UK: An Energy & Natural Resources: Power, Renewables & Alternative Energy Overview

While set against a backdrop of an ever-changing geopolitical landscape, shifting policy priorities among major economies and persistent economic uncertainty, 2025 marked another year of dynamic growth across the energy sector, and current signals suggest this momentum will continue through 2026 and 2027. Fossil fuels have been at the top of the agenda with a resurgence of gas (a bumper year for the global LNG market in particular) and oil production increasing. However, this renewed acceptance of fossil fuels has not necessarily adversely impacted investment into renewables, which were the overwhelming source of new generating capacity in 2025 in many developed economies. The International Energy Agency is modelling renewables to become the world’s largest source of electricity by the end of 2026, overtaking coal, and forecasting 4,600 GW of new capacity to be installed to 2030 (an amount equal to the entire installed capacity of China, EU and Japan combined).

Expanding electrification of major economies and industrial processes, coupled with the rapid deployment of data centres and AI, has helped to drive deployment and will continue to do so. 

Conservative projections for electricity consumption in the data centre sector and the constrained gas turbine availability suggests renewable and storage solutions will be key if this demand is to be met. A push to decarbonise is seeing large industrials turning to hybrid power solutions and participating directly in the generation and transmission space. This is particularly true in emerging market economies where such entities are often better placed to fund and deliver projects and infrastructure on an accelerated timescale, though they remain reliant on the evolution of necessary legislation and regulation to facilitate the same. 

This sector now draws on the full breadth of legal capabilities. Projects continue to scale up and adopt more sophisticated transaction structures. Regulatory frameworks are being developed at pace, often having to catch up with technological developments, to reflect new forms of generation, transmission, storage and end use – ranging from the EU’s Electricity Market Design reform that elevates long‑term PPAs and two‑way CfDs, to the UK’s grid Connections Reform led by the new National Energy System Operator (NESO). Each regime borrows from established markets while adapting to local realities, with implementation milestones landing through 2026.  

Solar remains the most widely deployed technology globally. Large(r) scale projects are being developed across the globe and solar continues to present the fastest, most flexible generation solution. There has been a significant increase in the co-location of battery storage with solar generating capacity, ensuring that the power is available for dispatch when needed, rather than when generated. Corporate procurement and behind‑the‑meter solutions have driven this trend, with large commercial and industrial players increasingly seeking 24/7 renewable energy solutions to power their facilities and processes. Regulatory reforms are being enacted to facilitate and promote long‑term PPAs and two‑way CfDs, allowing for a stabilisation of pricing to support bankability. The sector is facing constraints in supply chains (notably with transformers, but increasingly for panels also). The world of natural resources (such as copper, nickel, cobalt, silicon and lithium) becomes increasingly important as demand increases (including battery storage solutions) and constraints in the supply of such critical minerals will have a direct impact on the global deployment of solar.

Onshore wind has regained momentum through renewed support from various governments in developed onshore wind jurisdictions as well as countries where the technology has not yet been deployed at scale. The technology is mature, well understood and fully bankable. Many jurisdictions have aging fleets of small onshore wind projects, often developed on the best wind-speed sites. These projects present interesting repowering opportunities, though governments will need to streamline consenting and grid connection processes if this potential is to be fully realised.

Offshore wind continues to be the means through which renewable power is delivered at true utility scale, though the sector is experiencing challenges. Projects are taking longer to deliver as high interest rates, supply chain constraints, a lack of vessel availability and increasing prices are stretching the economic viability of projects. Certain negative approaches to offshore wind have caused a ripple effect in the sector. This has meant that other governments have not delivered the clear and concise regulatory frameworks and wider support that the investment and banking sectors require in order to take FID on such large capital commitments. 

Floating offshore wind has advanced in the past year and the sector should see a meaningful step forward by the end of 2027, with the next generation of projects moving the technology out of demonstration and into full commercialisation. Efforts to streamline permitting, expand port and supply‑chain capacity and to stabilise market frameworks amid cost pressures have helped create significant opportunities and certain markets (the UK notable among them) have demonstrated strong commitment to moving this technology class forward at pace, though the wider challenges in the sector mentioned above must be overcome. 

Energy storage is scaling rapidly as the indispensable counterpart to intermittent renewable generation. The ability to store electricity and deploy at the times of greatest need is critical, and standalone storage solutions have gathered traction, particularly in Europe, alongside the deployment of battery storage as a co-located option. The investment and finance communities are developing a greater understanding of (and associated comfort with) the technology risk and bankable revenue stacks are setting the precedent for increased deployment. The sector faces supply chain challenges similar to those described above in the context of solar.

A year ago, no discussion would have been complete without reference to hydrogen, though the sector has failed to overcome various challenges in order to deliver commercially viable solutions and a number of sponsors are pausing (or exiting) investments in the sector. Many governments see the longer-term potential for Hydrogen as a key part of a decarbonised energy mix and remain committed to delivering a sustained pipeline of projects. However, the success of the hydrogen economy ultimately depends on internationally co-ordinated transport, storage and certification systems – without which, scalable, cross‑border trade cannot mature. Against a backdrop of more inward‑looking national politics, building the multinational infrastructure and regulatory alignment required for hydrogen to reach its full potential remains one of the sector’s biggest challenges.

2025 was also a pivotal year for several emerging renewable and alternative technologies. While innovation continues across tidal, biomass and circular‑energy solutions, the most significant progress has come in the acceleration of small modular reactor (SMR) deployment. Use of SMRs and advanced modular reactors broaden potential locations for development and enabling co‑location with energy‑intensive industries and AI data centres is a key focus.   

Across all technologies and solutions, one common theme pervades – grid. Grid availability is a constraint to deployment across the world. Queue times remain prohibitive and the delivery of critical grid infrastructure remains challenging and beset with legislative obstacles. Many governments acknowledge the challenge and the need for grid reform, and the past 12 months have seen positive steps forward in various jurisdictions, though navigating the regulatory regimes can be complex. Governments and transmission owners are acknowledging the need for interconnection and flexibility and the next few years should see meaningful steps forward in this regard in a number of regions. 

The energy sector remains firmly in transition, with conventional power generation continuing to play a stabilising role in global markets. Governments are turning to carbon capture-enabled generation and associated transportation and storage solutions as they work to maintain system adequacy while progressing toward net‑zero goals. The rapid rise in electricity demand is strengthening the need for reliable capacity worldwide and accelerating interest in alternative low‑carbon solutions. This trend is mirrored internationally, with markets in Europe, North America and Asia exploring new nuclear, CCUS and hybrid power technologies as part of broader energy‑security strategies.

Liquidity across global energy financing remains strong, with increasingly diverse pools of lenders and investors seeking opportunities in markets offering stable returns. While cost pressures and supply‑chain constraints have complicated large‑scale renewable deployment in parts of Europe, traditional risk‑allocation structures for project financing have largely persisted. M&A activity in the sector has increased substantially and the trend of consolidation and large-scale joint venturing will certainly continue through 2026 and into 2027.

Delivering the next phase of the energy transition requires co-ordinated effort across governments, sponsors, lenders, investors, OEMs, network operators, supply chains and energy-intensive industries. There will be an increase in cross‑sector partnerships, policy reforms and infrastructure initiatives as countries collaborate to unlock and enable the deployment of new technologies and secure the investment needed to meet clean power targets, energy security and system resilience. The legal sector will be key in shaping and navigating this.