UK Energy & Infrastructure Outlook for 2026

Recapping 2025

In 2025 several long-running policy and regulatory issues moved forward and provided clearer direction for the market.

A central development was the conclusion of the government’s Review of Electricity Market Arrangements (REMA), which assessed whether the UK’s electricity market remains suitable for a system increasingly dominated by renewables. One of the most debated options was the introduction of locational or zonal pricing, which would have led to different wholesale electricity prices across regions. In July 2025, the government confirmed it would not introduce a full zonal pricing model and would instead pursue reforms within the existing national pricing framework.

Progress was also made on grid connection reform, with a move away from the traditional first-come, first-served approach towards prioritising projects based on readiness and alignment with the Clean Power 2030 (CP2030) targets. The REMA decision and the grid connection reforms were generally well received by the industry. However, uncertainty persists, as many investors and developers are waiting to see the tangible impact of these decisions on their projects.

In the UK, the market for battery energy storage strengthened, with record levels of deployment reflecting improving revenues and growing demand for system flexibility. We have seen an increase in activity within our client base for solar and battery projects in particular. 

What to expect in 2026

Global energy transition priorities continued to shift through 2025, with increased emphasis on energy security and affordability alongside decarbonisation. While this has not altered the UK government’s commitment to its CP2030 targets, it has led to a more pragmatic assessment of what the next phase of the transition will require. The first phase, driven largely by renewables deployment, is giving way to a more complex stage focused on system flexibility, network capacity and rising electricity demand.

As deployment becomes the priority in 2026, a range of critical issues will come into sharper focus.

1.   Grid connection reform: moving from policy to practice

2026 will see grid connection reforms move further into implementation. Projects across the queue are expected to begin receiving revised connection offers under the new framework, which prioritises readiness and strategic alignment. For developers and investors, the issuing of clear and credible connection dates will be critical in driving transaction activity.

At the same time, uncertainty remains around how many projects in the connection queue may fall away without Gate 2 approvals and the resulting impact on developers. The reform process has already placed pressure on developer business models, and these models are expected to continue adapting to the new connection regime over the coming years.

In parallel, Ofgem continues to review whether physical network build-out can be delivered in line with revised connection dates, making delivery capability a key issue to watch in 2026.

“We are looking forward to seeing the grid reform process move towards a conclusion and are expecting transaction activity to increase once projects receive clear grid connection dates.” – Ben Morris, Partner, Forvis Mazars in the UK

2.   Allocation Round 7 (AR7)

Allocation Round 7 (AR7) will be an important milestone for the sector in 2026. As the seventh Contracts for Difference (CfD) auction round, AR7 will determine support for the next wave of low-carbon generation projects, with applications having opened in August 2025 and results expected in early 2026. DESNZ released the initial AR7 results on 14 January, confirming the allocation of 8.4GW of offshore wind capacity.

“The AR7 offshore wind outcome is a significant step in the right direction, showing improved conditions for offshore wind after a challenging period. It has also reinstated investor confidence in the UK market after a period of policy uncertainty. However, it’s only one part of a broader picture. As results from other lots are released in February, it will become clearer whether the sector is on a durable path toward the scale of low‑carbon infrastructure needed through 2026 and beyond.” - Shifali Aggarwal, Director Energy Advisory, Forvis Mazars in the UK

Beyond headline capacity awards, a key issue for AR7 will be the size of the budget allocated to each technology. Questions also remain around risk transfer, including exposure to grid costs, curtailment and negative pricing, which are not yet fully resolved. The outcome of AR7 will therefore be an important signal for investor confidence and risk appetite across renewable technologies.

3.   Nuclear: developments and areas to watch

2025 saw renewed momentum for UK nuclear projects. Great British Nuclear announced the preferred bidder to build the first small modular reactors (SMRs), while Sizewell C secured its Final Investment Decision, enabling the project to move into full delivery mode. Momentum at Hinkley Point C also continued, reinforcing nuclear’s long-term role in the UK’s low-carbon energy mix.

“The approval of Sizewell C’s Final Investment Decision marks a turning point for UK nuclear. Combined with progress on SMRs, 2026 will be about translating renewed policy commitment into delivery, a sign of growing confidence in nuclear as a cornerstone of a balanced and secure energy future.” – Natasha Moolman, Audit Partner, Forvis Mazars in the UK

In 2026, attention will shift to implementation, including final SMR selections, financing milestones under the Regulated Asset Base (RAB) model and early construction mobilisation. These steps will shape the scale and pace of nuclear’s contribution to a clean energy future beyond 2030.

Forvis Mazars supported the equity financing of Sizewell C through model audit, reflecting our growing engagement in the nuclear energy sector.

4.   Carbon capture, utilisation and storage (CCUS)

CCUS remains essential for the UK to meet future carbon budgets and achieve net zero by 2050, while also supporting regional economic development. However, progress has been slower than expected, with only two projects currently in the pipeline and the earliest operations not expected until 2028. High costs, technical challenges and delays in establishing bankable business models have weighed on investor confidence, despite strong policy support from the government.

Further progress in 2026 will depend on effective implementation of frameworks such as the Transport and Storage Regulatory Investment Model, Dispatchable Power Agreements and the Low Carbon Hydrogen Agreement.

5.   Planning reform and delivery pressure

Planning reform will also be an important area to watch in 2026. Changes aimed at streamlining the process for Nationally Significant Infrastructure Projects (NSIPs) are intended to reduce delays and improve predictability.

Rising electricity demand, including from data centres and digital infrastructure, is adding further urgency to timely project delivery. Whether revised planning processes translate into faster decisions in practice will be an early test of the reforms.

6.   Supply chain constraints

Supply chain constraints remain a key factor for the energy and infrastructure sector, particularly for offshore wind and grid-related projects where manufacturing capacity and logistics remain constrained. This pressure is largely unavoidable in a system undergoing rapid build-out across multiple technologies. The launch of Great British Energy’s Supply Chain Fund in December 2025, offering up to £300m in capital grants, is intended to help address key bottlenecks, though its impact will take time to materialise.

7.   Listed funds and NAV pressure

Another area to watch in 2026 is the listed infrastructure and renewables funds space. Many UK-listed funds have continued to trade at persistent discounts to net asset value (NAV), reflecting cautious market sentiment. 2025 saw a number of take-private transactions as sponsors and long-term investors sought to capitalise on these NAV discounts. We expect this theme to continue into 2026.

Final thoughts

2025 showed that political consensus on net zero is breaking down, and we anticipate energy to stay a frontline issue in 2026. Stories about curtailment payments for wind and pressure from household bills will continue to draw attention - despite the prospect of modest bill reductions in the spring. A key question will be how far these debates start to influence investment decisions in a year where we are expecting to see significant progress in project deployment.

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