The Energy Transition | Autumn Budget 2025

This week we look at the chancellor's Autumn Budget, the report on the Nuclear Regulatory Taskforce review, the North Sea Future Plan, and the consultation response on the Climate Change Levy costs for low-carbon electrolytic hydrogen.

Autumn Budget 2025: the Energy Profits Levy, renewables, nuclear, electric vehicles and energy infrastructure

On 26 November 2025, the chancellor, Rachel Reeves, delivered the Autumn 2025 Budget, introducing important changes affecting the Energy sector. Announcements include: 

• The Energy Profits Levy windfall tax will be replaced by an Oil and Gas Price Mechanism (OGPM). The levy, introduced in 2022, will remain in effect until the earlier of March 2030 or on the triggering of the Energy Security Investment Mechanism (ESIM), at which point the new OGPM will take effect, also triggering the tax rate to return to the flat 40% "headline" tax, which will continue as a permanent regime. (The ESIM was established as a trigger such that if the six-month average price of both oil and gas drops below $71.40/barrel for oil and £0.54/therm for gas, thereby returning to "historically  norma" prices, the Energy Price Levy would cease to apply.) The OGPM  imposes a 35% charge on revenues above "unusually high" price thresholds of $90/barrel for oil and £0.90/therm for gas. It is intended that the OGPM will be legislated in the next Finance Bill.
• The government will publicly fund 75% of the domestic legacy costs of the Renewables Obligation from 2026-27 to 2028-29. As recently reported, there is an ongoing consultation in relation to the indexation of the Renewables Obligation. Paired with ending the Energy Company Obligation, this is projected to reduce average household energy bills by around £150 in 2026-27. These changes will take effect from 1 April 2026.
• The British Industry Supercharger, providing energy bill relief for energy-intensive industries, received an uplift. The Network Charging Compensation Scheme relief, which compensates eligible businesses against the cost of using the Great British Electricity Grid, will rise from 60% to 90%.
• Nuclear energy will be introduced as an eligible use of funds under the UK Green Financing Framework. However, proceeds from green gilts and Green Savings Bonds issued before 27 November 2025 will not be used for nuclear projects. See further on nuclear developments below.
• Electricity used to produce electrolytic hydrogen will be exempt from the Climate Change Levy (CCL). See more on the CCL below.
• The introduction of a new British Industrial Competitiveness Scheme from 2027, which the government states will reduce the electricity costs for over 7,000 businesses by up to £40/MWh. Support is intended for manufacturing "frontier industries within the Industrial Strategy's growth sectors and foundational manufacturing industries that provide key inputs to the frontier's industries which meet a certain threshold of electricity intensity". The consultation opened on 24 November and will close on 19 January 2026; responses should be submitted to: bics.correspondence@businessandtrade.gov.uk.
• The Carbon Price Support rates (the minimum floor price for carbon) in Great Britain will be frozen in 2027-28 at a "level equivalent to" £18 per tonne of CO2.
• Electric vehicles (EVs) and plug-in hybrids will pay a per-mile levy from April 2028. The self-reported charge for EVs will be "half the equivalent fuel duty rate for petrol and diesel cars, and plug-in hybrid cars will pay a reduced rate equivalent to half of the electric car rate". 

Government releases report on Nuclear Regulatory Taskforce review

On 26 November, the government published a report on the Nuclear Regulatory Review 2025. The review identifies regulation as central to the UK's relative decline in nuclear competitiveness, with the increasing complexity and risk aversion of the regulatory system contributing to a weakening of the UK's leadership position. 

It diagnoses five primary regulatory problems: (i) fragmented oversight with multiple regulators and no designated lead; (ii) disproportionate decisions that are overly conservative and costly; (iii) flawed legislation prioritising process over outcomes; (iv) government indecision in policymaking and regulatory roles; and (v) weak industry incentives due to near-monopolistic market structures.

