Onshore renewables industry: 7 predictions for 2025

2024 marked a future full of promise for the renewables industry. The general election put renewable energy back at the forefront of the agenda, with policies like the immediate permitting of 1.3GW of solar and energy storage, increasing the budget for Auction Round 6 of the CfD scheme by £530 million, allowing contracts to be won by 3.3GW of solar and 990MW of onshore wind, just to name a few.

Labour, however, are continuing with National Energy System Operator (NESO), the publicly owned organisation with wide ranging powers to propose and implement reform through code and licence modifications.

NESO produced Clean Power 2030. This report laid out a feasible pathway, largely based on the Future Energy Scenarios “Holistic Transition” scenario from 2024. From this, NESO was asked to produce a Strategic Spatial Energy Plan, which would lay out the target vision for the makeup and structure of the electricity system in 2030.

By necessity, this means that the system is moving from a market led system to a grid led system where generation and storage is only connected when and where it is required, rather than where there might happen to be spare capacity on a network.

Based on these reforms and plans, these are our top 7 predictions for the upcoming year:

1: The AR7 CfD round will have sufficient budget to clear a greater capacity of projects than AR6.

To ensure sufficient deployment of projects by 2030 sufficient capacity must be procured in AR7 and AR8 to largely meet the 2030 goals.

2: The contraction in the standalone BESS development market will be (fairly) fast.

The introduction of £20,000/MW grid security, combined with an oversupply of projects compared to the predicted total requirement as well as market uncertainty, will mean that a lot of smaller and more thinly capitalised developers find their margins squeezed as development premiums fall.

3: Increased flow of capital in the UK.

With the US renewables investment market becoming more challenging over the next 4 years, it is expected that the UK will see an increased flow of capital. This is because Donald Trump has issued a large number of executive orders, with some targeting the termination of the “Green New Deal” policy put in place by the previous administration, and ordered faster extraction of fossil fuels. Within these orders, “energy” is defined as crude oil, natural gas, lease condensates, natural gas liquids, and more but there is a notable absence of wind and solar. Offshore wind specifically has been banned.

4: Onshore wind market will see an increase in activity.

Since the Labour government announced the end of the hiatus on onshore wind in England, the onshore wind market in England is likely to see an increase in activity, although it is to be seen whether the new 150m tip height standard is acceptable.

5: REGO legislation reform will lead to REGOs being time-stamped.

This will create a more granular trading market, with REGOs produced during peak demand times meaning greater value than those produced at night. REGO backed energy stored and exported to grid later would need to have the REGO re-validated at the time of export, and a de-rating factor applied to account for efficiency losses during the storage process.

6: High volatility within the power market suggests a promising year for BESS operators.

For operators of existing battery energy storage systems (BESS) assets, 2025 looks to be a promising year too, with high predicted wholesale market volatility.

7: Wholesale prices forecast to be around 25% higher than 2024.

For operators of existing generation assets, the average wholesale price for the year is expected to be around 25% higher than it was in 2024, representing around a 20% increase at EBITDA level for a merchant project.

The optimism in the sector is a complete 180 from the previous government, with a previous lack of support, lack of industry direction for trying to achieve decarbonisation, and a grid system that would struggle to facilitate the necessary connections and upgrades, both at transmission and distribution level.

Although there is still uncertainty around regulations for onshore renewables in the UK, the outlook is positive, especially for generation, with more investment expected and a clearer understanding of the regulatory situation by the end of the year.