More muddled logic and misrepresentation to the House of Lords on the cost of climate action

Bob Ward exposes further inaccuracies about the UK’s climate policy propounded by Lord Lilley and Lord Frost in a recent Lords debate.
Last month I wrote to Lord Lilley to challenge the misinformation he had promoted in Parliament, ahead of his debate on the ‘Impact of the government’s climate policies on jobs, growth and prosperity’ held in the House Lords on 24 October 2024.
Unfortunately, but perhaps predictably, Lord Lilley ignored my advice and instead made several false claims during his contributions to the debate.
Misrepresenting the Climate Change Committee’s work on costing net zero
For instance, in his opening statement, Lord Lilley claimed that the Climate Change Committee had not calculated the size of the investments required by the UK to achieve net zero emissions of greenhouse gases by 2050. He said: “It even spent large sums of taxpayers’ money resisting a freedom of information request for details of its forecast that net zero would cost the nation 1% to 2% of GDP by 2050. Many assumed that this was the cost of getting to net zero but, actually, this is the cost we will face after 2050 once we have eliminated our emissions. The CCC has not calculated the cost of getting there; maybe its forecasting instrument is like one of those telescopes that can focus with great clarity on distant objects but renders anything near at hand a blurred and fuzzy image.”
This assertion of a lack of costing is false. In fact, the Committee published in May 2019, ahead of Parliament’s vote on the adoption of the target of net zero emissions by 2050, details of its calculations of the resource costs, or investments, required. The CCC concluded at that point: “Taken together, and without assuming major cost breakthroughs akin to those seen for renewable power and batteries, we estimate an increased annual resource cost to the UK economy from reaching a net-zero GHG target that will rise to around 1–2% of GDP by 2050.”
The Office for Budget Responsibility in its Fiscal risks report in July 2021 examined the Committee’s calculations and concluded: “In the balanced pathway, the CCC estimates the total net cost of abatement across all sectors of the economy between 2020 to 2050 at £321 billion – with £1,312 billion of investment costs mostly offset by £991 billion of net operating savings.” It pointed out that “…the annualised cost in the balanced pathway stands at £16 billion in 2050, compared to an in-year saving of £19 billion in that year (thanks in large part to cheaper purchase and running costs for vehicles); similarly, the peak annualised cost is £19 billion and occurs towards the end of the period, in 2047, whereas the peak in-year cost is £42 billion and occurs much earlier, in 2027.”
This was not the only false claim by Lord Lilley about the Committee’s calculations. He also said: “The CCC’s reluctance to publish its workings was perhaps understandable given that it was so optimistic but, as it turns out, that is true of estimates produced by most public bodies. Sir Chris Llewellyn Smith – the lead author of the Royal Society’s report on the cost of large-scale electricity storage – recently pointed out that all official estimates were grossly optimistic, and he was honest enough to include his own, by the Royal Society.”
In fact, the Royal Society report on Large-scale electricity storage led by Sir Christopher Llewellyn Smith did not examine the CCC’s calculations of the cost of reaching net zero. Indeed, it only considered a future in which all electricity generation is provided by wind and solar, with hydrogen for storage, whereas the balanced pathway scenario in the Committee’s 2019 report included a significant contribution from gas-fired power stations equipped with carbon capture and storage technology. Instead, the Royal Society report included comments on the assumptions contained in a report published by the Committee in March 2023 on Delivering a reliable decarbonised power system. Sir Christopher was quoted by The Sunday Telegraph on 21 January 2024 questioning the assumptions about the number of windless days made in the Committee’s March 2023 report. Chris Stark, chief executive of the Committee at that time, rebutted on X the newspaper’s presentation of Sir Christopher’s comments. But Lord Lilley’s statements in the House of Lords debate exposed his lack of understanding and muddled logic about the Committee’s work.
Confused – and confusing – about renewables
Mr Lilley also showed confusion about the relative costs of electricity generated by renewables and fossil fuels. He stated during the debate: “The Secretary of State assured us last month that, on the basis of recent auctions, renewables are the cheapest form of power to build and operate. Unfortunately, that is simply not true. The latest auction price for offshore wind was £82 per megawatt hour in today’s money, whereas his own department’s figures –for reference, on page 24 of the Electricity Generation Costs 2023 document – put the cost to build and operate a new gas plant at less than £60 per megawatt hour.”
It is true that the sixth allocation round for renewables, the results of which were announced in September 2024, awarded contracts for almost 3.4 gigawatts of new offshore wind for delivery in 2028–29 at a strike price of £58.87 per megawatt hour in 2012 prices, or about £82 per megawatt hour in current prices. For comparison, the latest figures published by the energy regulator Ofgem show that the weekly average price for electricity forward contracts was £88.75 per megawatt hour at the end of August 2024, having been above £100 per megawatt hour between October 2021 and November 2023, peaking at £511.20 per megawatt hour in August 2022.
Lord Lilley misrepresented the figures published in the report on Electricity Generation Costs 2023, page 24 of which shows that the levelised cost, in real 2021 prices, of electricity generation for a combined cycle gas turbine Class H power station, commissioned in 2025, would be £114 per megawatt hour, compared with £44 per megawatt hour for offshore wind.
Lord Lilley also made false statements claiming that electricity prices are high because of renewables. He said: “I hope that wind power, in particular, because we have lots of it, will one day be cheaper than fossil fuels, but it patently is not yet. If wind and solar are cheaper, why have our electricity prices doubled as they have replaced fossil fuels? If renewables are cheaper, why is our electricity more expensive than in other European countries, which have less than us? If renewables are cheaper, why do they need subsidy?”
Ignoring the significance of wholesale gas prices
Lord Frost also made similarly inaccurate and misleading comments during his contribution to the same debate. He said: “A child can see, surely, that it is not cheaper to build a renewables grid, plus all the back-up, than just to build effective back-up and forget about the renewables.”
In fact, it is the wholesale cost of natural gas that is responsible for the high price of electricity. The most recent statistics published by the Department for Energy Security and Net Zero show that the UK has the highest electricity prices for both domestic and industrial consumers compared with many other countries. However, the UK does not have the highest prices for natural gas for domestic and industrial consumers. As several analysts have pointed out, the explanation for this is that the wholesale price of natural gas is higher than for renewables, and usually sets the marginal price for electricity in the UK, far more often than in other countries where the marginal price is set more frequently by sources that are cheaper than natural gas. An international study published in the journal Energy Reports in November 2023 found that natural gas set the price of electricity 97 per cent of the time in Great Britain in 2021, more than in any other country.
In addition, the exposure of UK households and businesses to the volatility of international market prices for natural gas led to the energy crisis following Russia’s invasion of Ukraine. Both natural gas and electricity prices rose steeply and required the Government to intervene to protect consumers. The latest analysis by the Office for Budget Responsibility published in its Forecast evaluation report in October 2023 indicated that the Government spent £56.2 billion in 2022–23 on energy support policies, offset by £5.1 billion in revenue from windfall taxes. The net expenditure was equivalent to about 2 per cent of UK GDP.
Unfortunately, the misinformation promoted by Lord Lilley and Lord Frost is likely to be repeated on 14 November when Lord Frost leads a debate on the ‘Cost of renewable energy and its effect on energy costs in the UK’.