From NOT A LOT OF PEOPLE KNOW THAT
By Paul Homewood
Time to take an in depth look at what the Budget had to say about Net Zero costs. Most figures are from the OBR.
First off, Environmental Levies, which are in essence subsidies for renewable energy, direct and indirect, added onto our energy bills:
| 4.20 Environmental levies | |||||||
| £ billion | |||||||
| Outturn | Forecast | ||||||
| 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | 2030-31 | 2031-32 | |
| Renewables obligation | 8.0 | 8.5 | 6.6 | 6.7 | 6.6 | 6.4 | 6.0 |
| Contracts for difference | 3.0 | 1.1 | 1.5 | 3.2 | 4.0 | 4.1 | 4.2 |
| Capacity market1 | 0.0 | 2.8 | 3.6 | 3.7 | 2.9 | 3.0 | 3.7 |
| Green gas levy | 0.1 | 0.1 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 |
| Warm home discount | 0.8 | 1.2 | 1.0 | 1.0 | 1.0 | 1.0 | 0.0 |
| Sizewell C RAB levy1 | 0.0 | 0.7 | 0.9 | 1.3 | 1.4 | 1.6 | 1.8 |
| Feed-in tariffs | 1.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Environmental levies | 13.7 | 14.3 | 13.7 | 16.1 | 16.0 | 16.2 | 16.0 |
| Memo: Expenditure on renewable heat incentive (RHI) | 1.2 | 1.3 | 1.3 | 1.3 | 1.3 | 1.4 | 1.4 |
| Note: The ‘Environmental levies’ line above is consistent with the ‘Environmental levies’ line in Table A.5 of the October 2026 Economic and fiscal outlook. | |||||||
| 1 The ONS have yet to include capacity market auctions and the Sizewell C RAB charge in their outturn numbers. If they were included, they would have been £1.6 billion and £0.5 billion respectively in 2025-26. | |||||||
| 2 The ONS have recently included feed-in tariffs in their outturn numbers, forecast data will be included in our next Economic and fiscal outlook. | |||||||
https://obr.uk/efo/economic-and-fiscal-outlook-october-2026/
CfD subsidies fall sharply this year and next. This is because of higher electricity wholesale market prices caused by high gas prices. CfD subsidies top the market price up to the contracted strike price – the higher the market price, the lower the top up.
What is notable though is that even at currently inflated market prices, renewable energy is still more expensive than the gas power, which tends to set the market.
The OBR works on the assumption of market prices of £117/MWh this year and £84/MWh next, before falling back to historically normal levels. Of course, it all depends on what happens in the Middle East.
Note also that the OBR have shown Outturn costs in 2025/26 for Feed-In Tariffs this time. These have been excluded in recent years for no good reason. There is still nothing in the forecast, even though they continue to run at similar levels.
I have updated the OBR table, adding in other notable levies on energy bills resulting from climate policy decisions, which are either included elsewhere by the OBR, or independently estimated by NESO (System Balancing costs):
| 4.20 Environmental levies | |||||||
| £ billion | |||||||
| Outturn | Forecast | ||||||
| 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | 2030-31 | 2031-32 | |
| Renewables obligation | 8.0 | 8.5 | 6.6 | 6.7 | 6.6 | 6.4 | 6.0 |
| Contracts for difference | 3.0 | 1.1 | 1.5 | 3.2 | 4.0 | 4.1 | 4.2 |
| Capacity market | 1.6 | 2.8 | 3.6 | 3.7 | 2.9 | 3.0 | 3.7 |
| Green gas levy | 0.1 | 0.1 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 |
| Warm Home Discount | 0.8 | 1.2 | 1.0 | 1.0 | 1.0 | 1.0 | 0.0 |
| Sizewell C RAB levy | 0.5 | 0.7 | 0.9 | 1.3 | 1.4 | 1.6 | 1.8 |
| Environmental levies | 14.0 | 14.3 | 13.7 | 16.1 | 16.0 | 16.2 | 16.0 |
| Memo: Renewable Heat Incentive | 1.2 | 1.3 | 1.3 | 1.3 | 1.3 | 1.4 | 1.4 |
| Memo: Feed in Tariffs | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| Memo: Climate Change Levy | 1.8 | 1.8 | 1.7 | 1.5 | 1.5 | 1.6 | 1.6 |
| Memo: ETS (Carbon Tax) | 2.9 | 2.8 | 2.6 | 2.2 | 2.1 | 2.0 | 2.0 |
| Memo: System Balancing | 4.3 | 4.6 | 3.4 | 4.0 | 4.8 | 7.7 | 3.4 |
| Total | 26.0 | 26.6 | 24.6 | 26.9 | 27.5 | 30.7 | 26.3 |
I have assumed that Feed-In Tariffs continue at £1.8bn a year. Both the CCL and ETS are directly lifted from the OBR Table 4.8.
RHI costs are, of course, paid out of general taxation.
The bottom line (literally!) is that for the six year period shown, the overall bill adds up to £188 billion.
But the cost of decarbonising the grid does not even stop there, as it does not include the £80 billion cost of grid upgrades already identified by OFGEM as needed by 2030.
DESNZ
The OBR has also published the Departmental Spending plans:
As far as DESNZ is concerned, the annual budget for Resource Spending (RDEL) runs at about £2 billion a year – this is basically for operational costs. Most of this could be saved tomorrow if the Department was shut down and its activities taken over by the Business Department.
But much more significant is the Capital Spend (CDEL), with a budget spend of £36.1 billion between now and 2029/30. A lot of this will be wasted on uneconomic carbon capture and hydrogen schemes.
Who needs hydrogen, when it seems we have money to burn?
