7 July 2026 • 25 minute read

Energy Regulatory Update (UK) – March

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 and the Clean Industry Bonus Scheme

Clean Industry Bonus Scheme

On 4 March 2026, the Department for Energy Security and Net Zero (DESNZ) launched a consultation set out in a document titled ‘The Contracts for Difference Clean Industry Bonus: Consultation on contract changes for Allocation Round 8’ – this relates to amendments proposed by DESNZ to the contracts for difference (CfD) contract, specifically those required to implement the Clean Industry Bonus (CIB) changes for CfD allocation round 8 (AR8). The CIB works within the CfD mechanism to competitively allocate extra revenue support (the bonus) to offshore wind and floating offshore wind applicants who take meaningful action to increase the social, environmental and economic sustainability of the supply chain. Successful generators will be subject to the conditions and rules set out in the CIB Allocation Framework, the CIB Guidance and the CfD contract.

The changes proposed to the CfD contract relate to (amongst other things):

  • workforce protection measures for offshore wind through a Fair Work Charter;
  • skills investment criteria;
  • brining onshore wind into the CIB for allocation round 9; and
  • certain process improvements so that the scheme continues to function as effectively as possible.

The proposed drafting changes are shown as tracked amendments to the CfD Contract Standard Terms and Conditions, which DESNZ has published on the consultation page alongside a number of related documents. DESNZ will publish the government’s response and the final version of the CfD contract prior to the opening of the CIB round.

The above consultation launch was followed by the updating by DESNZ on 9 and 26 March 2026 of its ‘CfD AR8 Clean Industry Bonus framework and guidance’ page to add, for AR8, a modified draft Allocation Framework (to include additional information on generator contributions) and a modified draft guidance document (to include clarifications on proportional CIB payments and performance adjustments), and to publish the Fair Work Charter.

On 18 March 2026, the Competition and Markets Authority announced that DESNZ had made a request to the Subsidy Advice Unit for a report providing advice to DESNZ concerning its proposed CIB allocation in respect of CfD AR8.

Timing of CfD AR8

On 15 March 2026, DESNZ published a press release titled ‘Government to go ‘further and faster’ in becoming energy secure’. One of the measures outlined in this is the government’s intention to bring forward the opening of the next annual CfD renewables auction to July 2026 rather than later in the year (this relates to AR8).

Refinements to contract terms for CfD AR8

On 20 March 2026, DESNZ published the first part of the government’s response in respect of the consultation launched by it on 16 December 2025 (December Consultation) seeking views on proposed refinements to the CfD contract terms in advance of AR8. The document of 20 March 2026 sets out the government’s response to the proposals in Chapter 5 of the December Consultation – a separate government response will follow setting out its decisions on the other measures proposed in that consultation. The government will now bring forward secondary legislation to amend the Contracts for Difference (Allocation) Regulations 2014 (Allocation Regulations) to allow the National Energy System Operator (NESO) to correct certain types of delivery body errors (as described in the response document) and to consider new documentary evidence or information when examining ‘Tier 1’ appeals in respect of non-qualifying applications. The Allocation Regulations are also being amended to clarify the treatment of pending applications in light of operational experience from allocation round 7 held in 2025.

 

Connections reform

Demand connections

On 11 March 2026, DESNZ published a press release headed ‘Government to tackle speculative demand grid connection requests’. This relates to a consultation launched the same day contained in a document titled ‘Accelerating electricity network connections for strategic demand: Amending the connections process to address speculation and prioritise future capacity for strategic demand including data centres’ (Demand Consultation).

As noted in the introduction, the government cannot allow vital demand projects representing billions in investment to be stuck behind non-viable or less-developed projects in the connections queue. In partnership with Ofgem and NESO, the government is, therefore, intervening to protect the integrity of the system, and ensure that the right demand projects can connect in a timely manner. This intervention will build on the government’s ‘Delivering AI Growth Zones’ policy paper of 13 November 2025 and Ofgem’s demand connections reform call for input published on 13 February 2026.

