Energy Regulatory Update (UK) – October

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.

 

Connections reform

Timeline and implementation of connections reform

On 1 October 2025, the National Energy System Operator (NESO) published a news update headed “Unveiling the Connections Reform timeline” – this relates to the launch of an updated version of the interactive “Connections reform timeline” which is hosted on NESO's “Connections Reform” page. This was followed by two further news items on the connections reform programme:

the Office of Gas and Electricity Market's (Ofgem's) “Implementing connections reform: our role in supporting a strong and fair outcome”, 17 October 2025, and

NESO's “Connections reform: The key to unlocking GB growth”, 16 October 2025.

At the end of the one-off existing queue reordering process (see the above timeline), each project that submitted evidence in the Gate 2 to Whole Queue (G2TWQ) window will be told whether they are eligible for a confirmed connection (a Gate 2 offer), with a position in the Gate 2 connections queue, or a non-confirmed (indicative) queue position (known as Gate 1).

G2TWQ dispute determination

On 31 October 2025, Ofgem launched a consultation concerning draft guidance which outlines Ofgem's approach to managing dispute determinations for the G2TWQ exercise – the draft guidance is contained in a document entitled 'Supplemental Ofgem Guidance on the determination of disputes: Gate 2 to Whole Queue' – the introduction to this document provides a helpful summary of the TMO4+ connections reform package and process as approved by Ofgem on 15 April 2025. The supplemental guidance is set out in Appendix 1 to the consultation document, explaining when and how Ofgem expects to exercise its dispute determination functions in relation to G2TWQ. Ofgem proposes to published the finalised guidance in late November 2025.

Progression commitment fee

On 20 October 2025, Ofgem announced a consultation on its minded-to position to approve the original code modification proposal called Connection and Use of System Code (CUSC) CMP448: Introducing a progression commitment fee to the Gate 2 connections queue. The relevant documentation published by Ofgem comprises the CMP448 Consultation document and the CMP448 Impact Assessment. The documentation describes the policy objective as follows: "The CMP448 proposal aims to introduce a progression commitment fee (PCF) between the period of accepting a Gate 2 connection offer and achieving queue management milestone 1 (M1: submitting planning permission), as this is the longest period unviable projects could remain in the queue without the requirement to provide a financial commitment. The removal of unviable projects in the queue at the earliest opportunity will ensure a more reliable connections pipeline that improves the efficiency and economy of network planning and support the achievement of Clean Power 2030 Action Plan (CP2030) targets. The proposed fee is designed to incentivise regular assessment of project viability if the connections queue is in poor health and CP2030 may be at risk".

 

Contracts for Difference

Contract budget notice for AR7

On 27 October 2025, the Department for Energy Security and Net Zero (DESNZ) added to its CfD AR7 statutory notices page the AR7 contract budget notice given by the Secretary of State to NESO pursuant to regulation 11 of the Contracts for Difference (Allocation) Regulations 2014 (as amended) - this notice applies to the contracts for difference (CfD) allocation round for offshore wind (technology pot 3) and floating offshore wind (technology pot 4) known as AR7, which opened to applications on 7 August 2025. The available budget is presented by delivery years - broadly speaking a delivery year is the year (running April to March) when it is expected that a project will start receiving payments under its CfD contract. At the same time, DESNZ published an accompanying note to the contract budget notice. The CfD budget for other technologies will be set out in due course. Securing capacity through AR7 is considered particularly important in terms of the government achieving the Clean Power by 2030 objective.

2024 baseline price

On 24 October 2025, the Low Carbon Contracts Company announced the publication of a new dashboard for use with the CfD scheme – the dashboard converts all previous auction results into the new 2024 baseline price, which is what will be used for allocation round 7. This will add transparency for industry stakeholders and the public so that they can compare like for like in the new baseline price (until this new development, the CfD scheme had used a 2012 baseline price). The change means that administrative strike prices, reference prices and budgets for allocation round 7 will be published in 2024 prices.

