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The Mind-Boggling Cost of Net Zero

Harry Wilkinson, The Conservative Woman

IS THE decision to reduce net carbon dioxide emissions to zero by 2050 one of extraordinary ambition or extreme foolhardiness? What we know for certain is that it isn’t an example of ‘evidence-based policymaking’. The Government and Parliament have given little thought to how it might be achieved, and how much it might cost.

The mind-boggling cost of Net Zero
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Rather than publish their own estimates, they have outsourced this crucial task to the Committee on Climate Change (CCC). This is the organisation chaired by Lord Deben, who himself receives vast sums from green business interests through his ‘sustainability consultancy’ Sancroft. Sancroft’s clients include Drax, the largest recipient of renewable energy subsidies in the UK. If that wasn’t bad enough, Drax have also effectively appointed their own ‘Head of Sustainability’ to the CCC. These are the very last people you would go to for an independent assessment.

The CCC have kindly informed Parliament that the cost of achieving net zero emissions will be between 1 per cent and 2 per cent of GDP in 2050, with a headline figure of £50 billion. The small print of their report describes how at least half of this cost is due to increasing the target from an 80 per cent to a 100 per cent reduction in emissions. Very quietly, MPs appear to have nodded through a doubling of the cost of British climate policy with no real debate and no objections.

The limited information they received was misleading. The CCC’s estimate was for only a single year, 2050, despite the fact that there would be enormous capital costs in the intervening years. When blogger Ben Pile asked for estimates for the years from 2020-2049, he was told that such estimates did not exist. 

Equally significantly, they would not explain their methodology. This means that it is impossible to say how reliable an estimate this is, or subject it to any scrutiny. The Government is therefore relying on an estimate that it can’t possibly explain or understand, because the CCC themselves cannot explain it.

Behind the scenes there are signs of private concern within Government that it will cost much more. Before they both left office, Philip Hammond wrote a letter to Theresa May warning that the Department for Business, Energy and Industrial Strategy (BEIS) had estimated the cost would be 40 per cent higher, at £70billion per annum. This would mean households paying an average of £2,400 every year between now and 2050. 

Unfortunately, BEIS has now gone all quiet, and the Government appears reluctant to admit that these calculations ever existed.

The GWPF was determined to get to the bottom of how much Net Zero might cost, so we commissioned some of the best in the business to apply their expertise to this important question. Their work has now been published in a selection of new reports. Unlike the CCC and the Government, our calculations are there for everyone to see, and we hope that they will trigger an important debate about the costs of Net Zero.

Michael Kelly is emeritus Prince Philip Professor of Technology at the University of Cambridge, and a fellow of both the Royal Society and the Royal Academy of Engineering. His report, Decarbonising Housing: The Net Zero Fantasylooks at data from pilot studies to refine his cost estimates of achieving an 80 per cent decarbonisation target through retrofitting existing homes. That is, to make them more energy efficient by improving insulation, draught-proofing, cladding etc.

The results are staggering, but not surprising to those familiar with the impossible economics of deep retrofits. Professor Kelly found that £2.1trillion would be required, or £75,000 per house. The findings are very much in line with those from the Energy Technologies Institute (ETI), which found that £2trillion would be required for the entire UK housing stock. A further £1.5trillion would be needed to decarbonise non-residential buildings, resulting in a total cost of £3.5trillion.

The other side of the coin is electricity. Not only is it proposed that the National Grid completely decarbonise, but it must also expand significantly to power the electrification of transport and heat. Both Dr Capell Aris and Colin Gibson have decades of experience in the power sector, and they have used a levelised cost of energy (LCOE) approach to calculate the additional costs of a renewables-based grid compared to one based on gas generation. LCOE can be thought of as the minimum constant prices at which electricity must be sold in order to break even over the lifetime of the project (in present value terms). 

Their analysis in The Future of GB Electricity Supply: Security, Cost and Emissions in a Net-zero Systemexplains that to deliver net zero carbon emissions you would have to build far more wind turbines than is necessary merely to cover peak energy demand. This is because wind cannot be relied upon to deliver power when it is needed. In this scenario, generation will also often exceed demand when it is windy, meaning that excess power cannot be used. The additional capital costs of building what is termed as overcapacity, and cost of paying wind turbines to switch off on windy days, entail a far more expensive system. In monetary terms, the cost is £1.4 trillion higher than in a scenario dominated by gas-fired power stations.

In theory, you could deliver net zero with a zero-carbon electric grid, and not have to bother about energy efficiency (albeit still making significant investments in heat pumps to replace gas boilers). In reality, a combination of approaches is needed to offset the price increases expected under electric heating systems that would otherwise make them even more unpalatable. Indeed, the National Grid assume reductions of 10-26 per cent in the demand for heat in their net zero compliant scenarios.

Andrew Montford has looked at both new papers in the round to calculate the total costs of reaching net zero. He concludes in £3 Trillion and Counting: Net Zero and the National Ruin that these costs would in all likelihood exceed £3 trillion once additional investments in decarbonising industry and transport were taken into account.

It is beyond belief that Boris Johnson, Dominic Cummings and indeed most Tory MPs are yet to realise that such costs are not going to go down well with voters. These large sums may sound theoretical, but they would impose a brutal form of green austerity upon the public. The Government must be forced to level with people about the significance of the intervention they are planning to undertake, and when they do so, they must surely realise that such a damaging policy is unconscionable.

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