Economic Report 2020

use of hydrogen) by 2050 to help achieve net zero. 28 However the current BEIS Energy Reference Scenario outlines that the UK is on track to see a reduction of only around 10 per cent by 2040. 29 In line with the global trend, UK demand has declined and the second quarter of 2020 marked the lowest demand on record for that period – down 16 per cent year on year – while the first half of the year saw an 11 per cent decline in total. The main drivers of this were a 26 per cent reduction in demand for gas in power generation (to record-low levels) and warmer temperatures leading to lower heating requirements. This follows on from a generally declining trend over the last

two decades, in which demand has fallen by 22 per cent between 2000–19. Alongside changing demand dynamics, a significant shift in supply has affected the wholesale gas National Balancing Point (NBP) price in recent years, mainly driven by massive increases in the available shipments of liquefied natural gas (LNG). LNG imports increased by 157 per cent in 2019 and have increased further in 2020. In the first half of the year LNG imports were 28 per cent higher than the same period in 2019 and five times higher than the first half of 2018. Much of this is being driven by traders taking advantage of lowprices and storing the LNG (predominantly in mainland Europe) to re-sell at times of

UK Quarterly Gas Demand

H1 2020 Gas Demand Snapshot

400,000

350,000

300,000

Power Generation

Industry

Domestic

250,000

200,000

150,000

100,000

UK Quarterly Gas Demand (GWh)

50,000

-26% -8% -4%

0

Source: BEIS

28 https://www.theccc.org.uk/publication/net-zero-the-uks-contribution-to-stopping-global-warming/ 29 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/931323/updated-energy-and-emissions-projections-2019.pdf

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