Net Zero will drive up energy bills again as the cost of upgrading the grid to cope with renewables increases, a report has warned.
Costs of handling wind and solar energy will leap from £44 per typical household to £104 by March 2031 – and could soar further if £70billion isn’t invested in the grid by then, the National Audit Office (NAO) warned.
It came as the cost of balancing the grid by switching wind off and gas on reached £1.9billion last year – a figure that could hit £8billion by 2030 without the investment. Many of the 80 grid upgrades needed for the 2030 clean power plan are at risk of not being completed, the NAO also warned.
But energy regulator Ofgem estimates billpayers will save £30 a year by the overall investment into the grid, compared to the wholesale costs of electricity and the ‘constraint’ payments used to balance the network if upgrades are not accelerated to cope with renewables.
In 2025/2026, consumers paid £1.9billion in these constraint payments, which are paid to generators to turn up or down their electricity to balance the grid.
Significant amounts of renewable electricity can enter the grid far from where it is used, such as from offshore wind farms, but cannot be sufficiently moved to where it is needed because of limits to grid capacity. So wind producers have to be paid to switch off while gas plants, whose costs are linked to global gas prices, are paid to generate electricity elsewhere instead.
Currently ‘clean power’, renewables and nuclear, make up 73 per cent of Great British electricity generation, and the Government has pledged to increase that to 95 per cent by the end of 2030.
But renewable electricity generation has expanded faster than the grid under successive governments, increasing constraint costs and the NAO warns these costs could rise to £7.8billion by 2031 if grid upgrades are not accelerated to match the clean power plan.
Net Zero will drive up energy bills again as the cost of upgrading the grid to cope with renewables increases, a report has warned
Upgrading the grid is also necessary for economic growth, to connect energy-intensive developments such as new housing and data centres, the report said.
But many of the 80 grid upgrades needed for the clean power plan are at risk of not being completed when they should have been, the NAO warned.
And there has been no significant acceleration in three schemes that required speeding up to meet the 2030 target, or a further eight projects which would be beneficial to limit constraint costs.
The report said most of the grid upgrades were chosen because they were already in development, and the Government has not demonstrated these projects represent the best way of achieving its objectives.
The National Energy System Operator (Neso), Ofgem and the Department for Energy Security and Net Zero (DESNZ) are working to speed up the delivery of grid upgrade projects, the report said.
But delivering all the upgrades by 2030 ‘will be very challenging’, with significant risks to planning, supply chain and system access risks, the NAO warned.
The watchdog is urging DESNZ, Neso and Ofgem to strengthen oversight of the upgrades, improve transparency over the cost and progress of each scheme and review options over what to do with new power generation projects that are due to connect to the grid before it is ready.
Tory energy spokesman Andrew Bowie said: ‘Labour rushed to hit arbitrary renewable targets without building the grid to carry the power, and taxpayers are now footing the bill twice over.’
And Sir Geoffrey Clifton-Brown, Public Accounts Committee chairman, said the grid was in ‘dire need’ of an upgrade.
‘Today’s NAO report highlights the scale of the challenge: up to £70billion of investment is needed by 2031, requiring transmission owners to quadruple annual investment spending,’ he said.
‘As one of our most important pieces of infrastructure, the grid must be capable of meeting rising demand, whether that is from new homes or data centres.
‘Years of underinvestment already cost consumers almost £2billion a year in payments to manage network constraints, which may rise to up to £8billion by 2030.
‘DESNZ, Ofgem and Neso must deliver critical projects on time and provide transparent reporting so Parliament and the public can hold them to account.’
A Neso spokesperson said: ‘Consumers benefit when generation, networks and future demand are planned together as part of a coordinated whole-system approach.
‘We are doing everything within our control to keep balancing costs down while maintaining security of supply and will continue working with Government, Ofgem and network companies on the strategic planning needed to support delivery across the system.’
An Ofgem spokesperson said: ‘A stronger grid will connect more home-grown renewable power, reduce costly constraints on the system and help shield consumers from volatile international gas prices.
‘That’s why we’ve introduced reforms to speed up critical infrastructure projects, unblock connection queues and strengthen incentives on network companies to deliver efficiently and on time.
‘Protecting consumers and driving down costs remains our priority. Funding is released in stages, costs are rigorously scrutinised and companies face financial penalties if they fail to deliver.’
