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Network Code celebrates 20 years

This month marks 20 years since the introduction of the Network Code which replaced the point to point gas transportation contracts and established an entry – exit system. This supported the development of the virtual National Balancing Point as a hub for title trading of wholesale gas. The growth of trading at this hub led to it becoming the most liquid in Europe.  

Since its introduction there have been more than 1,300 modification proposals to the Network Code and its successor, the Uniform Network Code, which came into being following the sale of four distribution networks around 10 years ago. Back in 1996 the UK was self-sufficient in natural gas but three major pipelines and three Liquefied Natural Gas (LNG) import terminals later we are now around 50 per cent dependent on imported gas.

There have also been many structural and regulatory changes with an impact on the wholesale gas market and its context within the wider energy market. To name just a few just: British Gas demerger, competition in supply to domestic customers, waves of environmental legislation, merger of National Grid and BG Transco, merger of the gas and electricity regulator, growth of energy efficiency and numerous European Directives and Regulations.

During all this time the gas wholesale market has worked effectively ensuring supply has been sufficient to meet demand at all times to keep us warm, to heat our water, cook our dinner, provide a feedstock to industry and a fuel for electricity generation. Prices have been on a bit of a roller coaster ride at times. Firstly by being coupled to European prices which are linked to oil prices and more recently being linked to global gas prices which has seen UK prices soften.

So what will happen in the next 20 years? Will gas run out? No, there are vast reserves around the world although they may not be in easily accessible locations.

How important will shale gas, bio-methane, biogas be to the UK? That is a difficult call and will be based on economics, safety and regulatory regimes and whether ‘hearts and minds’ can be won over. Will heat pumps replace gas boilers? Maybe, if the incentives and economics stack up. Will gas be used in transport? LNG is already being used to fuel trucks. Perhaps cars will use compressed natural gas (CNG) or maybe electric cars become dominant.     

Looking forward, there is uncertainty whether gas will be used as a primary fuel or whether electricity will replace gas in some of its current applications. If the latter happens, gas may well continue to have a role in the generation mix for some time to come as gas generation plants are flexible and able to meet electricity demand when the wind does not blow or the sun does not shine. Beyond this we may have a hydrogen network or electricity storage solutions, in any event we can be sure things will not stand still. 

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