Infrastructure and Energy Spotlight – Spring / Summer 2026

With most of the media focussing on possible challenges to the Prime Minister, the King's Speech has had rather less attention than usual  - but as we highlight below, a significant number of the measures have implications for the UK infrastructure and energy sectors. 

Frustratingly, there are many areas where detail is lacking and it will be important to keep an eye out for further announcements about the exact content of some of the key Bills included in the Speech. Putting that criticism to one side though, overall, the Government's focus on infrastructure and energy-related measures in the King's Speech is a welcome development, which sends an important signal to investors about the UK's commitment to these sectors.

The Labour Government came into office facing calls for prompt action to tackle high numbers of pollution incidents by water companies. Its immediate response was the Water (Special Measures) Act 2025, but this essentially involved strengthening the existing regulatory system – even though critics of that system had argued that the scale of the problem required more radical surgery. The Clean Water Bill, announced in the King's Speech, aims to address the criticism that the existing regulatory structure is too fragmented by combining the functions of Ofwat, the Drinking Water Inspectorate, the Environment Agency and Natural England into a single "super-regulator".  That said, the Government is also at pains to emphasise that the Bill will help speed up water infrastructure projects, particularly those needed to support new housing. This highlights the tension between the need to strengthen regulation and the Government's desire to promote economic growth and attract new investment into the sector.

The King's Speech contains a number of measures on transport, but operators and investors may be particularly interested in the following funding-related measures:

• Highways (Financing) Bill: this aims to introduce a "Regulated Asset Base" (RAB) funding model – as already used on projects such as the Thames Tideway tunnel and Sizewell C – to help fund development of new road infrastructure.  It will involve private sector businesses being awarded licences to develop and/or improve sections of the UK road network, with oversight being provided by a new independent regulator. The Lower Thames Crossing is expected to be the first project to use this model.
  
  
• Overnight Visitor Levy Bill:  at first sight, this might not seem directly relevant to transport, as it aims to allow UK regions to impose a "tourist tax" to raise revenue and invest back into local economies. However, as the Government points out, in other countries where such levies exist, they have sometimes been used to fund improved local transport infrastructure.

The remaining measures are primarily of interest to existing operators and investors in the air and rail sectors:

Last but by no means least, the Regulating for Growth Bill is worth noting because it will give the the Government so-called "sandbox" powers allowing it to suspend or modify regulation in order to facilitate market-testing of new products and services. Much will depend on the Government's willingness to actually use these powers once it has them. However, in principle, they could make the UK a more attractive jurisdiction for rolling out innovative products and services – including those relevant to sectors such as clean energy and electric vehicle charging.

The Government has also made much of provisions in the same Bill imposing a "growth duty" on regulators - although it remains unclear whether this will have the impact that the Government seems to envisage. Regulators, after all, exist primarily to regulate – and whilst they need to ensure that they do so in a manner which is proportionate and does not impose successive burdens, they may not always be set up in a way which lends itself to the pursuit of initiatives to promote economic growth.

In April 2026, the UK Government announced a package of measures intended to reduce the influence of international gas prices on electricity bills in Great Britain (GB). 

In response, the Government proposes two key measures:

• New WCfDs: renewable energy generators will be offered new arrangements known as Wholesale Contracts for Difference (WCfDs). These will not be linked to the gas price, although the Government will offer higher prices for technology where generators are taking a higher risk, such as floating offshore wind. Whilst the Government emphasises that the move to WCfDs will be voluntary, other changes (see next bullet) may act as a significant incentive to switch.
  
  
• Changes to the EGL: the Government is also increasing the Electricity Generator Levy from 45% to 55%.  In practice, this means that where renewable energy generators end up being paid for their electricity at the same price as gas generators, they will be able to keep less of the profit than at present (which Government says it will use to fund support for households and businesses affected by the current energy crisis). This is expected to act as an incentive for renewable electricity generators to enter into WCfDs, which will not be subject to the EGL (so generators should stand to keep more of their profits).  These changes will be implemented through the Electricity Generator Levy Bill announced in the King's Speech.

Our briefing -  Breaking the link: Government moves to decouple gas and electricity prices – explains the background in more detail and outlines some of the key considerations for investors, generators and lenders with exposure to renewable assets.  It also sets out a series of other steps that the UK Government is proposing alongside the flagship measures around decoupling gas and electricity prices outlined above.

As demand for data centres continue to grow, driven by the AI boom, we highlight key legal and market developments in the UK and the EU:

A key concern about data centres is their impact on the environment as a result of the very high levels of electricity and water they need to operate. The approximately 500 TWh of energy and 560 billion litres of water consumed by data centres in 2025 is expected to double by 2030.

The EU's Energy Efficiency Directive (EED) is looking to apply an energy efficiency rating to data centres which should drive efficiency measures and will guide future policy interventions (even if procurement of services by most businesses is unlikely to take this into account in the short term). Owners and operators of data centres in the EU are already required to report a range of key performance metrics by 15 May each year. Data will be published in aggregated form, adding a layer of reputational exposure that owners and investors concerned about their sustainability credentials will need to consider.

