How to Balance Sustainability, Affordability and Security of Supply?

All energy systems, be they national or regionally integrated, are different. It is not always possible to extrapolate global issues from a single example.

However, the UK turning to coal is a good example of a global challenge – how to keep the lights on, whilst balancing the books and maintaining commitment to sustainability.

Natural gas at 0735 on 7 September provided 51% of UK power generation capacity. Abundant and flexible, natural gas has been and will continue to be the catalyst for and foundation of a more sustainable energy system. The combination of gas and renewable energy effectively replaced coal in the UK and has done so throughout the world to a greater or lesser extent.

This has driven significant sustainability & environmental benefits, not least to public health. Cleaner air makes life better for everyone and decreases the fiscal burden on the state via improved health and lower stress on the healthcare system. There are no longer toxic smogs covering London that were in part created by power generation using dirty fuels. (See the IGU report “Case Studies in Urban Air Quality” for more detail).

The graph above & media stories linked to this article demonstrate a global policy challenge. It is vital for our future that the global energy system becomes more sustainable. A return to burning coal in a system where coal had been removed is a retrograde step in terms of sustainability policy. So why has this happened?

1. The UK has significant installed renewable energy capacity, but it is today operating at minimal level of its efficiency factor, as has occurred on many days of 2021. This puts significant pressure on the power grid – for instance, if the wind doesn’t blow at times of high demand, there are potential shortfalls. Natural gas at 51% this morning has done its job to avoid the shortfall and provide flexible, secure and reliable supply.

2. Renewable energy technologies today (in the UK, but there are other examples) are not at the performance stage where they are ready to significantly offer flexible capacity (that is currently provided by thermal generation – natural gas, coal, and sometimes oil), and there is a need for long-term infrastructure investment and construction, as in the case with offshore wind – which is a process that takes significant time and £ billions of capital that has to have a viable long term return on investment narrative. While, the demand for energy and power needs to be met now and continuously to keep the lights on, houses warm, and businesses working.

3. The global backlash against investment in any hydrocarbons has led, amongst other things, to a tight global natural gas market. With stably high demand, due to its uniquely flexible nature and low emissions, and low new investment, natural gas has become more expensive. Coal has for many years been the cheaper alternative. Whilst it may have been hoped that renewable technology would fill the gap, what is more and more clear is that the world needs enhanced natural gas liquidity to loosen the market and lower prices – at least in the short to intermediate term.

4. To be clear, it is vital for the world to continue to invest into sustainable renewable energy systems and build smart infrastructure to enhance them, but that is not an either/or proposition with gas. Natural gas is the ideal flexibility resource that has enabled the unprecedented growth in renewables all over the world especially in the past decade – from Asia to Europe, and North America – and for that growth to continue, natural gas investments also need to continue to maintain access to affordable, reliable, safe, and clean flexible capacity resource.

The conclusion: in the short term, the UK and the world need more gas and more affordable natural gas – otherwise there are deeply challenging issues to consider on either individual / domestic energy poverty or national energy security. The demonisation of gas could create very real human misery and / or significant sustainability downside. It can set back Paris goals by pumping more CO2 into the atmosphere from falling back on coal.

We therefore call on policy makers and all energy stakeholders to recognise the unique and valuable role that natural gas plays today and for the foreseeable future.