Energy news – January 2025

Outlook 2025: Energy infrastructure trends and challenges

The decarbonisation challenge

Upgrading energy infrastructure and facilitating new renewable energy generation and storage is essential in meeting the UK’s net zero target and unlocking new development. A combination of strong government support, technological advances and the growing demand from data centres (and development more widely) offers potential for significant investment in the year ahead.

As set out in the 'Clean Power 2030 Action Plan', the Labour government has pledged to decarbonise the UK’s electricity grid by 2030, pulling the target forward by five years. Keir Starmer also announced at COP29 in November 2024 that the UK aims to reduce all greenhouse gas emissions by at least 81% compared to 1990 levels by 2035, up from a previous target of 78%. The government has already demonstrated their commitment to renewable energy by promising to double onshore wind (reversing the de facto ban in England), triple solar, and quadruple offshore wind by 2030. They also announced funding for several projects in the Autumn Budget, including £100 million capital funding in 2025-2026 for clean energy project development and financial support for the carbon capture and storage (CCUS) and hydrogen industries.

These changes, coupled with longer-term influences, such as an increased demand for electricity, a societal shift towards renewable energy and geopolitical factors, present opportunities for the sector.

The demand challenge

The shift towards decarbonisation needs to be seen alongside the expected seismic shifts in demand for electricity. This creates the complex challenge of increasing supply whilst decarbonising production, as well as upgrading the capacity of the transmission network.

The expected increase in electricity demand has a number of causes. Electrification of the built environment will accelerate, with owners and occupiers of both residential and commercial buildings looking to make the switch to electricity as generation is decarbonised.

For commercial buildings in particular, this could prove to be a significant a factor in raising EPC ratings to adhere to the proposed tightening of MEES regulations. It is proposed that the current minimum EPC rating for commercial property of E rises to B by 2030 (barring exempted properties). Taking the example of offices, 14% of the buildings are currently below the minimum of E, and are therefore unlettable. However, 88% are below B, and will become unlettable in 2030.

Another source of surging demand for power is data centres. The rapid growth of the artificial intelligence (AI) sector is a major driver of this increased demand which, as AI models become more complex and sophisticated, will see energy requirements escalate further. In addition, demand growth will be driven by increased use of cloud-based storage, online streaming services, and 5G technology.

There are planning applications either submitted or approved for the commencement of 43 new data centre projects (including four changes of use) over the next two years, representing almost 25 million sq ft of floor space. This is over three times the amount that started construction in 2023 and 2024, illustrating the potential scale of the pipeline. Some of these incorporate on-site renewables to generate their own power, at least in part.

The growth in energy infrastructure will also be essential to the success of the government’s target to build 1.5 million homes over the next five years. Although newer homes and commercial buildings are typically more energy efficient, electricity demand will increase. In line with the UK’s commitments to net zero, this will need to be led by an increase in renewable energy sources alongside grid upgrades. And while we are unlikely to see housebuilding at greater scale in the next couple of years, the additional demand needs to be planned for now.

The supply challenge – jumping the queue

The National Grid’s ongoing Great Grid Upgrade provides a combination of new infrastructure and modernisation of existing grid components. The projects aim to improve efficiency, increase capacity and handle increased renewable energy, especially given that much of the grid was built around the now decommissioned coal fire power stations. The Eastern Green Links are key projects and comprise interconnectors that run between the east coast of Scotland and the coast of northeast England, bypassing the current grid bottleneck at the Scottish Border. Eastern Green Links 1 and 2 are due to start construction in 2025.

The UK is currently undergoing grid connection reform that should streamline the process for connecting renewable energy projects. Plans look to facilitate the move away from the current “first come, first served” approach, where speculative developments are securing queue positions but with no plans to start, to a “first ready, first connected” system. Currently, the backlog of projects means that some developers are being offered connection dates in the late 2030s (Ofgem). The government has formed the National Energy System Operator to produce a strategic plan and accelerate the connection of generation projects to the grid. The latter facilitates the leapfrogging of “project ready” energy projects over others in the queue. Connection offers are intended to start in 2025.

Both the public and private sectors are looking to new and innovative technologies to accelerate the shift to clean power. Green hydrogen, with its high energy density and versatility, is attracting growing interest. The government’s confirmation of funding for 11 green hydrogen projects in the Autumn Budget marks a significant step towards commercialising this technology at scale. Private investment is also gaining pace, with a number of projects with private funding now breaking ground and a strong pipeline of applications either submitted or being prepared.

Private companies are increasingly looking to Small Modular Reactors (SMRs) for on-site power supply, to both support energy-intensive operations and mitigate grid risks. Google, Oracle and Amazon all announced plans in the second half of 2024 to invest in SMR for powering their data centres and AI operations in the United States. In November 2024, Great British Nuclear started negotiations with four shortlisted bidders for the UK’s SMR programme for a contract to design, develop and construct, aligning with global nuclear energy ambitions.

Carter Jonas’ energy team ends 2024 with a bang as more solar projects reach important milestones

2024 was another successful year for the energy team at Carter Jonas as multiple projects reached crucial milestones as part of the 2GW pipeline of project we are involved in. A couple of key headlines include:

• Harmony’s Wormald Green 42MW solar farm received planning consent on 10 December with construction is due to start at the end of 2025.

• The Alfreton solar farm which is being developed by Anesco was energised in December 2024.

