UK Energy Market Report — 28 September 2026

What we’re watching today

• DESNZ’s latest energy‑price statistics for April‑June 2026 showing upward trends in wholesale power costs.
• Guidance on the Renewables Obligation (RO) level calculations for 2027‑2028, setting the next benchmark for renewable generation.
• Evaluation of the 2026 Boiler Upgrade Scheme and research on heat‑pump uptake, highlighting incentives for low‑carbon heating.
• OPRED communications on oil and gas, signalling potential shifts in upstream policy.

Headlines and what they mean

Energy prices: April to June 2026

DESNZ released official statistics indicating that average commercial electricity prices have risen year‑on‑year, reflecting higher gas‑fuel costs and the ongoing carbon intensity of the grid. For buyers, this underscores the importance of securing fixed‑price contracts or exploring demand‑side management to hedge against further price spikes. source

Renewables Obligation level calculations: 2027‑2028

The department published guidance on how the RO levels will be calculated for the next two compliance periods. The methodology will affect the volume of renewable certificates needed, influencing the economics of new wind and solar projects. Commercial buyers should monitor the forthcoming RO targets as they will shape the supply of renewable‑sourced electricity and potentially affect contract pricing. source

Evaluation of the Boiler Upgrade Scheme, 2026

DESNZ’s evaluation report shows that the Boiler Upgrade Scheme has delivered a modest reduction in carbon emissions but uptake remains below the government’s ambition. The findings suggest that additional financial incentives or streamlined installation processes may be required to accelerate low‑carbon heating adoption across the commercial sector. source

Impact of heat‑pump costs on uptake: a discrete choice experiment

Research released by DESNZ indicates that upfront capital costs are the primary barrier to heat‑pump adoption for businesses, even when long‑term savings are modelled. Policymakers may consider expanding loan‑back schemes or tax reliefs to improve the business case for heat‑pump retrofits. source

OPRED communications, 2026 – Oil and gas sector

The Oil and Gas Production and Exploration Data (OPRED) communications provide updated production forecasts and regulatory expectations for the upstream sector. While the UK’s domestic oil and gas output remains modest, the data can inform expectations around future supply constraints and potential price impacts on electricity generation. source

Geopolitics and global markets

Global gas markets remain tight, with OilPrice reporting a "Global Gas Squeeze Could Last Through Next Summer" that could pressure European gas imports and, by extension, UK wholesale power prices. Meanwhile, US natural‑gas prices are 6 % lower than last summer, offering a modest relief on global LNG pricing, but the overall supply risk persists. Venezuela’s planned oil comeback and Nigeria’s output surge add further volatility to crude markets, influencing fuel‑price expectations for power generation. source source source source

The view from the trade desk

The grid is forecast to run at a high carbon intensity of 177 gCO₂/kWh, driven by a generation mix still dominated by gas (40.9 %). Wind and nuclear together supply roughly 34 % of output, while imports and biomass fill the remainder. Buyers should expect higher marginal costs for gas‑fired generation and consider contracts that lock in renewable‑sourced electricity to mitigate exposure to carbon‑intensity‑linked price spikes.

What to do this week

• Review existing electricity contracts for exposure to gas‑price volatility and explore fixed‑price or renewable‑linked options.
• Assess eligibility for the Boiler Upgrade Scheme and heat‑pump incentives; begin procurement planning to capture any remaining funding windows.
• Model the impact of the upcoming RO level calculations on renewable‑certificate costs for long‑term PPAs.
• Monitor gas‑market news, especially EU storage reports, to anticipate short‑term price movements.
• Engage with a flex‑management provider to leverage TUS’s 150 + GWh portfolio and potentially achieve 20 % cost savings versus supplier forecasts.

Bottom line

UK commercial energy buyers are navigating a high‑carbon, gas‑heavy grid amid rising wholesale power prices and evolving policy signals on renewables and low‑carbon heating. Proactive contract management, uptake of government incentive schemes, and strategic use of flex‑management can protect budgets and support the transition to a greener energy mix.