Energy Outlook 2025: Energy digitalisation

The energy sector has always been a keen adopter of new innovative technologies. These technologies help to drive forward the energy transition and, with it, help manage the increased complexity of the energy markets. 

In common with many other industries, we have seen market participants explore the potential benefits of digital technology solutions such as blockchain, AI and data solutions, as well as considering security issues inherent in an increasingly digital environment. 2025 will see some milestone adoptions of new digital regulation affecting the energy sector, as well as opportunities for organisations within it to be involved in shaping future regulation. Governments and (energy) regulators have taken note of this, and 2025 will be another year of major developments in this area.

Data sharing in the energy sector 

UK energy regulator Ofgem's consultation on the governance of the Data Sharing Infrastructure (DSI), focuses on enhancing data sharing within the energy sector to support the UK's transition to net zero. The DSI aims to facilitate secure, efficient, and standardised data exchanges among energy companies, promoting greater collaboration and innovation. The current data sharing process is described as manual and inefficient, often leading to data silos and inconsistent standards. 

The proposed DSI comprises three main components: a data preparation node, a trust framework, and a data sharing mechanism. These elements are designed to improve market access to energy data, enhance grid security, and support the development of new green industries. 

In the EU, sector-specific rules on data, such as those contained in the Directive (EU) 2019/944, Implementing Regulation (EU) 2023/1162, have been recognised as being important to facilitating a more competitive energy sector, in which consumers will be active and empowered. The EU’s Data Act and Data Governance Act will soon supplement sector-specific rules, impacting on the overall access to data and connected technology. Meanwhile, the EU Commission’s European Strategy for Data provides for the creation of a common European data space, and the new Community Research and Development Information Service (CORDIS) includes research for the development of a Europe-wide DSI for new energy services. 

Finally, the Australian energy market operator’s Project EDGE (Energy Demand and Generation Exchange) has been testing methods for integrating distributed energy sources in the Australian energy market. See our article for more information. 

The EU Data Act 

Even though there has been much focus on the EU’s regulation of AI, equally important new rules were enacted in 2024 around access to and sharing of data – these will come into force in 2025 as part of the new EU Data Act. 

Under the Data Act, users will have the right to directly access or request access to data that is generated by their use of connected products (IoT devices) and related services, or to have the data made available to third parties of their choice. The data covered includes personal and non-personal data and is broadly defined.

For example, relevant metadata, data collected by sensors, or data collected during user inactivity, are all included in this definition. Data access can only be withheld under limited circumstances; trade secrets do not provide a blanket exemption. Under certain conditions, there may also be Business-to-Government (B2G) data access. 

The regulation also includes interoperability requirements for data space participants, that will be relevant for the Common European Energy Data Space (CEEDS). 

There are still many open questions regarding the precise application of the new rules set out in the Data Act (and its interaction with sector specific regulation), and the European Commission continues to work on a range of implementing measures required by the act, including model contract clauses. 

AI regulation affecting the energy sector 

With AI in the energy sector predicted to be worth $909 billion in 2030, energy organisations are preparing for incoming regulation (or helping shape the thinking about the best approach to regulation), such as: 

• EU AI Act: the world’s most comprehensive legal framework for AI developers, deployers and importers. The use of AI systems within “critical infrastructure” (which has a specific definition within the Act) are considered “high risk” and involve many obligations for providers and deployers of such AI systems. See our EU AI Act Guide here.
• UK regulator Call for Input: instead of creating a legislative framework, the UK Government asked sector regulators to publish their AI strategies by April 2024. UK regulator Ofgem published a consultation in April 2024 asking for comments on a number of proposals for its strategy, including an AI use case risk assessment matrix, as well as its recommendations in reaction to a number of identified specific risks of using AI within the energy sector. At the time of writing, Ofgem has not yet published its consultation response. 
• Australian Government Consultation: on 8 October 2024, a proposal paper titled “Introducing Mandatory Guardrails for AI in High-Risk Settings” was published including 10 proposed mandatory guardrails and three regulatory options to mandate them. 

Many regulators across the globe are now also adopting their own approach to AI Regulation. For example, Ofgem’s Call for Input outlines the existing energy regulatory framework and suggests that while current regulations are adequate, additional guidance on risk-based AI use will be focused on ensuring that AI technologies are used safely and responsibly while fostering innovation.

Data Centres 

Data-intensive AI has in turn led to a huge demand for, and more intensive use of, data centres. AI processes require data centres to provide considerable and reliable energy resources, the impact of which (on electricity networks and carbon footprints) has attracted a lot of attention in 2024. Organisations have been feeling the pressure of upcoming sustainability reporting obligations mandated by the EU Commission’s Corporate Sustainability Reporting Directive, which will require them to understand and manage the carbon impact on their use of AI (for assistance with this, see here). So, as the data centre industry draws up plans to cope with and manage this increased demand for data processing power, we expect to see it develop innovative and sustainable ways to offset power gaps, such as using microgrids and battery storage. We also expect to see increased competition for renewable energy in key locations where data centres are built. 

