The role for gas in the UK’s energy mix

New Statesman

Let’s face it – we are heading for another ‘dash for gas’ in the UK – we might as well be upfront about it. Is this a bad thing? Probably not. We desperately need new electricity generating capacity as 35GW of existing capacity (coal and nuclear) is due to close in the next decade – partly as a result of tightening European legislation. Also, with the move to a low-carbon electricity mix in the UK, increasing amounts of inflexible and intermittent generation sources will be added to the system – this will require large amounts of flexible sources of electricity, able to switch on quickly and ramp up to provide electricity at times of high demand.

At present, it is only really fossil fuels (coal and gas) that can provide such flexibility. So the reality is that we will inevitably be hooked on fossil fuels for quite some time to come. Coal regularly provides 50% of electricity and gas provides just over 30% - with official estimates by the Department of Energy and Climate Change showing that fossil fuels (particularly gas at 30%) will still generate a large proportion of our electricity in 2030.

Ok, so more fossil fuels (particularly gas) is on the horizon, but what about climate change? Well firstly, it is obviously important to remember that gas emits about half of the carbon dioxide emissions of coal, which means we can go someway towards meeting our climate change targets by switching from coal to gas in the near-term. However, as the Committee on Climate Change have said; if we are to ensure the UK doesn’t significantly veer off the path towards meeting our statutory target of reducing greenhouse gas emissions by 80% by 2050, we need to build gas with carbon capture and storage (CCS). By removing more than 90% of the carbon dioxide emissions associated with fossil fuels, CCS enables these vital sources of electricity to be used without the associated climate change impacts. So assuming a large increase in gas-fired capacity in the next few decades, CCS really is the only way forward

It is therefore important to investigate whether the development of CCS and gas policies are actually aligned to make gas-CCS an attractive investment for companies. Well firstly, it needs to be said that CCS is applicable to both coal and gas, and in the current debate about the need for new gas-fired capacity, it may seem that the important role of coal has been slightly forgotten. Obviously, considering the figures mentioned earlier regarding the current electricity mix, 50% of electricity from coal is certainly not a number to be ignored. In addition, of the four remaining bids in the current UK CCS Competition, three are based on coal-fired power stations, so to take the first steps in developing a long-term CCS industry – the UK must embrace coal- as well as gas-CCS.

It is vital that this Competition reaches a successful conclusion as soon as possible, enabling the first four CCS projects in the UK to be built and starting down the path of cost reduction, which will enable CCS to cost-effectively compete with other low-carbon technologies in the 2020s. These first projects must lay the groundwork for the roll-out of CCS – in particular the construction of transport and storage infrastructure that can support follow-on projects, as well as the need to gain a more detailed understanding of the UKs storage capacity. 

The UK’s flagship policy for supporting all low-carbon electricity generating technologies is the Electricity Market Reform (EMR), which is currently going through parliament in the form of the 2012/2013 Energy Bill. Although a somewhat complicated policy, with much of the detail still in development, this is a world first-of-a-kind for CCS, in that it places CCS on a level playing field with nuclear and renewables. Questions still remain over the treatment of CCS within EMR, and how much money will ultimately be available for the different low-carbon technologies, but in short – this is the only show in town for providing long-term incentives for both coal- and gas-CCS.

One of the key issues that lies at the heart of the debate on EMR is the need to provide investment certainty. Although there is a sense that the right investment signals are now coming forward, the UK Government decided back in April that more was needed to give confidence to investors in gas-fired power stations. It was announced that gas-fired power stations, consented under the current Emissions Performance Standard (EPS) of 450g carbon dioxide per kilowatt hour, would be “subject to that level until 2045”. As this level of EPS allows a gas-fired power station to run unabated, it must be questioned how these gas-fired power stations will be sufficiently encouraged to fit CCS in their lifetime.

The UK Government also published a Gas Generation Strategy in December 2012, in which it concludes that up to 26 gigawatts of new gas-fired capacity will be needed by 2030. Although the Strategy does include an entire chapter dedicated to CCS, there is very little in this chapter to suggest that the government will do everything in its power to ensure the aforementioned 26 GW of gas-fired capacity will be fitted with CCS.

In short, the reality is that the UK will see a significant increase in gas-fired power stations in the next 15 years. Only with an ambitious CCS programme (on both coal and gas) through the current Competition, as well as strong and clear signals from EMR for gas-CCS, will we ensure that our requirement for new gas-fired capacity is compatible with our climate change agenda.