With green subsidies now accounting for three quarters of the price of electricity, the cost of Net Zero to the public is much higher than politicians are willing to admit, say Professor Gordon Hughes and Dr Lee Moroney.
GORDON HUGHES AND LEE MORONEY
This is the 13th in a series of 13 articles challenging climate change orthodoxy commissioned by Professor Gwythian Prins. We will be publishing the articles at a rate of one a week (read the first article here, the second here, the third here, the fourth here, the fifth here, the sixth here, the seventh here, the eighth here, the ninth here, the 10th here the 11th here and the 12th here). The hope is that they can be collected into a book for Sixth Formers and university students.
Intermittent ‘renewable’ (solar and wind) electricity generation is a useful but niche technology, either for off-grid users or as a small portion of on-grid generation. However, British politicians have decreed its central role in an energy transition away from the sources of energy that fuelled our transformation from a remote outpost of Europe to a rich post-industrial economy. Since most renewable generation is highly capital-intensive as well as intermittent, this can only be achieved by taking vast sums of money from electricity consumers to build generation plants and a parallel electricity grid. Maintaining two grids – one reliable, the other not so reliable – is not only vastly expensive but it introduces the risk of major failures, as the near total-blackouts in Spain and Portugal in April 2025 and in Texas in February 2021 have illustrated.
The commitment to an energy transition has been supported, until recently, by most politicians from all the main political parties. However, as explained in other articles, notably by Frank and Prins, the political and bureaucratic elite has never attempted to assess whether the policies adopted were, in any sense, value for money. In this article we will examine the tangled web of subsidies for renewable generation and ask what we are getting from the huge sums involved.
Large scale subsidies for renewable generation were first introduced under the Renewables Obligation, which commenced in 2002. This required energy suppliers to source a minimum proportion of the electricity they supplied from accredited renewable generators whose output was awarded Renewable Obligation Certificates (ROCs). The original idea was that the value of ROCs would be market-driven with a cap (the ROC buyout price) to prevent excessive costs to consumers. After lobbying by renewable generators, the rules were changed to ensure that the buyout price is effectively a floor price with the consequence that the value of a ROC has more than doubled since 2002.
A major factor prompting the introduction and extension of the Renewables Obligation was a pair of EU Directives adopted in 2001 and 2009 under which indicative targets were set for electricity generation from renewable sources. Preceding concerns about climate change, the primary consideration behind the policy was the over-wrought belief that supplies of fossil fuels would rapidly decline and their prices escalate – the ‘peak oil’ hypothesis. To the extent that this was ever true for petroleum, it is patently wrong for other fossil fuels, especially coal and natural gas.
In the early 2000s, renewable generation was not expected to make a large contribution to meeting the UK’s target to reduce CO2 emissions under the 1997 Kyoto Protocol. That would be achieved by the so-called ‘dash for gas’: the large and rapid shift from coal to gas generation which followed the privatisation of the electricity sector in 1990. Even today, the case for renewable generation is made less on grounds of reducing CO2 emissions and more on grounds of energy security together with reducing exposure to European gas prices. Hence the oddly juxtaposed functions of the Department for Energy Security and Net Zero (DESNZ). This is odd because the title is an oxymoron: the more of the latter, the less of the former, also discussed in other articles too.
The Renewables Obligation became more complicated and expensive over time as the government tried to provide differential support for a variety of emerging technologies as well as to correct what was seen as the overly generous treatment of solar and onshore wind farms. As the scale of renewable generation increased after 2010, the scheme became increasingly painful for the coalition government from 2010 to 2015 and later the Conservative government. This was not only a consequence of its costs but a result of sharply conflicting political responses.
In much of rural England, there was – and still is – strong opposition to the development of solar and onshore wind farms. In Scotland, the devolved administration saw the scheme as a way of extracting money from electricity customers in the South of England. Even then, it resisted strongly all proposals under which Scottish generators would pay a higher proportion of the costs of developing the transmission network to handle the power from Scottish wind farms. In Northern Ireland, the scheme was seen by many politicians as a disguised form of farm support.
