Happy New Year and welcome to (a so far very turbulent) 2026!
Last year remained a volatile time in energy markets both on a domestic and international level. In the UK, the impact of the government’s decision to target 95% clean power by 2030 started to be felt through sharp increases to non-commodity costs which pay for the grid and network upgrades required to reach targets and the introduction of the RAB charge added another line item to energy invoices to pay for the building of nuclear infrastructure. On a global scale, conflict continued to rage in the Ukraine and the Middle East across 2025 and a despite a very fragile ‘ceasefire’ being reached in the latter region, global uncertainty remains. 2025 also witnessed the reintroduction of uncertainty across the Atlantic, with Donald Tump beginning his second tenure as President of the United States. His campaign mantra of ‘drill baby drill’ in a commitment to maximising US fossil fuel resources has pierced the global agenda on climate change, illustrated by Trump’s refusal to send a delegate to the COP30 summit.
As news events from the US, Venezuela, Iran & Greenland across the first weeks of 2026 have shown, the risk of volatility in energy markets will continue to be present. With that in mind the below blog by our Managing Director, Asif Rizvi, highlights what is on the horizon for the coming year.
A Welcome Development:
To start with some positive news, last October saw the announcement that following a 2024 consultation, the government would hand responsibility for regulation of the TPI sector to Ofgem. As a TPI in a crowded marketplace, LGE has always looked to differentiate ourselves from our competitors through being advocates for transparency in the sector. A decade ago, LGE became an early adopter of Ofgem’s proposals for transparency and LGE also provides all clients with full transparency on utility cost make-up, which may seem an obvious requirement but can be a rarity in the TPI industry. LGE therefore strongly welcomed the announcement.
LGE looks forward to seeing and contributing to Ofgem’s market survey in 2026, helping to inform the creation of a model for the structuring of the TPI market, introduction of principles for TPI behaviour and introduction of a license to operate. LGE hopes that developments across 2026 will see this process occur in a swift and efficient manner, allowing for the regulation to hopefully go beyond the current scope of just ‘energy procurement’ services and encompass the continually diversified products and services that the TPI sector has to offer customers.
Huge Change, Fast Approaching:
Another welcome development in 2025, was the beginning of the Market Wide Half-Hourly Settlement (MHHS) project. The biggest change to the UK energy sector since privatisation in 1998, the project will see all electricity meters become ‘settled’ on a half-hourly basis, meaning measurements of your consumption will be taken each half-hour. LGE hopes to see suppliers remain committed to the project across 2026, allowing for the target date of October 2026 for complete migration to be met. This will allow customers to start benefitting from the greater insights and flexibility that MHHS offers, with more data being accessible to help improve decisions on product, practices, forecasting and energy management. Savings through the project are estimated to be between £1.6bn and £4.6bn by 2045.
More intervention?:
Publication of NESO’s five-year forecasts at the back end of last year laid bare the stark reality of increases to non-commodity charges. From April 2026, TNUoS charges are set to increase by 50% upon average and from November 2025, consumers have also had the costs of the RAB charge for funding nuclear projects added to their bills. Combined these increases mean that the average business electricity bill in 2026 will be made up of 60% non-commodity costs.
For existing non-commodity relief schemes, such as the EIIC scheme, 2026 will see increased support, with discount for network charges increasing from 60% to 90% from April 2026. Alongside this, consultations across 2026 will help set out the parameters for the British Industrial Competitiveness Scheme which aims to widen the relief to businesses in manufacturing, foundational manufacturing, automotive and aerospace industries.
LGE has always welcomed and supported schemes for UK businesses facing the highest energy costs. However, those eligible are currently around just 500 UK businesses, the imbalance with those who receive support is continually increasing, meaning it is LGE’s view that further government intervention will be needed to support sectors not already covered by support schemes.
Not Before Time?:
Will 2026 finally see progress on reform to market arrangements four years after the launch of the REMA project which finally in last July ruled out a move to zonal pricing which would have set electricity prices by geographic area. Instead, the government has opted for a plan which aims to deliver a more efficient energy system through speeding up developments, cutting grid connection waiting times, making transmission charges more predictable and better access to battery storage sites for flexibility and grid balancing. The likelihood of any real progress on this does feel optimistic, with developments over the last half a decade being slow and uncertain.
