DESNZ unveils plans to cut bills and reform the energy system
On Tuesday, the Government revealed its plan to cut energy bills, in the context of rising wholesale prices triggered by conflict in the Middle East. Various measures were packaged into a speech the Energy Secretary, Ed Miliband, delivered to the Good Growth Foundation. Two major announcements dominated headlines: action to reduce the impact of gas prices on renewable electricity generation and the Reformed National Pricing Delivery Plan.
Breaking the influence of gas on electricity prices
Despite considerable industry pressure, the highly anticipated ‘decoupling’ of gas and electricity prices was not announced. Instead, the Government has opted to soften the influence of gas on electricity prices by reducing the exposure of legacy renewable generators (subsidised by the Renewables Obligation – RO – scheme) to wholesale prices set predominantly by gas. These measures have been pitched as a complement to the Government’s Clean Power 2030 target, which is expected to reduction the amount of time gas sets the wholesale price of electricity to around 50%.
The two measures are broken down into a 'carrot' and 'stick':
The carrot: Introducing a Wholesale Contract for Difference (WCfD) contract for legacy RO renewable generators with a plan to run the first auction in 2027.
The stick: An extension and deepening of the Electricity Generator Levy, which taxes windfall revenues for large renewables, with an increase in the marginal tax rate to 55% from 1st July 2026.
These ‘Wholesale Contracts for Difference’ will be voluntary and introduced later this year, with an intention to run an allocation process in 2027. RO renewable generators would essentially forfeit their wholesale revenues for fixed-price, inflation-linked government contracts, while continuing to receive support via the RO in the way they do currently.
Reformed National Pricing Delivery Plan
The long-awaited Reformed National Pricing Delivery Plan was also published, after the Government ruled out zonal pricing last summer as part of its Review of Electricity Market Arrangements. At its heart, this plan lays out the tools for the development of the Strategic Spatial Energy Plan, which will inform the capacity and location of generation and storage – optimised for cost across demand and high-level network needs, as well as environmental and societal impacts.
The Delivery Plan is split into three main sections:
Siting and investment levers: ahead of the publication of the SSEP, the Government is developing a combination of siting and investment levers across the network build, planning reform, grid connections, locational charges, and generation and storage investment support mechanisms.
Constraint management action plan: this section focuses on reducing both the volume of constraints and the price paid to manage constraints. Actions include accelerated construction schedules for critical transmission works, introducing a long-term constraints management market for flexible demand turn-up (with a tender due this year), and a decision on whether to permanently remove final consumption levies from demand turn-up.
Balancing and settlement reforms: the Government has indicated that the following proposals in NESO’s recent Call for Input will likely go ahead: a) lowering the mandatory BM participation threshold; b) mandating that Final Physical Notifications must match traded positions; and c) alignment of the market trading deadline with gate closure. A final decision is due later this year.
Other announcements
Nestled among these two major announcements were other measures aimed at reducing bills in the long term, with electrification a key focus:
Streamlining outdated rules to unblock the grid and speed up clean, homegrown power, through an overhaul of planning, land access and grid connection processes - as the Government sets out actions in its response to a consultation on electricity network infrastructure.
An increase to the Boiler Upgrade Scheme (BUS) grant for properties heated by oil and LPG, taking the total grant to £9,000.
An additional £100 million of funding for the Social Housing Fund, subject to final approvals, to support the delivery of up to a total of 57,000 solar installations for households this financial year.
An additional 100 schools and colleges to benefit from rooftop solar installations this year via GB Energy.
An expansion of renewables across the Public Estate, unlocking up to 10 GW of capacity.
New funding to build and expand heat pump factories in the UK, creating around 2,000 British jobs, alongside extra investment in the £30 million Heat Pump Ready scheme.
Plans to make EV chargers, solar panels and heat pumps easier to install for renters, flat-dwellers and households without a driveway.
Further detail on Transitional Energy Certificates to support the management of existing oil and gas fields in the North Sea for their lifetime.
techUK view
These announcements are not as transformational as the ‘decoupling’ of gas and electricity prices that some advocates have been calling for, yet such proposals would have been difficult to implement and likely caused significant uncertainty. The Government’s plans maintain certainty and offer some protection for significant energy consumers such as digital infrastructure from gas price volatility.
Yet it is currently unclear how this WCfD will work in practice, including the level at which the strike price is set and the length of contracts. There is a risk that moving an increasing amount of renewables generation to inflation-linked, long-term government contracts could disadvantage and disincentivise the merchant revenues. For example, the Corporate Power Purchase Agreement (CPPA) market, in which tech companies and data centres are pioneering investors, must be supported by the Government to grow. CPPAs are essential in getting more renewables online without adding to consumer bills.
Clarity on the Reformed National Pricing Delivery Plan is welcome. Much stronger locational signals are needed to incentivise location-agnostic large energy users to absorb excess renewables capacity, and - even then - other considerations such as fibre, demand, and skills may hold more weight. The focus should be on deploying and investing in tried-and-tested flexibility solutions to manage system costs, including addressing battery storage skip rates. Smarter data and wide-scale adoption of tech such as AI to predict generation and demand will be central to delivering and managing a decarbonised, cost-effective power system.
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Robert joined techUK in January 2025 as our Programme Manager for Transport and Mobility.
He works on a wide range of areas across road, rail, aviation, and maritime, with an overarching focus on enabling, advocating, and championing the technological innovations that will build the transport systems of the future.
Prior to this role, Robert worked in the House of Commons for a Member of Parliament and in public affairs roles in both agency and trade association settings. He holds a Philosophy, Politics, and Economics degree from the University of Oxford as well as a Graduate Diploma in Law.
Junior Programme Manager - Energy and Utilities, techUK
Jade van Zuydam
Junior Programme Manager - Energy and Utilities, techUK
Jade joined techUK in September 2025, leading our data centres work on energy and water. As Junior Programme Manager, she works with industry and government to shape policy and advance sustainability, resilience and the UK’s net zero goals.
She brings a background in research, journalism and advocacy. Prior to joining techUK, Jade worked at The Economist developing international conferences to debate the most important ideas of our time, before moving into freelance journalism for their daily newsletter, The World in Brief. Her writing explores the intersection of environmental and social justice issues, from climate litigation and energy grids to sustainable agriculture. As programme manager at Digital Leaders, she engaged a network of over 100,000 members on digital transformation and its implications for policy, public services and decarbonisation.
Jade holds an MSc in Environment, Politics and Development from SOAS University of London, and a BA (Hons) in History and International Relations from the University of Exeter.
Programme Assistant, Data Centres, Climate, Environment and Sustainability, Market Access, techUK
Lucas Banach
Programme Assistant, Data Centres, Climate, Environment and Sustainability, Market Access, techUK
Lucas Banach is Programme Assistant at techUK, he works on a range of programmes including Data Centres; Climate, Environment & Sustainability; Market Access and Smart Infrastructure and Systems.
Before that Lucas who joined in 2008, held various roles in our organisation, which included his role as Office Executive, Groups and Concept Viability Administrator, and most recently he worked as Programme Executive for Public Sector. He has a postgraduate degree in International Relations from the Andrzej Frycz-Modrzewski Cracow University.
