EUA Policy Position
Role of Gas in the Future Energy Mix Summary Policy Position
Modelling outcomes to 2050 for the future role of gas may cloud the policy interventions required; these should be firmly grounded in the 2020 to 2030 timescale.
EUA supports efforts to engage the EU in more heroic 2020 carbon emissions reductions as a mechanism to demonstrate UK supply chain excellence
Future EU agreements should be emissions-based; too great a focus on renewable contributions can detract from energy efficiency efforts and competing low carbon technologies.
A secure natural-gas based power generation future to 2030 and beyond is essential in light of ageing coal and nuclear plant retirements, intermittent renewable generation, and more stringent environmental requirements.
A post-combustion CO2 capture project is an essential part of the UK’s CCS demonstration portfolio.
Green Deal should in due course include entire heating systems as an integrated solution to residential heat emissions
Government policy support mechanisms for heat pumps should focus on off-grid and new build installations.
The gas and waste management industries should continue to seek lower cost integrated solutions for grid-connected biomethane supplies.
Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
EUA Policy Position Background Natural gas is today an essential fuel for powering and heating UK homes and offices, and for providing a unique source of high temperature energy for industrial processes. However, as a fossil fuel, combustion of natural gas (largely methane) produces carbon dioxide, albeit the lowest of any hydrocarbon fuel. It is right therefore that the future contribution of natural gas in satisfying UK energy demand comes under scrutiny as the nation heads towards a low carbon, secure and affordable energy future. It is our view however that natural gas has ‘had a rough ride’ in the last 2 years, with some critics questioning the role of the gas distribution network beyond 2030, although more recent statements issued by DECC indicate that natural gas is not only a transition fuel, but may also be a destination fuel in the low carbon world. Discovery of new ‘tight gas’ reserves globally is changing the supply/demand balance, notably shale gas extraction in the US which has reduced dramatically wholesale natural gas prices and affected supply/demand balances in other countries through export of surplus LNG supplies.
We focus in this policy paper on three key issues: (i)
The focus timescales and boundaries for credible policy making
(ii)
The role of Gas in power generation and the requirements for Carbon Capture and Storage (CCS)
(iii)
The role of Gas in providing space and water heating to the nations’ 27m residential and other commercial buildings
Focus for Timescales and Boundaries of Policy Statement The Climate Change Act has established a legally binding framework to reduce the UK’s greenhouse gas emissions by 34% by 2020 and by at least 80% by 2050. This embodies a system of 5-year carbon budgets starting in 2008; the first 4 carbon budgets are now cast in law and set reductions (relative to 1990 levels) of 23%, 29%, 35% and 50% respectively for the 4 budget periods. An initial policy focus on the 2050 end game has led to some unhelpful and potentially time-wasting activities; for example the need for full decarbonisation of electricity and heat supply by 2050 has led some to question the continued investment in the Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
EUA Policy Position gas supply infrastructure beyond 2030. Such conclusions have been drawn through simulation programmes such as that produced by DECC (cost-optimising model, MARKAL). EUA is supportive of a focus on the short to medium term objectives that the current 4 carbon budgets deliver out to 2027 as a platform for rationale policy making, and a retargeting of the trajectory as 2030 approaches. Indeed the 4th carbon budget is itself very stretching with significant changes required to the traded emissions sector if the UK is to meet its obligations.
No EU-wide agreement for emissions reductions exists beyond 2020. The UK has committed to 15% of primary energy consumption from renewable sources by 2020 (3.3% currently) as part of the EU’s 20/20/20 target framework, and this is in our view a stretching target, detracting in part from shorter-term energy efficiency improvements . At the current rate of progress the UK will out-perform its emissions reduction targets by 2022 (3rd carbon budget) and Government is continuing to lobby Europe to be more ambitious in this measure by 2020 (in turn to deliver a more stringent EU ETS cap). EUA is broadly supportive of this as it may better-showcase the technical and commercial capabilities of the UK’s supply chain in delivering climate change solutions.
Of course there is no crystal ball involved in predicting energy futures and the industry has now adopted a scenario-based approach to stimulate and polarise debate. EUA welcomes the studies conducted by National Grid as system operator for both electricity and transmission in publication of their ‘Gone Green’ and ‘Slow Progression’ energy scenarios. These demonstrate two boundaries defining, up to 2030, an area between ‘business as usual’ and a ‘balanced sector approach’ in deployment of renewable and low carbon technologies. The Gone Green Scenario meets the UK’s carbon emission reduction and renewable energy trajectory targets in 2020, 2030 and 2050. EUA views the extremes of National Grid’s modelling studies to represent pragmatic boundaries within which to frame short to medium term policy. A number of detailed challenges within these boundaries are presented below.
Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
EUA Policy Position Power Generation and CCS The policy debate in this area distils down to three big questions: (i) how much renewable capacity, (ii) when will new nuclear emerge (if at all), and (iii) when will CCS be deployed on fossil-fuelled combustion plant? These are key issues in determining the role of natural gas in the sector.
Meeting the renewable energy target in 2020 will require a contribution from the power generation sector of some 30% of the total; to meet the 2030 targets will require in addition life extension of some nuclear plant in preference to gas CCGT plant, and grid connection of new nuclear before 2020. We view this as a difficult position to adopt on both cost and safety grounds. The Gone Green scenario has some 36 GW of operational renewable capacity by 2020 compared with just 9.2 GW today.
Against a backdrop of unchanged peak electricity demand to 2030 (of around 60 GW) the UK has 90.2 GW of installed capacity with 19.1 GW forecast for closure by 2020, and further possible closures by 2023 under European Industrial Emissions Directive (IED). Projects currently under construction and with consents to build include 13 GW of new gas plant and 7.3 GW of renewable (mostly wind) projects. According to National Grid a further 5.7GW of renewable capacity is in the planning process. Assuming the latter is all constructed there is still a renewable capacity gap of some 14GW to the Gone Green scenario.
Our view is therefore that the electricity generation sector is unlikely to deliver its contribution to the 15% primary renewable energy consumption obligation and that unabated gas fired CCGT plant will continue to 2025 to underwrite coal and nuclear plant closures on economic, safety and environmental grounds. We would urge a detailed study of existing CCGT plant, its potential for life-extension, and its robustness to new environmental challenges imposed by IED so that a detailed capacity profile for the population may be generated to 2030.
Beyond 2030 CCS becomes an important factor for gas-fired combustion plant. EUA welcomes the inclusion of gas-fired CCGT projects within the scope of the government’s second round of CCS demonstration projects. Indeed it would seem imperative that the SSE/Shell/CO2DeepStore consortium’s current project bid should be successful as the only Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
EUA Policy Position UK-based project to demonstrate CO2 capture on gas- rather than coal-fired combustion or gasification plant.
Heat The area of domestic space and water heating is perhaps the biggest area of contention in delivering emissions reduction, affected as it is by the vagaries of consumer choice and spending patterns. With homes accounting for 25% of UK’s emissions and 40% of its final energy use, there is huge potential in tackling emissions through the provision of renewable heating technologies, but at a price to the consumer.
Our starting point in this key policy area is to question whether there is sufficient focus on energy reduction (efficiency) measures. Green Deal will deliver some progress in this area in improving the thermal performance of buildings, but insulating a home with inefficient heating systems is only part of the answer. Some 81% of the 450 TWh/y of residential heat is delivered through the gas boiler (about 33 bcm/year of natural gas). With 14m of 22m UK gas boilers still in non-condensing mode (and a further 12 years to replace them at current rates), a shift in average system efficiency from 72 to 83% (as projected by National Grid) would deliver around 9 MTCO2 reductions per year, contributing some 45 MTCO2 savings over a carbon budget period, and delivering 15% energy savings to the consumer on an ongoing basis. We would support therefore a ‘Green Deal+’ scheme which extends the scope of energy efficiency products in a way that the supply chain can deliver in a robust and sustainable way. We very much support the ongoing consumer engagement focus around smart meters to ensure consumers realise the gas benefits of smart deployment.
Much has been reported about the potential of heat pumps to deliver renewable heating to home and commerce – indeed the Gone Green scenario will require 7m residential installations by 2030; a tall order indeed from the current installed base of 28,000. Further, heat pumps face some real challenges: (i) their efficiency drops at high heating load (coldest 60 days), reducing their coefficient of performance (COP) towards that of a simple electrical resistive heater, (ii) they have demanding installation requirements, (iii) high capital cost compared with gas boilers, and (iv) in retrofit mode they may require modification to heat emitters in the home adding further expense. Early markets are seen as the 7m off-gas grid Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
EUA Policy Position homes (where some economies over oil can be realised) and in new build where buildings tend to be more thermally efficient. In summary we do not see heat pumps displacing significant gas heating load in existing on-grid properties before 2030 and our position is one of supporting their further development and deployment in new build and off-grid applications so as to drive down capital cost and improve operating performance for wider-scale deployment beyond 2030.
