Posted: 2 October 2017

FES 2017: Where next for gas supply?

FES, Future Energy Scenarios, gas, supply, transmission, distribution, shale, biomethane, bioSNG, green gas, imports, LNG, security of supply, residential heating, heat pumps, UKCS

Today gas supplies more than twice as much energy as electricity.

 

For generations, we’ve relied on gas as the preferred source of energy to heat our homes and businesses. Gas is also vital to Britain’s electricity production. Yet, in the past 15 years the pattern of gas supply has changed dramatically. So, how will we use gas in future and where will it come from? Market Insights Manager Simon Durk explores what the 2017 Future Energy Scenarios tell us.

Cast your mind back to the early days of 2000. Fears of the Y2K ‘Millennium Bug’ bringing businesses to their knees proved wide of the mark, while Westlife topped the charts in what was still a pre-downloads era. It was also a time when Britain was self-sufficient in gas.

Simon Durk, Market Insights Manager.

The gas market today looks very different. In 2016, imported gas supplied around 55% of our needs. Since 2000, production from the UK Continental Shelf (UKCS) has fallen from 95 billion cubic metres (bcm) to 35bcm. In its place, we take gas supplies piped from Norway and continental Europe, as well as imports from the world market – in the form of liquefied natural gas (LNG).

The role of gas today

Britain’s energy system is shifting towards a low-carbon future. As this change takes place, gas is critical to security of supply and it will have a long-term role as a flexible, reliable and cost-effective energy source. In 2016, gas met nearly two thirds of domestic energy demand and remains a vital fuel source to generate electricity.

Consider the fact that today gas supplies more than twice as much energy as electricity. It could still supply more energy than electricity by 2050. The question is, how will the overall gas supply picture evolve over time? What does the future hold?

Where next for gas?

The next 30 years are likely to bring more change. We expect the UKCS to continue to decline. New sources of gas are being developed and time will tell the extent to which shale gas, biomethane and bio-substitute natural gas (bioSNG) will influence the energy mix.

So, what do this year’s scenarios say? Firstly, there is enough gas available worldwide to meet GB demand through to 2050. In three out of our four scenarios imported gas will become even more important. Consumer Power has the lowest dependency on imports at 51% in 2050, rising to 93% in Slow Progression.

Just how green will Britain’s ambitions be? Two Degrees is the only scenario where the UK meets all its carbon reduction targets. In this world, biomethane and bioSNG account for 13% of total supply by 2050.

Meanwhile, what of shale? There has, of course, been a lot of debate about shale’s potential as an energy source. Fracking for shale also remains an emotive subject for many people. One survey in 2016 put public support for shale at 37%. In our two scenarios with less green ambition – Consumer Power and Steady State – shale gas has a role to play.

The low demand case for gas

Two Degrees has the highest level of prosperity. It is also our greenest scenario and the one with the lowest gas demand. In this scenario, gas supply falls by around half by 2050, from about 80bcm today to around 45 bcm. Even so, it’s worth pointing out that 45bcm is still a lot of gas! For example, it’s more gas than we currently get from the North Sea each year. And in this scenario gas still supplies more energy than electricity in 2050.

Two Degrees also sees two areas where future gas demand falls significantly. The first is residential heating. Today, 80% of us use gas to heat our homes and Britain has something like 22 million gas boilers. By 2050, heat pumps replace gas as the major source of residential heating. A total of 23 million heat pumps could be in operation by this date.

The other big fall in gas demand in this scenario is for power generation. In this world, we see greater investment in renewable generation.

There is little Government support for indigenous gas production and supplies from the UKCS run out by 2048 and there is no support from the public or from Government policy for shale gas in this scenario. On the other hand, Two Degrees includes 6bcm of green gas supplies by 2050 in the form of biomethane and bioSNG..

The gas supply mix continues to include gas imported from mainland Europe and Norway, although Norwegian gas supplies fall to 12bcm a year by 2050, compared with 30bcm today. In this future, Britain is 87% dependent on imported gas by 2050.

Consumer Power: The high gas demand case

What will the future hold if the focus is firmly on indigenous gas supply? Our Consumer Power scenario explores this world of high gas demand. In this scenario, both UKCS supply and shale development are at their highest.

Gas demand in 2050 is only 20% lower than in 2016. There is also the lowest reliance on imports, with almost half of gas supply coming from GB sources. The UKCS is still producing gas in 2050, while 32bcm of shale gas comes on stream from 2031. In this scenario, there is limited green ambition. The lack of investment means that biomethane sees little development over today’s levels.

The potential for distributed gas

What about where our gas supplies will connect in future? The National Transmission System (NTS) carries gas around Great Britain. It acts like the arteries in our body, moving gas to where it’s needed.

Unlike electricity, there isn’t the same split between connections at the transmission and distribution level. There are currently just over 80 biomethane connections at the distribution level. However, these only provide about 0.2% of the total gas supply.

Could we see more distributed gas in future? The four scenarios show a contrasting picture. In Consumer Power, with the growth in shale production, distributed gas could account for 44% of supply by 2030. The Steady State scenario has this figure lower – at around 15%. In both Two Degrees (3%) and Slow Progression (2%), levels of distributed gas are much lower.

The overall story for gas

It’s easy to forget the importance of gas in Great Britain today and in the future. It is part of our daily lives and will continue to be so for decades to come. As new energy sources connect to the network, the role of gas may well change, but for the foreseeable future at least, gas is here to stay.

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"There is enough gas available worldwide to meet GB demand through to 2050"

Simon Durk, Market Insights Manager