Introduction
After twenty years of decline, Britain’s electricity demand has turned a corner and is on the rise. Growing numbers of electric vehicles and heat pumps are the main driver, so this arguably marks the next phase of the energy transition: using clean electricity to decarbonise transport and heat. Demand is also poised to surge because of our growing appetite for AI, and the huge data centres it relies on.
Despite rising demand, renewables supplied a larger share of electricity than ever. Output from solar, wind and biomass rose by more than enough to meet the country’s additional demand. Alongside 2025 being the UK’s hottest ever year, it was also the sunniest since records began, helping solar power to produce one-third more electricity than last year. Record renewables meant record system pain, with balancing costs and wind curtailment costs reaching new highs, and the debate about ‘wasted wind power’ looming large. These challenges will continue to grow in importance, as the next CfD auction (AR7) awarded contracts to a record 8.2 GW of offshore wind. This is enough to put wind back on track with Government targets, but also enough to strain the grid even further.
The cost of energy continues to be a major challenge, with Britain’s electricity bills among the highest in the world. Ofgem’s latest price cap, which covers January to April, impacts this by raising electricity prices further while gas prices fall. This works against the country’s clean energy ambitions, penalising electric vehicle and heat pump owners. We look at the ‘spark gap’, the ratio of electricity to gas price, which reflects how costly it is to electrify heat relative to sticking with fossil fuels. Britain ranks worst in our international league table, with the highest spark gap of any major country.
Global, interconnected fossil fuel markets are a key driver for our energy prices. Recently, markets have been unsettled by the US military intervention in Venezuela and unrest in Iran amid a security crackdown. In the longer term, analysts expect both oil and gas markets to see large over-supply this year, which could ease pressure on bills, but risks pushing up emissions around the world.
The Government has set three Clean Power 2030 targets, covering the amount of clean electricity produced and overall carbon intensity. Progress towards these has been solid over the past 16 years, but clean electricity’s share has stalled over the last four quarters, along with carbon emissions intensity.
