This report, written by ARO’s Sustainability Director Joseph Letras, provides a strategic overview of recent developments in climate trends, energy pricing, and regulatory updates.
Executive Summary
Key insights include:
- Record-breaking summer temperatures and implications for energy demand
- Nuclear outages and short-term pricing volatility
- Rising REGO prices and long-term certificate availability
- European gas storage outlook and winter supply risks
- Regulatory changes, including Sizewell C levy and TNUoS charges
- Infrastructure milestones and transport decarbonisation incentives
September Climate Change and Energy Market Developments:
Extreme Weather Underscores Urgency
In recent months, the effects of climate change have become impossible to ignore across the UK and Europe. The Met Office confirmed that this summer was the hottest on record, while the UK experienced unprecedented wildfire damage in terms of total land area burned. With hotter, more frequent heatwaves projected, the need for decisive action from governments, businesses, and individuals is growing more urgent.
Encouragingly, the UK Government and the public are showing stronger support for climate-positive technologies and green jobs, while renewable energy projects continue to set new records.
Energy Market Update – Long-Term Pricing
Wholesale electricity contracts saw a mixed August. Prices for forward annual agreements covering October 2025 through October 2026 dropped early in the month amid signs of progress in Ukraine–Russia peace talks. But when those negotiations faltered, concerns over future gas supply drove prices higher again.
Energy Market Update – Short-Term Pricing
Early August brought a 4% dip in national grid demand thanks to robust solar and wind output. Yet this didn’t translate into lower prices because maintenance outages, both planned and unexpected, reduced output from the UK’s nuclear fleet.
High river temperatures in France compounded the situation by cutting the capacity of French nuclear plants, pushing day-ahead electricity prices higher. In the latter half of the month, falling wind generation meant more costly UK gas plants and imported European electricity were required, further driving prices up.
Energy Market Update – Outlook
Now in September, half of the UK’s nuclear reactors remain offline for maintenance, potentially squeezing supply and raising prices. Looking further ahead, planned strike action by French nuclear workers in October could restrict output and lift prices again. However, if we see peace talks between Russia and Ukraine commence during the month, this will potentially lead to a fall in wholesale energy rates.
Renewable Energy Certificates (REGOs)
Prices for Renewable Energy Guarantees of Origin continued their slow upward trend, particularly for compliance periods starting April 2027 and beyond. Limited availability of certificates in these later periods has pushed trade prices above expectations.
European Gas Storage
As winter approaches, one of the most important drivers for wholesale energy prices in the UK is the amount of gas held in European storage facilities. The UK remains a net importer of gas, with much of our supply coming from Europe, which is why European gas storage has an important part to play in setting UK wholesale rates.
EU targets for member states this year are set at 90% by the 1st December, and although current levels at 80% are slightly behind the 5-year average, plenty of LNG cargoes are expected to make their way to Europe in the remaining weeks before winter, which should allow for the EU target to be met. This in turn, should be a bearish driver for UK energy prices.
Industry Headlines – New Nuclear RAB Levy
The UK Government has detailed its Nuclear Regulated Asset Base funding mechanism for Sizewell C. From 1 November 2025, a supplier obligation levy of £3.455/MWh will apply, alongside an operational levy of £0.0028/MWh from 1 October. These figures will be reconciled later and may change.
Industry Headlines – Rising TNUoS Charges
Ofgem’s draft determination for the next RIIO-3 price-control period (April 2026–March 2031) signals a potential doubling of Transmission Network Use of System charges. Final tariffs for 2026/27 will be confirmed after January 2026.
Transport Incentives – Electric Vehicle Grants Extended
The government has extended plug-in van and truck grants until at least 2027, offering up to £2,500 for small vans, £5,000 for large vans, £16,000 for small trucks, and £25,000 for large trucks. A new Electric Car Grant also provides £1,500–£3,750 discounts on approved models. These measures aim to cut commercial transport emissions, which currently account for over a third of UK road CO₂ output.
Green Jobs on the Rise
Research shows roles in renewable energy, waste management, and climate data analysis are among the fastest-growing in the UK. Positions like “Sustainability Manager” and “Climate Data Analyst” are outpacing overall market growth.
To meet demand, the government has launched a Fair Work Charter for offshore wind, requiring investment in training and fair wages—supporting both employment and decarbonisation.
Major Infrastructure Milestones – UK’s Largest Battery Storage System
The Thurrock Storage facility in Essex, now the nation’s biggest Battery Energy Storage System, has connected to the grid. Its 300 MW (600 MWh) capacity can dispatch power within seconds, a vital step toward the 23–27 GW of storage the UK targets by 2030.
Quick Energy Updates
- Science Based Targets Initiative (SBTi): Verified near-term targets are up 97% from late 2023, with 8,715 companies now committed.
- COP30 Preparations: Brazil, host of the next UN climate summit, urges countries to submit ambitious emissions plans (NDCs) before the looming deadline.
- Renewables Surge: In Q2 2025, the UK approved 16.1 GW of new renewable capacity across 323 projects, a 195% annual increase. Over 100 battery storage projects totalling 8.4 GW were also submitted in the same quarter.
- Record Solar Generation: By mid-August, UK solar output hit 14.08 TWh, already surpassing all of 2024’s total thanks to sunny weather and rapid installation growth.
