12 August 2026 • 25 minute read

Energy Regulatory Update (UK) - June

Written by:Griffin O'RourkeGraeme Walton

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.

 

Contracts for Difference – Great Britain / Northern Ireland

CfD allocation round 8 (Great Britain)

On 1 June 2026, the Department for Energy Security and Net Zero (DESNZ) published the Contracts for Difference (CfD) Allocation Round 8 (AR8) standard terms and conditions page (subsequently updated). The CfD AR8 documents linked on it comprise versions of:

Each CfD contract comprises two components: (i) the applicable front-end agreement (which contains project-specific information that tailors the application of the standard terms and conditions); and (ii) the standard terms and conditions.

On the same day, DESNZ published (with supporting documents) the draft CfD AR8 contract allocation framework (subsequently updated to final form), which sets out the rules for CfD AR8 and the eligibility requirements that applicants must satisfy.

The above documents have been added to DESNZ’s CfD Allocation Round 8 collection.

Also on 1 June, DESNZ published the second part of the government's response (subsequently updated) (Part 2 response) to the consultation on proposed CfD scheme refinements for AR8 and future allocation rounds – ie. the consultation that was published on 16 December 2025. The first part of the response to that consultation was published on 20 March 2026 – it set out the government’s response to the proposals in Chapter 5 of the December 2025 consultation. The separate Part 2 response of 1 June sets out the government’s decisions on the other measures proposed in the consultation, with the changes which the government has decided to implement ahead of CfD AR8 summarised on pages 7 and 8 of the Part 2 response document under the heading “Summary of decisions” – that summary is followed by explanations of the changes, which are set out in numbered sections 1 to 10 of the document. The changes being implemented ahead of CfD AR8 are listed in a news item published on 2 June on the CfD Allocation Round Resource Portal.

The indicative timeline for AR8 (the qualification application window for which is scheduled to open on 20 July 2026) is available on the CfD Allocation Round Resource Portal.

National Energy System Operator’s (NESO’s) “Contracts for Difference (CfD)” page includes a helpful graphic showing the key stages of the CfD scheme. The same NESO page includes links to AR8 guidance published in June, including:

CfD amendment regulations (Great Britain)

The Contracts for Difference (Allocation) (Amendment) Regulations 2026 (No. 678) were made on 23 June 2026, and came into force on 24 June 2026, having been laid in Parliament on 20 April 2026 under the draft affirmative procedure. These regulations amend the Contracts for Difference (Allocation) Regulations 2014 (Allocation Regulations). The Allocation Regulations form part of the legislative framework underpinning the Contracts for Difference scheme under Chapter 2 of Part 2 of the Energy Act 2013. The above amendment regulations concern the arrangements for determining whether renewables projects qualify for a CfD and the procedure where qualification appeals are pending when the process of allocating contracts begins. Please refer to the explanatory note at the end of the regulations for a summary of the amendments.

Northern Ireland Renewable Electricity Generation Bill

On 30 June 2026, the Renewable Electricity Generation Bill of the Northern Ireland Assembly completed its first legislative stage on the journey to enactment – its progress can be tracked on the Renewable Electricity Generation Bill page of the Northern Ireland Assembly.

The Renewable Electricity Generation Bill (version as it stands on 30 June) will confer powers on the Department for the Economy for the purpose of providing financial assistance to encourage electricity generation which in the opinion of the Department will contribute to a reduction in emissions of greenhouse gases, within the meaning given by section 60 of the Climate Change Act (Northern Ireland) 2022. The assistance is to take the form of contracts for difference (CfDs) between an eligible generator of electricity and a counterparty. CfDs are to be awarded to generators in accordance with a scheme for their allocation, under which generators are to apply for those contracts. By clause 2 of the Bill the Department for the Economy may, by regulations, make provision about the terms and conditions of CfDs.

The Bill was published with an “Explanatory and Financial Memorandum” prepared by the Department for the Economy – please refer to this for further information on the structure of the Bill and what it provides for as regards CfDs.

