The Energy Transition | UK government announces CfD AR8 auction to open in July 2026

This week we cover government plans to open the AR8 auction in July, DESNZ's overhaul of nuclear regulation, proposals for demand connection reforms, T-4 Capacity Market auction results for 2029/30, Ofgem's call for members of a charging transitional arrangements group, updates to the UK's infrastructure pipeline, and the removal of tariffs on offshore wind components.  

UK government announces CfD AR8 auction to open in July 2026

The government has confirmed that it intends to open the next Contracts for Difference (CfD) allocation round (AR8) in July – a move it said is designed to give certainty to clean energy investors. The announcement follows the government's consultation on AR8 published in December 2025. The consultation closed at the end of January with the results yet to be published. 

DESNZ to overhaul the UK's nuclear system 

The Department for Energy Security and Net Zero (DESNZ) has announced an overhaul of nuclear regulation, in response to the recommendations made by the Nuclear Regulatory Taskforce's November 2025 report.

The government says it will implement all 47 recommendations made by the taskforce and expects all reforms to be completed by the end of 2027. The reforms aim to move towards "smarter" nuclear regulation through two key objectives.

Reinvigorating Britain's nuclear sector 

The first objective covers reinvigorating Britain's nuclear sector, with a focus on "proportionate, risk-based" decision-making. Proposed reforms include streamlining complex regulatory structures and giving the Office for Nuclear Regulation (ONR) a statutory objective to further the delivery of the government's growth, climate and national security goals. 

The government has also proposed that the Defence Nuclear Safety Regulator will also be merged with the ONR. Safety standards will be maintained in line with international norms – while being applied proportionately – and a focus will be placed on reducing the inflation of regulatory guidance beyond the enforcement of the industry's legal duties.

The plan to reinvigorate the sector will look to increase investment in a skilled workforce to keep pace with nuclear ambitions through the expansion of the Nuclear Skills Plan; and establishing a nuclear regulatory implementation panel to hold the government and sector accountable, with a first meeting timetabled for June 2026. 

Effective planning and environmental assessments  

The second objective covers ensuring effective planning and environmental assessments. The government intends to reform the planning system and streamline compliance processes, while maintaining its commitment to "positive environmental outcomes".

Reforms include improving the application of the Habitats Regulations 2017 and accelerating the development of nuclear-specific environmental delivery plans. The government has published a roadmap to implement environmental outcome reports by December 2027, alongside plans to accelerate reforms to the nationally significant infrastructure project planning process. It also proposes to build on existing reforms to judicial review to update the costs regime for claimants with merit. 

Tom Greatrex, chief executive of the Nuclear Industry Association, called the programme of reforms "the most important thing we can do to cut deployment times and costs, and rebuild the backbone of our energy security". He added that "driving through these recommendations offers our best chance in a generation of achieving that."

NESO and DESNZ seek industry views on demand connection reform  

The National Energy System Operator (NESO) has published a demand information request notice (IRN) as part of its connections reform process. Recipients will include existing transmission-level demand connection customers and those with connected generation agreements of which demand technologies form a part.  Responding will be mandatory for those who receive the IRN, and follows a discretionary call for input in 2025 that NESO says provided "high-level insights" into the reform process.

DESNZ has separately published a consultation on reforms of the connection process, building on Ofgem's call for input including its three-pillar "Curate, Plan and Connect" plan. The consultation also covers the TMO4+ package of connection queue reforms, accelerating improvements for demand-side projects and aligning connection reform with strategic priorities. The government will use powers introduced as part of the Planning and Infrastructure Act 2025 to amend the regulatory framework for demand projects.

As of June 2025, there was 96GW of capacity in the transmission demand queue, up 460% over the previous six months. The government says that this was driven largely by "speculative activity", particular with data centre applications, which represented approximately 50GW of capacity.

Reform proposals

The government is consulting  on three reform proposals. The first covers reforming connection licences, codes and methodologies to increase queue entry and membership requirements for data centres, including those with existing connection agreements. This would address speculative applications and improve the management of connections by increasing financial requirements for projects to retain or obtain a connection offer, as well as adding readiness requirements and progression milestones.

