It is unequivocal: the UK needs more and cleaner energy. Demand is rising, driven by electrification and technological innovation, while infrastructure struggles to keep pace. This mismatch is creating political flashpoints as energy prices and availability constrain growth. There is the political will to shift this, and investors are recognising the potential of growing the asset class.

The UK is legally committed to net zero by 2050, underpinned by an electrified economy powered by clean energy. Progress is notable: renewables supplied 23% of total energy consumption and nearly two-thirds of electricity in 2024. Electric vehicles (EVs) accounted for almost a quarter of new car sales in the year to November 2025, according to data from the Society of Motor Manufacturers and Traders (SMMT), yet account for only 6.7% of all cars according to Department for Transport data, and most buildings still rely on gas.

However, power availability and pricing structures are holding back electrical demand, while planning and grid connection delays remain critical supply-side issues. Location is increasingly strategic for both generation and consumption. Grid reforms, planning overhauls and pricing support aim to unlock progress, but delivery has been historically slow and piecemeal, and confidence is fragile.

Politics add complexity. Energy costs and infrastructure upgrades are contentious, with subsidies and grid investments often passed through to bills. The autumn Budget removed some costs for households and reaffirmed commitments for energy-intensive industries, concentrating costs on fewer payers. These pressures must be balanced with falling wholesale prices – via renewable integration and battery flexibility – which remains a challenge.

Demand dynamics
Electricity demand is surging. Central projections from the UK’s National Energy System Operator (NESO) include a 13% rise in electricity consumption by 2030 and 33% by 2035, driven by AI, data centres and transport electrification. Data centres consumed nearly 3% of UK electricity in 2024, with growth of 160% projected by 2030 and 330% by 2035. EV adoption will push transport electricity demand eightfold between 2024 and 2035, even as overall energy demand from transportation falls.

Constraints are shaping business decisions. In 2024, just shy of 10% of UK firms cited electricity as their biggest obstacle, according to the World Bank Enterprise Survey, and 26% saw it as a major constraint. Industrial energy prices were 63% above the International Energy Agency (IEA) median, including taxes, according to the Department for Energy Security and Net Zero (DESNZ). Ofgem is pushing demand-side reforms, with contracted demand capacity tripling from 41 GW in late 2024 to 125 GW by mid-2025. NESO’s recent connections reform announcement included enabling 13 GW of transmission demand projects before 2030 and a further 86 GW by 2035.

Building capacity
Renewable capacity grew 30% in five years to mid-2025, led by offshore wind (+60%) and solar (+40%), according to DESNZ. Investment reflects this momentum: onshore wind, solar and battery storage transactions peaked at over 6 GW in 2023 and nearly 5 GW in 2024, with £4.4bn invested, Knight Frank analysis of clean energy pipeline data shows. Notably, solar deals have shifted from 90% operational between 2015–2019 to over 60% ready-to-build most recently, signalling greater investor appetite for construction risk.

A key pinch point for the market has been the ongoing connections logjam, given the previous ‘first come, first served’ approach. The connection reforms have cut the queue by some 60%, with 283 GW of generation and storage capacity now given Gate 2 status with either a ‘Phase 1’ offer, to be connected by 2030, or ‘Phase 2’ with connection before 2035. Yet, technology-specific risks persist. Battery projects are oversubscribed, with 80 GW protected versus 30 GW required under the Clean Power 2030 Action Plan, raising questions about long-term viability. Solar remains under capacity in some regions, while wind faces regional imbalances with Scotland notably oversubscribed.

A development which we have supported clients with, which in turn is de-risking projects, is the advent of corporate power purchase agreements (CPPAs). Knight Frank tracked 18 CPPAs publicly signed in 2024 and eight in the first half of 2025, driven by corporate decarbonisation goals (particularly pertinent for data centres) and pledges to support development in the Clean Energy Industries Sector Plan. CPPAs offer long-term price stability, making projects easier to finance and less exposed to market volatility.

The UK’s CPPA market has expanded rapidly in recent years, becoming one of the most dynamic in Europe. Major corporates have been at the forefront of this growth, with technology companies like Amazon signing large-scale wind and solar deals, and retailers such as Tesco and Sainsbury’s committing to long-term renewable supply contracts. The acceleration in CPPAs has been driven by both commercial and regulatory factors. 

Location is critical. The forthcoming Strategic Spatial Energy Plan, among others, aims to coordinate deployment, but the ageing grid infrastructure remains a challenge. For example, Scotland’s abundant wind power cannot fully reach demand centres in the south-east of England. In 2025, wind curtailment costs reached nearly £1.5bn. Despite offshore wind capacity rising 6% in the year to 2Q2025, according to DESNZ, generation fell 3% due to constraints. Flexible storage could help, but investor caution remains. Ofgem’s recent £28mn grid upgrade announcement underscores the scale of the challenge, yet over half is earmarked for the gas network.

In addition, we have seen greater interest in developer funded private wire agreements, particularly to high energy consumers, to support energy independence. This has gained traction with ongoing demand queue uncertainties, backlog in grid infrastructure upgrades and availability of decarbonised power options.

We have also seen greater interest in developer funded private wire agreements, particularly to high energy consumers, to support energy independence – this has gained traction with ongoing demand queue uncertainties.

Powering ahead
The UK energy market faces a dual reality: soaring demand and ambitious targets versus ageing infrastructure and policy complexity. For investors, opportunities abound in renewables, storage and CPPAs, but success hinges on navigating grid constraints, market pricing, planning reforms and regional disparities.

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.

• Further reading: ‘Global PPA structures’. Discover the wide-ranging differences between power purchase agreement structures across the globe.
• ‘More renewable energy schemes now rely on corporate purchase agreements’, writes New Energy World Editor-at-large Steve Hodgson FEI.