The Demand Consultation sets out the government’s proposal to better align data centre connections with the energy system, and to introduce prioritisation mechanisms for reserving and reallocating scarce available network capacity. These measures could benefit strategically important projects, such as AI Growth Zones, EV charging hubs, and electrification of manufacturing sites. Reflecting the urgency of improving the process for demand connections, DESNZ intends to exercise new powers taken in the Planning and Infrastructure Act 2025 (PIA 2025) (see sections 14 to 18) to expedite these changes, working with Ofgem, NESO, and the network companies to implement actions as quickly as is practicable.

Connections reform and designated strategic plans 

The Electricity Network Connections (Designated Strategic Plans) Regulations 2026 (No. 223) were made on 4 March 2026 (Designated Strategic Plans Instrument) in exercise of powers conferred by section 165A(2) of the Energy Act 2023 (2023 Act). The instrument was laid before the House of Commons on 9 March 2026, will come into force on 30 March 2026, and was published with an explanatory memorandum. Its territorial application is England, Wales and Scotland.

Under section 165A(1) of the 2023 Act (as inserted by section 18(1) of the PIA 2025), the Independent System Operator and Planner (which is NESO) must have regard to those plans or documents designated as strategic plans under section 165A(2) of the 2023 Act when carrying out functions relating to network connections. And under section 16(2A) of the Electricity Act 1989 (1989 Act) (as inserted by section 18(3)(a) of the PIA 2025), when deciding how to comply with their duties under that section, and in particular in deciding how to prioritise persons requiring a connection, electricity distributors must have regard to designated strategic plans. Furthermore, under section 17 of the 1989 Act (as amended by section 18(4) of the PIA Act 2025) electricity distributors are exempt from the duty to connect where this would not be in accordance with designated strategic plans.

Regulation 2 of the Designated Strategic Plans Instrument designates (in accordance with section 165A(2) of the 2023 Act) the Clean Power 2030 Action Plan as a designated strategic plan. The plan, which sets out a pathway to a clean power system by 2030, was published by DESNZ on 13 December 2024 (and revised subsequently) – it comprises a main report and three annexes. NESO and electricity distributors must, therefore, have regard to the action plan when prioritising projects for connections to the electricity network grid.

The Designated Strategic Plans Instrument supports the implementation of the reforms made in 2025 to the electricity networks connections process (ie. the move to a ‘first ready and needed, first connected’ approach, prioritising for connection viable and strategically aligned projects). The designation provides guidance and support for NESO and electricity distributors when making decisions on issuing new connection offers.

Connections reform methodologies consultation

On 17 March 2026, NESO published on its ‘Connections Reform design documents and methodologies’ page the ‘Connections Methodologies Annual Consultation’ document (Overview Document). The purpose is to provide an overview of, and seek feedback on, the changes that NESO is proposing to make to the Connections Methodologies (pursuant to its licence obligation to formally review the same each year). The consultation also invites views from stakeholders on certain areas where NESO is not currently proposing changes.

The changes range from the minor and clarificatory (which cover most of NESO’s proposals), to the more material (of which there are a small number). The detail on the proposed changes is set out in Sections 6 to 8 inclusive, and in Appendices 1 to 3, of the Overview Document, which was published with several other documents, including mark-ups of the Connections Methodology documents (all available on the above NESO connections reform page). NESO will, following the consultation, submit revised versions of the methodologies to Ofgem (this will be later in spring 2026).

Certain topics of relevance to the Connections Methodologies are discussed by NESO in Section 4 (General Methodology Change Considerations) of the Overview Document, including (amongst others) battery storage, demand projects, and hybrid projects.

Section 10 of the Overview Document sets out next steps in relation to the consultation, and notes that NESO is working with key stakeholders to determine the most appropriate timing for the next connections application window. NESO will announce further information on this in due course but currently estimates that the most appropriate period may be quarter 3 of 2026.

