Energy Regulatory Update (UK) - July

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.

Demand Connections Reform and data centres

On 29 July 2026, Ofgem published a consultation document titled “Curate – Demand Connections Reform”, which is accompanied by several ancillary documents, all linked on the consultation page.

This is part of Ofgem’s work with government, National Energy System Operator (NESO) and network companies to develop reforms to the demand connections process structured around three core pillars: Curate (to ensure only viable projects enter and remain in the queue), Plan (to support government-led prioritisation of strategically important projects) and Connect (to accelerate physical grid connections).

The consultation seeks views on Ofgem’s “Curate” package of measures to better manage the rapid growth of data centres in the demand connections queue. Curate proposes two key reforms:

• a data centre commitment fee, which would be paid by large data centre developments when accepting a connection offer - the fee would be refunded when the project reaches energisation and forfeited if the project exits the queue early; and
• data centre queue management milestones, which would require developers to demonstrate tangible progress through evidence such as financial capability, commercial maturity and procurement activity if they wish to retain their queue place.

Both reforms are aimed at deterring speculative and non-viable projects and prioritising / facilitating viable developments in the connections queue.

An overview of the Curate package is given at 1.4 in chapter 1 (Introduction) of the consultation document, with the detail set out in the following chapters. Chapter 1 also explains the interaction with proposed securities reforms, the application of the proposals in relation to existing and future projects (subject to the scope, thresholds, exemptions and grace periods set out in the document), and the position in respect of projects which are connecting at transmission level and those connecting at distribution level.

Further information is available in the press release issued by Ofgem on the same day headed “Ofgem acts to free up grid capacity by tackling speculative data centre projects”.

Contracts for Difference and Allocation Round 8

On 6 July 2026, the Department for Energy Security and Net Zero (DESNZ) published on its “Contracts for Difference (CfD) Allocation Round 8: statutory notices” page the statutory notices for allocation round 8 (AR8) of the Contracts for Difference (CfD) scheme, comprising the:

• Contract Framework Notice;
• Counterparty Costs Notice;
• Standard Terms Notice;
• Application Window Notice; and
• Pot and Price Notice.

The notices set out, amongst other things, the administrative strike prices (ASPs), the delivery years and the technology pot structure for AR8. Also on 6 July, DESNZ published the final allocation framework for AR8, setting out the rules and eligibility requirements.

On the same day, DESNZ updated its “Proposed refinements for Allocation Round 8 and future rounds” page to publish a “Revision to the government response to the proposed refinements for Allocation Round 8 and future allocation rounds”. As explained by the Low Carbon Contracts Company, this revision confirms that the government will have visibility of bids from floating offshore wind and other deepwater offshore wind in AR8 in addition to previously confirmed technologies.

Following the above, on 20 July DESNZ published the Final Budget Notice for the Clean Industry Bonus applicable to CfD AR8.

The application window for the CfD AR8 scheme opened on 20 July 2026. Refer to the AR8 Timetable on the CfD Allocation Round Resource Portal for AR8 future indicative dates.

Long duration electricity storage

On 21 July 2026, Ofgem published a call for input on its minded-to positions in respect of the special licence conditions that would apply to Window 1 cap and floor long duration electricity storage (LDES) projects. The call for input documents linked on the above Ofgem page comprise:

• the “Long duration electricity storage draft special licence conditions: minded-to decisions”; and
• the draft “Electricity Generation Licence: Special Conditions for Long Duration Electricity Storage Facilities Subject to The Cap and Floor Regime”.

Ofgem will make a final decision on the minded-to decisions after the LDES cap and floor awards in autumn 2026, before consulting on the statutory licence modification process for successful Window 1 projects.

On 28 July, Ofgem updated the above call for input page to add the “Draft guidance on the Special Licence Conditions for the LDES Cap and Floor regime”. This draft guidance explains the proposed special licence conditions (see above) which would be added to the electricity generation licences of LDES facilities awarded a cap and floor regime in the first application window. It covers the proposed licence requirements, how payments would be calculated, the obligations on licence holders, and how the cap and floor regime is intended to protect consumers while supporting investment in LDES.

The draft guidance addresses the two financing classifications for the cap and floor regime, ie. a “balance sheet project” and a “project finance project”. This classification affects how the “Floor Level” is determined, how availability shortfalls are treated, the discount rate used in assessments, and how often settlements take place.

