Is net zero to blame for rising energy prices?

In recent months, the debate about whether the push for net-zero is driving high energy prices has heated up. Critics claim that renewables are making grids unreliable and making energy unaffordable. Net zero advocates counter that solar and wind are now the cheapest forms of power and provide much needed capacity to the grid. Both sides miss part of the picture. The truth is that fossil fuels remain the main driver of volatility, but building a 21st century energy system does demand investment.

Through our work with clients around the world, we often encounter misconceptions about the energy transition. These myths lead to an underestimation of the risks of fossil fuel dependence and overlook the opportunities of clean energy. In this analysis, we provide an evidenced-based approach to the energy transition and what it means for the future of energy prices.

Fossil fuels drive volatility, not net zero 

When household bills spiked across Europe in 2022, some were quick to blame renewable policies. The real culprit was fossil fuel dependence. Following Russia’s invasion of Ukraine, wholesale gas prices in Europe surged to more than 10 times their 2019 average. The International Energy Agency (IEA) estimated that the gas crisis added €400 billion to European household energy costs in 2022. 

This was not the result of solar panels or wind farms, but of overreliance on gas imports. Countries with more diverse electricity mixes fared better. France, where nuclear provides nearly 70% of the nation’s electricity, consistently recorded lower retail power prices than the UK or Germany. The relationship between the energy source and electricity prices makes clear that volatile fossil fuel demand and geopolitical crises are the culprits destabilizing energy markets. 

Renewables are cheap, but grids need investment 

It is true that renewable energy has become the lowest-cost source of new power. The cost of solar has fallen by nearly 90% since 2010, while onshore wind is down by over 70%. In 2023 and 2024, renewables accounted for 90% of new global power capacity additions. 

Yet the claim that renewables alone will deliver cheaper bills overnight is misleading. While sunlight and wind have no fuel cost, the infrastructure to capture, transmit, and store that energy is capital-intensive. The European Commission estimates that €584 billion will be needed by 2030 to modernize grids for renewable integration. Globally, clean energy investment must rise to $4.5 trillion annually by the early 2030s to stay on track for net zero. 

These upfront costs explain why governments often use long-term “strike price” contracts to guarantee future returns for wind or solar developers. Consumers may initially see higher tariffs, but the long-term benefit is cheaper, more stable energy. It is not unlike buying a house: the mortgage is a burden, but once paid off, the cost of living falls dramatically compared with renting forever. 

The hidden costs of fossil fuel dependence 

The idea that sticking with fossil fuels avoids these expenses is a false choice. Oil and gas come with their own high and recurring costs. Power plants must be built and maintained, fuel extracted and transported, and prices remain hostage to global shocks. Small shifts in demand can trigger massive price swings. During the early months of COVID-19, oil futures even went negative for the first time in history. 

Oxford University calculated that reaching net zero by 2050 would avoid $12 trillion in fossil fuel spending between now and mid-century. That represents both a climate win and a significant economic benefit. 

Storage and stability: the next frontier 

One valid criticism of renewables is intermittency. The sun does not always shine and the wind does not always blow. That means storage must play a central role in a renewable-dominated system. Encouragingly, battery prices have already fallen more than 90% since 2010, and global grid-scale storage is forecast to grow 15-fold from 2023 to 2030. 

Other forms of storage, such as pumped hydro, as well as complementary zero-carbon baseload sources like nuclear, will be crucial to keeping the lights on during demand spikes or weather disruptions. Better storage and more distributed grids ultimately mean less volatility and lower costs. 

Energy prices are a policy choice 

Perhaps the most overlooked factor is the role of policy. Energy bills reflect far more than generation costs. Taxes, subsidies, price caps, and long-term contracts all shape what households and businesses pay. The UK’s link between wholesale gas and electricity prices, for instance, has inflated bills even as renewables have become a bigger part of the energy mix. 

Policymakers face a balancing act. Subsidize fossil fuels, and volatility persists. Under-invest in renewables, and the transition stalls. Overcharge consumers, and public support for climate policy erodes, as seen in France’s 2018 Yellow Vest protests. The challenge is to spread the costs of grid modernization fairly while ensuring affordable access to power. 

Building a 21st century energy system 

Most of today’s energy infrastructure in advanced economies was built in the mid-20th century. It was not designed for data centers, electric vehicles, or distributed solar. As demand rises and climate targets tighten, the case for investment is unavoidable. The question is not whether we pay, but how we pay. 

The net zero push is not what is driving energy bills higher. Fossil fuel volatility is. At the same time, creating a clean, stable, and secure energy system requires upfront spending. Done right, that investment pays back in lower fossil fuel imports, greater energy independence, and a grid fit for the 21st century. 

In the long run, net zero is not a cost driver but a cost saver. The real risk lies in delays and fossil fuel dependency. We hope this analysis helps leaders and teams cut through the myths around energy prices and make more informed decisions about the transition ahead.

This article is also published on Substack. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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