2025 Energy Outlook: Trends and Predictions

The UK reached a pivotal moment in its energy transition, closing its last coal station and achieving over 50% of electricity generation from renewables. These achievements highlight the power of regulatory incentives like the carbon price floor and the government’s intervention in 2014 to halt new coal plant construction. 

This reflection on progress underscores the opportunities and challenges ahead, especially as renewable energy growth creates new dynamics in energy storage, market volatility, and grid stability. 

The rise of Battery Energy Storage Systems (BESS) 

Battery Energy Storage Systems (BESS) have emerged as a key player in the energy transition. The rapid expansion of renewable energy in 2024 increased market volatility due to the intermittent nature of wind and solar power, mismatched supply and demand, and the decline of stable baseload sources like coal. This variability created both challenges for grid stability and significant opportunities for Battery Energy Storage Systems (BESS) to manage fluctuations, stabilise the grid, and capitalise on price dynamics. 

This volatility presents significant commercial opportunities for BESS asset owners and operators. Batteries are no longer seen as prohibitively expensive projects but as essential assets supporting grid stability and energy security, now generating multiple revenue streams while supporting the broader energy network, proving their value as grid-balancing assets. 

Navigating market complexity 

The UK energy market is one of the most advanced yet complex systems in the world. With over a dozen revenue streams available to energy asset operators, the market offers significant opportunities but also requires careful navigation. Regulatory reforms, such as the 2024 updates to Capacity Market Rules to account for battery degradation, demonstrate a shift toward enabling long-term investment in energy storage. 

Additionally, the grid connection process in the UK is undergoing significant transformation. The National Grid Electricity System Operator (NESO) has proposed changes to prioritise a “first ready, first connected” approach, moving away from the traditional “first come, first served” system – this new approach commenced on the 1st of January 2025. The previous model contributed to a substantial backlog of projects, many of which were speculative or stalled, thereby occupying capacity and delaying viable developments. 

The new approach prioritises projects that demonstrate readiness by meeting milestones such as securing land rights, obtaining planning approvals, and other indicators of feasibility. It also aligns with the UK’s Clean Power 2030 Action Plan, ensuring that projects contributing to national strategic energy goals are given precedence. 

As of January 29th 2025, NESO will pause new grid connection applications to focus on implementing these critical reforms, which aim to streamline the process and better support the integration of renewable energy into the grid. 

The role of data, AI, and automation 

As the energy sector becomes increasingly decentralised, the importance of data-driven insights cannot be overstated. Historically, the industry has been slow to adopt advanced software and automation solutions, relying on manual processes and siloed systems. However, the growing complexity of operations is accelerating the adoption of AI and analytics. 

In our Hypercube Podcast bonus episode, Hypercube Senior Data Engineer, Connor Galbraith, highlighted the untapped potential of historical data analysis for optimising battery performance and scenario planning. By leveraging AI-powered automation, operators can respond to market changes with greater agility, unlocking additional revenue streams and improving operational efficiency. These advancements are crucial as settlement processes become more intricate and market conditions evolve rapidly. 

Regulatory and financial shifts driving progress 

Government intervention continues to shape the energy landscape. The UK’s commitment to invest £8.3 billion in renewables through 2029 through Great British Energy, alongside National Wealth Fund contributions, reflects a renewed focus on decarbonisation. Instruments like the cap-and-floor scheme, which establishes revenue bands for energy projects, are incentivising investment in long-duration storage technologies. 

Meanwhile, reforms in grid connection processes and Crown Estate financing are paving the way for large-scale projects like ScotWind to accelerate offshore wind development. These policy changes signal a shift toward proactive governance in achieving the UK’s Net Zero goals. 

Challenges ahead: skills and integration 

The energy sector is grappling with a significant hiring challenge: the skills gap between advanced data proficiency and deep energy knowledge. While the industry increasingly relies on solutions like AI-driven analytics, battery optimisation, and real-time grid management, there remains a shortage of professionals who understand both the technical demands of energy systems and the complexities of data and software engineering. 

This gap often forces organisations to choose between hiring energy specialists and training them in data skills or bringing in tech experts with limited energy sector context. Both approaches require time and resources, slowing down the pace of innovation. Furthermore, the demand for interdisciplinary skills is outpacing the supply, making it difficult to build teams capable of handling the complexities of decentralised energy systems and advanced automation. 

Additionally, the integration of decentralised energy systems requires overcoming legacy infrastructure and fragmented technology stacks. Many organisations still rely on manual processes and outdated software, hindering their ability to harness real-time data and drive innovation.

Looking ahead: 2025 and beyond 

As we move into 2025, we’ll be keeping a close eye on the following: 

• Scaling Battery Energy Storage Systems (BESS): Increased deployment of BESS to stabilise the grid, support renewable integration, and provide energy security during periods of low renewable output, such as dunkelflaute (periods of low renewable energy generation caused by a combination of minimal wind and solar power availability).  

• Grid connection reforms: Regulatory changes like the “first come, needed and served” approach aim to reduce delays in connecting renewable and storage projects, addressing the bottleneck of 800 GW in the pipeline. 

• Advancing AI and analytics: Wider adoption of AI-powered tools to optimise battery performance, improve settlement processes, and enable real-time energy management across decentralised systems. 

• Public and private investment growth: Increased funding commitments, including the UK government’s £8.5 billion investment and National Wealth Fund contributions, are driving renewable and storage project development. 

• Skills gap in the energy sector: Addressing the shortage of professionals with expertise in both energy systems and advanced technologies, such as AI and data analytics, remains a critical challenge. Note: we provide our own talent offering – Hypercube Talent – to help our customers navigate this. 

The energy sector stands at an inflection point, with the potential to achieve significant progress toward Net Zero. However, realising this potential requires navigating market complexity, leveraging advanced technologies, and addressing systemic challenges. 

For a deeper dive into the dynamics of energy complexity and market trends, listen to our latest Hypercube Podcast episode – Energy Complexity and Market Trends: A Tech Perspective – Batteries, Renewables, and AI – where Adam Sroka, Cynthia Grainger, and Connor Galbraith unpack the milestones of 2024 and share insights and predictions into what lies ahead for the energy sector in 2025.