Supply chain plans

To qualify for a CfD allocation round, CfD applicants for solar generating stations of 300 megawatts or more will be required to submit a Supply Chain Plan (SCP) to DESNZ. On 24 October 2025, DESNZ published details of the SCP application process for CfD allocation round 8 (AR8) for large-scale solar applicants. The documents published that day are: “Supply Chain Plan Guidance: For all projects submitting Supply Chain Plans – Allocation Round 8” and “Supply Chain Plan Questionnaire: Contracts for Difference Allocation Round 8: For solar PV projects equal to or greater than 300MW”. Successful applicants will be awarded a Statement of Approval from the Secretary of State, which the applicant can submit to NESO (as delivery body) when applying to participate in the CfD allocation round. As regards large-scale onshore wind, CfD applicants for that technology have in the past been subject to the SCP policy. For AR8, ministers will decide later this year whether onshore wind becomes eligible for the Clean Industry Bonus. Depending on the outcome, the SCP guidance may be updated to include onshore wind.

Subsidy control

On 16 October 2025, the Competition and Markets Authority gave notice that its Subsidy Advice Unit (SAU) had that day published its report providing advice to DESNZ concerning the CfD allocation round 7 subsidy scheme. The report sets out the SAU’s evaluation of DESNZ’s own assessment of compliance of the subsidy scheme with the requirements set out in the Subsidy Control Act 2022. The assessment referred to above applies to both of the parallel elements of the scheme for 2025 - AR7 and AR7a (ie. the allocation round for offshore wind and floating offshore wind known as AR7 and the allocation round for all other eligible technologies known as AR7a).

Capacity Market

In early October, DESNZ published a number of documents relating to the Capacity Market (CM) in Great Britain (GB), as linked below.

Call for evidence regarding hydrogen to power and interconnectors

On 2 October, DESNZ announced the “Capacity Market: Call for evidence on Hydrogen to Power and interconnectors” – this seeks views on enabling the participation of hydrogen to power (H2P) as a new technology in the CM in place across GB, and on technical changes to setting interconnector de-rating factors. The CM is technology-neutral, but capacity is “de-rated” based on the expected reliability of each technology type during periods of system stress.

A report was published by DESNZ the same day entitled “Electricity interconnectors contribution to security of supply: Technical de-rating factors for electricity interconnectors”.

Consultation on proposed changes for prequalification 2026

The above call for evidence is in addition to a consultation published on 2 October on proposals which aim to reform the CM (for prequalification 2026) to improve the security of supply and the functionality of the CM scheme, whilst aligning it with the government’s clean power mission and long-term net zero goals – the consultation document is entitled “Capacity Market: Consultation on changes for Prequalification 2026”. Following this consultation, the government aims to introduce changes ahead of prequalification 2026, prior to the auctions in 2027, subject to parliamentary time.

Outcome of call for evidence on consumer-led flexibility

On 2 October, in parallel with the above consultation, DESNZ published a summary of the responses it received from a call for evidence commenced on 16 December 2024 that sought views on improving consumer-led flexibility in the CM by improving the categorisation of demand side response technologies and the assurance processes surrounding testing and delivery. The government will continue to use the views shared as part of its ongoing policy development.

Electricity technologies - hurdle rates and revenue support models

On 6 October 2025, DESNZ published a report prepared for it by CEPA entitled “Hurdle rate estimates for electricity sector technologies”, 30 July 2025. CEPA was commissioned by DESNZ in 2024 to develop estimates of hurdle rates for a range of different electricity generation technologies, making assumptions for this purpose regarding revenue support models for underpinning the relevant generation project's revenue stream.

The report, which contains the output of CEPA's work in this area, is to be used by DESNZ in its departmental work (including in relation to the determination of payment streams that projects can receive by way of revenue support). As explained at 1.2 in the report, a hurdle rate represents the minimum project internal rate of return (IRR) at which an investment will proceed.

The ‘base case’ hurdle rate estimates for the generation technologies in the report are (as noted above) associated with an assumed revenue support model for the generation technology. This means that the estimated hurdle rates reflect risk differences that result from both the underlying technology characteristics and the risk mitigatory effect of the relevant revenue model.

The report provides information on investment hurdle rate assumptions for electricity sector technologies in the following technology categories (see Appendix A of the report for a description of each of the covered technologies, the development status of the technology in the UK, and its electricity generation characteristics):

• renewable generation;
• other low carbon generation;
• thermal generation (both with and without carbon capture use and storage (CCUS));
• storage technologies;
• electricity interconnectors;
• hydrogen electrolysers; and
• demand-side response.

