Looks like gas-fired boilers will be with us for a while longer…
Gas is back. OK, it never really went away, but global demand is on the up again, partly due to nuclear shut downs in Japan and Germany and it seems to be in plentiful supply. The state of the economy is turning the “greenest government ever” back into energy pragmatists.
Wholesale gas prices are at a 17-month low, and will go considerably lower. Decision making on renewables and nuclear has been slow and muddled so, as a result, gas is powering back in the frame.
The International Energy Agency (IEA) believes a new ‘golden age of gas’ is dawning. It sees global gas trade expanding by 35% after 2015 and accounting for 25% of primary energy demand – it was only 21% in 2010. Annual gas demand is predicted to rise by 2.7% over the next five years and suppliers are confident of meeting that demand with liquefied natural gas, international pipelines and shale gas.
Government ministers are at loggerheads over renewable subsidies. The Chancellor George Osborne has fallen out publicly with energy secretary Ed Davey as the Treasury tried to water down generous grants to wind farms to maintain investment in gas-fired power generation. ‘Business before carbon’ is the mantra and Osborne is exclusively focused on business competitiveness at the expense of true energy innovation – and he seems to be winning.
In the end they settled on a 10% cut to the subsidies rather than the 25% Tory backbenchers were calling for. This should still free up some public funds for gas development.
The US is enjoying a shale gas boom that has reversed its moves towards becoming a gas importer that could be mirrored here.
The ‘fracking’ (hydraulic fracturing) controversy that saw the nascent UK shale gas industry start and then stall over earthquake fears seems to be close to a technical resolution. A report from the Royal Society and the Royal Academy of Engineering, commissioned by the government’s chief scientist Sir John Beddington, has given fracking an apparent clean bill of health just at the right time for Osborne and his Treasury officials.
The controversy will continue over fracking, but whether or not UK fields are developed, there is enough capacity worldwide for the UK to make a low cost gas choice, which probably means we will because it is easy and ministers fear the lights going out more than missing carbon targets.
We might have been a bit premature when we suggested the next generation of heating engineers would not be fitting gas boilers. It might take another generation.
Energy might be the issue that ‘fractures’ the coalition government, but whatever the political fallout, it looks like we aren’t leaving gas behind anytime soon.