The proposed CfD scheme pursuant to the Bill has previously been referred to as the renewable electricity support scheme for Northern Ireland and the renewable electricity price guarantee.

 

Electricity connections

New demand queue entry requirements for the distribution network

The Energy Networks Association (ENA) has announced that, with effect from 1 June 2026, new minimum information requirements will apply to all eligible demand connection applications - ie. demand connection applications submitted to distribution network operators (DNOs) at or above 5MVA. Developers will need to meet strengthened requirements to ensure that projects entering the connection queue are sufficiently developed and demonstrably viable. The ENA has published updated guidance titled “New Minimum Information Requirements for Distribution Demand Connections (≥5 MVA)”, 1 June 2026, which was developed by DNOs.

Delivery of the Gate 2 to Whole Queue connections reform programme

On 3 June 2026, Ofgem (the energy regulator) published a letter to all interested stakeholders titled “Ofgem agreement regarding the timetable for issuing connection offers under the Gate 2 to Whole Queue (G2tWQ) process”. The letter reports how, on 13 May 2026, Ofgem received a request from NESO under condition E12.14(c) of NESO’s Electricity System Operator licence seeking Ofgem’s agreement to an alternative timetable for issuing connection offers under the Gate 2 to Whole Queue (G2TWQ) process. Under condition E12.14(c), connection offers must be issued no later than 7.5 months from the closing date of the relevant Application Window, unless otherwise agreed with Ofgem. The original G2TWQ programme has changed significantly from that originally envisaged, with a re-baselined timetable published by NESO on 13 February 2026. Under this re-baselined programme, Gate 2 connection offers in respect of G2TWQ will be issued through phases over the course of 2026 and 2027, with the final phase expected to be completed by mid-March 2027 (and Gate 1 connection offers will mostly be issued within the same period). Having considered NESO’s request, Ofgem agrees to an alternative timetable under E12.14(c) for the issuing of G2TWQ-related offers. The timetable aligns to the re-baselined programme and provides clearer delivery milestones, rather than a single “blanket” end date. Please refer to the letter for the detail on the timetable for NESO issuing relevant G2TWQ offers, and for further information.

NESO’s connections reform update

On 10 June 2026, NESO published a press release headed “NESO and electricity networks issue offers to over half of energy projects needed by 2030”. In this, NESO confirms that more than half (58%) of connection offers for transmission and distribution projects in the <2030 pipeline have now (as of 10 June) been issued. The connection offers to ready-to-go energy projects, including offshore and onshore wind, solar, battery storage and hydro, amount to 37GW of new electricity capacity, supporting the energy generation and storage expansion required to deliver clean energy goals.

Ofgem’s demand connections reform update

On 16 June 2026, Ofgem published an update on the work it is doing on the “Connect pillar” of its demand connections reform programme – the update includes a link to a document titled “Connect Update: Demand Connections Reform” (update document).

The Connect pillar is one of the three pillars around which Ofgem is committed to delivering demand connections reform (the other two pillars being “Curate” and “Plan”) – all three pillars are described in numbered paragraph 1.5 of the update document (and in Ofgem’s call for input on reforming demand connections published on 13 February 2026). The Connect pillar (the relevant one for the update) aims to develop new approaches and connection arrangements to accelerate and increase the number of demand connections (such as data centres), and to maintain a secure system. The overall objective is to reform the demand connections process so that viable projects can secure timely connections, and strategic projects can be prioritised, delivering benefits for consumers and supporting economic growth while maintaining system security and operational integrity. Numbered paragraphs 1.14 to 1.16 (Wider work) of the update document describe the complex landscape of policy and regulatory change taking place in respect of connections. There will be formal consultations in autumn 2026.

In addition, on 16 June Ofgem published a summary of the responses to its call for input of 13 February 2026 on demand connections reform.

NESO’s review of Connections Methodologies

NESO is required by its licence conditions to undertake periodic reviews of its Connections Methodologies. Following such a review and subsequent consultation, on 9 June it published its proposals together with a submission document, which have been sent to Ofgem for its approval.

