The Frightening Cost of Net Zero

By Paul Homewood

 

I was reminded last week in a conversation with a GB News Editor about just how little understanding there is in the MSM of just how much Net Zero could end up costing the country.

To some extent this ignorance has been deliberately engineered. The original Climate Change Act in 2008 included no sort of cost/benefit analysis at all; it was passed almost unanimously through Parliament on the basis that when you are saving the planet, costs do not matter. It was the same story when Theresa May amended the 2008 Act to set a Net Zero target.

The idea that the public should know the cost of decisions made by their MPs was regarded as abhorrent by them and still is.

Since then, much of the media has been complicit in refusing to discuss the issue of cost. Nevertheless, there have been attempts to put a figure on it. In 2019, then Chancellor Philip Hammond warned May that reducing greenhouse gas emissions to net zero by 2050 could cost the UK more than £1tn.

On the other hand, the Climate Change Committee has claimed the cost would more like £200 billion over thirty years. However, this excludes the costs we are already paying and was based on unrealistically optimistic assumptions about the future cost of renewable energy.

So, who is right?

It is of course foolhardy to try to predict what will happen in three decades time; we have no idea what the economy or technology will look like then. Anybody who thinks they do know is a fool and anybody who claims they do is a charlatan!

But we should have a much better idea of how things will pan out in the shorter term, say the next ten years or so. In any event, nobody cares about what will happen in decades time, when half of us will probably be dead! What they are concerned about is the here and now and what the immediate future has in store.

So, let’s start with what the transition to Net Zero is already costing the UK.

The Office for Budget Responsibility publishes the cost of Environmental Levies each year as part of its Economic & Fiscal Outlook. These levies cover the cost of direct and indirect subsidies for renewable energy which are added to energy bills, or in the case of the Renewable Heat Incentive paid out of general taxation. These are projected to rise to over £17 billion a year and show no sign of falling after 2029/30.

Although some of the older, more heavily subsidised wind farms will start shutting down in a few years’ time, carbon capture and hydrogen production are horribly expensive and highly inefficient ways to replace what we have now – conventional gas power stations.

https://obr.uk/download/economic-and-fiscal-outlook-march-2025/

Additionally, the costs that NESO (the National Energy System Operator), which is responsible for running the grid, pays out to balance the electricity grid has risen to £2.9 billion a year. This is almost entirely all because of the intermittency of wind and solar power; NESO now needs to pay generators to supply power at short notice, pay wind farms to switch off when there is too much wind and pay for storage and other grid frequency measures.

In all, the transition to renewable energy is costing around £20 billion a year. Far from these costs falling in years to come, they are only going to increase, as NESO admitted in their Clean Power 2030 Report published last November.

NESO estimated that Ed Miliband’s plan to fully decarbonise the grid by 2030 would add £25/MWh to the cost of electricity. When wind and solar power is tripled, as planned, there will be many occasions when there is too much power for the grid to handle. As a consequence, billions will be paid out to wind and solar farms to switch off – so-called constraint payments. But there will also be long periods when there is not enough electricity to meet demand; when that happens billions more will be paid to standby generators and batteries to switch on. All in all, NESO estimates this will add another £9 billion a year, on top of the £20 billion we are already paying.

Astonishingly NESO did not budget any extra costs for the enormous task of expanding the electricity transmission network. Only this month OFGEM announced the first tranche of an £80 billion grid upgrade which will need to be completed by 2030. This upgrade is only necessary to meet decarbonisation targets. On OFGEM’s calculations, this expenditure will add an extra £6 billion to electricity bills.

NESO also made it clear that building new wind and solar farms would not produce electricity any more cheaply than simply continuing to run our existing gas generators, which would need to be paid to provide standby capacity anyway. (They say renewables will be cheaper than gas, but this is sleight of hand, because it assumes a punitive carbon tax on gas generators).

Add that lot up and you get a cost of £35 billion a year, just for decarbonising the electricity sector alone. That figure can only go up, as the bills for carbon capture and hydrogen storage start to take effect.

Moreover, we have not even started to address the problem of upgrading the local electricity distribution network, which brings power from the high voltage transmission grid into our homes. As we all start using more electricity for heating and electric cars, the existing network will quickly get overloaded. This will effectively mean digging up streets up and down the country to replace cabling, replacing fuse boxes in homes and increasing the capacity of sub stations. One independent electrical engineering expert, Mike Travers, researched the problem five years ago, and estimated the cost of all this work at around £200 billion, not even counting the enormous cost of disruption which will inevitably be caused. We are probably looking at a figure closer to £300 billion now.

Earlier this month the OBR published the costs to the public sector of the transition to Net Zero – note this just accounts for the cost to government, not the wider UK economy. The bill comes to £257 billion over 26 years. As is usual with Net Zero, most of the cost is frontloaded. Supposedly these costs will start to rapidly decline in the 2040s. Only a fool would believe that. We are expected to believe in jam tomorrow!

Using the OBR’s high-end scenario, that cost could be 50% higher. In the next fifteen years alone, the cost will be £204 billion, all to be funded by higher taxation, reduced public spending or borrowing.

Most of this expenditure will have little added value, for instance installing heat pumps in public buildings, electrifying buses. It also includes the tens of billions handed to Ed Miliband to waste on Great British Energy, carbon capture and other nonsense.

https://obr.uk/frs/fiscal-risks-and-sustainability-july-2025/#es

But the private sector will also be hit hard as well. Within the next ten years, everybody with a gas boiler will need to replace it with a heat pump when it packs up. About 20 million homes have gas boilers. Including extra insulation, hot water tanks and radiators, we are probably looking at £15,000 a go, compared to £3000 for a boiler. That’s a total cost of £240 billion, or £16 billion a year.

Meanwhile electric cars remain stubbornly more expensive to buy than petrol ones. Even allowing for savings on fuel costs, the extra cost of purchase will amount to at least £16 billion a year when the petrol/diesel ban comes into force in 2030.

And we have not even looked at the cost of complying with decarbonisation targets which will be incurred by industry.

If we add that lot up, we get approximate annual costs in the 2030s of:

· Electricity Supply – £35 billion

· Heat pumps – £16 billion

· Electric Cars – £16 billion

· Public Sector – £14 billion

· Upgrading distribution networks – £20 billion

A total of £101 billion. It is possible that costs may start to subside from this peak at some point in the distant future, but the damage will be done by then.

Proponents of Net Zero often try to deflect attention from the issue of cost by claims that millions of green jobs will be created and that the economy will somehow grow because of Net Zero.

However, the hundreds of thousands of green jobs long promised have never materialised; the number of jobs in the renewable sector are no more than tens of thousands, many less of course than the jobs that have been lost to the UK because of high energy prices over the years.

Moreover, their claim defies the laws of economics. Jobs that create no extra value and rely on subsidies and government diktat simply drain money and resources from the productive economy. It’s the old “Green Door” theory – pass a law requiring every home to have their doors painted green, and you create work for decorators; but homeowners then have less money to spend on other goods and services.

Whether it’s electricity generation, transport or heating, the solutions demanded by Net Zero are more expensive and less efficient than existing ones. No economy can grow by promoting and subsidising inefficient alternatives.

Worse still, the threat to British industry and jobs from Net Zero is a very real one. This is one cost that is impossible to measure.

This exercise is, by definition, broadbrush. But it is all founded on officially sourced data and analysis and based on sound principles. Maybe some new technology will come along eventually or maybe the cost of renewable energy will tumble.

But where we stand today, the cost of transitioning to Net Zero will within a few years cripple the UK economy.