New analysis shows that backing innovation in key energy technologies could reduce the cost of reaching Net Zero in the UK by up to £348 billion by 2050 while supporting 470,000 jobs. Importantly, many of the solutions demonstrating greatest potential impact are already technologically proven but have yet to be deployed at scale. The challenge now is not invention, but scaling up these technologies rapidly so they deliver real-world impact.
Where innovation investment delivers greatest impact
The Energy Innovation Needs Assessments (EINAs), undertaken by a consortium led by the Carbon Trust, in partnership with University College London, Mott MacDonald and Pengwern Associates for the Department of Energy Security and Net Zero (DESNZ), provides the most comprehensive picture yet of how innovation in key energy technologies can bring down costs of the UK’s future energy system.
The EINAs examined three hypothetical scenarios for a Net Zero UK economy across 26 critical technologies, showing that high levels of innovation could cumulatively save £203-348 billion in UK energy system costs between 2025 and 2050, compared to a low innovation scenario. Energy system modelling identified four areas where innovation leads to the largest reductions in total energy system costs: air-source heat pumps, bioenergy with carbon capture and storage (BECCS), direct air carbon capture and storage (DACCS) and offshore wind.
Air-source heat pumps are the UK’s single largest energy innovation opportunity, offering £110 billion in potential cumulative system savings and £5.7 billion in gross value added (GVA) by 2050. Unlocking this potential requires coordinated progress to cut upfront and operational costs for consumers, develop workforce skills to scale installation and build a domestic supply chain.
BECCS and DACCS are vital for achieving negative emissions. High levels of innovation in these technologies offer £75 billion and £62 billion in cumulative system cost savings respectively, and up to £2.6 billion in GVA by 2050. The UK has significant potential for scale, with existing geological storage capacity, infrastructure and industrial clusters. However, commercial scale for these technologies still needs to be proven, with the availability of sustainable biomass presenting a constraint for BECCS alongside significant wider supply chain development needs for DACCS.
Offshore wind demonstrates the benefits of sustaining innovation in a more mature sector. With £41 billion in potential cumulative cost reductions and £4.9 billion in GVA by 2050, advances in foundation design, installation methods, grid integration and offshore monitoring and maintenance could all deliver major efficiency gains. The UK's early leadership in the sector positions it to capture disproportionate value from these advances, but supply chain constraints, skills shortages and complicated permitting and consenting processes all present barriers to scale.
Across the portfolio, innovation in technologies examined by the EINAs study could deliver 6-10% electricity transmission cost reductions in 2050, while innovation in modelled storage technologies could reduce annual electricity system costs by £2-5 billion by 2050. Deploying all technologies in scope could support around £19 billion in UK GVA in 2050 and 470,000 jobs, primarily resulting from innovation in carbon management, offshore renewables and heating.
Unlocking the next wave of energy innovation
Realising the future benefits of these innovations, and the wider technologies studied in the EINAs, should now be a key priority for the UK.
The DESNZ £1 billion Net Zero Innovation Portfolio (2021–2025) has demonstrated both the breadth and depth of technical capability across the UK’s energy innovation landscape, as detailed in the recent NZIP Impact Report. To date, NZIP has created 7,500 jobs and generated £917 million in investment from private, public and third sector investors; numbers set to grow over the coming years as technologies are deployed.
Building on this foundation, continued investment in energy innovation remains essential, both to progress emerging technologies and to reduce costs and risks as solutions move toward scale. At the same time, an increased parallel focus on creating the enabling conditions for these solutions to scale is needed.
Focussing innovation support where impact is greatest
Our consortium’s analysis across different Net Zero trajectories shows that supporting some energy innovations can deliver far greater returns on investment and/or emissions reduction than others. Innovation in one technology can also suppress the deployment need of another, or vice versa.
With constrained public budgets and pressing delivery timelines, innovation support can be targeted to high-return areas while considering whole-system effects. It is encouraging to see this reflected in DESNZ’s forthcoming Cleantech Innovation Challenges - announced in the Carbon Budget and Growth Delivery Plan 2025 - which will focus efforts on a smaller number of critical technologies and co-develop time-bound targets with industry, while removing barriers and creating the market-pull conditions needed for deployment. The Carbon Trust looks forward to working with DESNZ, industry and investors to support the development of these challenges over the coming months.
Financing the scale-up gap
Early-stage programmes have successfully advanced and de-risked many energy innovations with the greatest potential for future cost savings and emissions reductions. But the step from proven concept to larger-scale demonstration requires more financial support than grant funding alone can provide. For many of these technologies, first-of-a-kind demonstration projects need further multi-million-pound support before the private sector will back them.
This requires coordinated scale-up finance that can support larger, multi-year demonstration projects, absorb early project risk and create credible pathways towards commercial investors and long-term institutional finance. Without this, technically proven innovations risk being stranded before they can contribute meaningfully to Net Zero delivery, or unlock their full economic value.
Creating the demand signals needed for scale
Demonstrations and pilots alone cannot bring emerging technologies to market. Visible demand signals are essential to justify further deployment. Programmes led and managed by the Carbon Trust such as the DESNZ Industrial Energy Efficiency Accelerator (IEEA) and Offshore Wind Accelerator (OWA) demonstrate this approach in practice. These industry-led partnerships and consortia build on critical foundations laid by early-stage government innovation funding to jointly commission pilots, share technology development risk, and send credible market signals that accelerate technology development and cost reductions.
To realise the scale of the impact identified in the EINAs, further initiatives that are intentionally designed to convene and stimulate private-sector demand across highest-potential Net Zero technologies are now needed.
Addressing long-term barriers to deployment
Innovations can only be implemented at scale when wider market barriers are addressed in parallel with technology development. The EINAs identified supply chain challenges, skills shortages, and regulatory challenges as the most common barriers to technology scale-up. Crucially, these areas should be addressed while technologies are still being proven to avoid hitting roadblocks when attempting to scale.
Creating this enabling environment requires long-term planning and significant investment to support longer term pay-offs. Strategic investment in supply chain development and skills programmes is required to ensure the UK can scale up and deliver impact as technologies mature.
From evidence to action
Evidence from the £1 billion Net Zero Innovation Portfolio shows that well-designed energy innovation support delivers major results. The EINAs analysis points to even greater future potential: up to £348 billion in system savings by 2050. Together, this evidence confirms that targeted innovation support is essential for achieving Net Zero at the lowest cost.
However, realising this full value depends on a coordinated approach that aligns innovation priorities, finance, demand creation and system readiness behind the technologies that can have the greatest future impact. As DESNZ develops its Cleantech Innovation Challenges, strong coordination across policymakers, industry and finance will be essential to align market creation, regulatory frameworks and enabling infrastructure.
