Innovation and renewables will underpin energy transition M&A and investments in 2026
Investors remained bullish as across the UK and Europe, investment flowed into renewables, alongside enabling technologies like battery storage, all driven by net-zero targets and energy security goals
Robust activity in 2025
Global corporate deal activity in the energy sector, fuelled primarily by renewables, was robust in 2025 despite geopolitical hurdles and cost challenges. We expect 2026 to continue in a similar vein as companies continue to grapple with inflation risk and economic uncertainty.
In the first half of 2025, renewable energy M&A reached $43 billion worldwide (compared to $117 billion in the whole of 2024). North America led in absolute investment (about $16 billion in H1 2025 compared to $50 billion in 2024), but the UK and continental Europe maintained dominant positions (about $13 billion in H1 2025 compared to $40 billion in 2024).
Beyond established generation assets such as solar and wind, in the first half of 2025 investors poured €3.5 billion into European battery storage and grid modernisation, as well as green hydrogen, nuclear and sustainable aviation fuel. This broad investment base underscores how the energy transition is the biggest catalyst for deals in the sector.
Client success story
Osborne Clarke acted for Eclipse Power, a wholly owned subsidiary of Octopus Sky Fund which owns and manages network infrastructure in the UK, in its acquisition of Vattenfall Networks Ltd, an energy producer and retailer owned by the Swedish state. This deal marks the first sale of an independent distribution network operator (IDNO) in the UK, and the combined entity will create one of the UK's leading IDNOs.
This acquisition enables Eclipse to scale up and accelerate energy distribution across the UK, helping to drive innovation in the energy sector and move towards net zero infrastructure. It marks a significant step in the energy distribution market, representing continued confidence in the IDNO model as well as in the energy infrastructure investment landscape more broadly.
Osborne Clarke Partner, Matthew Bodfield, led the corporate side of this acquisition and Marc Shrimpling, Partner, led the National Security and Investment Act clearance application. This acquisition involved liaising with Ofgem and therefore the regulatory side was led by Hugo Lidbetter, Partner in Osborne Clarke's project team.
Key drivers and regulatory landscape
A convergence of factors continues to underpin deal making: government net-zero targets, energy security priorities after recent geopolitical shocks, and surging power demand for data centres and electric vehicles. Even with higher interest rates and inflation raising project costs, the long-term value proposition of clean energy remains strong. In Europe, for instance, the EU’s Green Deal and recovery funds have earmarked billions for renewable infrastructure, and the UK aims to generate 95% of its electricity from clean sources by 2030.
Nevertheless deals have to navigate a complex regulatory environment. Government policies heavily influence deal viability. For example, renewable auction designs and subsidy schemes determine revenue certainty. Unclear or shifting policies can dampen investor confidence: a case in point, ill-judged pricing at the 2023 UK clean energy auction saw no offshore wind bids, prompting improved incentives that led to a record 2024 auction, with the 2025 results expected in January 2026.
In the UK and the rest of Europe, investors and developers need to factor in planning consents and grid connection, alongside traditional financial metrics. Across Europe, slow permitting and grid bottlenecks remain hurdles that can delay project development and construction. In the UK, onshore wind farms still face median approval times of roughly 1.4 years, and as of 2025 a large share of consented projects (60–80%) are still awaiting construction due to grid or financing delays. These challenges have spurred the UK government to reform planning rules and the National Energy Systems Operator (NESO) together with the regulator, Ofgem, have streamlined grid connection processes and are investing in grid upgrades to prioritise strategic projects which are ready for construction.
Also on the positive side, regulators are broadly aligning with industry on the clean energy agenda. An EU court ruling in mid-2025 upheld the inclusion of nuclear energy in the EU’s sustainable finance taxonomy (as a transitional climate solution), potentially opening doors for more private capital in nuclear projects. Overall, while legal complexities persist, the policy climate in Europe and the UK remains largely supportive of the energy transition, providing a favourable backdrop for continued deal activity.
Solar and onshore wind: mainstream renewables drive M&A
Solar and wind generation outpaced the rise in global electricity demand in H1 2025 demonstrating the dominance of these technologies in the sector. This was reflected in energy M&A: in the UK, around 1.5 GW of solar and onshore wind capacity changed hands in H1 2025. In Europe more generally, ready-to-build solar opportunities, especially across Germany, Spain and Italy, remained attractive.
The outlook for solar and onshore wind M&A and investment remains robust. Corporate buyers (such as tech firms signing power purchase deals) and financial investors are expected to continue driving high transaction volumes, drawn by the stable returns and strategic value of owning green power assets.
Offshore wind: high-stakes partnerships amid cost challenges
Offshore wind continued to generate some of the largest and most complex deals in 2025. The capital-intensive nature of this sector, combined with recent cost inflation, have led to developers seeking partners to share risks and funding.
In November 2025 Ørsted announced the sale of a 50% stake in Hornsea 3 project in the UK to Apollo managed funds for around $6.5 billion and in August, BP formed a 50-50 joint venture with Japan’s JERA to combine their offshore wind portfolios. In some cases this led to painful decisions: in May 2025 Ørsted cancelled its planned Hornsea 4 project in the UK, citing that it was no longer financially viable under current market conditions and support levels.
However appetite remains strong: TotalEnergies' success in German offshore wind auctions in summer 2025, underlines how traditional energy firms are doubling down on offshore wind as part of their balanced generation portfolio and energy transition strategies. And authorities are responding to the challenge: in the EU, efforts are underway to streamline offshore permitting and coordinate grid build-out (for example, connecting multiple countries to the same wind farm hub) with the objective of reducing cost.
