Renewable power generation could end the need for gas-fired energy, and emissions targets may cut gas out of the heating sector, writes Rhys Talbot
The UK's recently passed Energy Act facilitates the development of renewable and fossil fuel energy. But growth in renewables capacity looks set to weigh on gas-fired power demand, while increasing emissions reductions targets could cut gas' role in heating.
The bill became law last month and contains an array of measures aimed at increasing renewable and nuclear power generation and energy storage, and provides a legal framework for developing carbon capture, utilisation and storage and hydrogen projects. It contains provisions to speed up the development of renewable generation technologies and ease grid constraints that have limited their roll-out, and give the energy regulator greater control over industry codes.
Reforms to permitting processes for renewables projects and to grid procedures could make 2030 renewables capacity targets easier to reach. The UK government is aiming to have 50GW of offshore wind power capacity by 2030, up from 14.4GW this year. There are no UK solar or onshore wind targets for 2030, but reaching the Scottish government's 2030 target for onshore wind and progressing towards the nationwide 2035 solar target of 70GW would leave installed capacity of the two technologies at 47.2GW and 26.3GW, respectively, in 2030, up from 15.4GW and 15.3GW at present.
If these targets are reached, generation from the three technologies could reach 280TWh in 2030, assuming load factors in line with recent years. This is not far below the UK's total power demand last year of 321TWh. Even ignoring the contribution of nuclear, hydro and biomass-fired power generation, this suggests that the residual load left for flexible gas plants to cover could shrink from the 111TWh that gas-fired plants generated in 2022. Gas could slip into a backup role, with significant generation occurring only in the relatively few hours each year when demand is high and wind and solar power output is low. But even if these ambitious capacity targets are reached, power demand is likely to rise as well, leaving room for gas in the mix in the coming years.
Electrification of the transport and heating sectors could push up power demand in the coming years, and nuclear output will probably dip in the second half of this decade as ageing nuclear plants close and their much-delayed replacements take time to come on line. And the UK's increasing power interconnection with neighbouring countries may bolster the call on the country's gas-fired plants to fill any gaps in generation in mainland Europe.
No certainty on gas' role in heating
While the provisions of the Act could shrink the role of gas in power generation, the future configuration of the UK's residential heating sector remains less clear.
Local distribution zone demand — gas delivered through distribution networks to homes and businesses — accounted for two-thirds of gas used in the UK last year. The residential sector emitted 56.4mn t of CO2 in 2022, mostly from gas used for heating, accounting for 17pc of all greenhouse gas (GHG) emissions in the UK. And the government's legally binding emissions reduction targets mean that total GHG emissions will have to fall sharply in the coming years. Annual emissions must fall from 417mn t of CO2 equivalent (CO2e) in 2022 to 390mn t/yr CO2e in 2023-27, 345mn t/yr CO2e in 2028-32 and 193mn t/yr CO2e in 2033-37.
While the power sector may be able to continue using gas by storing the CO2 it produces, gas burnt on local distribution networks cannot be abated, meaning that all of the CO2 emitted by the residential sector will continue to be released into the atmosphere. This poses a problem for the UK's four gas distribution system operators (DSOs) — Cadent, SGN, Wales and West Utilities, and Northern Gas Networks. The UK's shrinking carbon budget will possibly not allow for gas heating in the coming years, and so if renewable gases are not able to replace natural gas in distribution grids, the DSOs' sprawling pipeline networks will be transformed from assets to liabilities, which they will have to decommission.
But the four firms seem confident that they will be able to modify their grids so they can distribute carbon-neutral hydrogen — whether made from natural gas with carbon capture or through electrolysis —and remain viable businesses in a net zero era. Cadent, Northern Gas Networks and SGN included 294 references to hydrogen in their most recent annual reports and only two to "stranded assets".
The bill provides a legal framework for firms to begin producing hydrogen from natural gas and storing the CO2 separated out in geological formations. Producing hydrogen in this way would be carbon neutral if all the CO2 generated can be successfully stripped out and stored, and it could continue beyond the government's 2050 deadline for reaching net zero carbon emissions. But the government has not committed to piping hydrogen into homes. Last month, it said that it expected heat pumps and heat networks to be the "primary means of decarbonisation for the foreseeable future", with hydrogen playing a role "in some locations".
Other provisions of the bill support electrification of domestic heating, which could curb demand for gas boilers. It also includes legal backing for the clean heat market mechanism, under which sellers of gas-fired boilers need to sell a steadily rising number of heat pumps, or buy credits from heat pump manufacturers.
The UK is Europe's laggard on heat pump installations, with the devices comprising 3pc of domestic heating installation sales in 2022, compared with more than 90pc in Nordic countries and 20-40pc in other large western European countries. But if the government reaches its target of 600,000 heat pump installations a year by 2028, this is likely to come at the expense of the UK's 21mn installed gas boilers.
