Gas (and other energy) outlook

[AE-NMidlands]

Interesting article in the Guardian/Observer today
https://www.theguardian.com/business/20 ... GTUK_email

Gas’s future looks cloudy as demand and prices tumble
A conference this week will discuss a market being transformed by green energy, LNG and milder winters

The annual International Energy Week conference will see bosses gather at a hotel in Mayfair amid a tense debate over the pace of oil and gas firms’ transition to low-carbon energy. Last year, then BP boss Bernard Looney (since defenestrated) defended its fossil fuel spending over the sound of noisy protests outside. Activists later let off a smoke bomb at a black-tie dinner, forcing executives on to the street in front of protesters.

Speakers will include the chief economists of BP and Shell, and the bosses of France’s Engie, the UK’s Octopus Energy and oil trader Vitol, as well as Ed Miliband, the shadow energy secretary, representing a Labour party under scrutiny for watering down funding for its green policies.

A significant talking point at the conference will be the role of gas in the energy transition – and the impact of falling wholesale prices. In recent weeks, European natural gas prices have fallen to levels not seen since before Russia’s invasion of Ukraine in February 2022, which intensified an already escalating energy crisis. Gas has been trading at €23 a megawatt hour, the lowest since May 2021 – and down from highs of €319/MWh in August 2022.

A multitude of factors have contributed. “European demand remains very low with the second mild winter on the trot,” says Tom Marzec-Manser, head of global gas analytics at consultancy ICIS. “A lot of gas is normally used for heating homes and businesses across Europe, and it hasn’t been used this year.” Warmer, windier weather has also reduced the need for gas-fired power stations to generate electricity, with the under-pressure windfarm industry stepping in. As a result, storage levels in Europe’s gas facilities remain high.

[Mart]

Brilliant news.

Reading way too much into this, and jumping ahead, but given we've suffered such high prices, then perhaps a good time to consider a small(ish) carbon tax on gas prices as they fall. Need to distribute a good share to those in energy poverty, but a good way to encourage heatpump installs, since the UK is so, so, so far behind most of Europe.

Would also provide an additional benefit/incentive for RE leccy generation, and storage.

[Krill]

Brilliant news.

Reading way too much into this, and jumping ahead, but given we've suffered such high prices, then perhaps a good time to consider a small(ish) carbon tax on gas prices as they fall. Need to distribute a good share to those in energy poverty, but a good way to encourage heatpump installs, since the UK is so, so, so far behind most of Europe.

Would also provide an additional benefit/incentive for RE leccy generation, and storage.

A gas tax is a double edged sword and has to be very carefully considered, unless it's coupled with HP installs in privately rented properties (and the landlords are charged in some way) it is quite easily a revenue shift.

[Adokforme]

Brilliant news.

Reading way too much into this, and jumping ahead, but given we've suffered such high prices, then perhaps a good time to consider a small(ish) carbon tax on gas prices as they fall. Need to distribute a good share to those in energy poverty, but a good way to encourage heatpump installs, since the UK is so, so, so far behind most of Europe.

Would also provide an additional benefit/incentive for RE leccy generation, and storage.

A gas tax is a double edged sword and has to be very carefully considered, unless it's coupled with HP installs in privately rented properties (and the landlords are charged in some way) it is quite easily a revenue shift.

Just off the top of my head, it wouldn't take much to invoke, simply increase vat on domestic gas by a few %. After all, if we need to get to net zero at the earliest opportunity then every little helps surely?

[Krill]

I'm not disagreeing with the goal of zero residential gas use, merely attempting to illustrate a problem with a usage tax on gas and some of the knock on effects.

I own my house (well, mortgaged, but whatever). Remove the planning permission barrier and I have a simple economic incentive to swap to a heat pump if it becomes cheaper to run than a gas boiler (I already have an ethical incentive), so a tax on usage can work to change my behaviour.

Occupiers of privately rented dwellings have no control over the presence of a gas boiler. It doesn't matter how high a tax is on gas, levied via a usage tariff paid by the occupier, because it does not act as an incentive on the landlord to change to an electric heat pump. Doesn't matter if it's 1% or 1000%, unless the tax is racked so high that it is actually cheaper to make the tenant put in the HP and hence acts as a wealth transfer from poor to rich.

Part of the issue is that any attempt to tax the landlord ends up with the landlord passing as much of hte cost onto the occupier, which is where (I think) statutory obligations need to be utilised, to force the incentive onto the owner (klandlord) and not the occupier.

