Déjà Vu – the implications of Zenobē Energy’s latest case for local government

A Subsidy Control challenge is a form of judicial review against a public authority's decision making process to award financial assistance to an economic actor. It stands to reason that if a public authority remakes a decision that a new challenge can be brought. This appears to be the case in the latest Subsidy Control challenge - which has been brought by Zenobē Energy Limited against "a further decision to adopt" a subsidy scheme to support longer-duration energy storage projects by the Gas and Electricity Markets Authority.

The first Zenobē Energy Subsidy Control Challenge

If the case sounds familiar, it is. In November 2025, the Competition Appeal Tribunal published the first case of Zenobē Energy Limited v Gas and Electricity Markets Authority in which a challenge was brought against a decision made by the Gas and Electricity Markets Authority (“GEMA") to establish a measure to provide financial support to longer-duration energy storage (“LDES”) projects by way of a 'cap and floor mechanism'.

Under this initiative LDES projects can benefit from a guaranteed minimum level of revenue through a ‘top up’ payment should revenues fall below this 'floor'. There is also a maximum revenue threshold (the 'cap') above which some revenues will be returned.  The floor payments originate from suppliers, but are collected by the National Energy System Operator, operating within a framework established by GEMA.

This challenge was built around the argument that GEMA ought to have treated the measure as a subsidy scheme when making its decision in September 2025 but had not followed the correct processes.  As a result, the measure ought to be regarded as being in breach of the Subsidy Control Act 2022 as GEMA failed to comply with its:

• duty to consider the subsidy control principles before making a subsidy scheme;  and
• duty not to make the Scheme unless it is of the view that subsidies under the scheme will be consistent with the Subsidy Control Principles.

As set out in our earlier article, there are two counter-arguments which seem likely to be advanced by GEMA in response to this challenge. The first relates to the Section 25 of the Planning and Infrastructure Bill (which is currently being considered by Parliament) that will place an obligation on Ofgem (which delivers functions on behalf of GEMA) to deliver a scheme which makes payments in regard to long duration electricity storage.  The second is whether the redirection of supplier funds involves a transfer of a public authority's resources - an issue which raises similar issues to the famous EU State aid case of PreussenElektra [C-379/98].

In January 2026, the Competition Appeal Tribunal considered and refused applications for permission to intervene in the case brought by NatPower and British Hydropower Association on the grounds that their applications were submitted too late.  It also considered applications from Gresham House Energy Storage Holdings Limited and the Secretary of State for Energy Security and Net Zero, refusing both on the grounds that these additional parties would not make a significant additional contribution to proceedings, noting the positions of existing parties to the litigation.

The second Zenobē Energy Subsidy Control Challenge

On 31 March 2026, the Competition Appeal Tribunal published a second case brought by Zenobē Energy against GEMA. The Notice of Appeal recognised that "Zenobē’s primary case remains that a subsidy scheme was made by the 2025 Decision and that GEMA erred in law in making the 2025 Decision on the grounds set out in the First Application. This Application alleges that GEMA made a further decision to adopt the 2025 Decision on 18 February 2026 (the “2026 Decision”). Zenobē now also alleges that GEMA erred in making the 2026 Decision to adopt the 2025 Decision".

Therefore the challenge is against the remaking of the decision.  Both the first and second cases are expected to be heard in a two day hearing (with one day in reserve) due to start on 28 April 2026.

What does this mean for Subsidy Control practitioners?

In short, it means we are likely to see many more Subsidy Control cases brought.

This is because what constitutes a decision is interpreted widely in Subsidy Control law. For example, in The Durham Company Limited v Durham County Council [2023] CAT 50 the Competition Appeal Tribunal ruled that the local authority continuing with an existing arrangement was a decision to continue that was capable of review.

Furthermore, the regime is subject to strict timescales for challenge. Therefore if it appears a decision has been remade or modified, it is sensible for a challenger to act quickly and bring proceedings.

What do the Zenobē cases mean for the wider Net Zero agenda?

The Zenobē Energy challenges focus upon the process applied when a public authority makes a decision to intervene in the market.  If the challenge(s) are successful then the government's arrangements to support the UK's transition to clean energy are likely to be impacted, because it would bring into question the compliance of financial support for the delivery of long-duration energy storage and undermine the confidence of businesses to accept public sector financial support for green initiatives.  

Conclusion

Subsidy Control law is developing rapidly. Practitioners need to ensure that they keep up with all such changes when advising.  The Zenobē Energy cases have already shed light on the tactics which challengers need to take and the Competition Appeal Tribunal decision is likely to clarify the degree of control required for funds to be regarded as the resources of a public authority.  

Alexander Rose leads Ward Hadaway's Subsidy Control team. He advised the public authority in the first case brought under the Subsidy Control Act 2022 and has spoken on Subsidy Control compliance in Select Committees in the House of Lords and House of Commons.