Energy: an end to gaslighting?
RICHARD NORTH
You don’t need to be a genius to work out that 2035 is ten years away. But, in political terms – where one week can be eternity – it is in the far distant future, two general elections away, possibly embracing two different governments, in addition to the Starmer regime that we are currently suffering.
An assessment by the National Energy System Operator (NESO) of the nation’s gas supply by 2035, therefore, might seem of limited interest and somewhat academic, given the more pressing issues that assail us by the day and the hour.
Actually, although the media which have reported the assessment have focused on the ten-year period, NESO have supplied two assessments, one for the winter of 2030/31 and the other for 2035/36 as well as considering the intervening years, to provide a clearer view of gas supply security across this period.
The assessments, written in mind-numbing bureaucratese, are evidently designed to switch off all but the most inquisitive minds, as the document starts by telling us that Britain is expected to continue benefiting from a diverse range of gas supply sources in the 2030s.
For those who didn’t know already, we get to learn that these sources include the United Kingdom Continental Shelf, Norwegian Continental Shelf (UKCS), Liquefied Natural Gas, pipeline imports from Europe, gas storage and biomethane.
Moreover, in a “No shit! Sherlock” paragraph, we are also sagely informed that the relative contribution of these sources “will evolve over time”, primarily driven by the long-term natural decline of UKCS production. Since that trend has been evident since the early 2000s and has been accelerated by Mr Miliband’s intervention in the energy market, this should come as no surprise.
Despite all that, NESO thinks that the national gas supply will be sufficient to meet demand under seasonal normal weather conditions. However, it assessed this against “a range of 1-in-20-year peak demand scenarios” for 2030/31 to 2035/36, from which is identified “an emerging risk” to gas supply security.
Finally, we get to something which seems vaguely newsworthy and, in an attempt to inject a note of alarm into the scenario, the Telegraph gives its report the headline: “Britain threatened by gas shortages as North Sea output plummets”, with the sub-head warning: “Energy security at risk as grid is forced to rely on foreign suppliers”.
It has to be said that reading this report is much more fun, if a tad alarming, as we are confronted by the news that “Britain faces the risk of severe gas shortages as plummeting North Sea production leaves the country dangerously reliant on imports”.
The paper continues by telling us that NESO is saying that gas production is poised for a steep decline because of Labour’s energy policies – posing a risk to Britain’s energy security as the grid becomes in hock to foreign suppliers, a finding that it arrived at after assessing “the impact of Labour’s ban on new exploration and the 78 percent tax rates imposed on North Sea gas producers”.
According to the Telegraph’s take of what NESO says, gas availability will be 78 percent lower by 2035 compared with today – equivalent to a decline of up to 13 percent a year. It also warns that the amount of gas produced by the North Sea this year will decline by over 80 percent – from 27 billion cubic metres (bcm) to just 5bcm by 2035 – making the UK massively reliant on supplies from Norway, the US and Qatar.
Thus, “During periods of peak demand in the 2030s”, says NESO, “we expect GB’s import dependency could rise above 90 percent” but the emerging risk to UK gas supply risk is evident “only where peak gas demand remains close to or above current expectations”, providing all gas supply and network infrastructure are operational. However, “in the unlikely event of the loss of the single largest piece of gas infrastructure, gas supply falls short of demand”.
For all the journalistic alarmism, though, the situation expressed in the dry prose of the NESO report is actually worse than painted. In its full report, NESO says that risks to gas supply security emerging are due to any one of three conditions. The first is when there are cold days and peak demand is higher than seasonal normal levels, the second is the loss of the largest piece of infrastructure, and the third is that gas demand remains high due to slower decarbonisation.
The key point, therefore, is that we might encounter supply difficulties as a result of any one of those factors. Obviously, if we encounter two or more of these, then the supply situation might be even tighter.
But what NESO then says is that the risk can be reduced by a series of mitigation measures, which include increased storage, more LNG gasification facilities, greater biomethane production and things like better use of interconnectors.
Where the alarm bells start ringing is that NESO provides no costings or timescales for these measures and simply has Dr Deborah Petterson, director of resilience and emergency management, burbling about working with government, Ofgem and National Gas Transmission “to ensure the timely delivery of the most effective options for consumers”.
Just how far down the line from reality we are comes, possibly unwittingly, from Glenn Bryn-Jacobsen, director of energy resilience and systems, at National Gas, who says that, in considering potential solutions, “it is essential to look at both the gas supply landscape and the investment required in network infrastructure”.
And here we have the divergence between politics and reality. While ten years might be an eternity to politicians, it is a terrifyingly short time when planning energy resources. Where there is evidently a risk of shortfall in that period, planning should be well-advanced and investment already identified and committed. There is no indication that that is the case.
Furthermore, of the three conditions that might give rise to a security crisis, it is a fair bet that the slow rate of decarbonisation will be one of them. For the current “pathway” to be met, it is essential that the targets for replacing domestic gas boilers with heat pumps are met, and renewable energy production is able to replace much of the electricity generation derived from gas plants, which is still currently running at 30 percent.
In terms of the heat pump programme, annual rate of installation has peaked at under 100,000, still well-short of the 600,000 annual target required by 2028. By any measure, the programme is significantly off-track, with only about one percent of UK homes currently fitted with these devices.
As for renewable electricity generation, the government target is for 95 percent to be provided by renewables by 2030. This is a target which NESO and government believe is “achievable”, although analyst Cornwall Insight warns that solar, onshore and offshore wind are currently on schedule to account for just 44 percent of Great Britain’s electricity generation by 2030.
Cornwall Insight are not the only pessimists. The Telegraph cites Chris Wheaton, an analyst at Stifel, who thinks that NESO could be downplaying the threat. He says: “We think Neso forecasts are too optimistic. We forecast gas production to decline by 70 percent by 2030 due to the impact of the windfall tax”.
And although the government is to allow companies to drill close to current fields in the North Sea, using existing pipelines and drilling rigs, the industry has warned that this will do little to boost production unless the government removes the windfall tax on oil and gas companies, which it left unchanged in the Budget.
Historically, the UK has relied on terminals and pipelines taking gas from the North Sea. But it is now more reliant on import terminals in Wales and southern England, which can receive shipments of liquefied natural gas from around the world.
To Wheaton, this suggests that the UK will run out of LNG import capacity as early as 2031, as the current import terminals reach the maximum rate they can deliver gas into the UK grid during winter”. The best way to ensure security of gas supply, he adds, “is to maximise domestic gas production.”
But, we need not have any concerns. The Guardian is on the case, having energy minister Michael Shanks promising that government would “redouble our efforts to decarbonise” the economy and make sure the UK had enough gas storage and import capacity”, while blaming the previous government for failing to plan for shortages.
The Financial Times, though, is less sanguine, pointing out that not only has production from the North Sea been falling. terminals to process gas are being shut down or will be closed in the coming years.
Many experts, the paper says, expect plenty of gas on global markets in coming years, but global supplies are highly vulnerable to disruption, and Britain also needs to have the infrastructure in place to import, deliver and store gas and, when needed, use it to generate electricity.
The first thing to be hit by a gas shortfall will, in fact, be electricity generation, with plants shut down rather than interrupting the domestic supply and no one will be at all surprised if the lights go out in or around 2030 if not before – an end to gaslighting, but not as we know it.
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