New report recommends a UK ‘dash for smart gas'
The UK should use natural gas, including from unconventional sources such as shale, to help decarbonise its power sector by replacing coal over the next few years, but should not assume that its price will be low, according to a new report published today (18 March 2013) by the Grantham Research Institute on Climate Change and the Environment at London School of Economics and Political Science, the Grantham Institute for Climate Change at Imperial College London, and the Centre for Climate Change Economics and Policy at the University of Leeds and the London School of Economics and Political Science.
The new policy brief by Samuela Bassi and co-authors, on ‘A UK ‘dash’ for smart gas’, also warns that, beyond 2030, gas-fired power stations can only play an extensive role in electricity generation if they are fitted with carbon capture and storage technology. While the authors suggest that the potential of shale gas is worth investigating, the scale of extraction in the UK could be constrained not only by the size of the resource and the cost of exploiting it, but also by public concerns about its environmental and social impacts.
The report points out that the Government’s Gas Generation Strategy, which was published in December 2012, could undermine efforts to reduce emissions cost-effectively because it suggests that the UK’s carbon budgets could be relaxed in order to allow more natural gas to be burned for electricity.
The report states: “Analysis reveals that substantial investment in gas on the assumption of low prices and large unconventional reserves is a risky option. A lower risk option would be a ‘dash’ for smart gas, where natural gas is used judiciously in those areas where it offers the greatest value in decarbonising the power sector.”
It notes that “natural gas will continue to play an important role in the UK energy mix over the coming decades, for both heating and electricity generation”, and adds: “Should gas prices fall, for example as a consequence of increasing worldwide supply of gas from unconventional sources, there could be positive consequences for the UK economy.”
However, the report also emphasises that “low gas prices are not guaranteed and there are large uncertainties around future forecasts”. It states: “Several estimates, including by the International Energy Agency, indicate that gas prices in the UK and European Union are more likely to increase than fall over the next two decades. Too great a reliance on gas may turn out to be inconsistent with the UK Government’s objective to insulate the economy from the risk of energy price rises by diversifying energy supply.”
In addition, the report highlights that “extensive deployment of gas-fired power stations would not be consistent with the UK’s carbon targets, unless it is accompanied by the widespread introduction of carbon capture and storage (CCS) technology”. It continues: “In the short run, the UK’s emissions can be reduced by replacing coal-fired power stations with those fuelled by natural gas, which emit less than half the carbon dioxide per kilowatt-hour of coal-fired plants. But in the medium to long term, a heavy reliance on gas-fired power stations with unabated emissions would hinder the decarbonisation of the UK’s power sector.”
The report draws attention to the “great uncertainty around the actual size of UK shale gas resources and reserves that can be commercially extracted”, and states: “The potential of shale gas is worth investigating, but future exploration and production will have to be subject to strict environmental standards upstream (e.g. at the wellhead to prevent fugitive emissions) and downstream (e.g. to ensure carbon dioxide is captured and stored safely). As noted by the International Energy Agency, the shale gas industry will need to obtain a ‘social licence to operate’ in order to satisfy public concerns about its environmental and social impacts.”
The report concludes:
“In sum, natural gas will continue to be important during the transition to a low-carbon electricity system. But if the UK is to meet carbon targets in a least-cost way, there is only a limited window for baseload generation from gas-fired power stations with unabated emissions, during which time it should replace coal. Gas can only play a more significant role beyond the 2020s if CCS technology is deployed on a commercial scale.
“Current Government thinking, most notably the UK Gas Generation Strategy, does not appear to have fully acknowledged these challenges. In particular, the Strategy’s central scenario builds on the assumption that by 2030 the carbon intensity of the power sector will be twice as high as the level recommended by the Committee on Climate Change in the fourth carbon budget (50g/kWh). More dangerously, the Strategy’s recommendation that ‘gas could play a more extensive role should the fourth carbon budget be revised upwards’ could jeopardise the UK achieving its mandatory emissions targets at least cost.”
Notes for Editors
- The Grantham Research Institute on Climate Change and the Environment was launched at the London School of Economics and Political Science in October 2008. It is funded by The Grantham Foundation for the Protection of the Environment.
- The Centre for Climate Change Economics and Policy is hosted by the University of Leeds and the London School of Economics and Political Science, and funded by the UK Economic and Social Research Council and Munich Re.
- The Grantham Institute for Climate Change was established by Imperial College London in February 2007. It is funded by The Grantham Foundation for the Protection of the Environment.