Tesla Applies for UK Energy Licence

Elon Musk’s Tesla has applied for a licence to supply electricity to British homes and businesses, a move that could see the US-based firm directly enter the UK’s highly regulated energy market from 2026.

What Has Tesla Done?

The application was formally submitted on 25 July by Tesla Energy Ventures Limited, a UK-registered company under the wider Tesla umbrella. Ofgem, the UK’s energy regulator, confirmed the licence request on its website and set a consultation period until 22 August for stakeholders to submit comments. In line with the Utilities Act 2000, Ofgem has only published the notice of application, limiting further detail. If approved, the licence would allow Tesla to operate as a retail electricity supplier across England, Scotland and Wales.

Extend Scope of Existing Licence

It should be noted here that Tesla already holds a generation licence in the UK (granted in 2020) which allows it to produce electricity. However, this latest move could extend its scope to selling power directly to households and businesses, in the same way as established suppliers such as British Gas, Octopus Energy and OVO.

Why Is Tesla Doing This?

Tesla’s decision comes at a time when the company is facing declining electric vehicle sales across Europe. UK registrations in July fell by almost 60 per cent compared to the previous year, while German sales dropped by 55 per cent. Across ten key European markets, Tesla’s sales were down by 45 per cent. Competition from rival EV manufacturers, particularly China’s BYD, has been a major factor in this slump.

Diversifying into energy supply, therefore, offers Tesla another route to growth, particularly given its sizeable existing footprint. More than 250,000 Tesla vehicles are on UK roads and tens of thousands of its Powerwall home battery systems have been installed. This customer base could provide a ready pool of households willing to adopt Tesla’s electricity supply, particularly if bundled with discounts for charging vehicles or exporting stored solar energy back to the grid.

Like In Texas

The company has already built up experience as an energy supplier in the United States. In Texas, Tesla Electric launched in 2022 as a retail provider offering households low-cost, 100 per cent renewable power. Customers do not need to own a Tesla product to join, though EV owners and Powerwall users are offered cheaper charging rates and the ability to sell surplus electricity back to the grid.

The Texas operation also supports the concept of a “virtual power plant”, where thousands of home batteries are linked together to provide grid stability. Tesla has suggested that similar models could eventually be deployed in other markets. In the UK, this would align with National Grid’s push for more flexible energy resources and time-of-use tariffs that encourage households to use power at off-peak times.

What Could This Mean for the UK Market?

If the licence is granted, Tesla would join a market that is both competitive and tightly controlled. The so-called “Big Six” suppliers, now expanded to include Octopus alongside British Gas, EDF, E.ON, OVO, ScottishPower and SSE, still dominate with more than 90 per cent of the domestic supply market. Smaller and newer entrants have struggled in recent years, especially during the energy crisis, which saw dozens of challenger firms collapse under pressure from soaring wholesale prices.

Some analysts have pointed out that Tesla is entering a highly regulated market where profit margins are already thin and most of the big suppliers have invested heavily in smart tariffs, making it difficult for new players to break through. However, others have highlighted how Tesla’s existing ecosystem could help it stand apart. For example, despite falling EV sales, Tesla still has a sizeable footprint in the UK, with more than 250,000 cars sold and thousands of Powerwall batteries installed. That existing customer base could give Tesla a natural advantage if it follows the same model as its Texas business, where households are offered cheaper charging and paid for feeding power back into the grid.

Potential Tariff Innovation

One area where Tesla may compete effectively is in smart tariffs for EV charging and home energy storage. Between 2020 and 2023, Tesla partnered with Octopus Energy on the Tesla Energy Plan, a smart import-export tariff that allowed customers with solar panels and Powerwalls to buy and sell electricity at the same rate. Although Tesla later withdrew from the partnership, Octopus continues to offer a similar tariff, demonstrating demand for such arrangements.

If Tesla can combine its EVs, batteries and potential supply licence into a single integrated offer, it could appeal strongly to existing customers. For example, discounted tariffs for charging Teslas overnight, coupled with payments for sending energy back to the grid from a Powerwall, would create a closed-loop system that few other suppliers could match.

Challenges

Despite the potential, the barriers are considerable. The UK retail electricity market is crowded, margins are slim, and switching rates are low compared with the period before the energy crisis. Many households are locked into dual-fuel contracts that combine gas and electricity, which may make a Tesla-only electricity offer less attractive.

There is also the question of public perception. Elon Musk’s increasingly political public profile has drawn strong criticism in Europe and the UK. Also, he has described Britain as a “police state” and criticised asylum and migration policies. His closeness to US President Donald Trump (although they have since fallen out) and his actions with DOGE in the US have further polarised opinion and appear to have caused huge damage to his personal brand (and his vehicle sales). In fact, some consumer groups have warned that Musk’s views could influence whether households are willing to sign up for Tesla-branded energy.

Tesla itself has remained quiet on its application. The notice submitted to Ofgem was signed by Andrew Payne, Tesla’s head of energy for Europe, the Middle East and Africa. No public statement has been issued by the company, which has said only that it continues to expand its energy services globally.

What Does This Mean For Your Business?

Tesla’s bid to supply electricity in the UK sets up a clear test of whether its brand strength and integrated technology can overcome the realities of a tightly controlled market. On paper, its combination of cars, home batteries and solar solutions could give it an edge in offering customers genuinely joined-up energy services. In practice, it faces the same pressures that have squeezed margins for existing suppliers, alongside the added complication of public sentiment about its founder.

For UK households, the offer of cheaper EV charging or the ability to trade surplus solar power back to the grid would be attractive, particularly at a time when energy bills remain under close scrutiny. For businesses, Tesla’s entry could bring new tariff models for fleets or for sites already investing in renewable generation and storage. If the model mirrors what has been developed in Texas, it may also open the door for companies to participate in virtual power plants that improve resilience and provide income streams from energy flexibility.

For the energy sector, the move signals that disruption could just as easily come from a technology giant as from a nimble start-up. Incumbent suppliers will be watching closely, both for the pricing strategy Tesla adopts and for the way it leverages its hardware base to win loyalty. Regulators, meanwhile, will have to balance innovation with consumer protection in a market that has already seen waves of supplier failures.

Tesla is attempting to diversify at a time when its automotive business is under pressure, and the UK market will be an early test of whether energy supply can deliver the growth it now seeks. If it succeeds, it could accelerate the shift towards more dynamic and decentralised energy systems. If it fails, it will underline how difficult it remains to challenge the dominance of established players in one of Europe’s most heavily regulated markets.