 

New nuclear and fusion

Government response to the Fingleton report 

On 13 March 2026, DESNZ published a press release headed ‘Overhaul of nuclear system to speed up building and cut costs’. This reports that the government is outlining plans to speed up nuclear delivery, in response to the review undertaken by the Nuclear Regulatory Taskforce led by John Fingleton, which published its final report on 24 November 2025. The government is implementing the Fingleton review’s recommendations, with all reforms expected to be completed by the end of 2027, subject to legislative timelines. The plan (which puts outcomes ahead of unnecessary processes) is expected to reduce the cost and timeframe of delivering new civil and defence nuclear projects, without compromising safety and environmental protections.

On the same day, DESNZ published a policy paper titled ‘Building Our Nuclear Nation: Government Response to the Nuclear Regulatory Review 2025’ (Response). The Response is organised around two objectives: (1) Reinvigorate Britain’s nuclear sector (building on the Prime Minister’s strategic steer to the nuclear sector of 26 November 2025); and (2) Streamline planning and environmental assessments. The aim is smarter regulation.

Also on 13 March, the government published the ‘Environmental Outcomes Reports: a new approach to environmental assessment - government response’; and HM Treasury published a letter from the Chancellor to the nuclear regulators and industry urging them to work with government to address high costs and delays in the nuclear sector – this states that the “Government expects regulators and industry to treat nuclear programme delivery as a national priority”. It also notes how the government is merging the Defence Nuclear Safety Regulator with the Office for Nuclear Regulation (ONR), and how it will be legislating to give the ONR an explicit secondary mandate to support delivery of growth, energy, and national security objectives through the nuclear sector.

Consulting the Secretary of State on planning decisions

On 23 March 2026, the Ministry of Housing, Communities & Local Government published a consultation seeking views on (amongst more) two new proposals for a requirement for Local Planning Authorities (LPAs) to consult the Secretary of State where they are minded to refuse a planning application – one of those proposals relates to nuclear facilities. Many new nuclear projects are classed as Nationally Significant Infrastructure Projects (NSIPs), and so fall out of scope of the Town and Country Planning Act 1990 (TCPA 1990). However, certain development associated with decommissioning and the nuclear fuel supply chain does require planning consent under the TCPA 1990 – this is what section 2 of the consultation document relates to.

Advanced nuclear technologies – Nuclear third party liability 

On 23 March 2026, DESNZ launched an open consultation calling for evidence on approaches that might be taken in applying Nuclear Third Party Liability (NTPL) arrangements to Small Modular Reactors and Advanced Modular Reactors. NTPL treaties are international agreements which ensure that in the event of a nuclear incident there is a minimum amount of compensation available to victims and that claims are channelled appropriately to the operator of a nuclear installation and the jurisdiction in which an incident occurred.

Fusion strategy

On 16 March 2026, DESNZ published a press release headed ‘Britain to lead fusion energy race to deliver energy security’, reporting on the launch that day of the UK’s fusion strategy, titled ‘A New Energy Revolution: The UK’s Plan for Delivering Fusion Energy’ (Fusion Strategy). This sets out the government’s vision for fusion energy and the UK’s plan for commercial fusion deployment. It includes plans for the UK to be the first to offer a market framework to attract and support private investment in fusion energy, providing confidence to investors and ensuring a fair deal for consumers. The Fusion Strategy was published with a ‘Funding breakdown for fusion energy’.

Competitively Appointed Transmission Owners (CATOs)

NESO’s newsletter of 6 March 2026 reported that Great Britain is entering a phase of transmission network expansion and invited responses, by 30 April 2026, to NESO’s document titled ‘Expression of Interest: Competitively Appointed Transmission Owners (CATO): Market Sounding’ (EoI Document), the link to which is in NESO’s ‘Events and webinars’ page. The market sounding exercise embedded in the EoI Document is intended to give interested parties the chance to shape how projects are packaged, sequenced and brought to market under the Early Competition regime.

As noted in the introduction to the EoI Document, “Historically, new transmission infrastructure has been delivered exclusively by incumbent Transmission Owners [(TOs)] under the RIIO framework. Looking ahead, the scale and pace of future build-out are unprecedented. In response, government and Ofgem have confirmed the role of competitive delivery models to work alongside TOs. This approach is designed to complement the proven capability of incumbents, expand overall delivery capacity, and ensure the system has the flexibility and resilience needed to meet future requirements. // Under the Competitively Appointed Transmission Owners (CATO) framework, competitively selected parties would be licensed to design, build, finance, and operate defined transmission assets. In return they will receive a long-term, inflation-linked, availability-based revenue stream. Assets remain part of the electricity national transmission system, subject to system operation and regulatory oversight. However, delivery and operational responsibility sit with the competitively appointed entity rather than the incumbent Transmission Owner”.

