Reading press coverage of energy matters at the moment you get the distinct impression that gas is a thing of the past and the future is all about renewables and nothing else: Boris Johnson has recently said that by 2035 all UK electricity will come from renewable sources. The switch to non-CO 2 producing fuels is the right policy to pursue but I suspect Mr Johnston seriously underestimates the cost and the difficulties in this switch. It may take a lot longer than he imagines. The likelihood is that the UK will be at least partially dependant on gas for several decades to come and gas will continue to play a major, albeit diminishing, role in the European energy market until 2050 and perhaps even beyond. This short paper will set out some of the difficulties and barriers the market will face.
Gas demand forecasts
Gas demand is likely to remain constant in Europe in the short term, up to the middle of this decade. The IEA forecasts 1 shows Gas demand in Europe at between 572 and 598 bcm/year 2 by 2025, compared with the 2020 level of around 589 bcm. Even by 2040 European gas demand should still be between 332 and 536 bcm/year, between 55% and 90 % of current levels. Ironically this market strength in the short term is largely because of government energy policies to reduce CO 2 emissions. These policies have sounded the death knoll for coal use in generation in Europe, as coal is a bigger emitter of CO 2 than gas. Coal fired generation is disappearing all over Europe. Nowhere is this more apparent than in Germany. As recently as 2018 Coal/Lignite provided around 35% of Germany’s electricity. However, Germany has now decided to phase out coal and lignite generation, although this change over will not be completed until 2030. The effect of this switch is that in the short/medium term gas consumption in Germany will increase from the current level of around 90 bcm/year to around 110 bcm/year. This process will be compounded by the German decision, taken in the wake of the Fukushima disaster in 2011, to phase out all their nuclear power stations by 2023. Belgium has also taken a decision to phase out nuclear power by 2025, to be replaced by gas fired generation. This will probably add around 2-3 bcm to European gas demand.
Although Government policy on consumers use of energy is still at the formative stage, it may focus on persuading consumers to switch from using gas to using electricity, especially for domestic use. In the domestic market gas is the dominant fuel and it may not be easy to displace it. In 2020 gas accounted for 65.5% 3 of all domestic energy use. Measures to encourage switching to electricity are already in place. In 2019 the UK government announced that new gas fired boilers would be banned in new housing from 2025 onwards and installation in existing properties banned from 2035. However, the distant nature of the latter policy measure means that the hoped-for reduction in gas consumption will take a long time to come through. Even in the 2040s gas demand should still be relatively high in the UK.
The high Levels of gas demand in existing markets, relative to electricity, have significant implications for infrastructure, which will require major new investment. The figure below shows that Gas demand in the UK in 2020 was almost 2.5 times as great as demand for electricity 811,000 GWh compared with 330,000.
Gas and Electricity Demand in the UK in 2020, (GWh) 4