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To help facilitate the transition of unabated gas and other combustion power plants to a lower carbon solution, the UK Government is proposing to expand the scope of existing carbon capture readiness requirements (CCR) for installations in England. The aim of this change is to require more plants to become net zero-ready.  

Under the renamed "decarbonisation readiness requirements" (DR requirements), the Government's proposal expands upon the existing CCR rules and will, from implementation on 28 February 2026, require all in-scope new build and substantially refurbishing combustion power plants in England to demonstrate a credible path to decarbonise within the plant's lifetime, either through conversion to hydrogen-firing or carbon capture storage and usage (CCUS) retrofit.

The UK Government's Clean Power 2030 Action Plan (CP30 Plan) clearly sets out a continuing "strategic back-up" role for unabated gas in the UK's energy mix to 2030 and beyond, with 35GW of unabated gas capacity expected still to be needed in 2030.  

The DR requirements build on this expectation, aligning with the Government's mission to accelerate the transition to clean power and net zero, and are considered a key part of the energy transition and the decarbonisation of the electricity system, minimising the risk that high carbon combustion power plants become stranded assets in a future decarbonised power system.

The UK Government recently published its response to its March 2023 DR consultation (Government Response) and has subsequently passed the Environmental Permitting (Electricity Generating Stations) (Amendment) Regulations 2025 (Regulations). To supplement the Regulations, the Environment Agency has also published draft guidance (Draft Guidance) intended to aide the preparation of  decarbonisation readiness reports, and is running a consultation on the Draft Guidance until 9 May 2025.    

 

Application to England only

The new DR requirements will be implemented in England only, while the current CCR requirements will continue to apply in Scotland and Wales. 

The Welsh Government is proposing to issue a separate response in due course which will outline the next steps for Wales. The Scottish Government has acknowledged the responses to the 2023 consultation and will take these into account when considering its own policy. The UK Government has indicated that it will continue to engage regularly with both governments to align the respective policies and minimise potential distortions. Ultimately, if significantly different DR requirements apply between these jurisdictions, this may become one of the factors determining the suitable location for investment in power projects in the UK.

Application and scope of DR requirements

The DR requirements will apply to all new build and substantially refurbishing combustion power plants that generate electricity and which require an environmental permit under the Environmental Permitting (England and Wales) Regulations 2016 (EPR). An application for a new or varied environmental permit under EPR needs to be accompanied by a decarbonisation readiness report (DR).

The requirements mandate the election of either hydrogen-conversion or CCUS technology on all such new build or substantially refurbishing power plants. Plant operators will be free to elect the pathway that best suits their circumstances and will need to demonstrate that there are no known barriers to the technical or economic viability of their chosen pathway. The elected pathway can be changed in response to changing technology or conditions provided any DR Report is updated accordingly.

The scope of the requirements will be broadened beyond current CCR requirements by removing the existing 300MW minimum threshold (subject to limited exceptions) and by extending their application to now also cover biomass, energy from waste (EfW) and combined heat and power plants (CHP).

The removal of the threshold is intended to reverse the unintended market distortion which disincentivised the deployment of power plants above 300MW.

The Government has acknowledged stakeholder concerns around the proportionality of applying DR requirements to smaller plants. The Regulations do not require DR Reports for applications relating to existing medium combustion plants or Tranche A generators each with a rated thermal input of less than or equal to 5 megawatts and, for other smaller plants, the Draft Guidance suggests considering a modular carbon capture plant if the option is available and feasible. If an alternative approach is proposed which deviates from published technical guidance, a reasoned justification should be provided to the Environment Agency. 

A "substantially refurbished" plant will be one where "the cost of refurbishing a combustion plant exceeds 50% of the investment cost for a comparable new combustion plant." The Government considers that this approach will reduce the risk of operators seeking to avoid the DR requirements by gradually refurbishing individual parts of a plant.

A derogation mechanism will also be included for those plants that are unable to meet to the DR requirements, for example those that meet the requirements of the "substantially refurbishing" definition but have physical barriers to installing either CCUS or hydrogen equipment.