Meanwhile, some data centres (particularly those at the larger end of the scale) also face obligations to conduct audits, implement certified energy management systems and either utilise waste heat or apply other waste heat recovery measures. Upfront consideration of data centres' high resource demand in the planning stage can potentially reduce community opposition and smooth consenting. For more information, together with a discussion of the wider regulatory environment for data centres in the EU and the UK, see our briefing Too Big to Ignore: Regulating the Data Centre Boom.

For more detail on the above and our data centres practice generally, please contact those listed below or your usual Travers Smith contact. You may also be interested in the following:

• An A-Z guide to data centre terminology; and
• Locating data centres (our guide to where data centres are in the UK and why, including an interactive map and commentary on issues such as what drives location for hyperscalers and co-location providers).

The ongoing conflict in the Middle East is disrupting supply chains for clean energy, notably as regards the following products for which the region represents a significant source of global supply:

• aluminium (used in solar panels, wind turbines and battery storage);
  
  
• copper (used in the wiring of electrical components for solar and wind turbine systems); and
  
  
• sulphuric acid (which is important in the production of battery-grade lithium).

Meanwhile even for products not directly affected, higher energy costs are likely to mean prices and potentially longer shipping times for key inputs if vessels have been re-routed to take them away from the conflict zone. As well as renewables, the construction sector is also likely to be affected, particularly as regards the cost of products whose manufacture requires significant amounts of energy (such as iron, steel, cement, bricks and glass).

Large infrastructure projects typically involve significant pre-development expenditure on surveys and studies designed to support environmental impact assessments and applications for relevant consents. So operators and investors may be somewhat dismayed by a recent Supreme Court ruling (Ørsted) that various surveys and studies carried out to obtain consents for an offshore windfarm did not qualify for capital allowances; only expenditure more closely related to the provision of the wind turbines themselves was held to qualify.

Our briefing  - UK Supreme Court narrows scope of "expenditure on the provision of plant" – explains the background to the case and why the Supreme Court came down in favour of a narrow reading of the relevant test (namely, whether the costs amounted to "capital expenditure on the provision of plant").  It's also worth noting the following points – which are also discussed in more detail in our briefing:

• Structuring to maximise tax benefits: Disappointing as the ruling may be for operators and investors, there may be ways that future projects can be structured so as to maximise the proportion of expenditure likely to be regarded as qualifying for capital allowances.
  
  
• The new ATCS: In July 2026, HMRC will launch a new Advance Tax Certainty Service (ATCS), which is designed to provide legally binding certainty on tax treatment of large scale projects in advance (with a view to making the UK a more attractive destination for investors). ATCS will cover a range of tax issues, including capital allowances.
  
  
• Corporate Tax Roadmap: Looking ahead, a forthcoming consultation (promised in the 2024 Budget as part of the Corporate Tax Roadmap, but delayed because of this case) should provide an opportunity to persuade the Government to look again at the tax treatment of pre-development costs (particularly where – as in the Ørsted case – those costs are due in large part to regulatory requirements intended to meet other policy objectives, such as protecting the environment).

The UK Government has finally published the long-awaited Future Homes Standard (FHS), which sets out the key specifications that new build housing must meet with a view to the UK achieving its ambitious net zero targets.  Key points to note include:

• The standard would generally require developers to provide a low carbon heat source (typically a heat pump) together with in many cases on-site renewable generation (typically solar panels). Further improvements to energy efficiency would be achieved through higher insulation and air tightness standards, mechanical ventilation and wastewater heat recovery.
  
  
• Whilst the standard represents a significant uplift (as compared with the previous standard), it is not absolute and guidance provides a degree of flexibility (for example, around when it may be reasonable to derogate from the standards). 
  
  
• That said, aspects such as the new compliance model (to be known as the Home Energy Model) are expected to make it more difficult to offset poor fabric performance with renewable technology bolt-ons.
  
  
• The Government estimates an average capital cost uplift of approximately £4,350 per dwelling – although this may prove to be an under-estimate, particularly in the light of recent supply chain volatility and the anticipated spike in heat pump demand.

Our briefing explains the FHS in more detail and sets out the key points that investors and developers will need to bear in mind for projects involving new housing.

Whilst existing housing will not be required to be retrofitted to meet the FHS, the Government has also updated the Minimum Energy Efficiency Standard (MEES) Regulations, which impose minimum standards on the energy efficiency of residential property leased to tenants.  The minimum standard is being raised from EPC Band E to Band C and all tenancies in scope must comply by 1 October 2030.  Whilst FHS-compliant homes should meet this standard, those built to the previous standard may require costly retrofitting to achieve compliance.

