NESO publishes cost analysis of decarbonisation pathways

Our analysis of the Future Energy Scenarios 2025 (FES 2025) looks at the costs of three ways to meet Britain's emissions targets. These pathways use different mixes of electrification, hydrogen, bioenergy, and consumer engagement. They are not exact predictions but are meant to help with long-term planning.

The analysis shows that energy costs could drop from about 10% of GDP in 2025 to around 5-6% by 2050. This is despite higher energy demand due to population growth, increased GDP, and more energy-intensive sectors like data centres.

The modelling also shows that Britain would be less affected by fossil-fuel price changes under net-zero pathways. For example, during the 2022 energy crisis, fossil-fuel price shocks added costs equal to 1.8% of GDP. Under the FES25 Holistic Transition pathway, a similar price shock in 2050 would add just 0.3% of GDP. This shows the benefits of a decarbonised energy system.

In all scenarios, costs shift from imported fossil fuels to domestic investment in clean electricity, networks, and efficient electric heating. This investment not only reduces operating costs but also brings other benefits like local jobs, better air quality, and public health improvements.

The pathways show different cost trends. The Holistic Transition pathway is the cheapest from 2025 to 2050 when carbon costs are included. If carbon costs are excluded, the Falling Behind scenario seems cheaper, saving about 0.4% of GDP per year on average. However, this scenario would face higher long-term costs beyond 2050 and miss out on the benefits of early decarbonisation.

The report highlights that all cost comparisons are estimates and depend on technology costs, consumer behaviour, and policy assumptions. Still, the analysis provides valuable insights for strategic decision-making as Britain moves towards a cleaner, more resilient energy system.

Claire Dykta, Director of Strategy & Policy, said:

“Projecting future energy costs is very difficult, but our analysis suggests that Britain could halve energy spending by 2050. We would also be less affected by energy price changes under a decarbonised system, reducing the economic impact of price spikes like those in 2022. Our pathways are designed to help with strategic planning and policy development, and we see potential for costs to be even lower than our models suggest.”

Further details on each of the FES pathways are set out in today’s report and in the FES 2025 report.

 View the report