Flexibility Focus: key insights from Q3 2026

The Met Office has provisionally recorded summer 2026 as the warmest on record. This came hand in hand with record-high sunshine hours and solar generation, but also unprecedented demand for cooling, creating new challenges for the UK electricity grid.

In much of Q2, commentators were optimistic that the conflict in the Middle East between Iran and the U.S. would be relatively short-lived, as both countries engaged in peace-deal discussions. However, in the last week of June and at the start of July, progress in the peace talks broke down, and strikes resumed. Throughout Q3, the conflict escalated, causing high spikes in wholesale costs, with prices trending upwards over the period.

On the policy side, the Department for Energy Security and Net Zero (DESNZ) released a consultation on changes to prequalification for the Capacity Market in 2027. It believes the proposed changes would ensure that capacity providers can meet their obligations under the Capacity Market.

In Q3 NESO also procured more volume in the Demand Flexibility Service, up from ~4GWh in Q2 to ~8.8GWh. The most extreme accepted bid prices hit £987.4/MWh, the highest since the updated service launched in April.

Looking ahead to Q4, we expect Ofgem to publish an update on its Cost Allocation Recovery Review (CARR), which will examine how future energy system costs could be allocated.

Read our full report for detailed market analysis, policy updates and revenue insights below, or view previous editions of Flexibility Focus.

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