Capacity Market Rules and Regulations

On 7 July 2026, Ofgem published a document setting out its decision on changes to the Capacity Market Rules (CM Rules) pursuant to regulation 77 of the Electricity Capacity Regulations 2014. This decision followed its statutory consultation on CM Rule change proposal CP391 on enabling the use of Market-Wide Half-Hourly Settlement systems for the Supplier Metering Solution Configuration. Ofgem has decided to proceed with CP391 on the basis set out in the decision document.

The Electricity Capacity (Amendment and Transitional Provision) Regulations 2026 (No. 850) were made on 16 July 2026, coming into force the next day. They were published together with an explanatory memorandum. This instrument amends the Electricity Capacity Regulations 2014, the Electricity Capacity (Supplier Payment etc.) Regulations 2014 and the Electricity Capacity (No. 1) Regulations 2019 to implement technical reforms to the CM. The changes aim to maintain security of electricity supply, align the scheme with the government’s decarbonisation objectives, and improve its functionality and efficiency to ensure it remains fit for purpose in a rapidly evolving energy system.

On 17 and 27 July, DESNZ updated its “Capacity Market Rules” page to publish the Capacity Market (Amendment) (No.3) Rules 2026, the Capacity Market (Amendment) (No. 4) Rules 2026 and the Informal Consolidation of Capacity Market Rules. DESNZ has also published a letter (plus Tables) from the Minister for Energy to NESO setting out the parameters for the next CM auctions.

In late July, NESO published its Electricity Capacity Report (ECR) and DESNZ published a report by the Panel of Technical Experts (an advisory group appointed by government) providing independent scrutiny of the analysis in NESO’s ECR – this is to inform the policy decisions of DESNZ in respect of the CM and assist it in setting the parameters for the CM auctions.

Sustainable aviation fuel

The Sustainable Aviation Fuel Bill was enacted on 5 March 2026, becoming the Sustainable Aviation Fuel Act 2026 – it introduced powers to establish a revenue certainty mechanism (RCM) which will support sustainable aviation fuel production in the UK. The RCM is to be contained in a revenue certainty contract. This mechanism shares features with the CfD scheme for low carbon electricity generation.

SAF contract allocation strategy

On 13 July 2026, the Department for Transport (DfT) published a document titled “Sustainable Aviation Fuel Revenue Certainty Mechanism: Contract Allocation Strategy”  (Allocation Strategy), the aim of which is to provide greater clarity on the approach to allocating contracts under the Sustainable Aviation Fuel (SAF) Allocation Round 1 (SAF AR1) in respect of the SAF RCM.

The Allocation Strategy includes:

• the strategic objectives of contract allocation under the RCM;
• an indicative timeline for the first round of contract allocation;
• the proposed size of the first allocation round;
• technology and feedstock considerations; and
• the current position on future allocation opportunities.

The above has been added to the DfT’s “Collection: Sustainable Aviation Fuel (SAF) Mandate” page.

Electricity Generator Levy

On 15 July 2026, the Taxation (Energy and Vehicles) Bill received Royal Assent and became the Taxation (Energy and Vehicles) Act 2026 (Taxation Act). Section 1 (Increase in rate of electricity generator levy) of the Taxation Act (which amends the Finance (No. 2) Act 2023) contains the provisions of relevance to the Electricity Generator Levy (as reported on in past editions).

 

Nuclear policy and regulation

National Policy Statements

On 16 July 2026, the Minister of State for Energy made a statement in Parliament under the heading “Review of National Policy Statements for Nuclear Energy Infrastructure”. This refers to the government taking forward the recommendations in the “Nuclear Regulatory Review 2025: Enabling nuclear delivery through regulatory reform” (which was published in final form on 24 November 2025), with a commitment to implement those recommendations by the end of 2027. As part of this, DESNZ plans to introduce the Nuclear Regulation Bill in this Parliamentary session.

The statement also reports on the government’s intention to review and update the National Policy Statement for nuclear energy, EN‑7, in response to the Nuclear Regulatory Review (the statement is made in accordance with section 6(4A) of the Planning Act 2008, which requires the Secretary of State to lay a statement before Parliament announcing the review). EN-7, designated in 2025, establishes the planning policy framework for nuclear energy infrastructure in England and Wales, and introduced a modular approach that enables targeted updates while providing regulatory certainty. The government intends to conclude the review by the end of 2026, with any updates to EN‑7 published in 2027, subject to parliamentary scrutiny. The current form of EN‑7 will continue to apply while the review is underway. The government expects to consult on any proposed updates.

