The UK's electricity system costs are set to more than double by 2030, adding the equivalent of £700 per household even if gas prices remain the same, according to a new post published by the Institute of Economic Affairs.

Writing for the IEA’s Substack, David Turver finds that total subsidies and grid integration costs — including Contracts for Difference, the Renewables Obligation, capacity market payments, grid balancing and transmission network costs — will rise from £19.8 billion in 2024/25 to £40.1 billion in 2030/31 on current government plans. Most of the increase is driven not by the cost of generating renewable electricity, but by the ballooning overhead costs of integrating intermittent wind and solar into the grid.

The grid integration bill dwarfs the cost of gas

Transmission network costs alone — the infrastructure required to connect remote wind and solar farms to centres of demand — are forecast to rise from £4.2 billion in 2024/25 to £13.3 billion in 2030/31. Grid balancing costs are set to rise from £2.5 billion to £7.3 billion over the same period. The paper notes that the forecast increase in transmission costs is actually larger than the increase in balancing costs the investment is supposed to mitigate. By contrast, the total cost of gas used for electricity generation in 2025 was approximately £5.3 billion — relatively trivial compared to the full costs of the renewables system built to replace it.

Senior energy industry figures have already conceded the point. When giving evidence to the Energy Security and Net Zero Select Committee, the chief executive of E.On UK said that even if wholesale prices fell to zero, bills would remain at current levels due to rising non-commodity costs. The paper's analysis confirms this: the Government's own briefing notes to the King's Speech effectively acknowledge that bills will rise before 2030, with any savings not materialising until after that date and then only reaching £20–40 per household annually by 2040.

Opposition proposals: welcome but insufficient

Turver assesses the potential impact of proposals from the Conservatives and Reform UK to bring energy costs down, including cancelling AR7 offshore wind contracts, abolishing the Renewables Obligation early and eliminating carbon taxes on wholesale electricity. These measures, if fully implemented in time, could reduce costs by approximately £12.1 billion per year from 2029/30. However, because the underlying trajectory of cost increases is so steep, electricity system costs would still be £3.2 billion above the 2024/25 baseline in 2029/30 and £8.2 billion above it in 2030/31.

He concludes that drastic further action — well beyond anything currently proposed by any opposition party — would be required to bring UK electricity costs back to levels consistent with a competitive economy.

The UK already has the most expensive industrial electricity in the developed world, and official forecasts show it is going to get significantly worse. The idea that building more wind and solar will bring bills down is just wrong. Grid integration costs alone are set to rise by £17 billion by 2030, dwarfing any savings from lower gas prices.

The opposition proposals to scrap AR7, end the Renewables Obligation and abolish carbon taxes are welcome, but they do not go nearly far enough. Even if every one of those pledges were delivered in full, electricity system costs would still be £8.2 billion above today's levels by 2030. Drastic action — well beyond anything currently on the table — is the only way to avert a slow-motion catastrophe for British industry and households alike.