Barriers to investment in new gas will be addressed as the Government confirmed the major role gas will continue to play in supporting significant decarbonisation of the power sector by 2030.
The Government confirmed a number of steps that would be taken to stimulate investment in gas generation in its Gas Generation Strategy today.
New gas-fired power stations (which emit half the CO2 of coal) will need to be built over the next two decades to replace retiring coal, older gas and nuclear power stations.
Gas will also be required to support a low-carbon electricity sector, providing the flexibility to balance out increasing amounts of wind and nuclear energy.
Secretary of State Edward Davey said:
“We have always said that gas will have a significant role in our electricity mix over the next two decades - this is not new.
“Gas will provide a cleaner source of energy than coal, and will ensure we can keep the lights on as increasing amounts of wind and nuclear come online through the 2020s.
“The strategy we set out today follows extensive consultation and is consistent with meeting our legislated carbon budgets and with significant decarbonisation of the power sector”.
Up to 26GW of new gas generating capacity could be required by 2030. The bulk of this will be used to replace retiring coal, nuclear and older gas capacity, so it is expected there will be a net increase of around 5GW.
This is consistent with significantly reducing emissions from the power sector in order to meet Carbon Budgets.
Gas could play a more extensive role, with higher load factors, should the 4th Carbon Budget be revised upwards after the Committee on Climate Change has provided advice on this in 2014.
The Government has announced measures to provide market certainty for gas investors and to ensure fair competition including:
- Powers in the Energy Bill to introduce a Capacity Market, allowing for capacity auctions from 2014 for delivery of capacity in the winter of 2018/19, if needed, to help ensure the lights stay on even at times of peak demand.
- Bringing forward proposals to improve the planning regime in each part of Great Britain, by introducing greater flexibility and clarity for existing consents, and by looking at reducing the amount of pre-planning work required.
- Backstop powers are being taken under the Energy Bill to allow Government to step in if necessary to improve liquidity and competition in the market.
- Government will support Ofgem’s work with industry to look at the case for interventions to enhance gas supply security in the market.
- Government will look at further measures to encourage gas storage, and will publish findings on this in Spring 2013.
- DECC will establish an Office for Unconventional Gas and Oil, which will join up responsibilities across Government and provide a single point of contact for investors and streamline the regulatory process.
- The Government has signalled that shale gas is potentially an exciting new prospect for diversifying our energy supplies. Any development will have to meet high standards of safety and environmental protection. A decision on whether to permit Cuadrilla to recommence fracking will be announced by the Secretary of State shortly.
- HMT is consulting on an appropriate fiscal regime for shale exploration, and DECC will consult on the terms and duration of licenses, and on an updated Strategic Environmental Assessment for future onshore licensing.
- The Gas Generation Strategy also confirms the Government’s commitment to supporting the development and commercialisation of Carbon Capture and Storage (CCS) technology, which will help to decarbonise gas, as well as coal, in future.
Notes for editors
- Gas Generation Strategy
- DECC published a call for evidence on the role of gas in the electricity market in May 2012.
- Gas accounted for 40% of all generation in the UK in 2011.
- A significant volume of new gas capacity is in the planning pipeline: excluding plant which have started construction, more than 14GW of capacity has been consented and a further 2GW is under consideration.
- The UK has developed a world-beating support package for CCS which includes £1 billion commercialisation competition for which four projects have been shortlisted, £125 million support for research and investment, and by setting up a CCS Cost Reduction Taskforce.