One example, is imagine this: what if there was alaw which set a date, say 1/9/2030 - beyond which no privately rented accomodation could have rent charged whilst the only source of heating was a gas boiler (the wording should probably be: has a gas supply to the property). Now the landlord have an incentive to ensure that there are no gas boilers present. If they try to sell up though, there are knock on effects for the housing market which can become quite unusual but also is likely to push out smaller landlords and increase larger corporations which own portfolios of property. So ther is another problem which needs to be managed.

But let's carry on with the scenario. We've just increased the demand on the HP supply, so we need to either manufacture or import the equipment in short order. We're going to see a price increase just like we did in Covid with solar PV and batteries due to the spike. We're already looking at a production gap, so we need to choose a date which works best - but landlords will put off the expenditure anyway so delaying doesn't happen. So we need phased increases, so need to start measuring portfolios of property to measure what percentage is gas and what percentage is electric. Oh wait, what if the landlords cheap out and just move to an electric boiler? I worked out that it would take the entire after tax, pension and student loan wage of a new band 5 NHS (ie newly qualified nurse) to heat the average 3 bed property in the winter months (or rather, at the winter 22 electricity prices, with the cap in place, so it would be a little lower at this point) using an electric boiler. So we already have problems there as well, need to stop land lords being cheapskates.

I'll stop at this point, because I've gone far enough, but I think the following steps need to be taken along with a tax on gas.

1. Planning permission needs to be relaxed for heat pump installs, especially in terraced housing.
2. Significant control is needed to enforce insulation of privately rented properties, with a due by date will before any enforced date affecting ending gas boiler use and installation.
3. Given that energy use and the housing market are closely linked, there will need to be robust and decisive governmental control (lol) over policies similar to "Right to buy" as a back stop, so landlords that try to sell privately rented properties and forced to sell to the tenants in the first instance to stop a glut of properties hitting the market, realistically this needs to be followed up with a similar scheme help to buy loans.
4. There does need to be a state owned company (realistically it would probably be commissioning companies to act on it's behalf in the near term, similar to NHS commissioning) to act as a ceiling price enforcer for solar PV, batteries, heat pumps and insulation to stop profiteering. Grants are a stupid way to manage the system, this way. Ideally this would be managed at local authority level so it could be integrated with housing plans.
5. A tax on gas used by powerplants would only work if the price gas powerplants is paid for power is completely decoupled from RE prices, otherwise we just get inflationary costs

To repeat, I agree with the zero gas use goal, but I think a tax is just harder to justify. It's actually simpler if it's outlawed sector by sector, as it's easily controlled by just turning off sections of the network.

[MrPablo]

That's a very well put together argument Krill, with several very good points.
I completely agree with your point regarding rented properties and the limitations that renters would face. There's definitely a need for serious joined up approaches across multiple sectors, but I genuinely don't know how feasible that is...

[Mart]

Very thought provoking Krill, thanks.

In case anyone didn't see it, here's an article from the Guardian a couple of months ago, showing just how far behind the rest of Europe, the UK is, for rolling out heatpumps.

Heat pumps are hot property in Europe. Does Britain have cold feet?




Just a silly thought from me, but I was wondering about the number of homes in the UK heated by resistive leccy, such as storage heaters. It seems to be less than 10%, perhaps 7-8%. So ....... stick with me here ...... if those properties were changed to heatpumps, and got an average COP of around 3, then we may already be producing enough leccy for around 20-24% of UK homes, IYSWIM.

I suspect it's far more complex, and many of these leccy homes, will be social housing, flats etc, so smaller than average(?), but just a thought, and at the very least, installing a simple A2A unit, may be a great way to reduce heating costs for some of these properties.

[resybaby]

My rather simplistic view is that the starting point to drive the decarbonisation of home heating isnt heat pumps at all initially. Its insulation, Insulation insulation. The biggest problem i see (discounting the practicalities somewhat) is the simple cost for folk to stay warm, with all forms of heating. So the obvious thing to me is to cut all losses down as much as possible first, then look at the source or heat and its exonomic and environmental benifits next.
Insulation is a buy/fit once then its free for the future product.

As a gas registered plumber, i have lost count of the times over the years ive been asked to 'bung a bigger radiator' in someones 'too cold' room. So many times when you look at the pipework running to the 'ineffective' radiator they want replacing you find it hanging under a suspended floor with zero insulation, leaking all that heat to the underfloor void and being lost rather than affective.