Section 2 (Technologies and Revenue Models) of the report describes each technology within the scope of the report, and the assumed revenue support model. Appendix B (Revenue Models) provides further detail on the revenue support models.

Two other reports were published by DESNZ on 6 October, namely “Renewable Energy Generation Cost and Technical Assumptions – Onshore Wind and Solar PV” and “Areas of Research Interest: Clean Energy Superpower Mission (CESM)”.

Hydrogen transport and storage infrastructure

On 7 October 2025, DESNZ announced the publication of its “Hydrogen Infrastructure Strategic Planning Policy Statement” (Policy Statement) – this applies to England, Scotland and Wales. The purpose of the Policy Statement, which concerns hydrogen infrastructure (primarily hydrogen transport and storage (T&S) infrastructure), is to set out DESNZ's policy view on how it envisages NESO will carry out strategic planning for hydrogen infrastructure for GB. The Policy Statement also details how DESNZ will consider NESO’s hydrogen strategic planning when developing policy in relation to its hydrogen business models. It is noted in the introduction to the Policy Statement that hydrogen T&S infrastructure could play a role in meeting GB's 2030 Clean Energy Superpower Mission, and that strategic planning (for the purpose of the Policy Statement) refers to the assessment of T&S network needs in the short and long term to inform the subsequent allocation of funding to enable infrastructure which best meets GB's ambitions for decarbonisation, energy security, economic growth and value for money. The three chapters in the Policy Statement are summarised on page 7 of the document.

Electricity distribution price control

On 8 October 2025, Ofgem announced the opening of a consultation on the methodology that Ofgem will use in applying the framework for the price controls for the electricity distribution sector which are to start on 1 April 2028 and will run for 5 years up to 31 March 2033 (ED3), ie. when the current RIIO-ED2 price controls finish in March 2028 (RIIO stands for Revenue = Incentives + Innovation + Outputs, ie. setting Revenues using Incentives to deliver Innovation and Outputs). This follows the publication by

Ofgem on 30 April 2025 of its “ED3 Framework Decision”. The core consultation document is titled “ED3 Sector Specific Methodology Consultation” (core document) (the supporting documents for this can be accessed on the consultation page reached using the first link above). The core document contains 11 sections, including section 2, which discusses (amongst more) the background to electricity distribution and price controls, and section 3, which considers investment in the energy transition (including long-term integrated network development plans). Section 9 gives Ofgem's updated response to the recommendations made in February 2025 by what was then the National Infrastructure Commission (NIC), following the NIC's independent review of the electricity distribution system and the associated regulatory framework.

Long duration electricity storage – financial framework

On 9 October 2025, Ofgem published the “LDES Cap and Floor Financial Model” (CFFM). This financial model is the one Ofgem expects to use to complete the financial assessment for the long duration electricity storage (LDES) window 1 cap and floor scheme projects. The same model will be used to set the initial cap and floor levels at the time of cap and floor regime award in the summer of 2026. It will then be updated with project-specific inputs at final investment decision (FID) or financial close to revise the initial administrative cap and floor levels and the actual cost of debt floor level where relevant. A final update will follow the “Post Construction Review” to set the enduring cap and floor level. At the same time, Ofgem published the “LDES Cap and Floor Financial Model Handbook”, which explains the purpose, structure, and operation of the LDES CFFM. It outlines the building-blocks approach as used to calculate revenue cap and floor levels, and describes the inputs, calculations, and outputs of each worksheet in the model.

OFTO reform update

On 28 October 2025, DESNZ announced the publication of the “Evidence outcome” in respect of the “Offshore Transmission Owner (OFTO) regime: Call for Evidence” which ran from 13 November 2023 to 9 February 2024. The “Call for evidence outcome” explains (amongst more) that the government has acted on the evidence submitted to it by making policy reforms to the OFTO regime, including: (i) the 132kV Array Transmission licence class exemption, which allows offshore wind farms to use higher voltage 132kV array cabling without needing to divest these as part of the offshore transmission assets - this came into force in August 2024; and (ii) an extension to the duration of the Generator Commissioning Clause (GCC) from 18 to 27 months. This is a measure in the Planning and Infrastructure Bill, which is currently in Parliament. A reformed OFTO regime will remain the means of supporting the efficient buildout of offshore wind transmission infrastructure in GB.

