UK admits costs of renewable technologies are pricier than fossil fuel

UK government officials have subtly conceded that the cost of renewable and other low-carbon technologies essential for the rapid transition to net zero is higher than that of using fossil fuels. This admission comes as an unwelcome one, as it has indirectly contributed to escalating energy bills for households throughout the nation.

Despite this revelation, Labour ministers are predicted to aggressively promote the expansion of green technologies as a means to reduce costs. The impending announcement of the UK’s industrial strategy by the Treasury and Department for Business and Trade is expected to underscore plans to decrease energy expenditures.

The strategic blueprint for enhancing the economy is set to highlight plans to reduce energy costs. With a budget increase of 16 per cent, The Department for Energy Security and Net Zero (DESNZ) is slated to allocate more funding towards nuclear power and clean energy. The ultimate goal of these efforts is to almost entirely eliminate the use of fossil fuels from UK electricity production by 2030.

Government officials, working under energy secretary Ed Miliband, have informed the Committee of Public Accounts that electricity prices have risen as a result of the costs associated with employing “low carbon technologies”. This is contrary to previous assertions linking the development of green technology to more affordable energy bills.

The admission was made in the minutes of a PAC report, which is publicly accessible online. The document outlines the government’s responses to recommendations made on energy policy. It highlights the fact that high residential electricity prices in the UK are not a reflection of the “cheaper wholesale price of clean energy”.

The government’s response also stated that “Low carbon technologies can be more expensive to run than fossil-fuel powered alternatives.” It is therefore critical to address the price disparity between electricity and gas to make it more appealing for consumers to install clean technologies such as heat pumps.

Earlier this year, it was also admitted that net zero policies would cause energy bills to rise in the “short to medium term”. This information was first reported in the Telegraph. Data released in March showed that standard electricity bills reached £1,067 last year compared to £814 for gas. This means the average energy bills were £1,881 in 2024.

There are differing opinions on the impact of renewable energy costs. Some experts like Oxford University’s Professor Dieter Helm believe that estimates have historically overlooked the cost of preventing issues related to unreliable weather. Others, such as Keith Bell from the University of Strathclyde, argue that a power system “dominated by renewables” could help to reduce costs overall.

Bank of England deputy governor Sarah Breeden and others have warned that the cost of energy transition policies are causing Brits to pay more. One of the leading critics of the government’s ambition to decarbonise the energy grid is INEOS owner Sir Jim Ratcliffe, who believes that a “negative political attitude towards oil and gas” is threatening the “extinction” of major producers of goods in the UK.

Confederation of British Industry (CBI) chief executive Rain Newton-Smith recently urged ministers to find a way to protect firms from the costs of net zero policies.