Professor Paul de Leeuw examines the arguments for the renewables agenda and further North Sea production as gas price pressure mounts.
The horrific events in Ukraine and the concerted and targeted global response put in stark focus the interdependencies and interconnectivity of the world’s economy.
With Russia supplying around 40% of the natural gas and close to 25% of all the crude oil to Europe, the war and the subsequent sanctions were inevitably going to materially impact global commodity prices. With Brent oil price peaking at $140 per barrel and UK natural gas price topping a staggering $600 per barrel equivalent (c. 800 pence/therm) before falling back more recently, it has created shockwaves around the world.
With security of supply, cost of living crisis and the climate emergency now all firmly in the spotlight, there are some stark decisions to be made to ensure the nation has access to the energy it needs at prices people can afford, whilst reducing emissions at the same time.
Accelerating the renewables agenda – and especially new wind generation – will be the right thing to do, but it will not alleviate the security of supply issue in the near term. Neither will it address the cost associated with heating our homes. With close to 23 million (or c. 85% of) homes in the UK relying on natural gas and with limited alternatives available in the foreseeable future, the UK will require access to natural gas for many years to come. With the UK’s own gas production declining and with international gas and LNG markets likely to be under serious pressure over the coming years, all supply and demand options should be on the table to lessen the impact on consumers and the wider economy.
With LNG imports typically having around three times the carbon emission intensity compared to gas produced in the UK, it would make sense to consider additional production from the North Sea. Assuming new gas projects can be approved in 2022, it will take a few years for this new capacity to come on stream. Other than providing additional security of future supply, new jobs in the UK and the opportunity to reduce imports, it will help to bridge the UK’s energy needs before new, large scale renewables capacity becomes available and it also allows time to find alternative solutions for heating our homes.
With gas prices subject to regional market dynamics, this may not necessarily change the price of wholesale gas or what we pay for heating our homes, but it will certainly help to ensure the nation has access to the energy it needs, on our doorstep and with full control.
The UK’s offshore energy workforce has always played a key role in powering the nation, fuelling the economy and in securing the country’s energy supply. With what is playing out in the world at the moment, this is even more important than ever.
Professor Paul de Leeuw is director of Robert Gordon University’s Energy Transition Institute .