The UK’s Renewable Energy Revolution: What’s Next for 2025 and Beyond

In 2024, more than half of the nation’s electricity came from renewable sources — a major turning point that cements the UK as a global leader in clean energy. Wind, solar, bioenergy, and hydro all delivered strong gains, with wind power alone climbing by 2%.

Yet, as green energy soars, the road ahead is far from straightforward. New pressures on supply, infrastructure, and investment are reshaping the energy landscape — and how we respond now will define the UK’s energy future.

Record-Breaking Renewables: A Huge Step Forward

Wind energy remained the dominant force, driving a 2% rise, while solar and bioenergy also saw impressive growth. In a landmark shift, fossil fuel generation fell sharply: gas and coal-fired electricity dropped by 16%, and by year-end, coal was phased out entirely.

The UK’s energy mix has fundamentally changed. Low-carbon sources — renewables and nuclear — now account for a record 65%, while fossil fuels have shrunk to just 31.5%. This isn’t just a statistic; it marks a pivotal change in our domestic energy usage.

Energy Demand Soars: A New Challenge

While there is plenty to celebrate in the UK’s renewable energy boom, how do we manage the growing demand for electricity?

Total energy consumption rose by 1.2% in 2024, driven largely by a 3.6% spike in residential electricity use. As more people adopt electric vehicles, heat pumps, and smart home technology, household demand is surging — adding new strain to the grid.
Meanwhile, industrial energy consumption fell to its lowest level in 50 years.

In 2024, the UK government launched an updated National AI Strategy, placing artificial intelligence at the centre of critical infrastructure development, including the energy sector. However, delivering on this ambition will require addressing a significant challenge: energy supply.

The UK’s AI Energy Council has identified the energy demands of AI technologies as a priority issue. Globally, AI systems already consume over 2% of total electricity usage — a figure projected to rise sharply as adoption accelerates. Without targeted investment in low-carbon generation, grid upgrades, and energy efficiency measures, the energy footprint of AI could undermine broader climate and resilience goals.
Ensuring that AI deployment supports, rather than strains, the UK’s clean energy transition must now be a strategic focus.

For energy providers, this presents a tricky balancing act. It’s no longer just about producing clean energy; it’s about delivering it exactly when and where it’s needed. To succeed, demand-side management, smarter grids, and greater energy efficiency aren’t just helpful — they are essential.

As renewable energy adoption continues to grow, new challenges emerge, such as the energy demands of AI technologies. At the same time, the role of fossil fuels in ensuring energy security remains a critical factor, particularly in the face of geopolitical tensions.

The Fossil Fuel Dilemma: Energy Security in a Volatile World

While the UK is steadfast in its commitment to decarbonising its energy system, fossil fuels continue to play a crucial role in ensuring energy security, especially in an increasingly volatile global environment. The ongoing war in Ukraine and tensions with Russia have starkly highlighted the vulnerabilities of energy markets that rely on imports from politically unstable regions.

Despite the renewable energy renaissance, natural gas remains essential, particularly as a backup to intermittent renewable sources. When the wind isn’t blowing or the sun isn’t shining, gas-fired power stations in the UK are vital for maintaining a stable supply of electricity, particularly during winter months when demand surges. In the short to medium term, oil and gas will remain a key component of the UK’s energy mix, and it would be naïve to suggest otherwise.

So, where do we go from here? The UK stands at a pivotal crossroads. The future path isn’t about an immediate phase-out of fossil fuels but about managing their gradual decline responsibly while ramping up investments in renewable technologies to secure a sustainable energy future.

“Over the last 5 years I have seen the UK renewable energy sector evolve at great speed, and whilst the sector continues to offer opportunities for growth, there are many barriers to achieving success. The recent U-turn by BP is just one example of how pressure to deliver returns to investors can significantly affect investment strategies. For smaller investors, developers or power producers, navigating the complex UK regulatory landscape whilst still hitting IRR targets continues to be challenging. However, the current UK and Scottish governments’ Net Zero strategies demand that investment continues at pace and therefore I am optimistic that UK businesses will continue to pursue renewable energy development opportunities.”- Erica Fitchie, Corporate Tax Partner

Rising Capital Costs: The Financial Reality of Renewables

Capital costs for renewable energy projects have also risen dramatically. With inflation climbing and interest rates remaining high, financing for new projects is becoming increasingly expensive. Infrastructure investments — like offshore wind farms, solar plants, and energy storage — require substantial upfront capital, and this financial pressure is slowing the pace of some planned projects. There has been some good local success stories on this e.g. SSE green bonds / sustainability finance framework, and more will be required to continue to maintain the current project pipeline in the UK.

Echoing the challenges outlined by the recent OEUK report, UK Government policy to drive investment in areas such as offshore wind and hydrogen is taking time to materialise. The regulatory barriers are only adding to the complexities and costs associated with renewable projects in the UK.