The second proposal looks to implement plans to identify strategically important projects, allowing network companies to re-allocate capacity, reserve capacity for strategic demand, and prioritise strategic demand projects. The third proposal covers a "strategically aligned process" for managing data centre connections. This will be set out in a data centre strategy currently in development.  

Phased introduction 

The government proposes a phased introduction. Proposals one and two would take effect before NESO reopens the transmission queue for new applications, in order to prevent more speculative entries. Proposal three would be integrated following the second application window after TM04+ reforms are complete.

The consultation closes on 15 April 2026. 

T-4 Capacity Market auction results published for delivery year 29/30

NESO has published the provisional results for the T-4 Capacity Market (CM) auction, which secures top-up electricity capacity during peak demand periods for delivery in 2029/30. These follow the most recent T-1 results for the winter of 2026/27. 

The auction has secured a total of 40.1 GW against a target volume of 39.4GW, secured at a price of £27.10 per KW per year – less than 50% of the clearing price of the previous T-4 auction for the delivery years 2028/29.  

NESO confirmed that the capacity was procured across 691 individual CM Units, including existing and new-build assets, demand-side response and storage. Most awards were secured by existing assets, with gas-generating assets accounting for 23.5GW of the total. Other successful technologies included hydropower (1.2GW), battery storage (1.2GW) and pumped hydro (1.35GW).  

The provisional results will become final eight working days from initial publication (11 March), following sign-off by the secretary of state.  

Ofgem seeks members for network-charging transitional arrangements group  

As part of its reformed national pricing programme, which evaluates possible changes to the electricity transmission network charging regime, Ofgem is seeking stakeholder interest in joining a charging transitional arrangements group (CTAG). This will inform its decision on whether the new regime should apply to all generators or whether it would be in consumers' interest – and consistent with Ofgem's statutory duties – to establish a "transitional" or "legacy" arrangement.

Ofgem is seeking responses from stakeholders across the market and generators across technology types and schemes, including merchant generators and those under Contracts for Difference or the nuclear Regulated Asset Base. Ofgem also welcomes responses from trade associations, consumer group representatives, and any other interested stakeholders.

The deadline for responses is 5pm on 24 March. Ofgem has published an open letter outlining how stakeholders can join the CTAG. 

NISTA publishes first update to the UK's infrastructure pipeline  

The National Infrastructure and Service Transformation Authority (NISTA) has published the first update to the infrastructure pipeline including the estimated skills and workforce demand from the 734 pipeline projects.  

The energy sector accounts for over 50% of planned investment over the coming decade: £365 billion of the £718 billion total. Investment pans a broad range of areas, including onshore wind, nuclear decommissioning and transmission upgrades.

Across all sectors, the update projects an average workforce of between 621,000 and 697,000 for the next two years, rising to between 629,000 and 706,000 over the flowing five years. Roughly two-thirds of this demand is expected to come from construction, primarily in education and health infrastructure.  

UK government lifts tariffs on offshore wind components 

The government has announced that, from 1 April 2026, 33 items used across the offshore wind manufacturing supply chain will become conditionally zero-rated for tariffs.  

This would reduce tariffs of up to 6% to zero on import, but only where the goods are imported for specified purposes – for example, use in the manufacturing process for an offshore turbine or ancillary equipment – and processed within six months. Accompanying authorised use information explained the eligibility for the zero rating with the period for "discharge" (use) of the goods set at six months. This conditionality is designed to prevent abuse of the tariff reduction in other sectors, and to protect against inadvertently undercutting domestic producers.  

The announcement follows the recent CfD results, with a record capacity of offshore wind power procured, and the April 2025 pledge of £300 million to support domestic supply chains for offshore wind.  

This article was written with the assistance of Osborne Clarke trainee solicitors Adam Budd, Oliver Derham and Yasmine Jauffur.