Existing nuclear generators and CfDs

The Contracts for Difference (Definition of Eligible Generator) (Amendment) Regulations 2026 (No. 844) were made on 16 July 2026, in exercise of powers conferred by the Energy Act 2013, coming into force on 17 July 2026 – they were published with an explanatory memorandum (having previously been laid in Parliament in May 2026). This instrument amends the CfD legislative framework to enable a CfD to be offered to an existing nuclear generating station to support the continuation of its generation. The amendment made by this instrument (which is to regulation 3 (Definition of eligible generator) of the Contracts for Difference (Definition of Eligible Generator) Regulations 2014) expands the scope of nuclear plants that are eligible for CfD support so that, where appropriate, existing nuclear generating stations (continuing to generate electricity) may access a long-term revenue stabilisation mechanism to extend their operational life. The instrument is enabling in nature (concerning eligibility only) and does not mandate the award of CfDs to any individual nuclear generating station. Please refer to the explanatory memorandum for further information.

Sizewell B

On 8 July 2026, DESNZ published a press release headed “Sizewell B power plant given lifetime extension to 2055”. This reports that the government is backing a 20-year lifetime extension of the Sizewell B nuclear power station. The government and EDF have agreed terms for a 20-year CfD, with the final deal to be subject to the development of the long-form contract and all regulatory approvals, which will be announced in due course.

ONR Strategy

On 7 July 2026, the Office for Nuclear Regulation (ONR) published a document titled “ONR Strategy”, setting out the ONR’s ambitions to transform how it works. As noted in the strategy, the “coming decades will be transformative for the UK civil and defence nuclear sectors. Nuclear is set to play a central role in driving economic growth, energy security and national defence. Major projects like Hinkley Point C and Sizewell C will reshape the energy landscape, alongside the development of SMRs, ANTs and the development of fuel manufacturing capability”. This was followed on 15 July 2026 by the publication of the ONR’s Corporate Plan for 2026/27.

Corporate Power Purchase Agreements

On 7 July 2026, the Department for Business and Trade and DESNZ published the “Government response to the Corporate Power Purchase Agreements call for evidence”- ie. the call for evidence published on 9 January 2026 which sought views on the role of corporate power purchase agreements (CPPAs) in Great Britain and how the market could be developed to support business competitiveness, energy security and investment in low-carbon electricity generation.

 

Greenhouse gas removals / CCUS

Greenhouse Gas Removals

On 17 July 2026, DESNZ published the “Independent review on greenhouse gas removals: government response” (GGR Policy Statement) – this is the government’s response (by way of policy statement) to the independent review report of 23 October 2025. The introduction to the GGR Policy Statement states that the government’s “strategy for a functioning GGR market is to kickstart UK supply with revenue certainty via the GGR Business Model and alongside investment in carbon capture and storage networks, while building durable demand through robust market frameworks and continually driving high‑integrity standards for removals”. The GGR Policy Statement contains (amongst much more) discussion on the GGR Business Model.

Transition Access Agreement

On 22 July 2026, DESNZ updated its Carbon capture, usage and storage (CCUS): business models page to add the “Transition Access Agreement: Policy Position Statement” (TAA Policy Statement) – this relates to the proposed Transition Access Agreement (TAA) in respect of which DESNZ expects to publish Heads of Terms later in 2026. The TAA is to be a new contract which is being introduced to enable projects that do not require the level of support provided by an existing CCUS Business Model to connect to the carbon dioxide transport and storage (T&S) network (T&S Network). Whilst the TAA will initially be developed for projects connecting to the T&S Network via pipeline, DESNZ will also be considering how the TAA can be adapted for projects connecting to the T&S Network via non-pipeline transport (NPT). The TAA Policy Statement provides an update on minded-to commercial provisions which have evolved and will make up the core offering of the TAA.

Regulatory model – transport and storage

On 30 July 2026, Ofgem issued a determination modifying the Price Control Financial Instruments in respect of the CO2 Transport and Storage economic regulatory model, ie. the Price Control Financial Model, the Price Control Financial Handbook and the Price Control Financial Guidance. These documents are available on Ofgem’s “Carbon dioxide transport and storage Price Control Financial Model” page.