UK Energy Market Report — 03 November 2026

What we’re watching today

• DESNZ’s Energy Act 2013 Part 3 annual report highlights the latest trends in UK energy consumption and emissions.
• The Green Gas Support Scheme budget management notice signals the next round of funding for low‑carbon gases.
• A major undersea power cable has received approval, promising new import capacity.
• The UK ETS allocation table for 2026‑27 has been published, affecting compliance costs for large emitters.

Headlines and what they mean

Energy Act 2013 (Part 3) annual report, 2025‑2026

DESNZ’s corporate report provides the first full‑year view of UK energy use, emissions and the effectiveness of policy levers since the 2025‑26 financial year. For commercial buyers it confirms that overall demand is stabilising while the share of renewables continues to grow, but gas‑fired generation still accounts for roughly 40 % of supply. The data underpin the Department’s targets for net‑zero and will feed into future capacity‑allocation decisions, meaning firms should anticipate modest upward pressure on gas‑linked contracts as the market balances decarbonisation with reliability needs. source

Green Gas Support Scheme: budget management notice

DESNZ has released a budget management notice for the Green Gas Support Scheme, outlining the remaining funding envelope for projects that inject low‑carbon gases such as biomethane and hydrogen into the gas network. The notice indicates that a proportion of the original budget has been allocated to early‑stage pilots, leaving limited capacity for new large‑scale projects in the current financial year. Companies considering green‑gas procurement should engage early with suppliers to secure any remaining support and factor the likely reduction in subsidy rates into their cost‑benefit analyses. source

Major undersea power cable given green light

DESNZ announced regulatory approval for a new high‑capacity undersea interconnector linking the UK to a continental European grid. The cable, expected to be operational by 2029, will add up to 5 GW of import capacity, enhancing system resilience and providing a conduit for excess renewable generation from abroad. For large energy users this could translate into greater price arbitrage opportunities and a hedge against domestic supply constraints, particularly during periods of low wind output. Monitoring the cable’s commercial terms will be essential for firms that rely on long‑term power purchase agreements. source

UK ETS allocation table for operators of installations

The latest allocation table for the UK Emissions Trading Scheme has been published, detailing the free‑allocation of carbon allowances to industrial installations for 2026‑27. The table shows a modest reduction in free allowances for sectors deemed to have sufficient abatement capacity, while the power sector receives a smaller share as it transitions away from coal. Energy‑intensive businesses should review their allowance holdings, consider voluntary purchases to cover any shortfall, and evaluate the impact of allowance price trajectories on their overall carbon‑cost strategy. source

Geopolitics and global markets

Oil prices have rebounded following reports of U.S. strikes on Iranian facilities, injecting fresh upward pressure on oil‑linked freight and, indirectly, on UK gas‑linked contracts as market participants reassess risk premiums source. At the same time, Germany has missed its gas‑storage target for the winter, with soaring European gas prices reflecting tighter supply balances and heightened concerns over winter adequacy source. Vitol’s CEO warned of an impending global supply crunch, citing constrained LNG cargoes and geopolitical volatility, a signal that wholesale gas prices could stay elevated in the near term source.

The view from the trade desk

The grid forecast shows a carbon intensity of 165 gCO2/kWh, categorised as moderate. Generation is still dominated by gas (39.8 %), with wind contributing 29.1 % and nuclear 15.5 %. Biomass and imports together add another 15.6 %, while coal is effectively phased out. The mix suggests that any further wind‑output shortfall will be met by gas, keeping marginal costs relatively high. The upcoming undersea cable and the modest rise in renewable output should gradually ease reliance on gas, but the current intensity level underlines the importance of hedging strategies for firms sensitive to carbon‑price fluctuations.

What to do this week

• Review your green‑gas procurement plans against the remaining Green Gas Support Scheme budget and engage suppliers now to lock in any available subsidies.
• Model the impact of the new undersea interconnector on your power price forecasts, especially if you have exposure to peak‑hour electricity demand.
• Assess your UK ETS allowance position ahead of the 2026‑27 allocation to avoid unexpected compliance costs.
• Incorporate the latest carbon intensity forecast into your internal carbon‑pricing models to ensure accurate budgeting for Scope 2 emissions.
• Monitor European gas‑price movements closely, given Germany’s storage shortfall and heightened oil‑price volatility, and consider short‑term contracts to mitigate price spikes.

Bottom line

Regulatory signals this week point to a tightening of green‑gas funding, a modest reduction in free carbon allowances and the imminent arrival of a new interconnector that could reshape import dynamics. Coupled with global oil volatility and a European gas‑storage gap, wholesale energy costs are likely to stay elevated in the short term. Commercial buyers should act now to secure green‑gas support, hedge against gas price spikes and align their carbon‑cost strategies with the latest intensity forecast.