My house is a fairly big 1970's bungalow, solid uninsulated concrete floors, internal wall (as well as cavity wall) insulation throughout and a silly amount of loft insulation. House naturally divides into two halves, living area & bedrooms area. I can heat either halve to 23'c with a simple plug in the wall 2kw electric convector in that space, can only be the insulation making that achievable. We heat with biomass however, no gas in the street.

Just has to be insulation first in afraid. Use less gas or electricity and work from there.

[Mart]

My rather simplistic view is that the starting point to drive the decarbonisation of home heating isnt heat pumps at all initially. Its insulation, Insulation insulation. The biggest problem i see (discounting the practicalities somewhat) is the simple cost for folk to stay warm, with all forms of heating. So the obvious thing to me is to cut all losses down as much as possible first, then look at the source or heat and its exonomic and environmental benifits next.
Insulation is a buy/fit once then its free for the future product.

As a gas registered plumber, i have lost count of the times over the years ive been asked to 'bung a bigger radiator' in someones 'too cold' room. So many times when you look at the pipework running to the 'ineffective' radiator they want replacing you find it hanging under a suspended floor with zero insulation, leaking all that heat to the underfloor void and being lost rather than affective.

My house is a fairly big 1970's bungalow, solid uninsulated concrete floors, internal wall (as well as cavity wall) insulation throughout and a silly amount of loft insulation. House naturally divides into two halves, living area & bedrooms area. I can heat either halve to 23'c with a simple plug in the wall 2kw electric convector in that space, can only be the insulation making that achievable. We heat with biomass however, no gas in the street.

Just has to be insulation first in afraid. Use less gas or electricity and work from there.

Hmm, you've given me a headache, by making me overthink this.

My heart agrees with you 100%, that we should reduce energy consumption first. That's simply obvious .......

...... or is it, as my head disagrees, and says if tested to the extreme (purely as a thought experiment) by allowing only one change - reduced energy consumption of gas, or switch to heat pump, then I'd have to say heatpump.

The heatpump allows for a switch to RE, whilst the gas boiler requires continued use of FF gas*, albeit a reduced amount thanks to the efficiency upgrade. [Although, it's fair to say the HP also allows for reduced energy consumption on the input stage (kWh), if not the output stage (kWh(t)].

Please don't get annoyed at my comment, I'm fully behind reducing energy consumption, and improving insulation etc, but we have to move away from burning FF's asap. HP's are almost certainly the best choice, whilst also reducing the energy needed, be it to heat an inefficient, or efficient home. But of course I'm simply haggling over the lesser of two evils, the best choice is improve the property, whilst switching to a HP sized appropriately for the reduced heating needs.

There's also an interim/hybrid possibility, which is the addition of a small A/C unit, an air to air HP, which can provide a significant contribution to space heating, especially if co-located with PV, allowing a property to partly heat itself from its own 'free fuel' powerstation. [Note, the fuel (sunshine) is free, not the powerstation (PV panels).]

*Happy to take the gas boiler a step further and switch to H2 from RE, but that will require roughly 6x the RE input for an equivalent HP output, so all roads lead to HP. I believe the Gov has now dropped (or is dropping) the H2 boiler idea/initiative.

[openspaceman]

My house is a fairly big 1970's bungalow, solid uninsulated concrete floors, internal wall (as well as cavity wall) insulation throughout and a silly amount of loft insulation. House naturally divides into two halves, living area & bedrooms area. I can heat either halve to 23'c with a simple plug in the wall 2kw electric convector in that space, can only be the insulation making that achievable. We heat with biomass however, no gas in the street.

Just has to be insulation first in afraid. Use less gas or electricity and work from there.

I only use a 4kW (nominal) wood stove for heating in a small victorian semi but we only heat two small rooms downstairs to about 20C I hope to move away from total dependence on wood in the next few years. I have never got the impetus to internally insulate the NW and SW downstairs walls because of the hassle of emptying the rooms to do so and I thought the lack of under solid floor insulation was bad. However now I see you have an un-insulated solid floor yet the bungalow is well insulated elsewhere and this chap, who I watch for the heat pump content, is similar.



Long time ago I read that it was only necessary to insulate exterior walls to below the floor slab to create a thermal island as equilibrium would be reached between the floor slab and soil beneath if heat could not escape through the perimeter, what was your thinking?