Ofgem Investigates UK Long Term Gas Supply
Ofgem, the energy watchdog, is to investigate whether the UK has sufficient gas in the long term to ensure the country’s energy security.
Concerns are growing over the UK’s energy security and long term gas supply as households and businesses suffer increasingly higher electricity and gas prices. Consequently, the Government has asked the watchdog to investigate whether “further action is needed to ensure that medium- to long-term gas supplies for consumers remain secure”.
North Sea oil and gas reserves have fallen and as a result the country has become increasingly reliant on imported gas. This makes the UK vulnerable to the volatile energy markets, something which energy providers have blamed for rises in domestic and business electricity prices over recent months.
Ofgem says that at the moment 50% of Britain’s gas comes from UK suppliers. However this is set to fall to around 20% by the end of the decade. Utility Exchange reported earlier this year that events in Japan and the unrest in the Middle East had resulted in gas imports, which had been intended for the UK, being shipped to Japan and Germany. Japan closed many of its nuclear power stations after the earthquake and subsequent tsunami while Germany decided to move away from nuclear power and focus on gas and renewables. Utility Exchange also reported this year that the International Energy Agency (IEA) predicts a golden age of gas as demand around the globe increases.
As a result of increased demand for gas, wholesale prices have increased by 40%. All consumers, from domestic users to small businesses and energy intensive industries have felt the pressure of rising energy prices.
Aging fossil fuelled power plants will be shut down over the next ten years as will old nuclear power plants. Energy security is therefore a priority and gas imports could become more limited as more countries move away from nuclear and turn to gas for their energy generation. It’s therefore important that Ofgem reviews how well the country is prepared as far as long term gas supplies are concerned.
The Energy Secretary, Chris Huhne, said “As our old coal and nuclear power stations shut down, gas can provide flexible and reliable backup electricity to complement the next generation of renewable and nuclear energy”.
He continued “Our analysis shows that it is likely to remain significant beyond 2030 – particularly with commercial carbon capture and storage [techniques which reduce emissions]”.
Ofgem will report on its finding in May.