Specific exemptions apply where the Government considers that the DR requirements would be disproportionate (e.g. back-up plants used for on-site emergencies, power plants with a nuclear safety role and black-start plants). The DR requirements will also not apply to any plants already exempt from environmental permitting.

The expansion of the DR requirements to also include biomass, EfW and CHP is consistent with the recently announced expansion of the UK Emissions Trading Scheme (UK-ETS) to waste incineration and EfW from 2028.

Noting the increase in EfW emissions in recent decades, the Government considers it necessary to address these emissions given they are expected to form a significant portion of residual emissions within the power sector.

CCUS / hydrogen conversion readiness

Any application by a plant operator for the grant of an environmental permit, or an application to vary an existing permit to which the DR requirements apply, must include a DR Report. The DR Report must including the following evidence of CCUS / hydrogen conversion readiness:

A technical assessment demonstrating:

  • that it is technically feasible to retrofit the plant and facilities necessary to capture CO2 / use hydrogen as the primary fuel, to be assessed against a technical checklist to be developed by the Environment Agency setting out the requirements to satisfy this test. For CCUS, in line with eligibility for a dispatchable power agreement, this will include a requirement that any technical solution provides a 90% CO₂ capture rate (or a higher rate where use of best available techniques would result in a greater rate of capture); and
  • that the project has set aside sufficient space to allow for the plant to achieve the CO2 capture rate required / future conversion to hydrogen firing. 

A requirement for 100% hydrogen firing capability by 2030 has not been included at this stage, partly due to concerns as to when hydrogen combustion units capable of burning hydrogen at this level will be readily available in the market, nor is there any requirement for plants to demonstrate hydrogen blend (e.g. 20% by volume) capability.

It is also worth noting that the CCUS DR requirements do not cover CO₂ usage at this stage, with concerns around the lack of technological development and research on alternative forms of permanent storage where a product has been created from CO₂ for use.

An economic feasibility statement from the operator that it has reasonable grounds to believe that it will be economically feasible to:

  • for CCUS, connect to a qualifying complete CCUS system during the lifetime of the plant and to operate whilst connected to that system; or
  • for hydrogen, convert to hydrogen as the primary source of fuel during the lifetime of the plant and for the plant to use primarily that fuel.

A storage / fuel feasibility certification from the operator that it has reasonable grounds to believe that it will:

  • for CCUS, be technically feasible, during the lifetime of the plant, for the captured CO₂ to be transported (including by way of non-pipeline transport methods) to a named storage site for disposal by way of permanent storage; or
  • for hydrogen, be possible, during the lifetime of the plant, to ensure access to a sufficient supply of hydrogen to enable the plant to use hydrogen as the primary source of fuel.

As part of the CCUS transport and storage test described above, developers will be required to identify either a viable transport route from their plant to a suitable area of deep geological storage offshore, or a suitable CO₂ transport and storage network to connect with.

Satisfaction of the latter test will require evidence from the developer of how it has communicated with, or attempted to communicate with, the relevant transport and storage company, and the expectation is that developers will update their chosen transport route and/or destination if a more economically or technically efficient solution transport and storage becomes available. A particular mode of transport will not be specified in the DR, but the Draft Guidance provides a checklist for operators to consider, including forms of non-pipeline transport, such as road and rail, where shipping or pipeline transport is not feasible.

Further detail regarding what information should be included in the above assessments is included in the Draft Guidance, including that the DR assessment should be proportionate to the scale and complexity of the plant and must demonstrate that there are no "fundamental barriers" to CCUS or hydrogen conversion. The Draft Guidance is intended to be kept under review.

A move to the permitting process

The Government is proposing to administer the DR requirements via the EPR permitting process, rather than through the planning consent process as is currently the case with the CCR requirements. Several reasons were provided for this change, including that it would prevent the creation of a loophole whereby plant operators could avoid the application of the DR requirements by resuming projects which have already been through the planning consent process but have since been abandoned. It also enables greater consideration of technical details. The existing appeals process under the EPR will continue to apply to the DR requirements.