The proposed revised methodology documents (plus marked up versions showing the proposed changes) and the submission document - titled “Ofgem Annual Methodology Submission”, June 2026 - are available on NESO’s “Connections Reform design documents and methodologies” page. If the proposals are approved by Ofgem, the revised Connections Methodologies will come into effect and apply for the next connections application window following Ofgem’s approval.

The Connections Methodologies are a core part of the reformed connections process, determining how it works in practice, including:

  • how projects are assessed;
  • how they are prioritised; and
  • how the pipeline is formed and progresses.

The “What has changed” section of the “Ofgem Annual Methodology Submission” (at pages 3 to 5) summarises the proposed changes to the methodologies, as submitted to Ofgem, including the position in respect of battery energy storage projects, hybrid projects (such as generation combined with storage) and repowering projects (where existing sites are upgraded).

The underlying reason for many of NESO’s proposed changes to the content of the Connections Methodologies was to make refinements and improvements (for the future) as a result of lessons learned from the G2TWQ process.

 

Electricity Generator Levy and the Taxation (Energy and Vehicles) Bill

HM Revenue & Customs paper

On 17 June 2026, HM Revenue & Customs published a paper titled “Amended rate of the Electricity Generator Levy” (June Paper). This reports on the increase to the rate of the Electricity Generator Levy (EGL) from 45% to 55% from 1 July 2026. As explained in the June Paper, the EGL was originally announced in 2022 and applies from 1 January 2023 – it is provided for in Part 5 of the Finance (No. 2) Act 2023 (2023 Act). The increase in the rate of the EGL was announced in a Written Ministerial Statement on 21 April 2026 (following a review of the EGL in the light of the conflict in the Middle East), alongside the government’s intention to extend the EGL beyond its scheduled conclusion in 2028.

Taxation (Energy and Vehicles) Bill

On 24 June 2026, the Taxation (Energy and Vehicles) Bill (a Government Bill) was introduced in the House of Commons together with a set of explanatory notes – its progress can be tracked on the Taxation (Energy and Vehicles) Bill page on the UK Parliament site. Clause 1 of this Bill is to give effect to the increase in the rate of the EGL from 45% to 55% by amending the 2023 Act. As set out in the explanatory notes, the change provided for in clause 1 will increase the rate at which generators pay when they are receiving exceptional revenues. The purpose is to support the Government’s wider work to break the link between electricity and gas prices by encouraging older generators onto new fixed-price contracts.

UK’s carbon budgets, growth delivery and clean energy

The Climate Change Act 2008 (as amended in 2019 by the Climate Change Act 2008 (2050 Target Amendment) Order 2019 (No. 1056)) (2008 Act) provides a binding framework to cut UK greenhouse gas emissions. It was the amending order of 2019 that introduced the national target of net zero carbon emissions by 2050 (net zero) – this is set out in section 1 of the 2008 Act. Section 1 requires the Secretary of State to ensure that the “net UK carbon account” for 2050 is at least 100% lower than the 1990 baseline. The net UK carbon account is defined in section 27 of the 2008 Act.

Section 4(1) of the 2008 Act imposes a duty on the Secretary of State to set carbon budgets to cap carbon emissions in a series of five-year periods, and to ensure that the net UK carbon account for a budgetary period does not exceed the carbon budget. Carbon budgets must be set with a view to meeting the net zero target for 2050 (section 8(2)). This ensures progress towards the 2050 target.

Carbon budgets are set 12 years in advance by secondary legislation made under the 2008 Act.

Seventh carbon budget (2038 to 2042) and clean energy

On 2 June 2026, DESNZ issued a press release headed “Energy security, jobs and investment boost through climate action” – this reports that the government has set out its proposed level for the seventh carbon budget for the period 2038 to 2042 (Carbon Budget 7) (endorsed by the Environmental Audit Committee and the Climate Change Committee) (see below for the delivery plan and the Carbon Budget Order 2026 approving the budget). The press release discusses how, since July 2024, the UK has seen over £90 billion of private investment announced in clean energy, including carbon capture projects in Teesside and nuclear at Sizewell C, and reports how businesses are playing a leading role in supporting the energy transition in areas such as nuclear power, offshore wind, solar, and carbon capture.

