An Institute for Fiscal Studies (IFS) report notes that continuing to push for rapid decarbonisation does risk further increasing high electricity costs, but the dramatic fall in the cost of renewables has made the effect of decarbonisation on long-run energy costs difficult to predict.

Over the last ten years, the UK has moved from being around the average of advanced economies to having some of the highest electricity prices.

Confusingly, politicians seem to offer contradictory solutions, with some arguing that the answer to high prices is to continue rapid investment in renewable power, others that we should instead accept a grid with more power generated by fossil-fuel-fired power plants, and a third that the UK should extract fossil fuels and sell them to fund renewable investment (an approach Norway has taken).

The IFS report pins the causes of high prices (a 175 per cent commercial increase since 2010) on international gas prices, increases in carbon taxes on fossil fuel generators and the scale of support for low-carbon generators and home retrofit schemes, the costs of which were passed on to electricity prices.

Taxes and levies (excluding VAT) grew by 59 per cent in real terms between 2017 and 2025 and made up 23 per cent of an average household’s electricity bill in 2025, though since then the Government has taken significant steps to reduce these costs.

So, you might think slowing down is the answer. Not so fast, it might be, but it might not. Renewable plants built today require lower subsidies than those built in the 2000s and 2010s. Forecasts from government bodies suggest that achieving net-zero by 2050 would modestly increase the overall costs of the energy system by 2050 compared with making less ambitious emissions reductions. The forecast costs associated with decarbonising electricity are front-loaded, rising into the 2030s before lower day-to-day costs are realised through the 2040s. However, these projections are highly uncertain and depend on the future evolution of, among other things, fossil fuel prices, technological developments and interest rates.

The short-term political cycle may have an impact too. At the moment, the costs of upgrading and operating the electricity grid are entering a “crunch period of steep increases”. Annual spending on grid upgrades is forecast to more than double in real terms by the end of the decade, largely in order to accommodate more renewables feeding into the grid.

It is a fine balance, with imperfect access to information, and yet decisions will need to be made, and certainly is not in abundance, despite Ed Miliband, in one of the worst choices of verbs, saying in 2024 that he wanted to “turbocharge” the net-zero drive and decarbonise by 2030. A turbocharger only works with burning fossil fuels, so an odd choice of words indeed.

The IFS believes that reform of the taxation and levies is an important step in making the UK’s electricity system fit for purpose, as would allowing time shifting of pricing, concluding: “The importance of electricity prices for the UK’s economy is set to grow substantially in the coming years. Swift action in the context of a long-term plan could yield significant benefits.”

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