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UK Government must provide road map for gas after Brexit, urges new report

  • New report highlights risks to UK gas security, urges Government not to delay key long-term policy decisions
  • The “Brexit interregnum” escalates gas security threats by making existing challenges harder to resolve
  • Clarity is urgently needed on the UK’s future trading relationship with the EU’s Internal Energy Market
  • Post-Brexit, UK consumers may see prices rise as UK providers compete on the global gas market for supplies

March 2018’s ‘Beast from the East’ saw the UK National Grid issue its first gas deficit warning for 8 years as consumption spiked against a background of supply problems and the closure of the UK’s biggest gas storage facility, the Rough site.

The crisis was averted by extra supplies from mainland Europe and via ship in the form of liquefied natural gas (LNG). But will this be possible after Brexit?

A new report from Warwick Business School’s Professor Michael Bradshaw explores the challenges facing the UK natural gas market, clarifies the role that EU policies and institutions currently play in the UK’s gas market, identifies the potential impact of Brexit on how the market operates, and highlights the key issues that the UK government needs to address in a post-Brexit UK Gas security strategy.

It is based on a series of stakeholder meetings involving government, business, think tanks and academia, convened to discuss the impact of Brexit on the UK gas industry.

Professor Bradshaw emphasises that gas security must be understood as involving both physical security of supply, and price security – the provision of energy at a price consumers can afford.

Among the report’s key points are:-

  • Over 80 per cent of UK households rely on natural gas for their heating, while natural gas is used to create 42 per cent of the electricity consumed in the UK.
  • The UK imports around half of the natural gas that it consumes. This is likely to increase during the 2020s as domestic production falls, creating greater exposure to the global market.
  • The majority of UK imports come from the EU Internal Energy Market. Leaving the EU’s institutions means that the UK will no longer be a member of the IEM and will lose any ability to influence EU energy and climate strategies - but still be affected by them.
  • Brexit also creates regulatory risk for the UK market. It is unclear how the interconnectors which move gas between Belgium, the Netherlands and the UK will be regulated once the UK has left the IEM.
  • The UK’s supply infrastructure is ageing and was designed to move gas onshore and south from the North Sea fields. The system is now being asked to move gas in new directions over very short periods of time, and does not always cope. Critical decisions with long-term consequences are being delayed by uncertainty.
  • The Government needs to provide clarity on the future role of gas in the UK in order to allow industry to make informed investment decisions. If the UK government chooses to continue towards its ambitious decarbonisation goals, the use of gas must decline. This is a disincentive to infrastructure investment.

Professor Bradshaw said: “The UK needs a flexible, adequate and resilient gas supply chain into the 2020s and beyond. But the industry is wrestling with an uncertain future. In the medium term, gas security faces challenges from increased import dependence and domestic demand constrained by climate change policy.

“While there is this degree of uncertainty, it is difficult for industry to justify investments in the supply chain, whether to maintain existing capacity, deliver new sources of flexibility, or explore carbon capture solutions.

“Our analysis concludes that gas will continue to flow after Brexit, but consumers may have to pay more to guarantee supplies as the UK competes in the global gas market.

“While Brexit is a complicating factor, responsibility for strategic leadership rests with the UK Government and we urge them to provide a clear roadmap for gas in the low carbon transition and to draw up a proper long-term gas security strategy.”

Download the report here.

ENDS

NOTES

The UK Gas Security Forum co-produced three briefing papers based on discussions at each of their three meetings in Autumn 2017, hosted by WBS and UKERC. The first focuses on challenges to the upstream security of supply – where gas comes from. The second considers midstream security challenges – the critical infrastructures that are necessary to link gas suppliers to end users – and the third explores the future role of gas, considering factors such as increasing demand for low-carbon and renewable energy sources.

The Forum was supported by the Warwick ESRC Impact Acceleration Account (grant reference ES/M500434/1).

The UK Energy Research Centre (UKERC) carries out world-class, interdisciplinary research into sustainable future energy systems. Our whole systems research informs UK policy development and research strategy. For further information see: http://www.ukerc.ac.uk/

 

 

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