UK solar and energy storage market report 2025

Introduction

The UK’s solar energy and battery storage sector is undergoing a rapid transformation, bolstered by ambitious climate targets and supportive policies. Solar photovoltaics (PV) capacity has rebounded since the end of feed-in tariffs, while energy storage is scaling up to enhance grid reliability. This report examines five key areas shaping the market’s trajectory: recent policy and regulatory shifts, growth projections and investment trends, technological innovations, the competitive landscape, and the major challenges and opportunities ahead for developers and investors.

Key Policy Updates & Regulatory Changes

The UK government’s commitment to net-zero emissions by 2050 and a fully decarbonized power system by 2035 underpins a strong policy push for renewables. A dedicated Clean Power Plan 2030 calls for a rapid expansion of solar capacity to around 45 GW by 2030​. Industry and government ambitions align to target 70 GW of solar by 2035 – roughly a five-fold increase over current levels​. To achieve this, the government has reopened and expanded support schemes like the Contracts for Difference (CfD) auctions. Notably, the latest CfD round (AR6 in 2024) awarded 93 solar projects totalling 3.3 GW at strike prices near £50/MWh, a record allocation that far surpassed the ~2.2 GW awarded in 2022​. This underscores a favourable subsidy environment, driving utility-scale solar growth.

Regulators have also introduced new incentives and rules to encourage renewable deployment. For small-scale generators, the Smart Export Guarantee (in effect since 2020) ensures households and businesses are paid for surplus solar power fed into the grid, replacing the earlier feed-in tariff model. The Treasury’s decision to cut VAT on solar panel installations to 0% (until 2027) further lowers the cost for rooftop solar adopters, spurring consumer uptake. Meanwhile, Parliament is considering a “Sunshine Bill” that would mandate solar PV on new buildings – potentially requiring all new homes from 2026 to have rooftop panels covering at least 40% of roof area. If enacted, this regulation would embed solar generation into future construction, creating a sizable new market for residential PV.

Policy has evolved to support energy storage as well. In a notable 2020 reform, the government removed a major planning hurdle by allowing battery projects over 50 MW to bypass the national planning regime, streamlining approvals for large-scale storage​. This change unlocked the development of some of Europe’s biggest batteries on the UK grid. Additionally, electricity market reforms are in progress to better reward flexibility: the government’s REMA (Review of Electricity Market Arrangements) identified a need for 55 GW of short-term storage and flexible resources by 2035, signalling long-term regulatory support for storage investments. Overall, consistent policy direction – from net-zero targets and planning reforms to financial incentives – is fuelling confidence in the UK solar and storage market.

Market Growth Projections & Investment Trends

Surging capacity: The UK’s solar capacity continues to climb and is now at its highest level ever. As of late 2024, total installed solar PV capacity had reached approximately 17.6 GW (DC)​. Annual deployment has accelerated to around 1.2–1.3 GW of new solar each year​ – the fastest growth seen since subsidy cuts in 2019. Still, this pace must roughly quadruple to meet the government’s goals of 45 GW by 2030 and around 70 GW by 2035. Industry analysts note that large-scale projects will need to contribute a bigger share of new capacity going forward, as recent growth has been dominated by smaller installations​. The project pipeline is already robust: about 27 GW of new solar farms are in planning across the country​, indicating developers are gearing up to deliver on these targets. Investor appetite is also evident from a thriving corporate PPA market, where companies are signing long-term contracts to buy clean power. For example, Lightsource bp’s 61 MW solar farm at Tiln will sell 50 GWh annually to a UK manufacturer under a 15-year power purchase agreement, locking in stable returns​.

Boom in energy storage: The energy storage segment is experiencing even more dramatic growth prospects. Operational battery storage capacity has surged past 4–5 GW in 2024, compared to virtually nothing a few years ago​. The pipeline of upcoming projects is enormous – nearly 96 GW of battery capacity is at some stage of development (operational, under construction, consented or planned) as of 2024, an increase of 67% year-on-year​. This includes roughly 4.4 GW already in operation and another 4.3 GW being built​. Such figures highlight massive investment pouring into UK storage, making it one of the world’s most active markets. Industry reports forecast the UK’s installed battery capacity will more than double within the next 2–3 years if even a fraction of the under-construction projects come online​. Much of this growth is driven by private capital – from infrastructure funds to oil & gas majors diversifying – seeking to capitalize on revenue from grid services and energy trading. The government’s recent move to increase CfD budgets for renewables and its support for energy storage innovation (through grants and capacity market reforms) have further catalysed investment​. All told, both solar and storage are set on steep upward trajectories: analysts expect the combined sector to draw tens of billions of pounds in new investment this decade, making it a cornerstone of the UK’s clean energy expansion.

