44% of current UK energy bills is due to ‘net zero’

Written by Rhoda Wilson on May 27, 2025. Posted in Current News

Wholesale gas prices have fallen, resulting in the UK energy price cap being reduced by 7% last week.  In the following, David Turner provides an overview of what has changed in our energy bills since the price cap was introduced in January 2019

This move was broadly welcomed by various industry commentators such as Energy UK.

They reluctantly admitted that the reduction in the price cap was driven by falling gas prices.

However, they did insist that producing more of “our own clean power is the right way to stabilise bills over the long term.”

Note that they no longer claim that ‘renewables’ will cut bills; they only talk about stabilisation, presumably at today’s still elevated levels.

Ed Miliband welcomed the news but insisted that the only way we get long-term energy security is through cheap, clean, homegrown power. Maybe he means nuclear because, as we discussed last week, ‘renewables’ are much more expensive than gas.

He went on to say that we need to get off the rollercoaster of ‘fossil fuel’ markets.

This article looks at how our energy bills have changed since the introduction of the price cap in 2019 and what has changed since the last price cap announcement three months ago.

While gas and electricity costs have come down, the ‘net zero’-related charges on our energy bills have gone up.  “Net Zero costs have risen by £167 from October 2018 to £389 in the latest price cap,” he says.

Additionally, some ‘net zero’ related costs are hidden as they are included in other charges on our bills, such as ‘carbon’ tax and smart meters.

 “In the new price cap model, most of [the costs for smart meters] seem to have been rolled into Core Operating Costs. These other costs have gone up by £108 since 2018 to £223 today.”

Overall, excluding ‘carbon’ taxes and smart meters, 44 percent of the increase in our energy bills since 2018 has been due to the Government’s pursuit of ‘Net Zero’.

And we can expect ‘net zero’ costs to increase substantially as more intermittent ‘renewables’ are added to the network.  ‘Carbon’ taxes on fuels will also likely increase due to the UK re-joining the EU Emissions Trading Scheme, making gas more expensive for UK consumers.

Gas Bills

We will start with gas bills that have fallen 9.3 percent or £81 since the last price cap was announced. Of the (ex-VAT) total of £797, £408 is the actual price of gas, £351 is other costs such as the cost of the gas network, operation costs of the suppliers and profit.

Our gas bills also include £39 of ‘net zero’-related costs. These form part of the ‘Policy Costs’ in our gas bills and include the Energy Company Obligation (“ECO”), which is partly designed to reduce carbon dioxide emissions, and the Green Gas Levy that funds the production of biomethane.

Electricity Bills

Electricity bills (ex-VAT) have fallen by only 4.7 percent or £42 since the last price cap to £840. Note that the percentage reduction is only about half the reduction in our gas bills, which indicates that factors other than gas are having a significant impact on electricity bills.

We can now look at the details of how the different parts of our bill have changed over time, see Figure 1.

Up to March 2021, our electricity bills were quite stable at just over £500 per year. They then rose substantially through the energy crisis; most of that increase was driven by increases in the price of gas.

Since April 2024, electricity bills have been running in the range £780-£882 per year.  We can see that the fuel component has fallen dramatically but not down to pre-crisis levels. In fact, fuel cost £166 in 2018 and £267 in the latest price cap.

An element of this cost will include ‘carbon’ taxes on gas-fired generation that have risen recently – and are likely to rise even more as the UK re-joins the EU Emissions Trading Scheme.

This element of fuel cost should properly be included in ‘net zero’-related costs but I cannot find data to show what proportion of the fuel cost assumed by Ofgem is the ‘carbon’ tax.

The ‘net zero’-related and other components of electricity bills have continued to rise. We can zoom in on this in Figure 2 which zooms in on electricity bills excluding fuel costs.

‘Net Zero’ related costs include:

• Subsidies for ‘renewables’, which include Renewables Obligation Certificates (“ROC”), Contracts for Difference (“CfD”) and Feed-in-Tariffs (“FiT”).
• The Capacity Market required to back up intermittent ‘renewables’.
• Network Costs include grid balancing and extensions to the grid to connect remote ‘renewables’ installations.

‘Net Zero’ costs have risen by £167 from October 2018 to £389 in the latest price cap: ROC and FiT costs have remained stable, whereas the estimate for CfD costs has gone up from £2.3 billion to £2.5 billion.

When the gas price falls, the subsidies from CfDs increase so the generators maintain their fixed strike price.

Other costs include the balance of policy costs such as the Warm Home Discount, supplier operating costs, debt-related costs, ‘smart’ meters and an element of profit. It might be appropriate to include ‘smart’ meters in the ‘net zero’ category, but in the new price cap model, most of their costs seem to have been rolled into ‘Core Operating Costs’.

These other costs have gone up by £108 since 2018 to £223 today.

Some 44 percent of the increase can be attributed to ‘net zero’. And remember this probably understates the case, as we can no longer separate out the cost of ‘smart’ meters and also the change in fuel costs includes the increase in ‘carbon’ taxes.

Conclusions

The gas price certainly has an impact on our electricity bills. However, ‘net zero’ is having a much bigger impact. In fact, we can argue that ‘net zero’ has led to a smaller reduction in electricity bills than we might have expected from the fall in the gas price.

We can expect ‘net zero’ costs to increase substantially as more intermittent renewables are added to the network and the grid is expanded to accommodate them.

It certainly looks like Miliband wants to step off the roller coaster and board a rocket to the moon.

See more here expose-news.com

Some bold emphasis added

Header image: BBC

About the Author: David Turver is a British retired consultant, chief information officer and project management professional.  He publishes articles on a Substack page titled ‘Eigen Values’ where he writes about contentious issues such as climate, energy and net zero.  You can subscribe to and follow his Substack page HERE.

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