UK goes for gas
Sighs of relief were no doubt breathed across the European gas industry when the UK government last week unveiled its gas generation strategy. The European gas market is in the doldrums currently as electricity producers are massively turning to cheaper coal and renewable energy. Many wonder what the long-term prospects are for gas in the European power sector. The UK government's clear statement in favour of gas-fired power production brightens those prospects considerably.
The Department of Energy & Climate Change (DECC) announced that "barriers to investment in new gas will be addressed as the Government confirmed the major role gas will continue to play in supporting significant decarbonisation of the power sector by 2030". DECC said that up to 26 GW of new gas-generating capacity "could be required" by 2030, the bulk of which will be used to "replace retiring coal, nuclear and older gas capacity".
One of the more significant steps the government announced is that existing coal plants will be kept to rigorous maximum CO2 emission standards, ensuring that old coal plants will have to be closed. In addition, the government said that "shale gas is potentially an exciting new prospect", and will soon decide on whether fracking can go ahead again in the UK. (It was halted after fracking activities had led to small earthquakes). The new Gas Generation Strategy also "confirms the Government's commitment to supporting the development and commercialisation of carbon capture and storage (CCS)".
Worryingly from an EU perspective is that the UK has plans to introduce a national capacity market mechanism, although it has not made any firm decisions on this. The European Commission has started a "consultation" on national capacity markets, which it fears will undermine the internal energy market in the EU.
All good news then for the UK and European gas industry? Well, there is one caveat. The BBC reported that the government's support for gas is "the chancellor's (George Osborne's) personal obsession". Indeed, according to Greenpeace, Osborne "has been over-influenced on the issue by his father-in-law Lord Howell", notes the BBC. David Howell is a former energy minister and known in the UK as somewhat of a climate sceptic. In other words, the gas industry may rejoice – until the next government comes along and declares gas to be a threat to humanity.