The landscape for UK renewable energy in 2025
10 February 2025
The landscape of UK energy production has transformed significantly over the past 25 years. At the beginning of 2000, the UK's energy mix was primarily composed of coal and gas, with renewable energy accounting for just 2%. Since then, and particularly from 2010 onwards, renewable energy has surged, with a s alone.
While we do not expect to see the same exponential increase over the next 25 years, not least because the starting base is significantly higher, the contribution of renewables to the energy mix in the UK will continue to rise. But what are the trends we expect to see, and how will the UK government ensure we meet our mandated targets and fulfil their promise of delivering clean power by 2030?
To put the UK’s renewable journey in perspective, Girls Aloud was formed (2002) before the UK’s first commercial offshore wind farm was installed (2003). The last of the 12 Round 1 projects were not installed until 2013, bringing the total Round 1 capacity to 1.2GW. As of June 2024, the UK’s offshore wind capacity was around 14.7GW and the then UK government had a goal of increasing this to 50GW by 2030.
- Clean power by 2030
- Increasing energy demands
- Rise in energy imports in 2025
- Renewables grow market share
- Subsector trends
- The rise of hydrogen
Clean power by 2030
2025 will mark the first full year since the labour government came into power, having made its dedication to meeting clean power and net-zero targets very clear throughout the election process.
The government quickly announced GB Energy, , and approved three solar farms—, Gate Burton and Mallard Pass—within weeks of coming to power. These projects will add a combined 1.4GW to the UK’s 15.5GW solar capacity. Additionally, it further increased windfall taxes for oil and gas producers in the North Sea and pledged not to approve any new licenses for North Sea oil and gas exploration. These actions send a strong message of the commitment to renewable energy and a move away from fossil fuels, all of which will have an impact on the UK’s energy production in 2025 and beyond.
Increasing energy demands
One does not have to be the Nostradamus of energy production to predict that UK and global energy demands will continue to rise in 2025 and beyond. The International Energy Agency (IEA) expects global electricity demand to this year. The laws of economics dictate that the result of the rising demand will in turn increase energy prices. Other factors influencing energy prices include rising production costs, declining gas inventories, and extreme weather conditions.
The demand for established energy-intensive services such as data storage and industrial activities shows no signs of decreasing, meaning that energy demand will continue on its upward trajectory. There is also a relatively new drain on energy demand entering the market in the form of Artificial Intelligence (AI).
To deliver on the Prime Minister’s recent announcements to become an “AI superpower”, experts warn that this will more than triple the industry’s demand on the grid. Or, put another way, supporting the current 4,000MW of data centre capacity currently under construction in the UK would require another nuclear power station similar in size to Sizewell C. The reported cost of Sizewell C is £40bn, and it is unclear how the government would fund such a development given the strains on the Treasury. As such, it is predicted that the AI superpower initiative will be put on ice, certainly for 2025, due to public scepticism and the high costs associated with nuclear power plants.
Rise in energy imports in 2025
The energy transition is not going to happen overnight and with oil majors exiting the North Sea and UK coal mines closing, the UK will have to look overseas to meet its short-term energy needs.
The last remaining coal mine in the UK closed in October 2024. Labour followed this in November with the announcement of a ban on any new coal mines, pulling support for a planned mine in Cumbria.
Further disincentives were revealed in the Autumn Budget, with another increase in windfall tax on North Sea oil and gas producers to 38% (up from 35%), bringing the headline tax on the sector to 78%, one of the highest in the world. Due to these increasingly high costs, oil majors such as Shell, ExxonMobil and Chevron have been exiting the North Sea in recent years, and this exodus is likely to continue as these oil giants look for more cost-effective drilling locations.
Renewables grow market share
2024 was the first year where UK low-carbon renewables generated more electricity than fossil fuels.
By the end of 2025, renewable energy is expected to make up close to half of the UK鈥檚 energy supply, particularly from offshore wind, solar power, and green hydrogen. The continued growth of renewable energy generation in the UK should mean a decrease in reliance on overseas energy imports over time, albeit 2025 is likely to see a net increase in imports to compensate for the declining North Sea oil and gas production.
The shift towards renewable energy will create a more stable and sustainable energy mix. However, the challenges around intermittency鈥攚hen renewable energy production is lower due to lack of wind or sunlight鈥攚ill be exacerbated as the UK becomes increasingly reliant on this energy source.
