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

The Future Energy Scenarios 2025 (FES 2025) looks at the costs of meeting Britain's emissions targets, considering different mixes of electrification, hydrogen, bioenergy, and consumer engagement.

The modelling shows that Britain would be less affected by fossil-fuel price changes under net-zero pathways, and in all scenarios, costs shift from imported fossil fuels to domestic investment in clean electricity, networks, and efficient electric heating.

However different 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 per cent 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.

Claire Dykta, director of strategy and 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.”

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