The ‘EoI next steps’ section of the document concludes with this: “Following the publication of the Transitional Centralised Strategic Network Plan (tCSNP) in Summer 2026, NESO will work to shortlist and prioritise favourable projects for early competition. NESO will then recommend selected projects to Ofgem for confirmation to advance to the next phase, Invitation to Tender”.

NESO published a number of draft CATO competitive tendering documents in the ‘Document Library’ on its ‘Early competition’ page on 9 and 11 March 2026, including the ‘Early Competition in Onshore Transmission Networks: Project Appraisal Method – Draft for Stakeholder Feedback’.

 

Electricity interconnectors and offshore hybrid assets

Next steps document

On 25 March 2026, DESNZ published a document titled ‘Next Steps for Electricity Interconnection in Great Britain’ (Next Steps Document), in which DESNZ sets out a clear direction for the future of electricity interconnection. DESNZ will be working closely with Ofgem and NESO to deliver both new interconnectors and offshore hybrid assets (OHAs), strengthen cooperation with neighbouring countries, and improve the way existing assets operate.

The Next Steps Document explains how new infrastructure, such as OHAs that combine interconnectors with the transmission of offshore wind generation, could allow Great Britain to use offshore space more efficiently while delivering greater value for consumers and communities. NESO’s new system-wide strategic planning work will be central to this, helping to ensure that future interconnectors are built in the right places and at the right scale. The point is made on page 9 of the Next Steps Document that the optimal location, capacity, connecting country and commissioning timing for potential projects will be identified in NESO’s Strategic Spatial Energy Plan (SSEP), expected to be published in Autumn 2027; and further details on asset type, including point-to-point interconnectors and OHAs, will follow in NESO’s Centralised Strategic Network Plan (CSNP), expected by the end of 2028.

On page 6 of the Next Steps Document it is noted how OHAs can either be multi-purpose interconnectors (MPIs), in which the connected offshore wind farm is in Great Britain’s waters, or non-standard interconnectors (NSIs), in which the connected offshore wind farm is in the connecting country’s waters; and it is explained how two NSIs already have initial regulatory approval from Ofgem; and that the government, Ofgem and NESO are actively developing an innovative policy framework for MPIs. These types of assets are increasingly recognised as the future for North Sea energy infrastructure, as reflected in the shared ambition to deliver 100GW of ‘cooperation projects’ (such as OHAs) by 2050, set out in the Hamburg Declaration of Energy Ministers at the last North Sea Summit. DESNZ, Ofgem and NESO are, as noted on page 10 of the Next Steps Document, working closely with industry and other partners to develop a policy and regulatory framework to ensure MPIs are commercially viable in Great Britain, with the government exploring ways to reduce first-mover risk for these complex assets, including assessing the viability of a pilot scheme.

The government has three strategic objectives for the future of interconnection (including OHAs) in Great Britain, which are summarised on pages 6 and 7 of the Next Steps Document:

  • delivering new interconnectors and OHAs that are strategically aligned with a Net Zero energy system;
  • strengthening cooperation with international partners to support the timely delivery of projects on the right terms; and
  • ensuring the efficient operation of the interconnector fleet and supporting delivery of pipeline projects to ensure they provide the most value.

The Next Steps Document provides a framework for achieving the above goals.

Ofgem’s call for input on the future strategic approach 

Alongside DESNZ’s Next Steps Document, Ofgem published a call for input (Call for Input) on 25 March 2026 seeking views on proposals set out in a document titled ‘Future Strategic Approach to Interconnection’ (Call for Input Document).