At Wormald Green, Carter Jonas acted on behalf of the landowner to negotiate the Option and Lease, so it is great to see the project progressing as expected.

In 2020, the energy team completed a feasibility review of our clients’ landholdings. Through this process, we identified a 94-acre site north of Alfreton, Derbyshire, as having potential for a large-scale solar scheme, in part due to its location adjacent to a Northern Powergrid substation.

Grid investigations by the team established that there was c.20MW of export capacity available. Following a competitive marketing exercise to developers, Anesco were chosen to progress the site forward, securing the 20MW capacity which we had identified.

As at Wormald Green, Carter Jonas acted for the landowner to negotiate competitive terms for the Option and 40-year lease term with Anesco. Construction of the solar project started in 2024, and the site became fully operational in December 2024 with Gresham House as the scheme’s asset manager. The site now generates enough green electricity to power 5,000 homes and save over 4,000 tonnes of carbon dioxide per annum.

Helen Moffat, Associate Partner in the CJ energy team who has acted for the landowner since the project’s inception said, “We are extremely pleased to see this scheme through to completion in collaboration with the landowner and Anesco. Solar projects such as this which are delivered quickly are essential to the UK hitting its net zero target by 2030 and we look forward to seeing the rest of our pipeline come to fruition.”

For more details, please reach out to Helen Moffat, Associate Partner - Helen.Moffat@carterjonas.co.uk, 07585881374

Launch of our new Green Energy Platform

This month we are launching our innovative Green Energy Platform which matches high electricity consumers with renewable energy generators (such as wind, solar & AD) via a Power Purchase Agreement (PPA). This is building on recent work from Ofgem and suppliers to make the energy market smarter by matching demand and supply, with financial benefits available to those who move early. This platform enables consumers to purchase cheaper green power at a time when energy prices are at a high and putting significant cost pressures on high electricity users.

Benefits are maximised for both parties by matching usage and generation profiles as closely as possible. As well as financial savings for electricity consumers of up to 1p/kWh, a PPA enhances a business’s green credentials, providing a step towards net zero objectives and ESG commitments. Generators can also benefit with an increase in export revenue of around 10-15% compared to selling direct to the grid.

This platform is designed for high users of electricity, such as commercial and industrial businesses, local authorities, utilities and other entities. If you would like to know more about how you can sign up to the platform and reduce your electricity costs, please get in touch with Helen or Jamie in the energy team.

Helen Moffat, Associate Partner – Helen.Moffat@carterjonas.co.uk, 07585881374

Jamie Baxter, Associate Partner – Jamie.Baxter@carterjonas.co.uk, 07598580511

Technical and commercial trends in the UK's renewable energy market

Energy prices in 2025

The end of 2024 saw the last Russian gas deliveries to Europe via Ukraine. With the end of this supply, which had been planned, European countries are turning to more expensive liquefied natural gas (LNG) sources in the short term. Ultimately, this has led to increased gas and electricity prices in the UK, both for gas and electricity which is expected to extend into 2025 While this will be unwelcome, resulting in higher costs for consumers and businesses, it does the underline the need for greater energy diversification and the shift to national energy security through renewable energy and supporting technologies.

Solar panel prices

Solar panel prices in the UK have been on a steady decline over previous years, driven by advancements in manufacturing and economies of scale. Global prices of PV modules decreased by over 20% in 2023 according to BloombergNEF, with similar trends reflected in the UK market. This direction of travel is continuing to improve the returns from solar installations, encouraging wider adoption from industrial and commercial clients. Higher efficiency modules, such as bifacial and TOPCon technologies, are also improving the value proposition by improving paybacks.

Based on information from recent project, we are currently seeing system commercial pricing at around the £650/kWp mark for a 500kWp and £900/kWp for a 100kWp rooftop system. Paybacks are below 5 years as a result.

Battery storage for commercial buildings

Alongside the deployment of solar and wind for commercial buildings, battery storage systems are also increasing in popularity. While some electricity consumption profiles match with solar peaks, many do not, and batteries help to maximise onsite energy usage. These systems can also help to reduce peak time costs and allow businesses to generate revenue through the growing demand side response opportunities.

Falling costs helped with an increase in battery storage installations in recent years. Analysts expect annual growth of 15% in this sector to 2030.

Planned NESO grid reforms for 2025

2025 will be a year of continuing grid reforms by the National Energy System Operator (NESO), especially around the transmission queue. Gate 2 has been pushed back to end of May 2025 which has been mitigated by NESO providing clarity on what it means to meet Gate 2 in an open letter at the end of 2024. The Clean Power Plan for 2030 has added additional urgency to the existing grid reforms and provided a new ‘first needed’ view based on technology type and the amount of existing and proposed connections. This view will be applied alongside the existing criteria.

While this may be a period of change, this reform should help to provide clarity around the ‘real’ connections in the queue and ensure the UK connects the required projects in the required places in the country in order to provide a net zero electricity network.

New rules for energy for waste plants

In its drive to improve recycling rates and reduce incineration, the UK government has introduced stricter environmental standards for new waste incineration facilities. These will be effective from 2025. These rules require higher efficiency and emissions controls, in order to align with the UK’s net zero targets. Advanced thermal treatment technologies, such as gasification and pyrolysis, are being encouraged to minimize environmental impacts.

This policy shift reflects growing concerns over the carbon intensity of energy-from-waste processes and aims to strike a balance between waste management and environmental sustainability.