Economic Report 2016 - Oil & Gas UK

ECONOMIC REPORT 2016

A sustained recovery in gas-fired generation beyond 2020 to allow the phase out of all unabated coal by 2025, as the UK Government intends, will probably require some reform of the existing capacity market to ensure that new gas-fired combined cycle gas turbine (CCGT) plants are able to compete with other sources of generation.

Figure 5: UK Gas Demand by Sector

100 110 120

Domestic

Industrial

Electricity Generation

Other Sectors

Services

0 10 20 30 40 50 60 70 80 90

Gas Balance (bcm)

2004

2006

2008

2010

2012

2014

2016

Source: BEIS, Oil & Gas UK projections

Projections of UK gas demand have been notoriously unreliable because gas is the marginal fuel in the UK energy mix, particularly in electricity generation, and highly sensitive to policy-induced low-carbon penetration and plant retirement. In its latest Future Energy Scenarios 11 , National Grid projects a decline in UK gas demand between 2015 and 2030 in all four of its scenarios. By 2030, its UK gas demand projections range from 49 bcm to 66 bcm in these scenarios. These projections are highly sensitive, not only to assumptions about renewables and new nuclear build in the power sector, but also to the possible deployment of carbon capture and storage and the pace of decarbonisation within the heating sector, which has recently been the focus of much new thinking within government and the gas industry.

11 See http://fes.nationalgrid.com/

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