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UTILITY WEEK | 6TH - 12TH MAY 2016 | 21 Operations & Assets Market view E nergy security cannot be dealt with in silos. In order to keep costs down while keeping energy supplies flowing, the UK needs to work with its neighbours, get serious about energy demand reduction, and look at the security of systems rather than individual fuels. As North Sea gas production continues its steep decline, the question of how much gas imports and new infrastructure the UK needs is of strategic importance. The uncertainty of the outcomes of major geopolitical crises in the Middle East, North Africa and Russia makes it increasingly difficult to predict how they will affect future supply and prices. So how secure is the UK's gas supply in the face of major crises? New E3G research shows that even in the case of major gas disruptions – such as from a Russia-Ukraine crisis, a cut-off of gas sup- plies from North Africa, an interruption of Norwegian imports, or an exceptionally cold year – the UK can meet its gas demand and keep supply secure without needing any new infrastructure. There are three factors driving this security. First, the UK is well-connected to Europe and global markets. For example, in the event of a one-year Norwegian disruption – the single biggest gas supplier – the UK can rely on additional imports from its pipelines to Belgium and the Netherlands, as long as it remains on track to deliver its climate and energy goals in line with the 2030 European targets. If the targets are missed or higher demand than expected materialises, the UK will also need additional imports from its existing LNG terminals, whose capacity was utilised by only 36 per cent in 2014. Well- functioning European and global markets make the UK more secure. Second, gas demand is falling, in the UK and the EU, across all sectors. Despite con- tinued predictions that gas demand would rise, data for 2015 show that gas demand was down by 28 per cent in the UK and by 22 per cent in the EU compared with its peak in 2010. Demand reduction from increased energy efficiency and substitution by low carbon alternatives are the silent but most important security sources. It gives a major cushion in case of physical disruptions, and strengthens the resilience of the UK economy – that is, its ability to absorb and react to shocks – by lowering the overall impact. Projections from the European Commis- sion indicate that EU gas demand will con- tinue to fall if Europe delivers its climate and energy targets for 2030. Similarly, meet- ing all the UK's emissions reduction targets, reflected in the "Gone green scenario" devel- oped by National Grid, would lead to a sub- stantial decline in gas demand over the next two decades. In the UK, UKERC analysis shows that without carbon capture and storage, there is limited scope for gas use in power generation beyond 2030 if the UK is to stick to its carbon budgets. The scope for gas use in 2050 is lit- tle more than 10 per cent of the 2010 level. Ultimately, meeting the UK target of an 80 per cent reduction in emissions compared with 1990 will constrain the role of natural gas to the 2020s and beyond. This points to a further decline in consumption – and sug- gests existing infrastructure will be sufficient to maintain security in future. Third, as well as gas, the UK is also increasingly interconnected with other Euro- pean countries in electricity. This means that in the event of a disruption to UK gas supply and consequent dialling down of gas gen- eration, electricity imports could pick up the slack. The recent Artelys analysis showed that an integrated perspective that combines gas, electricity and buildings efficiency has the potential to reduce gas infrastructure spend by 80 per cent in Europe. Energy secu- rity comes from systems, not single fuels. Remarkably, the findings apply even in a situation in which the UK and other EU countries pursue a coal phase-out. The research shows that an orderly transition out of coal in the UK does not lead to gas security of supply issues (even under high demand assumptions) because demand reduction, low carbon technologies and interconnec- tions offer smarter and cheaper ways of pow- ering and heating the nation. The key lesson is that energy security can- not be dealt with in silos. The UK needs to work with its neighbours, get serious about demand reduction, and look at the security of systems rather than individual fuels. Luca Bergamaschi, policy adviser, E3G No need for more gas Energy security relies on a mix of technologies, not a single fuel, and under any envisaged future scenario the UK does not need any more gas infrastructure, says Luca Bergamaschi. GAS CONSUMPTION FORECASTS INVESTMENT AND MAINTENANCE (€BN) TO ENSURE SECURITY OF SUPPLY 14.1 7.7 6.9 3.7 3.7 0.9 1.4 0.8 0.7 4.2 5.9 0.4 0.8 0.6 1.9 1.8 2.1 2.2 4.7 2.7 6.3 0.2 0.3 0.3 0.3 0.4 Gas reserve LNG terminals Pipelines Reverse flows National Grid scenarios Gone green Slow progression No progression Consumer power Historic 1,000 3,500 3,000 2,500 2,000 112 90 78 66 54 Scenario High demand Current trends On track Strategy Gas only integrated Gas only integrated Gas only integrated Petajoules a year Billion cubic metres a year 2005 2010 2015 2020 2025 2030 2035 Source: UKERC based on National Grid Source: Artelys 11.4 -80%