The True Cost of Net Zero
Net zero: an information primer on cost and consequences
- UK electricity is expensive because of policy, not fuel. Industrial power prices are among the highest in developed economies, domestic bills rank fourth, while UK gas prices sit around 15th globally. This is a competitiveness killer.
- Since 2006, retail electricity prices have broken away from wholesale prices. If the historic retail-wholesale margin had held, households would be about £218 billion better off in today’s money.
- Policy and network charges now weigh heavily on every bill. Environmental and related levies were about £17.2 billion in 2023-24 and are set to exceed £20 billion by 2029-30. Reclassifying Capacity Market and CfD costs as policy would put wholesale at roughly 42% of bills and policy at about 14%.
- Intermittency imposes real, permanent costs. With wind averaging ~35% capacity factor and solar ~10%, the Capacity Market pays for backup capacity. That costs about £1.3 billion today, likely rising to around £4 billion by decade-end.
- Grid constraints force consumers to pay twice. In 2024-25 constraint costs were about £2.3 billion. Seagreen was curtailed twice as often as it generated in 2024, so consumers paid wind farms not to produce and gas plant to produce instead.
- Weather-based renewables are low-density and grid-hungry. Many turbines mean many connections, plus long transmission lines to reach demand centres. Balancing costs have surged and are on track to rise further.
- Subsidy auctions are not signalling falling costs. Offshore rounds have seen cancellations, rebids at higher prices, and outright failures. Turbine makers hiked prices to restore profitability. Developers posted large losses. A move to 20-year contracts spreads larger subsidies over longer periods while flattering headline strike prices.
- Carbon policy is being ratcheted up. Re-linking UK and EU carbon markets points to higher carbon costs flowing through to bills. Harmonisation at current prices adds roughly £120 million a year.
- Net zero levies are multiplying. Beyond RO, FiT and CfDs, add heat and social schemes, constraint and balancing charges, and prospective new levies such as Carbon Capture and Storage. The direction is up, not down.
- Claims that renewables will deliver cheaper power are contradicted by reality. Hornsea 4 was uneconomic even with an £83/MWh strike versus an average £73/MWh day-ahead price in 2024.
- The counterfactual is stark. Sticking with a gas-based system since 2006 would have left consumers almost £220 billion better off in 2025 money, even after the gas shock. Meanwhile industry has been priced out, emissions offshored, and the UK’s 0.8% share of global CO₂ unchanged in global terms.
- Bottom line. Mad net zero policies are driving up bills, hollowing out industry, and locking in decades of subsidies and system costs. Promised savings are punted to 2038-43 on optimistic assumptions. The pain is certain. The payoff is not.