One element of the plan that does appear to have some progress is speeding up grid connections. With 132GW of generation and storage earmarked to be added to the grid as part of the Clean Power 2030 target, around 26GW of new connections will be required over the next five years. 2026 should hopefully be the year in which progress is made in accelerating connections, with forecasts showing new connection rates to surpass 10GW for the first time in 2026.
Progress & Fragmentation?:
As part of the Clean Energy 2030 plan, ambitious targets were set to increase the UK’s renewable capacities. This included increasing offshore wind from a current capacity of around 15GW to 43-50GW and onshore wind from around 14GW to 27-29GW, whilst solar power is hoped to increase from around 17GW to 45-47GW. In some cases, this means the government effectively wants to triple capacity, with many critics seeing the plans as too ambitious and potentially damaging to the economy. In December of last year, NESO announced a new pipeline of plans to help deliver the targets, with connection reforms helping to unlock £40bn worth of investment. The projects amount to 283GW of generation/storage capacity. The first batch of projects are already scheduled to be connected to the grid in 2026, meaning it could be an exciting year for seeing plans turn into tangible progress.
One element toward progress will be the results of the CfD Allocation Round 7 auction, with CfD being the main mechanism for obtaining investment for government clean power targets. Good news in this area has already been announced this year, with DESNZ posting the results of the offshore wind auction on 14th January. A record breaking 8.4GW of capacity has been awarded, beating previous forecasts of 7.5GW. The announcement has been celebrated by the government with the procurement representing the biggest offshore wind auction not only in the UK but also in Europe. Further auction results are to be announced in due course. However, with only Allocation Rounds 8 & 9 left before 2030, Round 7 will be viewed as the last opportunity to gain funding for projects that can feasibly go live and contribute before the 2030 target deadline passes.
However, this progress is built on a fragmented discourse in the political sphere, with 2025 seeing increasing divergence on opinions surrounding net zero and climate change. This fragmentation is only going to increase in 2026, with Nigel Farage’s highly anti-net zero Reform Party growing in confidence as their polling figures increase and the Conservatives under Kemi Badenoch also ditching her party’s commitment to net zero by 2050, any progress made by the government could be futile if come 2028 or 2029 when the next election arrives, those waiting in the wings want to blow up their clean power agenda.
The Elephant in the Room:
The UK’s fragmented political opinion reflects the fragmentation on a global level and the elephant in the room that is Donald Trump. Trump’s actions already in 2026 illustrate the turbulence his administration is going to cause to energy markets and the global climate agenda. Following events in Venezuela, Trump made no secret of his desire for Venezuelan oil reserves to provide the US with cheaper sources of fossil fuel energy. Following the cancelling of nearly $8bn worth of grants for clean energy projects in October 2025, the moves in Venezuela represent another lever in achieving Trump’s ‘drill baby drill’ mantra and refocusing global energy markets around crude energy commodities rather than renewable technologies. With Trump increasingly dominating the global agenda, will the UK’s approach to clean energy be increasingly out of step with the direction of ideas and could we see the UK’s agenda watered down to appease Trump?
Trump’s actions in Venezuela also deepens the influence of geopolitical factors on global energy markets. Although no one is expecting a return to the price highs seen following the Russian invasion of Ukraine, Trump’s actions could have ripple effects that further impact the markets. With 80% of Venezuelan oil being sent to China in 2025, how will Trump’s seizure impact policy in Beijing and will Russia adopt even more aggressive policies towards Ukraine justifying such action as being in the same vein as Trump’s in Venezuela? Whilst events in Iran will further fuel instability, protests against the Iranian regime and its potential overthrow could impact energy resources in the Middle East and with Trump’s refusal to rule out US military intervention it suggests resources there could be his next target. Then in recent days Trumps’ escalating approach for his desire of US ownership of Greenland has added further elements of instability, threatening the NATO alliance and leaving Europe nations in a conundrum as they face new geopolitical realities. If the first weeks of 2026 have taught anything, expect the unexpected!
For more information on how LGE can you help navigate these issues contact us today at info@lgegroup.com