Working paper
Pot-Zero 2025 Update: Reducing the Cost of Renewable Support to Consumers
04 August 2025
The UK Energy Research Centre welcomes today’s announcements laid out by Energy Secretary Ed Miliband that “double down” on the government’s clean energy mission. These include policies to de-link the price of electricity from the price of gas, unlock up to 10GW of renewable capacity on public land, and streamline planning and land access rules for renewables.
Since the war in Ukraine, UKERC has advocated for the delinking of electricity from the price of gas. Under the current marginal pricing system, electricity costs rise in lockstep with gas prices, even when much of that electricity comes from wind, solar or nuclear sources with far lower operating costs.
UKERC first proposed a ‘Pot-Zero’ Contract for Difference (CfD) in 2022. This would place the older renewable energy schemes that receive Renewables Obligation payments on the fixed price CfD that has been used for new renewables schemes since 2017. Taken together, RO renewable energy provides about 30% of the UK’s electricity.
In 2022, when gas prices were even higher than they have been recently, UKERC demonstrated that the policy could deliver consumer savings of up to £20bn, or £300 per household. Before the outbreak of hostilities in the Gulf, we showed savings in the range of £2-8 billion per year. Price increases at the onset of Epic Fury added a further £1.5-2.5bn per year.
The ‘wholesale price CfD’ announced by the government today stops short of the full Pot-Zero proposal, since it will leave the RO subsidy in place. This makes the potential savings smaller, but it will break the link with gas prices. The devil will be in the detail, but provided the majority of generators join the scheme, most of the UK’s power generation fleet will have a price that is not related to the global price of gas. Recent events demonstrate yet again the vulnerability of fossil fuel prices to geopolitical events that are impossible to predict.
In April 2022, UKERC published its first paper on a ‘Pot-Zero’ contract for difference (CfD) for legacy renewable and nuclear plants. The objective then was to provide a practical and implementable proposal to reduce electricity prices in the face of the war in Ukraine. Pot-Zero is also a means to delink power and gas prices by putting a larger share of total generation under a long-run fixed price that is independent of global gas prices. Our analysis then pointed to a prospective saving of up to £22bn, or £300 per household, based on 2022’s sky high wholesale gas and power prices.
Updated analysis undertaken in 2025 and prior to the upswing in gas prices pointed to savings ranging between £2bn and £8bn per year, depending on relative CfD and wholesale power prices. The recent increase in prices adds a further £1.5-2.5bn per year to these savings for as long as the high prices persist. Recent events demonstrate yet again the vulnerability of fossil fuel prices to geopolitical events that are hard or impossible to predict. In our 2025 update, we included a ‘high’ gas price scenario that is already out of date, and around 40 pence per therm below the current spot price.
Pot-Zero offers a number of benefits: