Britain’s energy-related spending could fall from around 10% of GDP in 2025 to between 5% and 6% by mid-century, according to an assessment from the National Energy System Operator (NESO) on the illustrative costs of its Future Energy Scenarios 2025.
The FES 2025 report, published in July, outlines three decarbonisation pathways featuring different roles for electrification, hydrogen, bioenergy and consumer participation. NESO said the cost assessment is intended to help government and industry evaluate the implications of each pathway.
The operator said that despite rising energy consumption driven by population growth, higher economic output and increased demand from data centres, energy’s share of GDP is projected to decline. NESO also noted a significant reduction in vulnerability to fossil fuel price swings by 2050. It said the 2022 energy crisis resulted in additional costs equal to 1.8% of GDP compared with pre-crisis years, while a similar shock in the report’s Holistic Transition pathway would raise 2050 energy costs by 0.3% of GDP.
The analysis points to a long-term shift away from imported fuels toward investment in domestic renewable generation, network infrastructure and more efficient electric heating systems. When carbon costs are included, the Holistic Transition pathway delivers the lowest system cost between 2025 and 2050. Excluding carbon costs makes the Falling Behind scenario cheaper by roughly 0.4% of GDP a year on average over the same period, the report said.
Claire Dykta, NESO’s director of strategy and policy, said modelling long-term energy costs remains uncertain but the trends are clear. “Projecting future energy costs is notoriously difficult, but our analysis suggests that Britain could halve the share of spending related to energy by 2050,” she said. Dykta added that the country would also be “less exposed to energy price volatility under a decarbonised energy system, reducing the economic impact of a spike in prices as we saw in 2022.”
She said the pathways offer insights that may support long-term planning and policymaking, adding that NESO has “identified scope for costs to be lower than what we have modelled.”