Also on 2 June, the Climate Change Committee (as established under Part 2 of the 2008 Act) published its “Response to the Government's Seventh Carbon Budget target”. This was followed on 24 June by the Climate Change Committee publishing a news item headed “Response to Parliament passing the Seventh Carbon Budget into law”. This reported that on 24 June Parliament agreed the level for Carbon Budget 7, setting a legally binding target of ~87% emissions reduction in the period 2038 to 2042, in line with the Committee’s advice.

The next day, on 25 June, the Carbon Budget Order 2026 (No. 695) was made – it came into force on 26 June 2026. This Order sets Carbon Budget 7 for the 2038 to 2042 budgetary period – it was published with an explanatory memorandum. The territorial application of this instrument (that is, where the instrument produces a practical effect) is the whole of the UK.

Carbon budget limit for 2028 to 2032

The Climate Change Act 2008 (Credit Limit) Order 2026 (No. 694) was made on 25 June 2026, coming into force on 26 June – it has an explanatory memorandum. This legislation relates to the maximum level of UK greenhouse gas emissions for the years 2028 to 2032, known as the fifth carbon budget, which was set in 2016. The legislation sets a limit (of zero) on the amount of overseas reductions, or avoidance, of greenhouse gases that are allowed to count towards meeting the fifth carbon budget. The legislation also exempts the EU Emissions Trading System from the limit. This is to avoid restricting any future approaches to linking the EU Emissions Trading System and the UK Emissions Trading Scheme.

 

Energy storage

Long duration electricity storage - Zenobē Energy litigation

The Zenobē Energy litigation in the Competition Appeal Tribunal (CAT) comprises the jointly managed case 1754/12/13/25 and case 1769/12/13/26.

These cases concern applications made under section 70 of the Subsidy Control Act 2022 (SCA 22) by Zenobē Energy Limited (Applicant / Zenobē). The applications relate to a decision of the Gas and Electricity Markets Authority (GEMA / Respondent, which acts through Ofgem) to make a cap and floor scheme in respect of long duration electricity storage (LDES) projects (Ofgem is under a statutory duty to establish the scheme – see section 26 (Long duration electricity storage) of the Planning and Infrastructure Act 2025, which amended the Electricity Act 1989 by inserting new section 10P (Long duration electricity storage)). It was alleged by Zenobē that establishment of the scheme constitutes a subsidy decision within the meaning of the SCA 22, that the scheme was not validly made, and that it should be quashed.

On 23 June 2026, the pages on the CAT site for the above related cases were updated to include:

  • a summary of the judgement (applicable for both cases) published on 23 June. As noted there, the CAT has dismissed the applications of Zenobē for review under section 70 of the SCA 22; and
  • a download link for the full judgement.

Section C (Background to the Scheme) of the judgement is helpful on the background to and workings of the LDES cap and floor scheme and the reasoning behind it.

On 26 June 2026, an order was published regarding the date for any application for permission to appeal, and the date for any response to such an application.

Energy storage assets and repetitive re-trading

On 19 June 2026, Ofgem published a policy document titled “Repetitive Re-trading (RRT) by electricity storage in transmission constraint periods”.

RRT can lead to inefficient dispatch patterns and higher balancing costs. It is not a new issue – with storage assets in constrained areas of the network having had significant volumes of bids accepted in the Balancing Mechanism in constraint periods for many years – and has been the subject of industry analysis and discussion, particularly in the context of the government’s review of electricity market arrangements. But its impact on system costs and efficiency is increasing as the amount of storage connected to the network (and the volume of actions that NESO must take to manage constraints) continues to grow. A helpful example of RRT is given in numbered paragraph 2.13.

Section 4 of the policy document discusses existing market rules of relevance to RRT; and section 5 describes the options which Ofgem is working on with NESO and DESNZ to incentivise storage assets to charge and discharge in an effective manner and hence mitigate the negative system impacts associated with RRT (including DESNZ’s Reformed National Pricing (RNP) Delivery Plan).