Technological Advancements Shaping the Market

A large solar farm with an on-site battery storage facility in South West England. Co-located projects like this enable solar energy to be stored and dispatched when needed, illustrating how technology integration is advancing in the UK.​

Innovation is playing a pivotal role in the UK’s solar and storage success story. On the solar PV front, technology improvements have led to higher efficiencies and more effective use of space. The latest utility-scale projects are deploying next-generation PV modules such as bifacial and N-type TOPCon panels that can exceed 20–22% efficiency in real-world conditions​. For instance, Lightsource bp’s new sites are the first in the UK to use TOPCon solar cells, which reduce energy losses and boost output, thereby improving the economics of projects. Research breakthroughs promise even greater gains soon – UK-based Oxford PV recently set a world record with a 28.6% efficient perovskite-silicon tandem cell, pointing to commercially viable panels with significantly higher performance in the near future. Such advances mean solar farms will require less land per megawatt and can generate more energy over their lifetime, increasing their attractiveness.

Energy storage technologies are also evolving quickly. Lithium-ion battery costs have fallen dramatically over the past decade, and modern systems boast faster response and longer lifespans. The average size of new battery installations has ballooned – from 20–50 MW a few years ago to often 80–100 MW per site today​ – enabling grid-scale batteries to provide serious power output and energy duration. The UK is now home to Europe’s largest battery system: a 200 MW/400 MWh site in Scotland that went live in 2025. This flagship project not only stores surplus renewable energy but is also the world’s first to deliver full grid stability services (like short-circuit power and synthetic inertia) using battery inverters. It demonstrates a leap in capability – so-called “grid-forming” battery inverters can mimic the stabilizing functions of traditional turbines, a critical innovation for a renewables-based grid. Beyond lithium, developers are exploring long-duration storage technologies. Highview Power, for example, is constructing a 50 MW/250 MWh liquid-air energy storage plant in Greater Manchester (a first-of-its-kind “cryobattery”) to store energy for many hours, which could pave the way for storage that covers overnight gaps.

Equally important are advances in system integration and smart grid management. An emerging trend is co-location of solar with batteries: roughly 20% of new storage capacity in the pipeline is planned alongside solar PV. Pairing the two allows solar farms to store midday excess and release it during peak demand or after sunset, increasing the revenue streams and grid value of the project. Improved power electronics and control software coordinate these hybrid plants for optimal performance. Meanwhile, digital technologies like artificial intelligence are enhancing operations – for instance, AI-based “nowcasting” tools can forecast cloud cover hours ahead to predict solar generation, helping grid operators and storage providers balance supply more efficiently. Utilities are also deploying smarter inverters and battery management systems that use machine learning to optimize charging, discharging, and bidding into grid service markets. These innovations – from better panels and batteries to software intelligence – are collectively enabling higher penetration of solar and storage on the grid. The result is a more resilient and flexible energy system that can handle a larger share of renewables without sacrificing reliability.

Competitive Landscape & Major Players

The rapid expansion of the UK solar and storage sector has attracted a wide range of players, from specialized renewable developers to oil & gas giants pivoting into clean energy. On the solar development side, Lightsource bp stands out as a market leader. Originally a UK start-up, it’s now half-owned by BP and has built one of the largest solar project pipelines. Lightsource bp’s projects (often 50–60 MW each) are dotted across Britain – the company is investing £40+ million in its latest 61 MW solar farm, the largest in the UK to date. Other utility-scale solar developers include EDF Renewables, ScottishPower Renewables (Iberdrola), RES Group, and Cero Generation (backed by Macquarie’s Green Investment Group), all of whom are developing large solar farms often paired with batteries. International energy companies have also entered: Shell’s renewables division has been acquiring UK solar assets (about 100 MW from developer Anesco) to meet rising demand for green power, and TotalEnergies is pursuing solar sites via joint ventures. This influx of big players has intensified competition, but also brought deep pockets and confidence to the sector.

In the energy storage arena, a mix of agile tech firms and established energy companies is competing to build out capacity. Zenobē Energy, a UK-based storage specialist, has been particularly aggressive – it commissioned the 200 MW Scottish battery (Blackhillock) that is now Europe’s largest, and has more large projects in the works (including a 300 MW site). Other leaders include Fotowatio/Harmony Energy (which delivered the landmark 99 MW/198 MWh battery in Yorkshire in 2021) and Penso Power (which developed one of the first 100 MWh battery parks). Traditional renewable developers are also in the game: Lightsource bp, for instance, just sold a 60 MWh battery project alongside its solar farm to an investment fund​, and is integrating storage into future sites. Oil companies are active here too – BP and Total have invested in storage technology firms, and Shell acquired two US and European storage developers in recent years, signalling plans to scale up battery deployments. On the financing side, specialized funds like Foresight Solar Fund, NextEnergy Solar, and Octopus Renewables have amassed large portfolios of UK solar farms and are now investing in batteries to complement generation assets. Their involvement provides crucial capital and operational experience.

