Gas users and developers have laid out a three-point plan to ward off the threat of greater energy price volatility.
The Gas Security Group (GSG), which represents major industrial users of gas and infrastructure developers, has called for policies to be put in place which will maintain secure supplies while achieving lower carbon emissions.
It calls for investment in:
- Gas fired power generation, especially peaking power plants, to compensate for the demise of coal-fired generation, uncertainties over the future of new nuclear, the expansion in “intermittent” renewables and the limitations and costs of battery storage
- Additional storage to compensate for fluctuations in the imports that make up an increasing share of the UK’s gas supply as well as the additional capacity required to support the growth of low and zero-carbon gases, such as hydrogen
The GSG is also calling on the next government to introduce a new industrial gas Demand-Side Reduction (DSR) scheme that will provide industry with a commercial incentive to voluntarily curtail its demand for the fuel at times of system stress.
Changes to this mechanism will reduce the threat of gas shortages and energy prices spikes by providing greater short-term flexibility in the supply of gas.
The GSG says that Brexit could knock government projections that the UK will become increasingly reliant on interconnectors to meet electricity demand.
And it points to the conclusion of a recent study by the consultancy Aurora that interconnectors provide very little additional resilience in meeting peak demand and therefore a “minimal” contribution to security of supply.
In addition, it says that the UK wholesale gas price has seen “significant” fluctuations as the market becomes more dependent on imports of liquid natural gas (LNG) and so increasingly exposed to factors like growing demand for the fuel from other parts of the world.
Clive Moffatt, chairman of the GSG, said: “With electrification and greater efficiency, annual gas demand is likely to fall but the seasonal peak gas demand for heat and power will rise significantly and the resulting market volatility will increase sharply.
“It is in the interests of UK plc, and all consumers, that the next government makes energy security and affordability a priority during what will be a long and challenging transition to a net zero emission target.
“The importance of gas to the UK’s energy system and the transition to net-zero emissions just can’t be ignored.”