Acceleration of clean energy projects

Planning and Infrastructure Bill

On 13 October 2025, the Ministry of Housing, Communities and Local Government issued a press release headed “Pro-growth package unshackling Britain to get building”. This announced a package of amendments to the Planning and Infrastructure Bill put forward by the government, one of the aims of which is the acceleration of new infrastructure projects, including onshore windfarms. The Bill entered Report Stage in the House of Lords on 20 October.

Clean energy and development consents

On 14 October 2025, DESNZ issued a press release headed “Government has approved enough clean energy to power 7.5 million homes” – the focus of this is the grant of development consent on 14 October for the Tillbridge solar project (the development consent order is available on the Planning Inspectorate's page for the Tillbridge Project). The press release includes in the “Notes to editors” a list of all clean energy projects given development consent (under the Planning Act 2008 regime for nationally significant infrastructure projects) since July 2024.

Regulatory system

On 21 October 2025 (with a further update on 22 October), HM Treasury announced that, six months after the publication in March 2025 of its Regulation Action Plan, it is publishing an update entitled “Regulation Action Plan – Progress Update and Next Steps” (Progress Update), setting out progress delivered and the next steps it will take to upgrade the UK's regulatory system. This Progress Update is supplemented by a technical annex (Annex A), setting out the government’s approach to calculating administrative burdens, and a progress update setting out progress by key regulators (Annex B) in delivering the commitments that they announced in March 2025. Chapter 2 includes a section titled “Planning and Environmental Permitting” which starts by saying that "For too long the UK has been held back by a sluggish and overly complex planning and environmental permitting system which risks delaying the delivery of new homes, critical infrastructure and clean energy projects, the delivery of which support our central growth mission".

Environmental regulation and energy facilities

On 27 October 2025, the Department for Environment, Food & Rural Affairs and the Environment Agency published a press release regarding a “New common-sense approach to environmental regulation”. This reports on proposed changes to the environmental permitting system in respect of construction projects in England. Currently, certain activities which are vital for the early stages of construction projects – such as site investigation works, the storage of waste materials and drainage operations – require environmental permits, even though many of these activities pose only minimal risk. This holds up new developments at the very start. The Environment Agency will, therefore, be given new powers to consider which activities should be exempt from the requirement for an environmental permit, making the permitting regime quicker, more flexible and proportionate for low-risk activities, and helping to get the country building new homes and energy facilities. This means that many projects – such as solar and onshore windfarms – will be able to be constructed without the need for any environmental permits where the right conditions apply.

Nuclear

Sizewell C

On 13 October 2025, DESNZ updated its page “Sizewell C: Funded Decommissioning Programme (FDP)” (FDP page) (this is one of a number forming DESNZ's 'Sizewell C Collection'). The FDP page, and the documents linked on it, relate to the financing arrangements required to meet the full costs of decommissioning, waste management and disposal in respect of the Sizewell C project.

New nuclear and the National Policy Statement

On 24 October 2025, the House of Commons Energy Security and Net Zero Committee (ESNZ Committee) of the UK Parliament issued a news item headed “Committee calls for clear direction on Oldbury and Wylfa, and a “one-stop shop” to finally overcome excessive cost and delays in deployment of nuclear energy” – this relates to a report published that day by the ESNZ Committee titled “The new National Policy Statement for nuclear energy generation” concerning the draft nuclear National Policy Statement (EN-7) published by DESNZ for consultation in February 2025.

Compensation for nuclear damage

Section 305 of the Energy Act 2023 (2023 Act) states that Schedule 22 of that Act contains amendments to the Nuclear Installations Act 1965 to implement the Convention on Supplementary Compensation for Nuclear Damage. Section 334(4) of the 2023 Act provides that section 305 and Schedule 22 come into force on the day on which the Convention on Supplementary Compensation for Nuclear Damage (Convention) comes into force in respect of the United Kingdom. The UK acceded to the Convention on 3 October 2025, with it coming into force in respect of the UK (in accordance with the Convention's provisions) on 1 January 2026 – the latter is, therefore, the date on which section 305 and Schedule 22 of the 2023 Act come into force.