which will come into effect on 27 January 2026.

Registration guidance

On 17 November 2025, Ofgem launched a consultation on draft guidance (linked below) for heat networks registration pursuant to the Heat Networks (Market Framework) (Great Britain) Regulations 2025 (No. 269). Any person undertaking regulated activity on a relevant heat network from 1 April 2025 is required to be authorised.

The guidance explains the scope of heat networks regulation. It supports authorised persons undertaking operation or supply on a relevant heat network during the first part of the initial period (see regulation 26 of the above regulations); and explains roles and responsibilities, registration requirements, and obligations under the ‘Registration and Nominated Operator’ authorisation conditions. It also includes specific guidance for registering ‘Shared Ground Loop’ (SGL) heat networks and outlines what happens after registration is completed.

The documents published by Ofgem on 17 November are:

• the Heat networks regulation – registration guidance consultation document; and

• the Heat network registration draft guidance.