The recent disruptions in energy infrastructure, from the London power station failure that grounded Heathrow to the sweeping outages across the Iberian peninsula, have served as stark reminders of the critical role that resilient electricity grids play in modern economies and national security. As global energy demand evolves in the context of decarbonisation, geopolitical risk, and technological transformation, the spotlight on energy infrastructure has intensified, drawing investors and developers into a complex web of regulatory obligations that span domestic and international regimes.
The energy sector’s ‘trilemma’—balancing decarbonisation, security of supply, and affordability—is reshaping the regulatory landscape. Governments are accelerating efforts to reduce greenhouse gas emissions, with the EU’s Green Deal Industrial Plan and the UK’s legally binding emissions target driving investment in clean technologies. Simultaneously, energy security has become a national security priority, prompting regulatory interventions to safeguard critical infrastructure and ensure continuity of supply.
However, affordability remains a complex challenge, requiring policymakers to balance the costs of the clean energy transition with the need to protect consumers and businesses from price shocks. Recent surges in wholesale energy prices have exposed vulnerabilities in existing market structures, prompting calls for market reform or targeted subsidies.
In response to these forces, governments around Europe have set ambitious targets for new infrastructure development, but navigating the myriad of regulatory hurdles—from planning considerations to procurement and funding—remains a significant challenge. One of the most notable developments in recent years has been the proliferation of foreign direct investment (FDI) screening mechanisms, aimed at protecting national security interests and public order.
In the UK, the energy sector has been subject to regulatory reform to facilitate the development of projects of national priority. The National Energy System Operator has identified 80 transmission network projects to achieve the UK’s goal of a decarbonised power system by 2030. The regulatory agenda focuses on achieving a better integrated system that anticipates demand shifts and ensures alignment with new power projects. Notably, the UK government has committed to maintaining a single, national wholesale price, shifting its focus to other aspects of pricing reform.
Ofgem, the UK’s energy regulator, has implemented reforms to prioritise grid connections for projects that align with the UK’s strategic priorities. The Planning and Infrastructure Bill aims to streamline the planning process, further supporting the development of new energy infrastructure. Additionally, there is a renewed focus on nuclear energy, with recent decisions on funding for Sizewell C and the approval of small modular reactors.
The implications for markets are profound. The increasing scrutiny of energy infrastructure investments through FDI regimes highlights the need for investors to consider national security implications at the earliest stages of investment. Governments’ willingness to intervene in the energy sector to protect national interests is likely to continue, shaping the strategic landscape for investors and developers alike.
As the energy sector navigates these regulatory complexities, the interplay between decarbonisation, security of supply, and affordability will continue to drive market dynamics. The proliferation of FDI screening mechanisms and the focus on national security considerations add another layer of complexity, requiring stakeholders to navigate inherently political hurdles to unlock value in this dynamic and strategically significant sector. The recent developments underscore the critical role of energy infrastructure in underpinning modern economies and national security, setting the stage for a transformative period in the energy sector.