Ofgem expects that some of this work will deliver short-term benefits, whereas other options may involve more material changes to market and dispatch arrangements which are likely to be more long-term pieces of work.

LDES - Ofgem’s LDES minded-to decision consultation

On 26 June 2026, Ofgem announced a consultation on its minded-to decisions relating to the LDES cap and floor scheme – the consultation is on:

  • the proposed portfolio of projects Ofgem is minded to support;
  • Ofgem’s assessment approach, including capacity limits and regime requests; and
  • future LDES application windows.

Ofgem’s announcement includes a link to the online consultation page headed “Long duration electricity storage window 1: minded-to decisions”, which in turn includes links to the minded-to decision consultation documents published on 26 June, as follows:

The above “Window 1: Minded-to decisions” document includes a table which sets out the portfolio of 16 projects that, following Ofgem’s project assessment, Ofgem is minded-to decide should receive cap and floor support.

Ofgem will consider all consultation responses before publishing its final decisions. Ofgem intends to publish its “Window 1: Final Awards – Long Duration Electricity Storage cap and floor regime” in Autumn 2026.

Capacity Market

The Capacity Market (CM) is governed by secondary legislation through a combination of the Electricity Capacity Regulations 2014 (as amended) (CM Regulations) and the Capacity Market Rules (as amended) (CM Rules). The CM Rules provide the detail for implementing much of the CM’s operating framework set out in the CM Regulations.

On 26 June 2026, DESNZ updated its “Capacity Market Rules” page with the publication of the Capacity Market (Amendment) (No.2) Rules 2026 (Amendment Rules), as presented to Parliament pursuant to section 41(9) of the Energy Act 2013, which amend the CM Rules. The Amendment Rules come into force when the draft Electricity Capacity (Amendment and Transitional Provision) Regulations 2026 come into force – the latter were laid in Parliament on 14 May 2026.

On the same day, Ofgem published its “Decision on Statutory Consultation on Capacity Market Rule Change Proposals 2026” (decision document) following its statutory consultation launched in April 2026 on proposed changes. The decision document contains a section in respect of each of the 13 CM Rule change proposals consulted upon, including background, decision and rule change. A summary of the proposed changes is given in the first two pages of the document. The changes cover many areas, including in respect of connection capacity for battery energy storage facilities (as addressed in section 7 of the decision document).

 

Nuclear / fusion energy

National Policy Statement for fusion energy

On 8 June 2026, DESNZ launched an open consultation seeking views on a new National Policy Statement (NPS) that supports decisions for fusion energy infrastructure – this is contained in the document titled “Consultation on the draft National Policy Statement for fusion energy generation (EN-8): The proposed planning approach for fusion energy infrastructure in England and Wales” – this was published together with associated documents (all available on the consultation page), including the “Draft National Policy Statement for Fusion Energy Generation EN-8”.

An NPS is a statutory document designated under the Planning Act 2008 which sets out the government’s policy for decisions on applications for development consent under that Act for major infrastructure projects, known as nationally significant infrastructure projects (NSIPs).

DESNZ’s “Collection: National Policy Statements for energy infrastructure” page has been updated.

Small Modular Reactors

On 15 June 2026, DESNZ and the Department for Business and Trade published a press release headed “Government backing helps UK’s Rolls-Royce SMR win multibillion-pound Sweden nuclear export contract”. This reports that Rolls-Royce SMR has been selected by the Swedish development company Videberg Kraft to build small modular reactors (SMRs) in Sweden, marking a major multibillion-pound export win for the UK and a “breakthrough moment” for British nuclear. The decision marks an endorsement of the technology’s credibility, following the decision by Great British Energy – Nuclear (GBE-N) in June 2025 to select Rolls-Royce SMR as its preferred technology partner for the government’s own SMR programme.

