Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

The role of gas in a changing energy landscape

As the UK shifts towards low-carbon sources of energy generation, gas continues to play a major role in the country’s current energy mix. But with the majority of coal power generation already replaced, what scope is there for the future of gas?

As renewables capacity continues to increase and the grid becomes increasingly flexible, smaller scale gas plants could help manage the system. With a drive to reduce emissions at lowest cost, interest in greener gas options is increasing.

The gas boom

In 2012 the government issued its Gas Generation Strategy outlining how it expected gas to continue to play a major role in the UK’s generation mix over future decades alongside low-carbon technologies. It recognised that gas generation would be important in replacing old gas, nuclear and coal, as well as meeting demand for electricity on cloudy days with little wind as intermittent renewable supply increased.

So far, this forecast has broadly been accurate. While coal generation dived to 6% of the energy mix in 2016 and records for the number of days the country goes coal-free are broken with increasing frequency, gas has surged to meeting more than 40% of energy demand.

The International Energy Agency (IEA) puts this surge down to a combination of cheap gas, a liberalised electricity market, a relatively robust price for CO2 in the UK and the fact that it is a flexible source in terms of being able to provide both heat and electricity.

The current UK fleet now has around 32GW of combined cycle gas turbine (CCGT) generating capacity and 6.1GW of combined heat and power (CHP) plants.

Size matters

The government’s target to eliminate all coal generation was initially expected to involve up to 26GW of new large gas plants by 2030 to fill the gap while renewable capacity caught up.
To encourage this so-called “gas bridge” Britain began capacity market (CM) auctions in 2014 as low electricity prices dissuade investors from building new capacity.

However, the auctions produced some unexpected results. Lower than expected clearing prices meant much of the CM auctions have gone to existing plants, which having already absorbed all of their construction costs, were able to bid lower than those bidders considering building new plants. New developments have also seen a shift to lower-cost, more flexible small peaking gas plants.

According to a joint report released in May by WWF and climate think tank Sandbag, the CM auctions have already contracted most of the capacity required to replace coal – and the remainder is very likely to be replaced without a need for any new large gas plants.

It seems the government agrees and now projects a marked decline in gas in the coming decades. Official projections published in January detail less than half as much new gas capacity by 2035 as was expected in 2017 and is a quarter of the 2015 figure. Instead, the government expects renewables and battery storage to drastically increase with renewables overtaking gas by 2020 as the UK’s primary source of electricity generation.

This shift away from large scale gas could open opportunities for commercial and industrial sites to install small scale gas generation. Not only can firms produce power for their own needs, but as more and more renewables come online selling power to help balance the grid could open up new revenue opportunities.

Companies including Palm Paper recycling in Kings Lynn, chemical company CalaChem in Scotland and Bracknell Leisure Centre are all examples of firms adopting onsite CHP plants to make use of heat, save money and reduce emissions. There are still some moves to develop large-scale CCGT too though, with SSE announcing plans for a 840MW plant at Keadby.

A greener future?

As well as small scale generation, some developers are looking to “greener gas” options as a lower carbon alternative to natural gas.

BioSNG (bio-substitute natural gas) and hydrogen have the potential to be used with existing infrastructure but so far has been a limited sub-set of the energy market due to the problems in injecting it into the mains network. But these challenges are expected to be overcome as more projects emerge.

Gas grid owner Cadent published a report in May, which examined the market framework, mechanisms and incentives needed to create a national “green gas grid” that would see BioSNG (bio-substitute natural gas) plants rolled out across the country. The company hopes to build on its work on a BioSNG plant in Swindon, which has successfully converted household waste into gas in a trial period and is expected to start commercial production later this year.

Cadent has also announced a new green gas project in North West England The £900mn 30-year HyNet project will provide low carbon power to industry and heat 2mn homes, with longer term ambitions to provide fuel for transport. The project is set to launch with a planned hydrogen production facility in Cheshire, which should be up and running by the mid-2020s.

The H21 project in Leeds examined the replacement of natural gas with hydrogen and concluded that such a transition would require minimal infrastructure changes and a potential carbon saving of 73%.

In conclusion, in whatever form, gas will continue to play a major role in the UK energy system for decades to come, but what exact form that takes is yet to be determined.

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