The Call for Input relates to future interconnection projects in Great Britain; and the Call for Input Document seeks views on:

  • the ‘Future Delivery Approach’ as set out in section 2 of the document. This outlines the delivery options Ofgem is exploring as part of the future regulatory approach, including the type of competition to be used and the specific route to market; and
  • the ‘Future Financing Approach’ as set out in section 3 of the document. This outlines two financing models (ie. the cap and floor and the regulated asset base (RAB) models) and the key financial parameters Ofgem is considering as part of the future financing approach.

The introduction to the Call for Input Document (Introduction) discusses the proposal to coordinate future interconnection development with strategic energy planning under the SSEP and CSNP, moving from a developer-led approach to a strategically-led one for interconnection, which can better manage interactions with the wider network, mitigate constraint costs, and support efficient and coordinated design choices. This fundamental change will mean that NESO will determine the location, timing, and capacity of new interconnection, which could lead to a notable change in the type of interconnector projects developed. For example, there may be a greater emphasis on developing interconnector projects that have strong strategic benefits.

Numbered paragraph 1.4 of the Introduction notes how, to date, interconnection projects in GB’s jurisdiction have been delivered through a cap and floor regime or the merchant route (these both being developer-led methods). While this approach has so far unlocked significant deployment of required interconnection, Ofgem notes that, with the shift to a strategically planned energy network, it is now appropriate to consider the most beneficial enduring delivery approach. Additionally, with the possible changes to interconnector delivery routes as we move to a strategically planned system, there is also a need to look again at the financing of interconnector projects.

Through the Call for Input, Ofgem is, therefore, seeking early views on how interconnector delivery and financing should evolve to reflect a more centralised, strategically planned energy system. Numbered paragraph 1.8 of the Introduction states that, for the future financing approach, Ofgem is particularly interested in exploring: (i) the opportunities and limitations of the cap and floor model and the RAB model; (ii) key financing parameters (such as pre-operation revenue, availability incentives and performance incentives); and (iii) any other factors that should be considered to ensure future interconnection remains financially viable.

Market arrangements for multipurpose interconnectors

On 13 March 2026, Ofgem published the ‘Decision on Market Arrangements for Multi-Purpose Interconnectors’ (Decision on MAs). This was taken jointly by Ofgem and DESNZ and relates to Ofgem’s consultation on MPIs commenced on 2 June 2023, which sought views on the relative merits of the Home Market and the Offshore Bidding Zone (OBZ) configurations for this future class of infrastructure project, and on the trading arrangements required to support efficient cross‑border operation of future MPI projects. Following detailed assessment and further engagement, the government and Ofgem are pursuing OBZs under implicit trading arrangements as the preferred market model for MPIs. The ‘Conclusion and next steps’ section of the Decision on MAs sets out the outstanding issues in respect of the following: trading arrangement certainty; contracts for difference development; and other workstreams. It also details the next steps in MPI development, which include Ofgem’s aim to consult on its current policy development for an MPI regulatory framework.

Reformed national pricing and network charging for new assets

On 26 March 2026, Ofgem launched a call for input on proposed changes to transmission network charging – this is set out in a document titled ‘Locational Charges and Regulatory Siting Levers under Reformed National Pricing’ (RNP Document). The call for input explores potential options for how a locational charge could be designed to support the delivery of the Reformed National Pricing (RNP) programme, ranging from incremental to substantial changes to the current transmission network charging regime. It also sets out Ofgem’s initial thinking on legacy and transitional arrangements for projects in advanced stages of development.

A central part of the RNP programme (which followed the Review of Electricity Market Arrangements) is to align network charges for new assets with NESO’s forthcoming SSEP, to ensure that assets are strategically built in optimal locations, reducing system costs (the initial iteration of the SSEP will focus primarily on optimising generation and storage assets). The RNP Document sets out Ofgem’s early thinking on how transmission network charges could be reformed to incentivise the above. Ofgem wants to understand, through the call for input, potential risks, benefits, trade-offs and practical and technical considerations, and to identify areas requiring further analysis before any policy positions are developed further.

