The government has confirmed that gas will continue to play a role in supporting decarbonisation of the power sector and that barriers to investment in new gas will be addressed.
The announcement forms part of the government’s Gas Generation Strategy, which includes consultation on new tax incentives for shale gas and the creation of a single Office for Unconventional Gas.
New gas-fired power stations will need to be built over the next two decades to replace retiring coal, older gas and nuclear power stations.
Gas will also be required to support a low-carbon electricity sector, providing the flexibility to balance out increasing amounts of wind and nuclear energy.
In a statement, secretary of state Edward Davey said: ‘We have always said that gas will have a significant role in our electricity mix over the next two decades.
‘Gas will provide a cleaner source of energy than coal, and will ensure we can keep the lights on as increasing amounts of wind and nuclear come online through the 2020s.
‘The strategy we set out… follows extensive consultation and is consistent with meeting our legislated carbon budgets and with significant decarbonisation of the power sector.’
According to the Department of Energy and Climate Change (DECC), up to 26GW of new gas generating capacity could be required by 2030. The bulk of this will be used to replace retiring coal, nuclear and older gas capacity, and the DECC believes there will be an expected net increase of around 5GW.
This is said to be consistent with reducing emissions from the power sector in order to meet carbon budgets.
Responding to yesterday’s announcement, EEF head of business environment Roger Salomone said: ‘This is a decisive move towards a more balanced energy policy and further switching from coal to gas can deliver substantial emission cuts… developing the nation’s shale gas resources could enhance our energy security and help contain energy prices rises.
‘However, the government needs to be mindful that some of its policies, such as the carbon price floor, do not unintentionally destroy the economics of gas-fired generation.’
Dr Tim Fox, IMechE’s head of energy and environment, added: ‘It is sensible for the UK to invest in gas-fired power plants at this point in time as they are cleaner than coal, needed to back up intermittent renewable energy sources, and can be built quicker with much lower upfront costs than nuclear plants.
‘While the recent announcements in the Energy Bill will help ensure we meet our EU renewables obligation for 2020, it is important to acknowledge that climate change is still an issue and that gas is a fossil fuel.
‘This announcement reinforces the need for more investment, research and development into carbon capture and storage [CCS] — a technology that could in future be retrofitted on to gas plants to prevent emissions entering the atmosphere.
‘It is also important that the UK doesn’t become over-reliant on gas. The UK’s offshore gas reserves are dwindling, and given that the contribution of shale gas will probably be limited to a few per cent of future UK demand, we are unlikely to ever be self-sufficient in gas.’
Measures to provide market certainty for gas investors and to ensure fair competition include:
- Powers in the Energy Bill to introduce a Capacity Market, allowing for capacity auctions from 2014 for delivery of capacity in the winter of 2018–19, if needed, to help ensure the lights stay on even at times of peak demand.
- Bringing forward proposals to improve the planning regime in each part of Great Britain, by introducing greater flexibility and clarity for existing consents, and by looking at reducing the amount of pre-planning work required.
- Backstop powers are being taken under the Energy Bill to allow government to step in if necessary to improve liquidity and competition in the market.
- Government will support Ofgem’s work with industry to look at the case for interventions to enhance gas supply security in the market.
- Government will look at further measures to encourage gas storage, and will publish findings on this in Spring 2013.
- DECC will establish an Office for Unconventional Gas and Oil, which will join up responsibilities across government and provide a single point of contact for investors and streamline the regulatory process.
- The government has signalled that shale gas is potentially an exciting new prospect for diversifying our energy supplies. Any development will have to meet high standards of safety and environmental protection. A decision on whether to permit Cuadrilla to recommence fracking will be announced by the secretary of state shortly.
- HMT is consulting on an appropriate fiscal regime for shale exploration, and DECC will consult on the terms and duration of licenses, and on an updated Strategic Environmental Assessment for future onshore licensing.
- The Gas Generation Strategy also confirms the government’s commitment to supporting the development and commercialisation of carbon capture and storage (CCS) technology, which will help to decarbonise gas, as well as coal, in future.