Global supply chain disruptions have made it harder to source essential renewable components like solar panels, wind turbines, and battery storage systems. Procurement functions can add significant value to project IRR if they can agree/lock in component pricing at an early stage of the development process. This requires strong supplier relationships and coordination with financial modelling teams to ensure investment decisions are made on an accurate fact pattern and pricing forecast.

Though efforts to localise supply chains and boost domestic manufacturing capabilities are in progress, these will take time and significant investment. In the meantime, collaboration within the renewable energy sector will be crucial in overcoming these financial and logistical challenges. By working together, developers, manufacturers, and policymakers can pool resources, share knowledge, and leverage economies of scale to drive down costs and accelerate the adoption of green technologies.

“What remains particularly encouraging is the ongoing collaboration within the sector to drive capital investment into renewable infrastructure, which, in many cases, is making financial viability achievable. This partnership between private enterprise will be crucial in securing the future growth of the sector.” Jordan Taylor, Audit Director

Grid Connections: The Bottleneck

One of the most pressing issues as the UK moves toward a greener future is the capacity of the national grid to keep up. As renewable energy generation increases, so does the strain on the grid, especially when dealing with intermittent sources like wind and solar. Right now, the infrastructure isn’t flexible enough to respond to these fluctuations, leading to unnecessary costs and inefficiencies.

In many areas of the UK, especially in the north and offshore locations where wind resources are abundant, there is a significant lag in grid connection infrastructure. The delays in connecting new renewable energy generation projects to the grid have led to concerns about bottlenecks in energy transmission and the ability to meet future energy demands. This issue has been exacerbated by an overburdened grid system that has struggled to integrate renewable generation, which is often produced far from where it is needed.

The UK government and grid operators are actively working to address this challenge, with plans to improve grid flexibility and speed up the connection process. However, this remains a key issue as more renewable energy projects come online, and the grid must adapt quickly to integrate new generation capacity. Investments in smart grids, energy storage solutions, and new transmission infrastructure will be crucial to ensuring that the UK can maximise its renewable energy potential without facing energy shortages or inefficiencies. UK Government policy needs to reflect the realities of the sector.

The need for additional storage capacity is crucial to fully leverage the generation capacity already installed, particularly in Scotland. However, the development of Battery Energy Storage Systems (BESS) faces several challenges, including local planning issues and opposition from residents, as well as the high costs of battery technology. These hurdles pose potential risks to the future growth of generation facilities.

Despite these challenges, BESS margins are currently attractive to investors, and the market offers significant opportunities. We are seeing growing potential for capital investment in battery storage to balance supply and demand for the national grid. The UK is projected to have between 30 and 35 GW of battery energy storage capacity by 2030. However, this ambitious target requires substantial upfront capital, and the current financial climate adds a layer of volatility to such investments.

The Road Ahead

Despite these challenges, the outlook for the UK’s renewable energy sector remains positive. In 2024, the country’s renewable output reached a record 144.7 TWh, with wind alone contributing 36.5 TWh to the grid. This demonstrates the scalability and growing maturity of renewable technologies, especially wind energy.

Offshore wind farms are a particular focus, with plans to increase capacity dramatically. Solar power is also experiencing a resurgence, with new installations popping up across urban and rural areas alike. The UK still continues to be a global leader in foreign direct investment within the renewables sector, and this doesn’t s

The UK is on track to become a global leader in renewable energy, but the journey ahead will require sustained investment, smart policy decisions, and a lot of collaboration between government, industry, and investors. The challenges are real, but the opportunities are even greater.

A Balanced Path Forward

The UK is undeniably on a strong path toward a low-carbon future, but the transition is not without its challenges. To succeed, the focus must shift to addressing immediate issues such as rising capital costs, grid connection delays, and the ongoing reliance on fossil fuels. It’s not just about reaching the destination — it’s about navigating the journey strategically and responsibly.

At AAB, we collaborate with businesses operating both regionally and globally, spanning a wide array of technologies within the renewables and energy transition sectors. Our clients are active in wind, solar, energy storage, hydrogen, and other innovative fields, alongside the expanding support industries that have emerged from the rapid growth of the infrastructure ecosystem. These businesses include publicly traded firms, private equity-backed organisations, and privately held entities, operating not just in the UK but across international markets as well.

Whatever stage you’re at in your journey, we’re here to provide the guidance and support you need.

how we can AAB help:

• Audit and assurance
• ESG strategy development
• Carbon accounting and reporting
• Tax structuring and optimisation
• Innovation incentives guidance
• Financial modelling and risk analysis
• Transaction services
• Business services and outsourcing

If you have any queries about how we can help, please do not hesitate to get in contact with Gregor Angus, Erica Fitchie or Jordan Taylor.