Earlier in the year, the First Tier Tax Tribunal (FTT) ruled that the rate of VAT on electricity supplied to electric vehicles (EVs) at public charge points should be 5%, not 20% (see our briefing for more detail on the FTT decision).  5% is in line with the domestic rate that a car owner with a charge point on their driveway would pay.

Investors in and operators of EV charging infrastructure have long complained about this disparity in VAT treatment - arguing that if the Government wishes to encourage EV take-up, it should not be making it more expensive for the 8 million UK households who live in properties where installation of their own charge point is either difficult or impossible. The Government, however, is rightly concerned that, as EV adoption grows, tax revenues raised from drivers using traditional combustion engines will continue to dwindle. It is possible that it sees VAT on electricity supplies from charging points as an increasingly important part of plugging the inevitable shortfall – which may be one reason why HRMC has indicated that it will appeal against the ruling.

In the longer term, the shift to EVs as part of the drive towards net zero means that the UK Government will need to find a replacement for the revenue raised by fuel duty. Our briefing looks at whether VAT has a role to play in that or whether the Government would be better off focussing on EV excise duty (eVED), which is expected to operate as a mileage-based charge. We also highlight other policy issues that are likely to make the Government's decision more difficult  – including the need to accelerate EV adoption to meet climate commitments and how to share the cost of transition to net zero fairly at a time of geopolitical instability and uncertainty.

After some delay, the UK has formally endorsed ISSB's sustainability reporting standards. On 25 February 2026, the UK Government published the UK Sustainability Reporting Standards (UK SRS) which use the ISSB general sustainability and climate-related disclosure standards as a baseline (with a small number of UK-specific modifications). Reporting under the UK SRS is expected to become mandatory for all UK listed companies and potentially also for "economically significant companies".

Listed companies will probably be the first to be required to disclose in line with the UK SRS, for financial years beginning on or after 1 January 2027, with their first sustainability reports due in 2028. Asset managers are separately already required to preparate sustainability and climate-related disclosures in line with TCFD. The logical next step would be to align these requirements with the UK SRS, albeit that the FCA has not yet indicated any clear intention or timing for such a shift.  

Whilst the UK Department for Business and Trade ("DBT") has indicated that it intends to introduce mandatory reporting for "economically significant companies", it will need to consult on this first – an exercise due to take place later this year.

Our detailed briefing explains what businesses will be required to do, how the final adopted standards differ from the draft versions and what the position is on audit/assurance requirements. You can also sign up here to join discussions on 16 July with DBT on their wider priorities for UK non-financial reporting and insights into the next steps for UK SRS implementation. Speakers include Sarah-Jane Denton from our Operational Risk and Environment team.

New powers for Ofgem to regulate heat networks came into force on 27 January 2026, but the regime is being phased in gradually - and the deadline for existing heat networks to register with Ofgem is not until 27 January 2027.  However, whilst this may sound some way off, the reality is that a significant amount of preparatory work is required to be in a position to register – and the sooner regulated entities can make a start on this, the better. As we explain below, there are also certain steps that regulated entities should be taking now in order to be in a position to comply with the new regime, once it is fully operational.

Unsurprisingly, heat network operators will be regulated – but landlords could also be caught (where they are involved in the supply of heat and hot water via networks). For example, if a lease includes the provision of heat and hot water via a heat network, the landlord may fall within scope – because it will be regarded as a "supplier". By contrast, where an energy services company (commonly referred to as an "ESCO") is appointed to run the heat network and contracts directly with customers, the landlord is unlikely to fall within scope. This arrangement – which generally avoids the landlord being regulated – is what we are typically seeing with new developments. However, where no ESCO is involved (or where the ESCO does not contract directly with customers), landlords – especially those of less recent developments - could be caught.

As well as preparing for registration, regulated entities need to ensure that they are collecting the data that Ofgem will expect them to provide so that it can monitor performance. This will include information on;

• billing and pricing - such as standing charges, unit rates, total charges for domestic customers, costs and numbers of customers by payment method;
• service quality - such as complaints and interruptions to service; and
• vulnerability and debt - such as the number of domestic customers in debt and/or on repayment plans and the number of domestic consumers considered to have vulnerable characteristics e.g. elderly or disabled. 

Regulated entities are expected to be able to provide data on these aspects from April 2026 onwards.

They will also need to review their interactions with consumers and address any areas that need upgrading to comply with consumer protection obligations under the new regime. These cover areas such as pricing and billing, complaints processes and treatment of vulnerable consumers.

They will also need to be aware that Ofgem has published guidance on its fair pricing framework, which sets out how it will assess whether charges are fair and not disproportionate. Regulated entities should review their pricing structures against this guidance.

For more background on heat networks, see our short guide to heat networks in the UK.

On 22 April 2026, the UK Government published the final report of the Ofgem Review, making a series of recommendations about how energy regulator Ofgem needs to change in order to meet future challenges. Amongst those recommendations are three that are, broadly, intended to provide increased protection for consumers:

It's expected that these changes will be brought in through the Energy Independence Bill announced in the King's Speech (see section 1 above).