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Power struggles: The energy sector’s biggest pain points 

Posted 12 Mar 2025

From fluctuating demand to reliance on unsustainable power sources, the energy sector is under pressure from all sides. Despite contributing over £176 billion in economic activity (energy.uk), it faces challenges ranging from barriers to market entry and access to funding to clean power transitions and evolving regulations. So, what is preventing individuals and businesses from breaking into the energy market? 

The transmission system

The national grid is the backbone of the UK’s electricity supply, but the shift to a low-carbon energy system has introduced new challenges. As the country decarbonises and diversifies its energy generation sources, an increasing reliance on sustainable sources – which are innately more variable – is causing supply to become more unpredictable.  

Simultaneously, many renewable sources are utilised at lower network levels in the distribution network, which carries electricity from the high-voltage transmission system to homes and businesses through the National Grid. These sources are transitioning the UK power system away from the traditional model where a small number of large generators inputted into the high-voltage transmission system into a complex network of multiple microgeneration sources mixed with the larger players, all feeding into the grid at different times, locations and capacities.  

This transition requires an entirely different approach to grid management and operation, focusing primarily on demand flexibility – the capacity of demand-side loads to change their consumption patterns hourly or on another timescale (Berkley Lab). This approach is crucial to maintaining sustainability and, with £100 billion planned investment in new energy sources in the next decade, more flexibility and sustainable usage in the grid will be introduced (energy.uk). 

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Breaking into the market

Digital Catapult and Energy Systems Catapult co-hosted multiple workshops for the Digitalising Energy Flexibility programme, a UK-wide initiative to accelerate a digitalised, flexible, net-zero system. In these sessions, startups, innovators, and companies raised a key challenge: breaking into the energy markets isn’t easy. High investment costs, regulatory hurdles, and limited access to infrastructure and technology are major blockers. For many, the financial risks, ranging from the cost of setting up renewable energy projects to access to fair funding opportunities, are enough to steer them towards other sectors before they even consider energy. Barriers like these limit innovation in our economy; however, removing these barriers through initiatives like Clean Power 2030 and the upcoming activities in various decarbonisation programmes, will be key to unlocking transformation and helping deep tech companies scale.  

Policy and regulation

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Across the UK, businesses and innovators wanting access to the energy sector face the same dilemma; how to navigate the evolving policy landscape? In the Digitalising Energy Flexibility workshops, it was highlighted that policies and regulations make access to the renewable energy sector challenging, particularly for deep tech innovators. While huge advancements in the deep technology sector are transforming the landscape and creating new opportunities, it is simultaneously creating layers of complexity.  With large technological advancements comes large energy loads (for example, energy intensive data centres and online AI tools), and the energy flexibility industry presents an opportunity to decrease those consumption costs. However, without clear guidelines on how to navigate the policy landscape and financial support, businesses and innovators alike will continue to hesitate before considering the market. Digital Catapult can help organisations with this through our upcoming energy activities and resources.

How we can help

Looking ahead

The energy sector has various opportunities for deep technology innovators, but significant challenges remain. And, while progress is being made towards a more flexible and sustainable grid, breaking into the energy industry is no simple feat for smaller businesses. With high investment costs, complex policies and regulations, and difficulty in accessing funding, there are barriers for innovators and businesses alike. However, positive progress is driving innovation in the sector, with policies such as Clean Power 2030, Net Zero 2050 and UK’s Energy Security Strategy providing guiding principles for companies to work to. By continuing to remove obstacles and getting involved in various decarbonisation programmes like Digitalising Energy Flexibility, the UK can unlock the full potential of its energy transition, driving both economic growth and a decarbonised future.  

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Luke Sperrin

Senior Practice Lead – Energy and Sustainability

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Be the first to hear about upcoming decarbonisation activities and resources in the Digitalising Energy Flexibility programme now. 

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