No quick fixes for an energy market juggling competing priorities
Laura Petrie says meaningful progress will require a co-ordinated approach
Recent speculation about reforms to the UK energy market has reignited debate about how to accelerate development and reduce costs for consumers. While there are many suggestions of quick fixes, the reality is more complex. Today, the energy sector sits at the intersection of net zero commitments, infrastructure requirements, investment needs and commercial viability. As a result, meaningful progress will require a coordinated approach rather than a single policy solution.
There is no standalone measure that will unlock the development needed to strengthen the UK’s energy market and drive down costs. Instead, progress depends on a package of reforms that support infrastructure improvements and maximise existing opportunities.
A key priority is upgrading the UK's energy networks. Both the National Grid and the National Transmission System (NTS) require significant investment to accommodate growing energy demand and the increasing contribution of renewable sources. Grid upgrades are already under way but often face delays caused by planning requirements and supply chain constraints. If consumers are to benefit from lower-cost energy and increased renewable generation, the UK must ensure that infrastructure is upgraded to transport larger volumes of power.
This requires a more streamlined development process. While transparent planning and consultation procedures are important, timescales could be shortened through additional resources for local authorities or fast-track routes for less contentious projects.
Upgrading the gas transmission system presents additional challenges, given the extensive network of buried pipelines running through industrial, residential and rural areas. Improvements will be necessary to support future fuels such as hydrogen, which is viewed as a replacement for natural gas because of its low-carbon potential and relative compatibility with existing technologies. In practice, however, the development of a hydrogen economy has been hindered by supply chain constraints, material shortages, slow technology deployment and delays to industry support mechanisms. As a result, progress has been slower than initially anticipated.
These issues also apply to offshore and onshore wind, solar, biomass and geothermal energy which further highlights a broader need for government support across the energy transition ecosystem. Realising these opportunities will require continued investment and long-term policy support to be effectively integrated into the wider energy mix. Addressing manufacturing and workforce shortages, attracting skilled workers to the UK, and providing clear regulatory frameworks would all help accelerate development and investment.
A successful energy transition must build on existing skills, infrastructure and experience. Moving from hydrocarbons to renewables cannot happen overnight and must follow the principles of a just transition.
Therefore, continued development of domestic oil and gas resources will remain important while renewable capacity and associated infrastructure are expanded. Although measures such as the Energy Profits Levy have influenced investment decisions, lengthy approval processes and regulatory delays have also reduced the attractiveness of the UK market. These challenges have encouraged parts of the supply chain and workforce to focus on international markets that offer faster decision-making, more competitive tax regimes and greater project activity.
The challenge for policymakers is to consider energy as a whole system. Measures that provide short-term consumer relief can help, but lasting improvements require coordinated reforms across energy policy, infrastructure, planning and supply chains.
There is no simple solution. However, meaningful engagement with industry, combined with a balanced and considered policy framework, could help create a more competitive energy market while supporting the UK's ambition to deliver a successful and sustainable transition.
Laura Petrie is a Partner, Brodies LLP