The review proposes reforms that include a new Commission on Nuclear Regulation as a one-stop decision-maker for major approvals, which has been proposed to address the issues in current oversight identified by the taskforce. Interim steps entail a formal lead regulator model (the Office for Nuclear Regulation (ONR) as default) and merging the Defence Nuclear Safety Regulator (DNSR) into ONR. These structural recommendations complement earlier government initiatives analysed in this previous update, which covers parallel reforms in regulatory, planning and delivery frameworks.

Following the publication of the report, the prime minister's strategic steer endorses all recommendations, committing to full implementation within two years (subject to legislative timelines). It ties reforms to broader policies: a new National Policy Statement for Nuclear Energy Generation beyond 2025, Planning and Infrastructure Bill changes, and forthcoming SMR/advanced nuclear frameworks. 

Government launches North Sea Future Plan 

The government has published its response to the 'Building the North Sea's Energy Future' consultation, setting out a framework for managing the transition of the North Sea basin from traditional oil and gas production towards clean energy industries. The North Sea Plan seeks to implement the government's manifesto commitments to manage existing fields for the entirety of their lifespan and not to issue new licences to explore new oil and gas fields.

To implement this framework, the government has outlined a few measures listed below:

• Transitional Energy Certificates: A key part of the government’s response is the introduction of Transitional Energy Certificates, which allow limited oil and gas production on or near existing fields without new exploration. This mechanism supports an orderly transition by permitting development linked to existing infrastructure ("tiebacks"), consistent with the commitment to halt new exploration licences. Developers cannot explore new sites, and some uncertainty remains over how the framework will apply to larger projects extending into unlicensed seabed areas.
• Regulatory and licensing reforms: Primary legislation will amend the North Sea Transition Authority’s (NSTA) statutory objectives to balance maximising economic value, supporting net zero delivery and assessing long-term transition impacts on workers, communities and supply chains. Decisions on field extensions, emissions and decommissioning will incorporate these factors, aligning with the Climate Change Act and the Paris Agreement. The ban extends to new onshore licences in England (effectively ending fracking), while stricter rules on flaring, venting and platform electrification accelerate decarbonisation of legacy assets.
• Workforce transition support: A new North Sea Jobs Service, launching in 2026, will provide career transition support for oil and gas workers into clean energy, defence and manufacturing, building on the expanded Energy Skills Passport and £20 million UK/Scottish funding from the Aberdeen pilot. A minister-led North Sea Future Board, with industry and union representation, will oversee coordination, alongside a five-year basin-wide supply chain plan and a Fair Work Charter standardising employment rights across sectors.
• Investment in clean energy infrastructure: The plan sits alongside substantial government investment commitments, specifically across offshore wind, CCUS and hydrogen. The government intends to develop a comprehensive guidance package for supply chain businesses and improve certainty for investors. 

As next steps, the government will launch a new minister-led delivery board of experts from across the industry and trade unions, who will meet regularly to oversee the progress, coordination and long-term planning of the North Sea's industrial transition.

Government publishes response to consultation on Climate Change Levy costs for low-carbon electrolytic hydrogen 

The government has published its response to the consultation on the proposal for CCL no longer to be charged on electricity used in the electrolytic process for the production of green hydrogen. The existing CCL application to hydrogen provides "green" hydrogen (that which is electrolysed using renewable energy) less favourable treatment than "grey" or "blue" hydrogen (which uses steam reformation from natural gas) which already benefited from an exemption from the CCL. As previously reported, the government had therefore committed in this year's Spring Statement to remove the costs from green hydrogen production and this consultation was to consider the most appropriate legislative route to doing so. 

The consultation response confirms that the government will proceed with its proposal to add electricity used in electrolysis to produce hydrogen to CCL's "non-fuel use" exemption. As this exemption is designed to only exempt "non-fuel" uses, only electricity used in the electrolysis process itself will be eligible for relief.

Despite suggestion in the original consultation that the selection of this approach could see changes implemented by the end of 2025, the response paper confirms that the changes will be implemented by spring 2026. 

This article was written with the assistance of Adam Budd and Oliver Derham, trainee solicitors, and Tomisin Agbonifo, paralegal.