The Costs of Net Zero: Action vs Inaction

Reaching net zero in the energy network will cost the UK £3 trillion, according to a new cost analysis from National Grid ESO.

The costing applies to the four scenarios laid out by the operator in its Future Energy Scenarios, which was released in July. This outlined two scenarios – Consumer Transformation and System Transformation – where net zero was hit by 2050, one – Leading the Way – where net zero was hit by 2048, and finally one – Steady Progression – where the deadline was missed, and the UK still emitting 258 MtCO2e in 2050.

All four scenarios would have a similar cost according to the ESO, with just a 7% difference between the least and most expensive. The least expensive was Leading the Way, with net zero estimated to cost £2,820 billion, while Consumer Transformation was the most expensive at £3,020 billion.

Importantly, the Steady Progress scenario cost £2,930 billion, showing there is no real economic advantage to slower decarbonisation. The annual spend was also fairly similar between 2020 and 2050 for all four scenarios.

Net Zero Consumer Engagement

What did make a big difference was the levels of consumer engagement, with strategy manager Rob Gibson explaining that when consumers were “engaged, energy efficiency is pursued, and negative emissions are compensated” costs were lower.

“It’s the FES Leading the Way scenario which has the lowest overall cost, driven primarily by significant changes to transport and residential heating, with consumers adopting electric or autonomous cars for example, and negative carbon emissions from the power sector.”

Leading the Way

Within the Leading the Way scenario, there are a third fewer cars on the road by 2050 than in the Steady Progression scenario thanks to many homes opting to have one or no car in the last five years of the period. That would result in 20 million cars as opposed to 33 million cars, and this alone leads to a £27 billion annual cost reduction.

Lower carbon heating in both Consumer Transformation and Leading the Way both ultimately result in reduced heating costs, as despite the larger upfront costs of heat pumps and insulation they do ultimately cost less over their lifetimes than conventional heating. This could lead costs to fall by around £29 billion in residential heating between 2045 and 2050 in the Leading the Way scenario for example.

There is an increasing focus on decarbonising the heating sector, with incentives like the Green Homes Grant launched to make heat pumps more affordable while companies like Good Energy have opted to provide specific tariffs to mitigate the upfront costs.

Gibson cautions that costing the scenarios is challenging, and they do not provide the total cost of meeting net zero for the UK as the costing does not include those related to energy demands areas such as aviation, shipping, rail, agriculture and industrial and commercial heat demand.

However, these will allow for comparisons between the scenarios and remains a “hugely interesting project,” he finished.

“Even though this is not a total cost of Net Zero, it is evident from our analysis that the scenarios that deliver Net Zero do not result in a material increase in costs over the scenario where Net Zero is not met by 2050. Further the analysis reinforced the message that consumer engagement is critical to meeting Net Zero at lowest cost – from embracing energy efficiency technology such as heat pumps to the continued uptake in electric vehicles.”

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