U.K. FACES INCREASING
New electricity cables are planned but they risk tariffs once London leaves the EU
LONDON said Russel Mills, director of energy and climate policy at Dow Chemical Co. “The country’s already taking a bit of a risk in terms of the low level of gas storage. Brexit is going to complicate matters.”
Gas has been pivotal to the nation for four decades, but domestic output peaked almost 20 years ago and imports from Norway to Qatar are being used to make up the difference. About 75 per cent of foreign supplies arrive by pipelines.
Shortages aren’t an immediate risk because liquefied natural gas (LNG) import terminals are using about a third of their capacity. LNG is “a fantastic thing” for the UK market, said Dan Monzani, head of security of electricity supply at the Department for Business, Energy and Industrial Strategy, at a conference, here, last month.
Imported fuel added to costs for UK consumers, whose electricity costs were already higher than for other EU nations, according to a government paper in January. Fuel purchased in other currencies became relatively more expensive for UK buyers last year when the pound fell more than 13 per cent against the euro and dollar.
The nation is an importer of power from France and the Netherlands and total energy purchases from abroad are now at levels not seen since the 1970s. New electricity cables are planned with France, Germany, Norway and Denmark to help boost supply security, but they risk trade tariffs once Britain leaves the EU.
“Finding energy partnerships with EU member states will be an important task in the years to come,” said Jade Kalinowsky, a senior trader at Fredericia, Denmark-based utility Dong Energy.
While there were approvals for as many as 26 new gas-fired power stations, investors were hesitating because of the vast array of policies to navigate, according to the UK’s Major Energy Users Group. Diesel and coal generators have emerged as winners in government auctions designed to entice investments in largescale gas-fired plants.
To ensure supplies, the country relied for decades on gas pumped into the Rough storage facility, a depleted North Sea field. The underground reservoir is deteriorating from age. Stockpiling fuel at the site is halted until at least May next year due to the risk of leaks.
“I personally don’t see how the system is going to fill the gap of 3.31 billion cu m that Rough is able to provide without having a big impact in prices,” said Guillermo Baena Gomez, a senior market analyst and energy trader, here, at Advantage Utilities Ltd.
Bloomberg New Energy Finance estimated that Centrica Plc’s Rough, which accounts for 70 per cent of the UK’s total storage capacity, won’t ever return to service.
National Grid Plc, which manages UK pipelines, estimated power output from gas plants may drop as much as 64 per cent by 2025, according to a scenario where the nation focuses on climate protection. A business-asusual scenario has gas output rising. Bloomberg