Energy storage landscape 2026: Regulatory developments, litigation outlook, and M&A trends in the UK and EUl

UK outlook

The UK is introducing Ofgem’s cap and floor scheme for long-duration electricity storage (LDES), providing regulatory certainty and revenue stabilisation. The first contracts are expected by mid-2026, likely spurring increased market activity for eligible LDES technologies.

The capacity market is expected to be reformed so as to streamline access for battery storage and integrate flexibility services, while innovative solutions supported by the Clean Flexibility Roadmap, such as liquid air energy storage, are set to be deployed next year. Additional digitalisation and grid registration rules will roll out in early 2026, aligning with broader European efforts to future-proof grid infrastructure.

EU progress

The EU Battery Regulation will impose stricter sustainability, due diligence, and disclosure obligations for industrial and rechargeable batteries used in storage starting in 2026 (subject to implementing acts). Industrial battery producers must provide carbon footprint declarations, and from February 2027, full electronic ‘battery passport’ lifecycle traceability will be required. Due diligence guidelines for critical raw materials will be issued by August 2026.

The Net-Zero Industry Act (NZIA) requires member states to support storage permitting and prioritisation for net-zero technologies from 2027.

The Grids Package aims to simplify approvals and interconnections, aiding rapid storage expansion and integration, while tariff reforms will ease double-charging and digital platforms will enhance grid management efficiency.

UK-EU cross-border questions

The UK-EU Trade and Co-operation Agreement’s provisions for cross-border energy trading, including storage was to expire on 30 June 2026, but has been prolonged to 31 March 2027. In 2026, re-negotiation or further transitional arrangements will be vital, potentially affecting flexibility markets and balancing services between countries.

Litigation: What lies ahead

The High Court’s recent affirmation of a battery storage project in Walsall highlights rising judicial scrutiny of planning and noise disputes in the UK. More planning-related judicial reviews are expected as land use conflicts grow. In the EU, infringement proceedings against member states for permitting delays may escalate to the Court of Justice. Germany’s Federal Court rulings on grid connection cost allocation provide precedent as regulators implement new tariffs and fee structures.

M&A trends for 2026

Six trends will shape energy storage M&A in 2026:

• Consolidation of developers and platforms with gigaparks or strong grid access.
• Focus on long-duration and diversified technologies.
• Bundling hardware and services for optimisation and multi-revenue strategies.
• Pan-European deals for flexibility and grid integration.
• Infrastructure funds and private equity targeting mature players.
• Disciplined due diligence with premiums for risk-managed pipelines.

The UK’s policy momentum, especially around LDES, supports market expansion and M&A, with a strong pipeline and growing grid integration targets. The EU will likely see robust activity in Germany, Spain, France, and Central/Eastern Euro-pean markets, particularly where new regulatory or market incentives appear.

This article was written by Allison Soilihi, Partner, and Alexandra Rotar, Legal Consultant, at global law firm Morgan Lewis & Bockius LLP.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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