Natural gas: leaping forwards in 2013

Towards the close of 2012, the UK government submitted its draft Energy Bill to parliament and published a new Gas Generation Strategy; both instruments signal an indispensible role for natural gas in the energy mix for decades to come. While IGEM is a leading membership organisation for the gas industry and has been working hard to assure a critical future role for natural gas, it also believes this is the correct way forward for the economy, society and environment.

Several pressing concerns made these developments timely but also imperative. To provide energy for electricity generation the UK’s ageing gas, oil and coal plants must be replaced as they approach retirement: around one fifth of the UK’s current generation will close over the next ten years. Meanwhile demand for electricity is likely to grow significantly, as sectors such as heat and transport become increasingly electrified.

Affordability is also crucial. Producing and supplying primary energy sources and electricity is extremely expensive, which means high costs for end users. It is estimated that at least £110 billion of new private investment is needed in generation and transmission of electricity in the coming ten years, so it is necessary that the most economically viable resources are included in the future energy mix, including fossil fuels.

In its quest to ensure sustainability as well as security and affordability, the UK is also committed to meeting domestic and EU targets to reduce carbon emissions and increase the proportion of renewables in the energy mix. The government’s target is to produce 30% of electricity from renewable sources, en route to reducing carbon emissions by 80% from 1990 levels by 2050. Maximising the amount of relatively clean energy is therefore imperative.

All of these factors, in IGEM’s view, point to an indispensible role for natural gas in a diversified UK energy mix for decades to come.

The Gas Generation Strategy: renewing the UK’s commitment to gas and attracting investors

The Gas Generation Strategy, published in December 2012, is the instrument which makes the government’s support for continuing dependency on natural gas unequivocally clear. While the Energy Bill makes general provision for renewed investment in and for cleaning up the electricity sector, the Gas Generation Strategy contains direct measures to attract private capital for 26 GW of new gas-fired generation capacity specifically. These include:

• Providing new detail of electricity market reform relating to gas; more information for future investors.
• Enabling a current or future government to improve wholesale electricity market liquidity if necessary.
• Bringing forward proposals to improve the planning regime, giving greater flexibility for current and future applications to build new gas-fired plants.
• Demonstrating the government’s commitment to foster a viable carbon capture and storage industry to decarbonise the gas and coal sector.

As well as ‘keeping the lights on’ and improving energy security with relatively inexpensive, clean and flexible natural gas, new investment stimulated by the strategy will also boost the UK’s profile in the gas sector internationally. New jobs will be created for this thriving industry, with new tax receipts. IGEM hopes to see permission for and development of new gas-fired plants soon, which are vital for continuing energy security.

Fracking and UK shale gas development could be supported by tax breaks for explorers and a single regulatory office

The strategy and announcement lifted the ban on explorers such as Cuadrilla Resources Ltd prospecting for shale gas in the UK, but also indicated tax breaks for shale gas explorers and established a single regulatory office to encourage further investment by reducing perceived red tape. IGEM has been working hard to bring about this change, and it has also been pleased to see how public attitudes to towards shale have shifted. Recent research has shown that residents in affected areas are now more content with shale development.

The economic case for UK shale development has been gaining impetus for months, but the government refused to lift a ban on fracking for shale gas until extensive independent research into environmental concerns had been undertaken.

Now, prospecting will continue subject to rigorous safety controls designed to eliminate the possibility of groundwater pollution, and unusual seismic activity linked to fracking.

A single body has been established to co-ordinate regulation of shale gas development – the Office of Unconventional Oil and Gas – and in his Autumn Statement, Chancellor George Osborne announced upcoming tax breaks.

British and European industries have long suffered from high natural gas prices and it is hoped that UK shale development could ease this strain, as well as contributing considerably to energy security and independence in coming years.

However, while UK shale rock could contain enough gas to accommodate current annual consumption for many years, a US-style boom which has seen its gas prices plummet and which could lead to complete energy independence is not forecast. However, the UK’s decision could pave the way for other EU member states to lift restrictions on fracking, particularly since the EU’s parliament voted against an outright ban on fracking last year.

The future of the UK gas industry

While much has changed since William Murdock lit the first gas lamps in 1792, some of the most manifest changes in the industry are yet to come. Shale gas producers will benefit from a single regulatory office, but technical guidance and best practice are needed to assure safe extraction, processing and distribution. IGEM is leading production of detailed technical guidance for the UK with its members and the international onshore gas industry.

It is often overlooked that biogas plays a growing role in providing clean and green energy too, and will contribute to efforts to meet the target of 30% of electricity from renewables by 2020. The UK’s nascent biogas industry also needs provision of robust, safe and reliable Technical Standards and best practice. IGEM is examining the needs of the industry, learning from experience, and formulating guidance working closely with regulators including the Health & Safety Executive and government officials.

Looking ahead, innovations such as power-to-gas plants, which store excess electrical output from renewables as molecular hydrogen, could also gain a foothold in the UK’s energy future. If plants such as several recently built throughout Europe, which reduce wastage from and counteract the intermittency of wind and solar PV, are to come to the UK, regulatory and technical hurdles must be overcome. IGEM is currently examining how hydrogen could safely be injected in to the UK’s existing national gas grid.

This is an abridged version of the full article from Peter Hardy, Head of Technical Services, The Institution of Gas Engineers & Managers (IGEM), which was published in the January 2013 issue of World Pipelines, available for subscribers to download now.

Read the article online at: https://www.worldpipelines.com/business-news/25012013/natural_gas_leaping_forwards_in_2013/