UK Energy Market Report — 1 September 2026

What we’re watching today

• Low carbon intensity forecast of 112 gCO₂/kWh with wind at 46.8% of generation.
• DESNZ’s UK ETS allocation table and Green Gas Support Scheme tariff changes.
• Record heat‑pump applications from former heating‑oil households signalling a shift in demand.

Headlines and what they mean

UK ETS Allocation Table for operators of installations (DESNZ)

The Department for Energy Security and Net Zero has published the latest UK Emissions Trading Scheme allocation table. The allocation determines how many free allowances large emitters receive, directly influencing the marginal cost of carbon for industrial and power‑sector users. Companies should review their allowance position now to avoid surprise price spikes later in the compliance year and consider voluntary purchases if their forecast emissions exceed the free allocation.

Green Gas Support Scheme (GGSS) – expenditure forecast and tariff change notices (DESNZ)

DESNZ released updated expenditure forecasts and new tariff notices for the Green Gas Support Scheme. The adjustments reflect higher support rates for biomethane injected into the gas network, aiming to accelerate decarbonisation of heating. For commercial gas users, the revised tariffs could translate into lower contract prices for green gas, making it a more attractive hedge against future carbon‑price exposure.

Domestic energy price indices (DESNZ)

The latest domestic energy price indices show a modest upward trend in electricity and gas price baskets, driven by higher wholesale gas costs and the ongoing de‑carbonisation premium on renewable generation. The data provide a benchmark for contract negotiations and help buyers gauge the inflationary pressure on energy spend.

Record number of heating oil households apply for a heat pump (DESNZ)

A new DESNZ release highlights a surge in applications from heating‑oil households seeking heat‑pump installations. This reflects growing confidence in the UK’s heat‑pump subsidy schemes and suggests a future reduction in oil demand for space heating. Commercial landlords with mixed‑use portfolios should monitor this trend as it may affect future fuel‑mix strategies and eligibility for green‑building incentives.

First regional solar breakdown as installations hit record highs (DESNZ)

Solar installations have reached a new record, and DESNZ published the first regional breakdown. The South‑East and East of England lead with the highest capacity additions, driven by favourable planning policies and corporate PPAs. Companies with site‑level energy strategies can now target regions where solar supply is most abundant, potentially lowering the cost of on‑site generation or PPAs.

Geopolitics and global markets

European gas prices jumped 5 % to their highest level since 2023, reflecting tighter storage margins and reduced pipeline flows from the continent’s traditional suppliers source. At the same time, the ongoing Iran‑War has spurred billions of dollars in new oil‑pipeline and port investments, signalling a potential re‑routing of crude that could affect global oil price dynamics and, indirectly, UK gas‑linked power costs source. Norway’s push for a Europe‑wide energy market without sharing its own trade‑offs raises the prospect of market fragmentation, especially in the interconnector space, which could limit access to cheap Norwegian hydro power for the UK source. Finally, BP’s early delivery of an additional 80 MMcf/d of gas to Egypt eases regional supply constraints and may modestly relieve pressure on LNG cargoes that the UK imports during winter peaks source.

The view from the trade desk

The grid forecast shows a low carbon intensity of 112 gCO₂/kWh, underpinned by a wind share of 46.8 % and a modest gas contribution of 23.8 %. Nuclear remains steady at 18.8 %, while solar and biomass together supply just over 7 %. The high wind penetration keeps marginal generation costs low, but the still‑significant gas share means wholesale prices remain sensitive to European gas market movements highlighted above. Buyers should factor the low‑intensity backdrop into their short‑term procurement while keeping an eye on gas price volatility.

What to do this week

• Review your ETS allowance position against the new allocation table and consider voluntary purchases to lock in price certainty.
• Engage with gas suppliers about the updated GGSS tariffs to assess the cost‑benefit of switching to biomethane contracts.
• Analyse regional solar capacity data to identify attractive sites for on‑site PV or corporate PPAs.
• Monitor European gas price movements and incorporate a gas‑price hedge into your procurement strategy.
• Evaluate heat‑pump incentives for any property assets still reliant on oil heating, as the application surge suggests expanding subsidy availability.

Bottom line

Regulatory updates this week give commercial buyers concrete levers—ETS allowances, green‑gas tariffs and solar regional data—to fine‑tune their energy portfolios. Coupled with a low‑intensity grid and rising European gas prices, the environment favours proactive risk management and the early adoption of renewable‑focused contracts.