Why cheap power could matter more than clean power in the push for net zero

The issue is that while generating renewable electricity can be cheap, the system needed to deliver it is not. When I ask Sir Dieter Helm, professor of economic policy at Oxford University, for his definitive answer on the cost of renewables, he laughs.

“It all depends what you choose to measure,” he says. Sir Dieter says focusing only on the cost of generating electricity misses a larger issue: the cost of the system as a whole.

Electricity has to be available all the time — not just when the wind is blowing or the sun is shining. That means back-up generation, additional capacity and a more extensive network.

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Sir Dieter gives me a simplified example. The UK’s peak electricity demand is around 45 gigawatts (GW), he says. In the past, this could be met with roughly 60GW of capacity from coal, gas and nuclear power stations.

As the system shifts towards renewables, far more capacity is needed — not just wind and solar, but back-up for when they are not producing. In Sir Dieter’s estimate, the UK is moving towards something closer to 120GW. At the same time, the grid must also be expanded to carry electricity from offshore wind farms to where it is needed.

The exact figures are debated, but the direction is clear: partly because of renewables, the system is becoming larger, more complex and more expensive. Some of those costs are already showing up in bills. Expanding the grid — building new pylons and power lines — is pushing up network charges.

There are also “balancing costs”, including payments to wind farms to switch off when the system cannot absorb all the electricity they produce. And until recently, a subsidy scheme accounted for around 10% of the average household bill.