News
17/12/25
UK government eyes gas market regulatory push in 2026
Momentum is growing in the UK for regulatory changes aimed at reshaping the
country's gas system, writes Isabel Valverde Sala London, 17 December (Argus) —
Natural gas has climbed up the UK government agenda in recent months, with
regulation processes unfolding and culminating in 2026 likely to be pivotal for
the future of the UK gas market. The country's department for energy security
and net zero (Desnz) launched a consultation in late November aimed at reviewing
the UK's security of gas supply , including proposals aimed at ensuring
infrastructure capacity, preparing the system for unplanned outages and ensuring
a viable commercial model for the UK gas market. This is the latest of a series
of consultations held by the ministry in recent months, with a view of gathering
information and views from the market before laying down any proposals for
market reforms. The government had first announced its intention to address the
challenges facing the country's gas system in a policy paper published in June,
which minister of state for energy Michael Shanks described as "the first major
publication on the gas system in many years". The document sets three core
objectives for the coming years — preserving energy security in a context of
declining production, ensuring continued investment in infrastructure, and
managing a sustainable transition of the gas network "towards other uses in a
context of declining production", the paper says. Market participants can send
their comments to the latest consultation until 18 February, and Desnz intends
to publish a response to the feedback in the spring of 2026. The ministry is
also set to launch a call for evidence on network investment and affordability
before the end of this year as part of this programme. And next year, the
department plans to issue another call for evidence on transitioning the gas
network, according to the market update. Separately, an ongoing parliamentary
enquiry is at present gathering views from market participants on how to manage
a declining gas domestic market. Overall gas consumption across the UK has
fallen at an average 8pc rate over the past three years, figures from system
operator National Gas show. The call for evidence closes on 7 January and could
eventually lead the Energy Security and Net Zero Committee to put forward its
own proposals for debate in Parliament. Small steps to move faster The update to
the market was the "first step in a long-term programme" aimed at transforming
the country's gas system, and it may take years until the initiative turns into
policy. But other government measures — including the North Sea Future Plan —
may begin influencing the market sooner. The plan, published as part of the
government's 2025 budget, announced a new system of "transitional energy
certificates" to encourage firms to produce gas from areas adjacent to operating
fields as a means to maximise output from tapped-in resources. This would enable
faster production compared with traditional licences, according to the
government. And ongoing efforts by the North Sea Transition Authority (NSTA) to
retrieve as much gas as possible from active wells could slow down the decline
in domestic gas production. The NSTA expects UK gas production to halve by 2030,
compared with 2025 levels. The authority has worked with different well
operators since 2024 to identify and reactivate shut-in wells, and it will
continue to do so by engaging with new companies in the forthcoming months, it
said in November. After years in the making, UK energy market regulator Ofgem is
also set to complete a regulatory impact assessment on the introduction of a
single tariff for all entry and exit points into the country's gas grid by the
first quarter of 2026, with the aim of making the UK a more attractive hub for
gas transiting to Europe — particularly LNG supplies. If approved, the new
tariff system could be implemented before the beginning of the 2026-27 gas year.
On the demand side, the government's £15bn ($20bn) warm homes plan is poised to
add to the downward trend in gas demand by supporting households in implementing
energy-efficiency measures. These include the extension of the boiler upgrade
scheme (BUS) until the financial year 2029-30, and further funding for home
insulation and solar panel installations, among other measures. The publication
of the plan has been delayed to January from an expected release in December,
Desnz told Argus on 15 December. Regulatory changes affecting the power grid
will also have an important impact on gas demand. UK power grid operator Neso
earlier this month confirmed a major reordering of the country's electricity
grid connection queue to speed up renewable energy projects and connection from
demand sites. A quicker and easier access to the grid could incentivise
operators of data centres, which are poised to be one of the most important
drivers of electricity demand in the coming years, to connect to the electricity
grid instead of building on-site gas-fired plants . But even if that was the
case, a large part of that electricity could still come from gas even if
renewables and storage are deployed in line with expectations. In July, energy
minister Ed Miliband asked Neso in a letter to keep 40.1GW of power generation
in the country's capacity market by 2029-30 to assure energy security on days of
limited renewable generation, a decision that clearly favours investment in
flexible gas-fired generation. The Labour government has not disclosed specific
targets on new gas-fired generation capacity. The Conservative government, in
charge until last year, had said that the country needed to build a minimum of
5GW of new gas-fired capacity to partly offset the 15GW gas-fired capacity
closures in the coming years — a third of the total fleet of 34.5GW in
operation. Send comments and request more information at feedback@argusmedia.com
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