GBE-N is the government’s delivery body dedicated to supporting the development and deployment of new nuclear technologies in the UK. As an arm’s-length body of DESNZ, GBE-N helps ensure long-term energy security, supports net zero targets, and promotes investment and innovation across the nuclear sector. On 24 June, GBE-N published a press release headed “UK SMR programme at Wylfa hitting target for British contracts”, reporting that, since 2023, GBE‑N has awarded nearly £900m in contracts, with over 70% going to UK‑registered companies.

Cyber security - load control (including for grid-scale BESS)

The Cyber Security and Resilience (Network and Information Systems) Bill (Cyber Security Bill) is a Government Bill which (as of the time of writing in June) is progressing through Parliament and can be tracked on the relevant page of the UK Parliament site (the first link above is to the version of the Bill published on 17 June). A set of explanatory notes for the Cyber Security Bill was also published on 17 June; and on 23 June the House of Lords Library published a related research briefing.

The Cyber Security Bill is intended to strengthen the cyber security of organisations in the UK that provide essential services, including in respect of energy. It will amend the Network and Information Systems Regulations 2018 (NIS Regulations) to include additional sectors and update incident reporting duties. It will also confer powers on the Secretary of State to amend the legislation and issue directions to organisations when necessary for national security. The policy intent is to bring organisations remotely controlling large amounts of electrical load into the scope of the NIS Regulations, so as to tackle the evolving cyber threats faced by the UK.

Clause 6 of the Cyber Security Bill (as it stands on 24 June) will introduce load control as a new essential service for the purpose of the NIS Regulations and set threshold requirements to capture entities managing a significant amount of electricity through relevant energy smart appliances (ESAs). An ESA is defined in section 238 of the Energy Act 2023 as “an appliance which is capable of adjusting the immediate or future flow of electricity into or out of itself or another appliance in response to a load control signal”. ESAs in scope of the essential services in the Bill are electric vehicles, electric vehicle charge points, electrical heating appliances, battery energy storage systems (BESS) and virtual power plants. The explanatory notes add that “it is the intention of [DESNZ] to define the remaining relevant ESAs in regulations after royal assent”. Large load controllers will be in scope if the maximum flow of electricity in and out of the ESAs they manage is 300 megawatts or higher. Load controllers (ie. organisations delivering load control services) are organisations that control electrical load to and from ESAs, such as BESS, to manage and optimise the electricity system. Currently (June 2026), there are no legislative cyber security requirements for load controllers. The above will mean that any organisation managing relevant ESAs, i.e. controlling the flow of electricity into and out of the relevant ESA by way of load control signals, will be captured by the NIS Regulations (as amended) provided they control 300MW or more in aggregate. This is an important measure to improve security of the energy system as a whole.

On 23 June 2026, DESNZ published a consultation (applicable to England, Scotland and Wales) headed “Large Load Controllers: Tier 1 Cyber Assessment Framework and Associated Guidance” (Consultation). The consultation seeks views on the proposed Cyber Assessment Framework (CAF) profile for large load controllers in the electricity system, and accompanying draft guidance. The proposals are part of the Smart Secure Electricity Systems Programme, and support planned legislative changes under the Cyber Security Bill. As noted in the consultation document, “At an industrial and commercial scale, Battery Energy Storage Systems (BESS) provide vital support in managing fluctuating renewable energy sources and helping to maintain grid stability. Optimising energy usage across the GB energy system supports reduced costs for consumers through reducing the need for new infrastructure and reducing peak demand charges. Increasingly, organisations can opt to contract out the management of BESS alongside other ESAs to electricity aggregators. An aggregator is a service provider that bundles together a portfolio of ESAs, managing load through a central remote platform, often known as a virtual power plant, for the purpose of offering services that support grid balancing and generate revenue”. The consultation document also states that DESNZ expects the Cyber Security Bill to receive Royal Assent in Spring 2027, subject to the parliamentary process, meaning the legislation will be in force around Autumn 2027. DESNZ proposes a grace period prior to formal assurance of the new regime (year end 2029 is put forward as an appropriate timeframe for large load controllers to be fully meeting the profile).

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