ICIS Heren energy news, roundup & data

Supply shortfall leaves UK poised for gas dash

11 January 2010 00:00  [Source: ICB]

THE UK will see a surge in new gas-fired power generation this year. This has led some to speculate that the country is creeping towards a greater reliance on the fuel as a means of tackling the expected supply shortfall from the middle of the new decade.

Nearly 5.5GW of new combined-cycle gas turbine (CCGT) capacity is due on stream before the end of 2010.

Most of the new plant is scheduled to start production from the summer, although Centrica's 885MW UK Langage facility in Plymouth, Devon, could begin commercial operations before the end of this winter, said a company spokesman.

"It's a mini-dash for gas," David Hunter, an analyst at energy consultancy McKinnon & Clarke told ICIS Heren. "In the short term, we don't have an option, as new policies on nuclear and coal were delayed for too long."

Last year, the UK government presented its final policy framework for coal plants, and began consultations on a national nuclear policy statement, which will guide the deployment of a new generation of reactors.

But despite mid-decade targets for carbon capture and storage demonstration projects and a new nuclear reactor, technical constraints and policy wrangling could mean 2020 would be a more realistic target.

"2015 is when we expect to start seeing a yawning gap in power generation, and that can only be filled by natural gas, as it's relatively quick and cheap to build," Hunter said. However, the greater reliance on imported gas this would necessitate remains a significant downside.

This week has seen gas plant pushed to the margin by coal in response to gas price hikes and a very tight gas supply/demand balance. But Hunter argued that underlying UK gas supply fundamentals remained bearish, suggesting gas-fired plant was likely to return to the Baseload role it assumed last year.

"The market will react in the short term to provide supply," Hunter said. "But if we continue to see very high gas demand this winter, then coal will come in to provide balance."

 

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Author: Reg Ajuonuma



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