The Cost of Net Zero

• New analysis suggests gross costs of net zero could exceed even the highest official predictions of £7.6 trillion

• Official estimates of the cost of net zero are often driven by “fantasy assumptions”

• Public bodies have consistently underestimated the cost of renewables, heat pumps and electric vehicles, while assuming implausibly low borrowing costs

• New analysis warns that misleadingly low figures risk shutting down serious democratic debate over one of the most expensive policies in British history

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The true cost of the UK’s net zero commitment has been systematically understated, according to a major new briefing paper from the Institute of Economic Affairs.

In The Cost of Net Zero, energy analyst David Turver examines official costings from the Climate Change Committee (CCC), the National Energy System Operator (NESO), the Treasury and the Office for Budget Responsibility. He finds that headline figures have fallen dramatically not because net zero has become cheaper, but because public bodies have changed methodologies and relied on increasingly unrealistic assumptions.

The CCC now claims that achieving net zero between 2025 and 2050 will cost just £108 billion – down from earlier estimates of over £1 trillion. Turver shows this is done by moving the goalposts from measuring gross costs to comparing against a notional baseline scenario. It also relies on implausibly low projections for the cost of offshore wind, solar power, heat pumps and electric vehicles, alongside borrowing costs well below market rates.

By contrast, NESO’s own modelling implies gross cash costs of £7.6 trillion for the transition, or more than £9 trillion once the carbon costs of emissions are included. Even these figures, the paper argues, are likely to be underestimates given recent failures of offshore wind projects and rising financing costs.

The paper concludes that Britain has embarked on one of the most expensive economic transformations in its history without honest accounting or proper scrutiny. If net zero is to command lasting public support, Turver argues, voters must be told the true scale of the costs and trade-offs involved.

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Some of the overly optimistic assumptions made include:

- The CCC expect offshore wind to cost £1,500/kW of capacity for projects delivering in 2030. However, Hornsea 3 (2.9GW) expected to come online in 2028 is forecast to cost between £10 billion and £11billion, for a mid-point cost of £3,682/kW, more than double the CCC’s estimate.

- The CCC also expect solar power plants to cost £564/kW in 2025, falling to £403/kW by 2030. However, the recently delivered solar farms of Stokeford and Alfreton spent £952/kW and £995/kW, respectively, nearly double the CCC’s 2025 estimate and more than double their 2030 estimate.

- NESO calculate the cost of offshore wind as £70.10/MWh in 2025, falling to just £53.20/MWh in 2035. In the same 2025 prices, Hornsea 4 won a contract last year at £85/MWh, which was cancelled as uneconomic. Allocation Round 7 (AR7) is offering £118/MWh in September 2025 prices for index-linked 20-year contracts, some 121% above NESO’s estimate for 2035.

- NESO assume Floating Offshore wind will cost £109/MWh in 2035 despite contracts being awarded at £202/MWh in AR6 and £282/MWh being on offer in AR7. They also assume solar will cost just £31/MWh in 2035 despite AR6 contract awards at ~£72/MWh and £78/MWh being on offer in AR7.

- NESO assume the cost of capital for solar and onshore wind to be 5.0% and 5.2% respectively for projects delivering in 2035, which is below 30-year gilt yields around 5.3%.

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David Turver, author of the paper, said:

“The various public bodies responsible for working out the costs of net zero have not been entirely truthful in their analysis. They have made fantasy assumptions about the cost of renewables and low-carbon technologies. The true cost of net zero is much higher than we have been led to believe. If we are to have a serious debate about net zero, the various public bodies need to be more transparent and frankly more honest.”

The Rt Hon Lord Frost, Director General of the Institute of Economic Affairs said:

“Net Zero is already one of the most economically damaging policies in modern British history. We can now see it was sold to the public on the basis of fantasy numbers. This research shows that official bodies have consistently downplayed the true costs by relying on heroic assumptions about the cost of renewables, heat pumps, and electric vehicles, predicting future savings that bear little resemblance to reality. The whole of Net Zero badly needs a proper rethink before it kills off more of British industry and leaves British households permanently subject to unreliable supply and higher bills.”

The Rt Hon Claire Coutinho MP, Shadow Energy Secretary, said:

“It beggars belief that none of our ‘independent’ energy bodies can publish an accurate figure for what Net Zero is going to cost this country. Wildly optimistic assumptions and crippling groupthink in our institutions means we’re flying blind – and the result is the highest electricity prices in the world and our industry fleeing overseas.

“When I was Energy Secretary I had to pull teeth to make the Energy Department carry out an accurate costing of wind and solar – one which factors in all the extra costs of building the grid, paying wind farms to switch off when it’s too windy, and paying for gas backup for when it’s not windy enough. Ed Miliband has since cancelled that work, which tells you all you need to know about how little this Government cares about the cost of Net Zero.”

Andy Mayer, Energy Analyst at the Institute of Economic Affairs said:

“This paper cuts through the fog surrounding net zero costs. It shows that wildly optimistic assumptions and creative accounting have obscured serious economic scrutiny - and that the real price tag of the race to net zero is far higher than the public has been led to believe.”

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