To simplify – and reduce – financial support for renewable generation as well as to shift the focus towards offshore wind, in 2015 the Conservative government announced that new accreditations under the Renewables Obligation would cease between 2016 and 2017, though a few projects were not completed until 2018. However, accredited generators will continue to receive support for 20 years with the last ROCs being earned in 2038, so the run-off costs for the scheme will continue to be high for at least a decade.
In place of the Renewables Obligation, new support arrangements took the form of guaranteed prices, under a contractual arrangement known as Contracts for Differences (CfDs). Apart from an initial round of projects awarded contracts at pre-determined prices, CfD contracts are awarded via a series of auction rounds, held initially at two-year intervals but now annually. Over time the contractual details and auctions have become increasingly complex as the government has sought to cap the total subsidies offered while increasing the amount of generating capacity contracted.
The financial model that has underpinned subsidies for large offshore wind farms has come under increasing stress during the 2020s. In 2023, the government received no CfD bids for offshore wind projects, though it had wanted to procure up to 8 GW of capacity. Bidders believed that the maximum guaranteed price was too low. The outcome was similar for an offshore auction in Germany in 2025.
Finally, in August 2025 Ørsted, the largest offshore operator in the UK, announced what is effectively a huge bailout by the Danish Government – its majority shareholder. The stated reason was the need to fund a large offshore wind farm in the US, but the offtake price for that wind farm is significantly higher than guaranteed prices for recent UK projects. If Ørsted is unable to finance a 900 MW wind farm in the US, there is little prospect of it raising the money that would be required to fulfil current plans for European offshore wind development, unless subsidies are greatly increased.
Some European countries, notably Germany, have learned that increasing the share of intermittent renewable generation – primarily solar and wind power – in total generation has a detrimental effect on the functioning of electricity markets. In 2025 the wholesale market price in Germany was negative for 570 hours in the year. During these periods, wind and solar generators are paying electricity consumers to use power rather than switching off generation. They can do this because they receive subsidies which outweigh the losses that they make on market transactions.
For some economists negative pricing is a sign that prices are working, encouraging consumers to switch consumption to periods when solar and wind generation is abundant. That logic might be sound if final consumption of electricity responded in any significant way to hourly price variations. However, evidence suggests that such responses are negligible. Negative prices are the perverse consequences of subsidies that encourage intermittent generators to supply electricity to the grid even when and where it has no market or social value.
The GB market is following the German pattern. In 2021 standard market index price was negative for 36 hours in the year, whereas in both 2024 and 2025 the market index price was negative for more than 240 hours per year. The breakdown in the operation of the wholesale market is accelerating and the proportion of hours in the year with surplus generation. The frequency of negative market prices is likely to exceed 10% in 2030.
In parallel with this change, the GB market has become heavily dependent on imports of power from France and other continental countries. Annual net imports to the GB market have risen steeply: from 1% to 16% of final demand. In 2024 the GB market was a net importer of power in 91% of hours. From being occasional, imports via interconnectors have become fundamental to meet GB electricity demand. The dependence on imports is likely to increase rather than decline up to 2030. Hence, in addition to the volatility of prices caused by domestic renewable generation, the GB market will be heavily exposed to price volatility in France and Germany caused by the variability in solar and wind generation in countries from Spain to Sweden.
DESNZ argues that large investment in intermittent renewable generation up to 2030 will reduce the GB market’s exposure to gas prices. This claim is at odds with our analysis, which implies that some gas generation will be required for about 50% of hours in 2030 and more than 8 GW of gas generation for 27% of hours. Even for periods when the required level of gas generation is very low or zero, all the policy will have achieved is to substitute dependence on French and German market prices for gas prices. In all this there is an obvious – and rising – risk to security of supply: the opposite of the claimed objective.
Over two decades from 2005 to 2025, the UK has provided subsidies of £274 billion (at 2025 prices) to support electricity generation from ‘renewable’ sources. These subsidies can be split between direct and indirect subsidies.
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(UKR)