Finally, returning to existing dwellings, we are supportive of the industry’s efforts in demonstrating at small scale the injection of biomethane into the gas grid and support efforts by the supply chain to productise and standardise the gas injection and monitoring parts of the process. As a solution to reducing heat-based emissions the technology makes good sense: diverting waste away from landfill (and potential fugitive methane emissions) and delivering renewable heat to the >80% of homes and businesses already connected to the distribution grid. Despite RHI support we see major cost reductions required (and potentially gas quality requirements) before the technology can become widely deployed but support ongoing efforts and policy instruments to deliver 15-20% renewable heating load through grid-connected biomethane by 2030.
Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
EUA Policy Position Data Table Sources 1. HM Government, The Carbon Plan: Delivering our low carbon future, Dec 2011 (Carbon Plan) 2. National Grid, UK Future Energy Scenarios, Nov 2011, (NG Futures) 3. Dukes Energy Statistics 2011 (2010 Data) (DUKES 2011) 4. DECC Energy Trends June 2011 (2010 Data) (Energy Trends) 5. DECC, The Future of Heating: A strategic framework for low carbon heat in the UK (Heat) Note: ‘Gone Green’ Scenario hits Govt CO2 targets in 2020, 2030 and 2050; ‘Slow Progression’ doesn’t. Data Item
Today (3,4) 2010
Slow Progression (2) 2020 2030
Gone Green (2) 2020
2030
Gas Supply/Demand Total Primary Energy Demand (TWh)
2300
GAS - Annual Gas Demand (TWh) GAS -% of Total Primary Energy
1100 48%
1020
GAS – Average Daily Demand (GWh) GAS - Peak Day Demand (GWh) GAS - Ratio of Peak/Average (-)
3014 5200 1.73
2795 5100
470
450
450
390
300
3750
3500
3600
3000
2300
8.0
7.8
8
7.79
7.7
GAS – Import Dependency (%)
55
73
87
69
82
Renewable Energy End Use (TWh)
70
232
474
492
-40%
-62%
-37% 20%
-60% Not set
GAS - Dom + small I&C Annual Gas Demand (TWh) GAS - Peak Day Dom+ small I&C Demand (GWh) GAS – Ratio of Peak/Annual (-)
Carbon Emissions and Targets Carbon Emissions (MtCO2e)/% reduction to 1990 Govt Target (MtCO2e/%reduction) EU Renewable Energy Directive: target (%
20%
Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
2000
1900
950 48%
700 37%
2466 2603 5000 4500 unchanged
1918 3600
900
Not
EUA Policy Position Data Item
Today (3,4) 2010
renewable primary energy) UK target for above (% final energy consumed) EU-15 Kyoto (% reduction n GHG) 8% by 2012 4th Carbon budget 2023-2027 (% CO2e reduction)
3.3%
Slow Progression (2) 2020 2030 set 15% Not set
Gone Green (2) 2020 15%
2030 Not set
10.7% -50%
Power Generation First Nuclear Plant 10.8 7.4 9.2 0.077 1.3 4.0 36 -
>202 0 4 23 26 0.4 10 11 45 -
10 33 41 0.6 17 12 58 5
12 31 36 1 17 11 38 -
17 48 64 6 38 13 38 7
Gas consumed in Power Gen (TWh) (NTS loads)
310
320
215
273
102
Coal CCS capacity (GW) Carbon Intensity (gCO2/MWh)
500
0.6
6
0.6 222
6 48
Electricity Demand (TWh)
381
392
446
Heat Number of households (m)
26.9
29
31
Nuclear Generating Capacity (GW) Renewable (%) Renewable Capacity (GW) Solar PV Capacity (GW) Offshore Wind Capacity (GW) Onshore Wind Capacity (GW) Gas Fired Capacity (GW) Gas CCS capacity (GW)
Average UK boiler efficiency (%) Heat Demand (TWh) HEAT PUMPS – # domestic units (m ) HEAT PUMPS – domestic (TWh) HEAT PUMPS – non-domestic (TWh) GAS - Dom + small I&C Annual Heat Demand (TWh)
29
2019
31
72
83
7125 0.028
0.4
0.4
470
450
450
Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
605 1.2 6 15
571 7.7 60 55
390
300
EUA Policy Position Data Item
Today (3,4) 2010
Biogas (TWh)
Slow Progression (2) 2020 2030
~0
Gone Green (2) 2020
2030
20
50
1.5
12.8 75% limited
Transport Number of electric vehicles (m) New sales as electric vehicles Gas in Freight Vehicles
~0.15
0.7
Date: October 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk
4.5 42% none