Looking ahead, offshore wind deal activity is expected to stay high, but success will hinge on managing costs through innovation (such as larger turbines and floating platforms), diversification of supply chain participants (reducing reliance on a small number of OEMs) and on governments providing a predictable, investable policy environment.
Energy innovation: battery storage and more
A significant share of 2025’s energy-sector investment also flowed into innovative technologies that support and leverage renewable generation. Energy storage was a standout area: corporate funding for battery storage companies totalled over $11 billion in the first nine months of 2025. Europe including the UK, has become a hotbed for battery projects which are seen as attractive investments in their own right.
Smart grids and EV infrastructure are other innovation areas drawing investor attention. As electrification spreads – from vehicles to heating – and as renewables introduce more variability in supply, there is a pressing need for technologies that can make power systems more intelligent and resilient. In the first three quarters of the year, $2.8 billion was raised by smart grid companies across 68 deals, For example, UK-based charging network operator GRIDSERVE raised around £100 million in new funding in 2025, and French smart charging firm Believ secured £300 million.
The convergence of energy and technology is blurring traditional industry lines – utilities are buying tech firms, and tech giants are investing in energy projects – all with the aim of modernising the power system. There was a clear recognition in 2025 that achieving net-zero is not just about building wind and solar farms, but also about innovating across the whole economy. We expect this slice of the sector (storage, grid tech, and related digital solutions) to account for a growing number of deals, including more cross-border investments and possibly some high-profile acquisitions of energy tech unicorns, as the landscape matures.
Nuclear power: resurgence through new models
Nuclear energy is experiencing a guarded revival. Traditional large-scale nuclear projects remain heavily state-driven, but there were notable moves to involve private capital and new technology. In the UK, the government officially selected Rolls-Royce SMR to build the country’s first fleet of small modular reactors (SMRs), committing an initial £2.5 billion to jump-start the programme. Elsewhere in Europe, countries like Poland entered partnerships with experienced reactor vendors (from the U.S., France, and South Korea) to advance their first nuclear plants and France, a nuclear stalwart, announced plans to commercialise a domestic SMR design by the 2030s, seeking to maintain its leadership in nuclear technology.
Financing structures for nuclear are distinct. The UK, for instance, is using a Regulated Asset Base model for its Sizewell C project, which allows investors to earn a regulated return during construction, thus luring pension and infrastructure funds. The inclusion of nuclear energy in Europe’s green investment taxonomy may eventually enable nuclear projects in Europe to tap into green funds and bonds that were previously off-limits.
In terms of corporate activity, outright M&A in nuclear generation is still limited. However, the supply chain is fertile ground, as players position for more opportunities for private-sector engagement in the coming years given pro-nuclear policy shifts.
Hydrogen: from hype to reality
Hydrogen hype earlier in the decade transformed into reality in 2025. Instead of conventional M&A, much of the activity in this sub-sector took the form of joint ventures and strategic alliances aimed at developing hydrogen production and infrastructure. For example, French and Spanish gas network operators Teréga and Enagás created a joint venture in 2025 to advance the proposed BarMar hydrogen pipeline between Barcelona and Marseille. But the case for hydrogen is sometimes finely balanced: in November 2025 BP pulled its blue hydrogen plant in the UK citing reduced demand and competition from a rival data centre project on the same site.
Hydrogen projects are driven by a mix of optimism and pragmatism. Governments across Europe (and the UK) are offering hefty incentives for early hydrogen projects but the economics of green hydrogen in particular remain challenging. Many hydrogen deals involve navigating complex regulatory rules and securing agreements for future supply to make projects bankable. We expect hydrogen deal-making to remain steady in 2026 with the pattern likely to remain consortium-orientated: groups of energy, chemical, industrial and financial players locking arms with government support to build the first generation of hydrogen infrastructure.
2026 outlook: sustained momentum and tech integration
The stage is set for another active year of energy deals in 2026. The fundamental drivers of decarbonisation commitments, energy security needs and electrification trends are only growing in importance.
We anticipate further portfolio optimisation and consolidation: utilities and investors will keep acquiring renewable assets, infrastructure and operating businesses. Cross-sector deals should also deepen as the lines blur between energy, technology and infrastructure. For example, more automakers and tech firms, particularly data centre operators, may invest in renewable energy or battery storage to support their operations.
From a financial perspective, if interest rates stabilise or decline slightly in 2026 as expected, that could lower the cost of capital for projects and boost valuations, encouraging even more deal flow. Private equity dry powder dedicated to energy transition is at an all-time high and these funds will be on the lookout globally for attractive platforms.
On the innovation side, 2026 is likely to bring more integration of digital technology in energy deals. As data and AI become critical to managing distributed energy resources, we could see big tech merging with utilities, or acquisitions of AI-driven energy management startups by grid operators. Regulatory support for the energy transition should persist, though geopolitical risks remain threats to finance and investor sentiment. In Europe and the UK, however, the direction of travel is set: both are strengthening their policy frameworks around renewables, grids and storage. These policy tailwinds provide a degree of stability for dealmakers for the foreseeable future. The outlook for 2026 is one of sustained momentum with an increasing emphasis on marrying generation assets with the innovative technologies that enable a cleaner and smarter energy system.
Speak to one of our experts.
Our experts
Co-head International Corporate Group, Partner, UK
Head of Business Transactions Knowledge, UK
UK Head of Energy and Utilities Sector, Partner, UK
Co-head International Corporate Group, Partner, Germany
International sector lead of Energy and Utilities, Partner, Germany
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