A new study from the UK National Energy System Operator claims that, as a share of GDP, energy costs are set to fall from 10% of GDP today to 5-6% of GDP by 2050 if the transition to a low-carbon system is well-managed, based on NESO’s heavily renewable based Future Energy Scenarios. The new NESO study is quite a complex, looking to the significant change that is planned and what the costs would be. Perhaps unsuprisingly, there was some media confusion over what it was saying, with headlines asking ‘would net zero cost householders £500 p.a?’
So what does NESO actually say? While it accepted that there would be major costs, peaking at about £460bn by 2029 in some scenarios, it claimed that continuing as at present would also cost and not just in terms of climate impact. As Edie noted, the UK’s energy system is currently importing fossil fuels; some £50bn was spent in 2024, equivalent to 2% of GDP, with £27bn attributable to road fuel, the remainder being split evenly between gas for power generation and heating. And crucially, there will be saving from using cheaper renewables instead of increasingly expensive fossil fuel.
So, on balance, as Carbon Brief noted, change was needed and would be beneficial. And its costs could be minimized: NESO’s holistic transition scenario ‘would have the lowest cost over the next 25 years, saving £36bn a year – some 1% of GDP – compared to an alternative scenario that slows climate action’. However, NESO does also say, provocatively, that ignoring climate change would generate ‘savings’ of £14bn per year on average – some 0.4% of GDP.
It doesn’t recommend that, but Reform UK does! And although the public opinion polls show that renewables are still getting overwhelming backing, much of the press in the UK seems to have bought increasingly into the belief that bills are being pushed up by renewables and that Net Zero is not needed: newspaper opposition to climate action and also to renewables has now overtaken support. That is tragic: as the UKERC has made clear, costly fossil gas is actually still the main driver of power prices in the UK- not renewables. That’s valuable and clear. But sadly, in the current political context, NESO’s analysis may be too long term and uncertain: NESO says the scenarios are ‘inevitably uncertain’. And they add ‘the potential range of costs due to these uncertainties is greater than the differences in costs between the FES 2025 pathways under fixed assumptions’
What is needed, and soon, are solid and convincing savings that show up in bills. Some are hopeful that the much delayed (and changed) Warm Home Plan will deliver that. The plan certainly seems to be trying to get to grips with the cost issues and fuel poverty. But given that its aim to accelerate uptake of solar panels, heat pumps, batteries & insulation in homes is quite wide-ranging, we will have to wait to see if the huge £15bn of public funding really will deliver significant energy and price savings. There’s talk of bills being cut by £500 or even £1k p.a.
However, some feel it puts too much emphasis on installing domestic heat pumps instead of insulation/energy saving. Properly installed and maintained electric Heat Pumps do use much less energy than gas boilers and are well suited to many houses, but Chairman of the National Warm Homes Council David Lennan said: ‘Installing heat pumps in cold, leaky houses doesn’t cut bills. It drives them up’. And he told Edie that ‘by sidelining insulation in favour of headline-grabbing technologies, the government is missing a once-in-a-generation opportunity to genuinely cut bills and future-proof Britain’s homes. Around 25% of heat is lost through an uninsulated or unprotected loft. Prioritising heat pumps before fixing that is like pouring hot water into a bucket with a hole in it.’
Dale Vince, CEO of energy company Ecotricity, praised the new funding for solar but criticised the high level of subsidy for heat pumps. He told the BBC ‘Solar panels give us the biggest bang for buck there is no doubt about that - cheapest to install and most productive in terms of bringing down energy bills. Heat pumps sit at the other end of that scale. We could put solar panels on 10 million rooftops or heat pumps in one million homes.’
According to the BBC, from a very different political perspective, Richard Tice, Reform deputy leader, strongly criticised the plan and said it was: ‘A scandalous waste of up to £15bn of taxpayers' cash primarily buying Chinese made solar panels, batteries and heat pumps, that is bad for British industry.’
For good or ill, hydrogen heating was seen off as not viable, but there are some other maybe less contentious bits of the plan. It looks to heat networks to play ‘a crucial role in lowering bills and delivering energy security to homes and businesses in densely populated urban areas, or in places near to accessible heat sources which can be tapped into – for example data centres and industrial sites which generate excess heat.’ It adds that ‘through their ability to generate heat more efficiently, and to operate flexibly through fuel-switching and thermal storage, heat networks are a vital part of taking a more efficient, whole-system approach to heat’.
Linking in to systems like this might be done on a collective basis, whereas the installation of most other low carbon tech is only available to those who are homeowners or in social housing- although the Warm Homes Plan also notes that from 2030, landlords will need to make sure rental properties have a minimum energy efficiency score of EPC C - up from E.
There were also hopes that the Warm Homes Plan would set out updated efficiency requirements for new builds - the Future Homes Standard - but it says these would be published ‘in the next few months’. It’s not clear if it will mandate battery use with PV solar, that earlier evidently being a cost issue. For the moment, the Warm Homes Plan just says that, in terms of building performance, ‘the government is overhauling the system of standards and protections for energy efficiency and solar and battery installations. This will ensure that consumers have confidence in measures to keep their homes warm and comfortable. We will strengthen and simplify the system to ensure that installations are high quality, supporting our aim to deliver year-round comfort in buildings across the UK’.
What does it all add to? The stated aim is to deliver major upgrades for consumers, and to that end a new Warm Homes Agency will be created to help them. There will be a simplified consumer protection system, impartial advice and clear information on home upgrades to consumers in partnership with the private sector and the third-party advice sector. Will that be enough and avoid some of the big problems the previous ECO scheme suffered from? Most hope the new approach can succeed, but not everyone thinks it will and already some worrying adjustments have had to be made to some parts of the new plan.
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