Overall, the competitive landscape is characterized by consolidation and growth. Established renewables players are getting bigger (often via M&A backed by utilities or oil majors), even as new entrants continue to emerge to fill niche roles (such as software optimizers or community solar developers). The supply chain for equipment remains global – with panels largely sourced from Asia and batteries from global manufacturers like CATL, Tesla, LG – but project delivery and operations have become a strong domestic industry. The UK now boasts hundreds of solar installers and EPC contractors, and a burgeoning ecosystem of storage integrators and aggregators. This competitive mix is driving innovation and cost reduction, but also creating a race for grid connections and power purchase deals as companies jostle to secure the best sites.

Challenges & Opportunities

Despite the positive outlook, the UK solar and storage industry faces several hurdles that must be managed. The most pressing challenge is grid connectivity. Renewable developers are encountering lengthy delays – historically up to 5–10 years for some projects – to secure a connection slot on the electricity network. The queue for grid connect ions has become so severe that it threatens to slow the deployment of new solar farms and batteries. In response, the government is moving to reform the connection process from a “first-come, first-served” to a “first-ready, first-connected” approach, aiming to fast-track projects that are construction-ready​. How quickly these reforms take effect will heavily influence the pace of growth. Planning permission and local opposition are another concern, especially for large ground-mounted solar arrays. Opposition based on land use (such as concerns about losing farmland) has periodically flared up. In 2022, for example, proposals to severely restrict solar on agricultural land were floated by a short-lived government, but were ultimately shelved after industry and public pushback​. The sector has learned to navigate these issues by improving community engagement and designing projects with dual land use. Many solar farms now incorporate agrivoltaic practices like sheep grazing under the panels and wildflower meadow buffers, maintaining agriculture and boosting biodiversity alongside energy. These steps have helped win local support, turning potential conflicts into opportunities for rural development.

Economic and supply chain challenges also persist. The global spike in commodity prices and shipping costs in 2021–2022 caused solar panel and battery prices to tick up after years of decline​, squeezing project margins. While prices have since stabilized, developers remain vigilant about supply chain resilience – especially as the UK imports the majority of its solar hardware. Efforts are underway to diversify suppliers and even explore domestic manufacturing for certain components (e.g. battery module assembly), but this will take time. On the regulatory front, policy uncertainty can be a risk if support mechanisms change unexpectedly. The imposition of an electricity generator windfall tax in late 2022, for instance, caught some renewable operators off guard​. Maintaining a stable, long-term policy framework will be crucial to sustaining investor confidence.

Crucially, the opportunities far outweigh the challenges in this sector. The push for decarbonization and energy security is unlocking huge potential for businesses and innovators. Britain’s legally binding carbon targets virtually guarantee a growing market for solar and storage well into the 2030s – a recent estimate suggests the country needs to install over 16 GW of new renewable capacity annually to stay on track​, a scale that will mobilize significant private investment. There is ample room for expansion: from millions of untapped residential rooftops (only ~5% of homes have solar today) to vast surfaces like warehouses, parking lots, and water reservoirs that could host PV systems. The likely mandate for solar on new homes and commercial buildings would open a fresh wave of demand in the construction and real estate sectors. Energy storage, meanwhile, has opportunities beyond just lithium batteries – the UK can become a leader in emerging storage tech such as flow batteries, hydrogen storage, and gravity-based systems (several prototypes are being trialled, supported by government innovation grants). If proven at scale, these technologies could complement lithium batteries and provide longer-duration storage, solving intermittency issues and creating new business niches.

Integration with other sectors also presents growth avenues. The accelerating adoption of electric vehicles and heat pumps means electricity demand will rise, especially at peak times – solar and storage can meet this demand if managed smartly. Companies are exploring vehicle-to-grid (V2G) services, where EV batteries feed power back to the grid at peak times, effectively acting as distributed storage. The UK’s strong technology sector (from AI start-ups to engineering firms) can capitalize on the need for sophisticated energy management solutions, exporting these services globally as grids everywhere grapple with higher renewable shares. Finally, as the UK solar and storage market matures, export and international expansion become opportunities: British developers and financiers are already leveraging their expertise to invest in solar projects abroad, and homegrown innovations (like Oxford PV’s tandem cells or Virtual Power Plant software by firms like Kiwi Power) have worldwide applicability.

In conclusion, the UK’s solar and energy storage sector finds itself at an inflection point – bolstered by supportive policy, buoyant investment, and rapid tech improvements, yet challenged by infrastructure bottlenecks and the practicalities of an unprecedented build-out. How the industry navigates grid and planning reforms in the next few years will be pivotal. If obstacles are addressed, the reward is substantial: solar PV and batteries could form the backbone of a resilient, low-carbon energy system and drive sustainable economic growth. The coming decade holds the promise of a sunny outlook for the UK, with solar farms and battery banks becoming as common in the landscape as wind turbines, powering Britain’s homes and businesses with clean, reliable. By seizing the opportunities and tackling the challenges head-on, the UK can solidify its position as a global leader in the renewable energy revolution.

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