It is noted in the RNP Document that the government has set out its intention for reforms to network charging signals to be delivered as soon as possible within this Parliament, and by 2029 at the latest. This is why Ofgem is commencing industry engagement on potential options for charging reform now. It is also stated that the government will shortly publish its RNP Delivery Plan, which will set out the strategic approach and forward timetable for delivering reforms to support a more efficient, secure and cost‑effective electricity system.

Chapter 4 of the RNP Document considers provisional design considerations for locational charges for demand and electricity storage.

Long duration electricity storage

On 16 March 2026, Ofgem announced a call for input seeking views on a working draft of the proposed special licence conditions for the long duration electricity storage (LDES) cap and floor scheme. This forms part of early, non-statutory engagement and is intended to help Ofgem refine the drafting, structure and operability of the licence conditions before launching a statutory consultation planned for quarter 2 of 2026.

The key call for input documents published by Ofgem on the above page are:

 

Onshore and offshore wind projects

Permitted development rights for onshore wind turbines

On 18 March 2026, DESNZ opened a consultation under the heading ‘Permitted Development Rights for Onshore Wind Turbines’. Permitted development rights (PDRs) allow certain types of development to proceed without the need to submit a planning application, subject to limitations and conditions to control impacts. In the consultation, the government is seeking views on several proposals for PDRs for onshore wind in England. Whilst the  government is not proposing to change existing domestic PDRs that apply to households, or introduce a new PDR for repowering or community energy projects, it is seeking views and feedback on further changes that could support these types of development. It is also consulting on a new PDR that would allow small-scale, non-domestic wind turbines to be installed without the need for a planning application, subject to a set of conditions and limitations, to support small-scale onshore wind deployment. By providing planning flexibilities for low-impact, small-scale installations, the proposed PDR aims to support a range of non-domestic settings including businesses, farms, and public sector organisations to reduce their bills, become more energy independent and decarbonise their operations.

Offshore wind transmission – Tender Round 13

On 24 March 2026, Ofgem published a press release regarding Tender Round 13 (TR13) headed ‘Ofgem announces biggest shortlist of bidders since 2019 with offshore transmission assets for three major North Sea windfarms up for auction’. This reports that a field of five bidders, including some regular bidders and some returning after a long absence, are vying to own and operate the transmission links which connect three offshore wind farms (East Anglia THREE, Inch Cape, and Dogger Bank C) into Great Britain’s power grid. On the same day, Ofgem published the ‘Tender Round 13 (TR13) Enhanced Pre-Qualification (EPQ) Shortlist Notice’ providing information on the five shortlisted bidders. The shortlist notice includes a link to Ofgem’s ‘Offshore electricity transmission (OFTO)’ page.

Energy Code Reform

On 23 March 2026, the government and Ofgem published their joint response to the Energy Code Reform consultation launched on 1 May 2025 on the proposed Standard Licence Conditions for code managers and key policy updates underpinning code modification appeals to the Competition and Markets Authority. As noted in the response document, many of the rules that govern the operation of the energy system sit within industry codes. These codes set the rules for a wide range of commercial and technical activities, from how parties connect to the electricity and gas networks, to how consumers switch suppliers, to who can access consumption data. Energy Code Reform is a joint programme between the government and Ofgem to turn energy codes into an effective engine for wider system change, replacing the current industry governance process for updating the codes with a new framework, as enabled by Part 6 of the Energy Act 2023. The response document summarises the responses received to the consultation, and sets out the policy proposals the government intends to take forward.

Low carbon (electrolytic) hydrogen

The Climate Change Levy (Fuel Use and Recycling Processes) (Amendment) Regulations 2026 (No. 280) were made on 11 March 2026, coming into force on 12 March 2026 – they were published with an explanatory memorandum. The territorial application for the regulations is the UK. One of the effects of this instrument is to exempt from the climate change levy (CCL) electricity used in electrolysis to produce hydrogen. As noted in the explanatory memorandum, before this instrument came into effect electricity used to produce low carbon hydrogen through electrolysis of water was subject to the CCL, even though it is not used as a fuel. This put this method of hydrogen production at a disadvantage compared to hydrogen production via steam reformation (the use of natural gas in the latter process is already exempt from CCL on the basis that it is not used as a fuel).

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