Energy system costs are expected to total around £3 trillion over the next three decades according to new figures released by National Grid Electricity System Operator (ESO).
The ESO has published costings for its Future Energy Scenarios (FES) for 2020, which suggest the cheapest of the four scenarios would be Leading the Way – the one characterised by a mix of both electrified and hydrogen heating – at a cumulative total of £2,821 billion.
For comparison, the Steady Progression scenario, which is the only one of the four that is not aligned with the UK’s target to cut greenhouse gas emissions to net zero by 2050, is expected to result in a bill that is £100 billion higher at £2,927 billion.
The forecasts are almost exactly the same – £3,020 billion versus £3,019 billion – in the Consumer Transformation and System Transformation scenarios, which respectively see either electric heat pumps or hydrogen boilers take a more dominant position in domestic heating.
Total energy systems costs by 2050
The ESO said the figures give the net present value of total capital, operating and fuel costs in the energy sector out to 2050. It said they do not cover the costs of aviation, rail and shipping or commercial and industrial heating and do not represent the overall cost of achieving the net zero target.
Writing in a blog on the ESO’s website, the head of the project Rob Gibson explained: “The costs on their own are large but it’s important to put them into context. The energy system is vast and complex and the scale and importance of its operation means the costs involved are sizeable.
“Therefore, significant costs will be incurred across the energy system between now and 2050 in any event and the key insight we are providing here is enabling a comparison of what those costs might be under different assumptions, or in different scenarios.
“It’s also acknowledged that net zero could bring wider societal benefits, for instance to human health as a result of improved air quality and a better-protected natural environment. The Climate Change Committee outlined some of these opportunities and wider savings, including for instance by reducing hospital admissions and enabling people to be more productive.”
Annual energy system costs
The report said the 7 per cent difference between the cheapest and most expensive scenarios is “small when compared to the margin of error when producing these forecasts.” It noted that its forecasts for annual costs in all four scenarios are very similar up until the mid-2040s when they begin to fall in the Leading the Way scenario as the net zero target is achieved five years ahead of the deadline.
“The analysis indicates that costs are lower when consumers are engaged, energy efficiency is pursued, and negative emissions are compensated,” added Gibson.
“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.”