ECONOMIC REPORT 2013
62
In terms of investment, however, the rise in
non-OECD demand is paralleled by the need
for OECD countries to renew much of their
energy, particularly electricity, infrastructure.
Most of this infrastructure was either built or
rebuilt during the great economic recovery
following the Second World War and so is
now reaching the end of its expected life.
This provides both an opportunity to rebuild
so as to accommodate new technologies and
sources of supply, but also poses a threat, as
the necessary financial and other, especially
human, resources stretch both the investing
companies and the supply chain beyond what
is deliverable within the time-frame envisaged.
This point has been raised in these
Economic
Reports
for several years.
Gas is currently the fuel of choice for power
generation in North America, sharply reducing
emissions of GHGs while lowering electricity
costs for consumers including, importantly,
for heavy industry, making it more
competitive internationally.
Gas is also starting to be used in medium
to heavy commercial road transport in the
USA and in buses in various parts of the
world, offering both cost and environmental
benefits. In the International Energy Agency’s
(IEA) most recent
World Energy Outlook
17
,
published in November 2012, gas remains the
only fossil fuel whose demand is forecast to
grow in all three of the IEA’s policy scenarios
(
new, current
and
450
).
Within Europe, gas is primarily a fuel for
heat, although it has a significant presence
in electricity generation as well, albeit this
has been reduced of late by the resurgence
of coal. Nonetheless, looking ahead to 2030,
gas is likely to gain market share in Europe and
elsewhere for power generation purposes,
as demand in non-OECD countries and
environmental pressures almost everywhere
keep on rising. New nuclear power is delayed
or, in some countries, rejected, and large scale
renewable electricity projects are struggling
for funding, notably in the EU.
Evolution of the UK’s Energy Policy
It should not be forgotten that the UK’s energy
consumption divides broadly into three
similarly sized parts: electricity, heat and
transport. Gas dominates heat supply; more
than 80 per cent of Britain’s homes are heated
by gas, together with much of the smaller
commercial sector and significant parts of
the larger commercial and industrial sectors.
Meanwhile, oil products supply transport
to an overwhelming extent, as is the case
around the world, with electricity holding a
share of the rail market where traffic densities
make
investment
in
the
necessary
infrastructure sensible.
Almost all the policy debate in the EU and
UK continues to concentrate on electricity,
although DECC published a heat strategy in
March 2013. It is clear from this strategy how
difficult and expensive reforming heating
throughout the country is going to be. At its
highest level, policy is governed by the energy
and climate change triangle, depicted in
figure 43 opposite. As has been commented
on before in these reports, it is Oil & Gas UK’s
view that far more attention has so far been
paid to reducing emissions than on security
of energy supplies and their affordability with
which comes economic competitiveness.
However, the consequences of the recession
in much of the EU have moved the debate
perceptibly towards security of supply and
affordability. This is understandable, given
that the public at large are likely to react
adversely to any threat to supplies and/or the
affordability of energy.
17
See