Subsector trends
Along with the reduction in fossil fuel production, renewable energy is key to the Clean Power 2030 Action Plan and net zero 2050 target.
Labour lifted the de facto onshore wind ban within 72 hours of coming into power, a ban that has been in place since 2015. Shortly after, they announced the GB Energy partnership with The Crown Estate and confirmed a £25bn investment over a 25-year period.
The UK is currently the sixth largest producer of wind energy in the world. With the lifting of the ban, alongside Labour’s pledge to double UK onshore wind capacity by 2030, the use and production of wind energy is set to increase.
Leading wind, wave and tidal power trade association, RenewableUK, commented that and powerful, clarifying that doubling onshore wind capacity does not mean doubling the number of turbines (or their impact on the landscape).
Their research shows that delivering 30GW of onshore wind by the end of decade would boost the UK economy by £45bn and create 27,000 jobs.
An increase in offshore wind is also expected, based on the promise of investment from the government. Disappointingly, the fifth allocation round (AR5), part of the Fifth Assessment Report published by the IPCC in 2013-2014, saw zero bids from offshore wind developers. However, the sixth allocation round (AR6), part of the IPCC’s Sixth Assessment Report published between 2021 and 2023, awarded contracts for 5GW offshore wind and 400MW of floating offshore wind.
The government also announced its intentions to increase the capacity of solar energy threefold, so an increase in electricity from solar is also expected between 2025 and the end of the decade. Ongoing advances in solar module development will continue to push prices down and increase efficiency.
In July 2024, approval was given for three solar farms: Sunnica, Gate Burton and Mallard Pass. Sunnica, a £600m solar energy farm with three main sites in the Midlands, has been given the green light from the new government. Estimated to power over 400,000 homes and create 1,500 jobs during construction, with 27 full-time jobs to run it, this project takes the UK a step closer to achieving clean power targets and provides a much-needed boost to the economy. Construction will commence during 2025.
The rise of hydrogen
One of the simplest sources of clean energy, green hydrogen is produced by the electrolysis of water using renewable electricity, splitting water into hydrogen and oxygen. While hydrogen is expected to play a significant role in the future of energy, it is likely to be a longer-term solution.
Hydrogen production is an expensive process. Projects are capital-intensive, resulting in higher borrowing rates in an already high-rate environment. The technology is relatively new, and experience/expertise is limited from all areas, including equipment manufacturing and workforce/project management.
Supply is currently limited, with 13 reported hydrogen stations in the whole of the UK, only six of which are open to the public.
Demand over recent years has also been low; only two hydrogen fuel cell cars are for sale in the UK (Toyota Mirai and Hyundai NEXO SUV). In September 2024, BMW announced plans to produce a hydrogen car, with an estimated release date of 2028. This is as a result of their 100-fleet hydrogen-powered X5's, produced for research into hydrogen cars and their future.
Alternatives to grid connection
Despite all the advancements in energy production, grid connection issues are hindering our ability to deliver clean power and reduce the reliance on fossil fuels. There is no clear indication on how and when this will be resolved, although the previous and current government both vowed to cut grid connection delays. Given the lack of detail around plans, a resolution is unlikely in 2025. In the last few years, deals have fallen through due to failures in securing grid connections (a condition precedent written into many legal documents).
The queue for the grid has grown tenfold is the past five years and now contains the equivalent of 739GW - double what we need to meet our 2050 forecast.
Updating the grid is crucial for reducing our exposure to international markets and improving our energy security. However, in a survive and adapt approach, we predict that developers may step away from the grid wait times and start to invest in smart micro-grids and partnerships between producer and consumer, allowing energy to be shared among industries when the grid cannot deliver.
Investment in on-site renewable energy generation and storage can help manage rising costs and provide control over energy issues for businesses, though it requires significant investment and expertise. The rise of self-sufficient energy generating ecosystems could be accelerated by the removal of Business Property Relief (BPR) and Agricultural Property Relief (APR) for farmers announced in the Autumn Budget. This could lead to farmland being sold to developers who in turn set up an off-grid energy supply to local high-energy businesses.