A significant effort has also been put into innovation in the data centre industry around energy and water usage efficiency. Organisations have been looking at how ‘waste’ heat from data centres can in fact be a useful resource and potentially a source of revenue. Again, location will continue to play an important part here - reusing waste heat that comes from a data centre may conveniently support a nearby district heating scheme.

Cybersecurity 

Closely connected with the increasing digitalisation of the energy sector, we expect to see a strong focus in 2025 on the incoming EU regulation around cybersecurity, with the arrival of the NIS2 Directive, the CER (Critical Entities Resilience Directive), and the CRA (Cyber Resilience Act). NIS2 is broad in its scope – covering electricity, district heating and cooling, oil, gas and hydrogen. It contains explicit security, training and notification obligations, as well as express governance requirements (requiring management bodies to approve and supervise cybersecurity risk management measures, and undertake specific training). Management can be held personally liable for breaching these requirements. EU Member States are working hard to implement NIS2, with several Member States such as (at the time of writing) Belgium, Hungary, Croatia, Latvia and Lithuania having already adopted a national implementation act. 

The CER focuses on reducing vulnerabilities and strengthening physical resilience of “critical entities” (which the EU Commission has said could include entities within the energy sector, with services such as electricity production and energy storage). Meanwhile, the CRA focuses on products with digital elements; it applies to devices that use IoT, and so could include products like smart meters or smart home devices.

Energy trading using algorithms 

REMIT II (Regulation 2024/1106, which came into effect on 7 May 2024), introduces significant new requirements for market participants engaging in algorithmic trading. Its adoption shines a spotlight on an important tool in energy trading. 

An exploratory study published on 17 July 2024 by the Dutch competition and financial regulators, examined the growing use of algorithmic trading in wholesale energy markets in the Netherlands, concluding that while it can bring benefits, such as more efficient price formation and increased liquidity, it also carries risks, including increasing volatility and market manipulation. 

Under the new REMIT II regulation, a market participant engaging in algorithmic trading is subject to two specific new obligations. The first is to have in place effective systems and risk controls to prevent erroneous orders, and prevent actions that may create or contribute to a disorderly market. The second is to notify the home National Regulatory Authority of its engagement in algorithmic trading. 

With the growing use of complex algorithms, REMIT II aims to manage risks and ensure market integrity, fostering a more transparent and secure trading environment. Market participants should watch out for clearer guidelines and proactive measures; understanding and safeguarding algorithm use will be key to reducing risks. See our article for more information. 

We hope in this respect that ACER’s REMIT guidance, a new edition of which is currently in preparation, will give further guidance on the contents of the systems and risk controls required. Until it does, or if it does not, Nord Pool’s existing Best Practice Guidance for algorithmic trading provides a good starting point. (Nord Pool is a major power market in Europe providing day-ahead and intraday trading amongst other services). 

Blockchain use cases in energy 

Finally, helping shape the future of digital regulation, we draw attention to the European Blockchain Sandbox (which is organised by the European Commission and is open to all sectors. At Bird & Bird, we lead the operation of this sandbox so have insight into the technologies that will impact the energy sector. 

The Blockchain Sandbox provides a structured environment where public and private innovators exploring or implementing distributed ledger technologies such as blockchain can engage in regulatory dialogues with national and EU regulators. A third tranche of 20 projects is due to be put through the Blockchain Sandbox in 2025, offering participants legal advice and regulatory guidance in a confidential setting. Blockchain has already been explored in the context of several energy projects in the sandbox. These include:

• Tokenisation of solar panels 
• Peer-to-Peer Energy Sharing through tokenisation 
• Distributing energy saving measures subsidies through tokens 
• CO2 Reporting
• ESG/CSRD reporting 
• TSO support in grid balancing

Other blockchain use cases developing in the energy sector include, for example, the use of blockchain to transform electricity supply between members of peer-to-peer virtual energy networks, or microgrids. The regulatory landscape is emerging rapidly. Existing laws and regulations have to be applied on an EU and national level in a decentralised context (incurring novel regulatory questions). We are now seeing further, national regulatory sandboxes becoming operational or under development such as the French Energy Regulator’s Regulatory Sandbox, the Hellenic Competition Commission’s Sustainability Sandbox in Greece, the Polish Energy Regulatory Office’s legal order to introduce regulatory sandboxes in Poland, and similarly in Lithuania, the Ministry of Energy’s legal order to introduce a regulatory sandbox for the testing of energy innovation.