UK energy independence under threat from falling North Sea production

Hopes to make the UK energy-independent are under threat due to the rapid decline in North Sea gas production coupled with slow-paced policies to cut gas demand, experts have said.

According to a report by The Energy and Climate Intelligence Unit (ECIU), under current conditions, gas import dependence has the potential to grow by 60 per cent by 2035.

This is anticipated to have “major financial implications”, including a profound negative impact on the UK’s balance of trade and household finances.

Between 2024 and 2035, a household using typical amounts of gas would have paid £5,700 to overseas gas producers. However, a net zero home would have paid just a quarter of that cost, £1,400, the report said.

With wholesale gas prices potentially sitting at three times their pre-crisis levels for several years, current policies could leave the UK’s annual wholesale gas bill above £35bn most of the way to 2035, at least three times the pre-crisis level.

The vast majority of these costs would be paid to overseas gas producers, approaching £30bn a year from 2030 and accounting for 85 per cent of UK gas payments by 2035, taking this transfer of funds to over four times its pre-crisis level.

The government has made efforts to ramp up North Sea fossil fuel production with more than 100 new oil and gas drilling licences issued last year.

This is despite warnings from climate scientists that the expansion will do little to lower bills or improve security in the near term, while also counteracting efforts to curb global warming.

A typical UK household with a gas boiler would be paying £500 a year to overseas gas producers by 2035, five times the level before the gas crisis – roughly £200 to Norway, and £300 to Qatar and other LNG exporters.

However, a ‘net zero home’ with an electric heat pump, better insulation and solar PV panels would be spending less than £100 on imported gas in 2035, the ECIU report stated.

A more ambitious set of policies to deploy insulation, heat pumps, and British renewables could reduce gas demand for heating and power generation, potentially cutting UK gas imports by 55 per cent by 2035.

“You can’t squeeze much more out of the North Sea; its output has been declining and the official numbers show that’s going to continue. It’s simply running out of gas,” said Dr Simon Cran-McGreehin, head of analysis at ECIU.

“Those arguing against heat pumps are arguing for UK homes being more dependent on foreign gas.

“And with wholesale gas prices predicted to stay two to three times higher than before the crisis, that means being dependent on an expensive fuel.

“The government has some of the right targets for UK energy independence, but not the policies to deliver on them.”

A Department for Energy Security and Net Zero spokesperson said: “This analysis fails to take into account the plans we have in place for powering up Britain, including significant investment in new renewable and nuclear projects. All this is backed by billions of pounds of Government funding, leveraging around £100bn in private investment.

“This is on top of our commitment to invest £6.6bn in energy efficiency upgrades this parliament, with a further £6bn to 2028. We have upgraded around 2.4 million homes through our Energy Company Obligation scheme alone, while our Boiler Upgrade Scheme enables consumers to purchase a heat pump at an increasingly comparable price to a gas boiler.”

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Original Source: https://eandt.theiet.org/content/articles/2023/05/uk-energy-independence-under-threat-from-falling-north-sea-production/

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