UK EV manufacturers will fall short of 2025 Zero Emission Vehicle mandates
The zero-emission vehicle (ZEV) mandate for car manufacturers requires that 28% of cars manufactured must be ZEVs. Given that in 2024, only 19.6% of registrations were ZEVs (ie falling 22.4% short of the 2024 mandates), the 2025 target鈥攔epresenting a 43% increase on the current baseline鈥攕eems somewhat unachievable.
The current price point of EVs is driving consumers to seek out cheaper options, which is why Chinese brands are increasingly dominating the market, and this trend is likely to continue in 2025 and beyond. To meet the mandates and continue to develop automotive manufacturing in the UK, the government needs to incentivise demand, financially support production and deliver key EV infrastructure to ensure all aspects are in place to capitalise on the transition to electric motoring. However, it seems unlikely that significant strides will be made in 2025, given the past track record of slow progress and the government鈥檚 lack of funds to make the required investment.
There is, of course, the approach being adopted by the US in imposing high tariffs on EV imports. However, given the potential negative repercussions, such as a slowdown in uptake due to the lack of lower-price options on the market and/or wider economic implications with our overseas counterparts, it is considered unlikely that the UK will indulge in such protectionist policies.
Growth in auxiliary services
With the increase in the uptake of EVs, so too is the prevalence of obsolete lithium batteries. These are hard to recycle, and the methods used to recycle traditional batteries simply don鈥檛 transfer to their lithium alternatives. These are typically larger, heavier, much more complex, and even dangerous if taken apart incorrectly.
The to the House of Lords in September 2024 recognised that the government must 鈥渦rgently review and progress options鈥 to invest in EV and battery recycling facilities. This would ensure that recycling is undertaken by responsible operators and that as many of the critical materials contained in EV batteries as possible can be reused for domestic production. As such, 2025 will likely see a rise in operators undertaking this type of activity and also legislation in respect of lithium battery disposal and recycling.
Examples of other auxiliary services that will likely become more mainstream in 2025 include all-electric crew boats for the offshore wind industry. For all the clean kilowatts generated by offshore wind turbines, the carbon footprint of the construction phase is often ignored. Fuel usage among crew transfer vessels and to ferry equipment back and forth is substantial. Given the obvious oxymoron in such a practice, and the advancements in the early part of this decade on electric crew boats, it is expected that such vehicles will become the main transport option of choice. This will become increasingly important in reducing the UK鈥檚 carbon footprint if the offshore wind development activity ramps up to meet the government鈥檚 stated aim of quadrupling offshore wind by 2030.
Market reforms on the horizon
Several important reforms will come into play by 2025 that businesses must prepare for to contribute to the UK鈥檚 net-zero goals. These include the Market-wide Half Hourly Settlement, which will come into effect in April 2025, and the Energy Savings Opportunity Scheme, which requires businesses to conduct energy audits and identify energy saving opportunities. Additionally, large businesses will be required to report on their energy use, carbon emissions and energy saving measures as part of their annual financial statements.
We might see an increase in punitive measures in 2025 for businesses that fail to adhere to the regulatory framework.
In addition, 2025 and beyond might see legislation introduced regarding the decommissioning of offshore wind turbines, obsolete solar panels and similar infrastructure. In 2024, Offshore Energies UK produced guidelines for the removal of offshore wind turbines that have reached the end of their useful life.
Decommissioning of the first generations of wind turbines is already in progress, and the continuous turnover of older turbines will become more commonplace throughout 2025 and beyond. The turbines need to be dismantled and disposed of responsibly and ensuring environmental protection. Therefore, we may see the best practice and guidelines enshrined in legislation in the short to medium term.
New technologies entering the market
The number of new technologies entering the market is likely to continue rising in 2025. For example, developments in sustainable aviation fuels, recycling the energy produced from road traffic as electricity, nuclear microgrids and carbon capture storage will all continue to evolve.
Other subsectors, such as forestry and habitat banks, will become more mainstream as an investment option to 鈥榞reen鈥 investors.
Green things to come
Renewable energy has come a long way since the turn of the century. By the end of the first quarter of the 21st century, it will likely become the main energy source in the UK. The technologies in this sector will continue to develop and refine. We will also see an increase in regulation and perhaps fines for failure to adhere to mandates. However, significant progress in grid upgrades is unlikely in 2025, and developers will look for alternative ways to monetise green energy production.
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If you would like to discuss the impact for your energy and natural resources business, please contact Sheena McGuinness, David Hough, Grant Morrison or Graham Ricketts.
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