Review and reporting requirements

The Regulations will require operators to conduct reviews of their DR Report at least every two years. This will be implemented as a permit condition. The Regulations also provide that the permit may impose conditions requiring operators to report the findings of such reviews to the Environment Agency (which, in practice, the Government Response indicates will be required and so this should be expected to become a standard condition). The review will include information assessing the plant's potential decarbonisation, the effectiveness of its chosen decarbonisation pathway and whether any new barriers to decarbonisation have been identified. Updates are also required where there are material changes such as new technological or economic developments or wider infrastructure changes. Conditions can also impose that CCR or hydrogen conditions be met.

DR review

The Government proposes to undertake a review of the DR requirements at intervals not exceeding five years.

Among other things, the review will consider how the DR requirements have performed against their objectives and whether additional pathways to demonstrate decarbonisation readiness should be introduced alongside hydrogen conversion and CCUS.

The requirements are expected to be strengthened over time in line with technology advances and availability of enabling infrastructure.

Key implications for investors

Though building on existing CCR requirements which many developers and operators may be familiar with, the expanded scope of the updated DR requirements means many more power plants will now come within the ambit of these requirements.

In particular, given that smaller power plants and additional technologies, including EfW and CHP plants, are now captured, potential owners and operators of such plants will need to take account of these requirements when contemplating new developments (or substantial refurbishments of existing developments) from and before 28 February 2026, including considering whether they have sufficient land for their chosen pathway. Some developers may also be disincentivised from investing in such power plants in the first place, given the greater regulatory and reporting burdens.

That material refurbishment is within the scope of the updated DR requirements and will also need to be considered by owners of all in scope technologies. As, for example, the GB gas fleet gets older, the costs of material overhauls and life extending investment will need to be considered against the DR requirements.

Projects which are looking to submit their environmental permit application in the next year should be aware of the additional regulatory implications if their application is not both submitted and accepted by the Environment Agency as 'duly made' before 28 February 2026. Delays in achieving 'duly-made' status are not uncommon and therefore the application of the DR requirements is something that combustion plant projects in England without 'duly made' application status need to consider now.

The Government has consulted on (and said in the CP30 Plan that it will be) introducing an accelerated requirement for those applicants in the 2026 T-4 Capacity Market auction who would be within the scope of the DR requirements to have a credible plan in place to meet the DR requirements before becoming operational. Investors seeking such Capacity Market agreements need to be aware of this upcoming requirement and determine whether or not their project will be in-scope to comply. This may result in needing to prepare a decarbonisation plan for the relevant project earlier than would otherwise have been the case.

Refurbishing plants should give careful consideration to the amended definition of "substantially refurbished", as proposed works on any part of a plant may now trigger the application of the requirements where the 50% investment threshold has been met.

Operators electing the CCUS decarbonisation pathway to satisfy the DR requirements will need to consider their proposed transport and storage route as well as potential transport and storage operators who may be able to provide viable options.

As the first pipeline transport and storage projects in the UK are only now reaching completion, it is possible that options may initially be limited and, to this end, the Draft Guidance provides for non-pipeline transport options as well. If relying on a non-pipeline transport option, operators will have to (i) demonstrate that a feasible route exists to the connection point, (ii) estimate the amount of CO2 to be exported, (iii) estimate the expected frequency of vehicles loading the CO2 per day, (iv) consider the requirements, if any, for onsite or offsite storage tanks, their capacity, footprint, location, and appropriate safety considerations, and (v) consider the requirements, if any, for CO2 liquefaction.

It should be noted that the DR requirements are subject to the Draft Guidance, which the Environment Agency is currently consulting on. This may make it difficult to plan for the implementation of the DR requirements, including determining how some elements of the DR requirements will be implemented by the Environment Agency in practice.

If you would like to understand more about the DR requirements and what they mean for your project, please do not hesitate to get in touch.

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DR requirement clean power decarbonization energy transition UK energy

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UK Energy transition Electricity Renewable Energy

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Sarah Pollock Silke Goldberg Joanne Holbrook Amanda Tsangalis Kate Laidlow-Singh Bozidar Bogosavljev