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Author: Louis Fletcher

Last month, UKERC and the Unconventional Hydrocarbons in the UK Energy System research programme hosted a workshop at Warwick Business School’s campus at the Shard to discuss UK gas security.

We heard both from experts in prevailing gas market trends, and from those mapping out how the role of gas will change and decline en route to net zero. The event will feed into an ‘integration report’ bringing together work from across UKERC to produce an up-to-date whole systems account of UK gas security.

The discussion was rich, detailed and lively – a short blogpost cannot do it justice. But, speaking impressionistically, three issues stood out to me.

Supply

What is the gas supply picture? Russia’s curtailment of pipeline imports to Europe, declining UK production, flat Norwegian output, and the fading of Groningen in the Netherlands, paints a stark picture. Spot LNG imports have filled the breach, especially from the US, where export volumes to Europe have grown rapidly since 2016. This has drawn cargoes away from countries in the global South, most notably Pakistan and Bangladesh, which have been forced to relapse into coal. Current LNG capacity is maxed out, and although global export capacity is set to rise by 60% by 2030, this will not filter through to the market until late in the decade. In the meantime, it is difficult to see how these supply conditions will not add further weight to bill-saving efficiency improvements and clean alternatives. Whether this will happen at the scale and pace required is another question.

Storage

The UK is conspicuous for its dearth of gas storage. After the closure of its largest storage facility at Rough, its total capacity is equivalent to just five days of peak demand. Would there be value in increasing UK storage? Possibly.

At its height, production on the UK Continental Shelf could surge over winter to meet seasonal demand. More recently, the market helped maintain storage based on an inter-seasonal price spread, as gas was bought and stored at low prices in summer, to be sold at high prices in winter. One upshot of the rise in flexible import capacity, especially LNG, has been to undercut this inter-seasonal spread. The UK is now in a position of transiting huge volumes of LNG to continental Europe, without being able to dip into these terminal flows to store substantial amounts of gas for winter. But as we are seeing in the case of the government-supported revival of Rough, without a market basis, any new storage requires public funding (on what terms?) for an asset whose long-term prospects are unclear.

Decline

How sharply should gas demand fall in the 2030s? UK gas consumption is dominated by power generation and residential heating, followed by industrial use. In all cases the prospects of gas entwined with that of hydrogen. The government has deferred making a decision on the technology mix for domestic heating until 2026. But the CCC strongly favours heat pumps to hydrogen, and this may already be a fait accompli, cutting gas out of the sector entirely.

In the case of power, the crux of the matter is how to provide flexibility to a system built around intermittent renewables, primarily offshore wind. One ideal might be to use ‘green’ hydrogen. At renewable peaks, surplus electricity could be used to split hydrogen from water, and then stored to provide dispatchable power at renewable troughs. Yet the CCC warn that given the pace of renewable construction, and that renewable electricity achieves the greatest emissions savings when displacing ICE vehicles and gas boilers, domestic green hydrogen production will fall significantly short of expected hydrogen demand. A shortfall that can be made up via three kinds of imports. Electricity could be imported via interconnectors to produce more green hydrogen in the UK. Green hydrogen itself could be imported from low-cost producers. Or, ‘blue’ hydrogen could fill the gap, using gas to produce hydrogen via steam methane reformation and CCS to capture most of the CO2 released. This would require viable CCS at scale and, given declining UK gas production, further gas imports – with all the attendant emissions. The likelihood is some combination, but the balance will matter.

Bottom line

The discussions on the day made clear the short-term energy security challenges that the UK and its European neighbours face and the need to develop a strategy to manage that changing role of the gas system on the road to net-zero.

About the author:

Louis is a Research Fellow at the University of Warwick, where he undertakes interdisciplinary work on energy and climate politics. Before joining Warwick, he wrote his PhD at Edinburgh on twentieth century theories of world order, and was then Research Director of a small sustainable finance think tank. He is currently helping to write a series of ‘integration reports’ on UK energy security that will bring together work from across UKERC.