Fuelling the Future: Progressing the gas transition for Net Zero

The role of gas in the UK 

This is the first in a series of briefings from Energy UK and the Carbon Capture and Storage Association (CCSA) which will explore the role of gas in the transition to a Net Zero economy.

Gas is currently the largest energy source in the UK and accounts for more than half of our carbon emissions.[1]

We plan to reduce gas in the economy, across power, heat and industry over the coming decades, according to the scenarios laid out in the UK carbon budgets and as low-carbon technologies come online. However, the gas transition has been overlooked in policy to date, and the Government’s recent announcement that the UK needs to build new gas plants to ensure security of supply highlights the need to accelerate the deployment of low-carbon alternatives. This will require a repositioning of our existing supply chain to meet emerging opportunities and a repurposing and expansion of our workforce to enable the transfer of skills needed to meet the demand of this transition.

These measures are not only essential to achieving our Net Zero targets, but they also provide an opportunity for the UK to lead in the development of new low-carbon technologies while also reducing the UK’s reliance on imported energy sources. This will enhance our energy security and resilience and minimise the UK’s exposure to high and volatile international prices, as evidenced during the gas price crisis.

[1] DESNZ (2022), Provisional UK greenhouse gas emissions 2022

The UK needs to revolutionise its energy sources

Natural gas is the UK’s most important source of energy

According to the Climate Change Committee, in every scenario to Net Zero – it’s likely we will still need some gas on the system to meet demand.[2] However, to achieve the UK’s legally binding Net Zero targets, we will need to reduce overall gas consumption and abate (capture and store) the carbon emissions created from any gas used. Currently, almost all of the gas used in the UK is not abated i.e. emissions are not captured and stored but released into the atmosphere.

Under ambitious pathways, the amount of natural gas used could fall by over 90% between now and 2050 – providing just 6% of the UK’s total energy needs.[3] However, in order to achieve this, we will require a comprehensive strategy that maps the development of viable alternatives and manages the transition alongside the integration of renewables.

[2] Climate Change Committee (2020), Sixth Carbon Budget

[3] National Grid ESO (2023), Future Energy Scenarios: Leading the Way

Our gas is increasingly imported

The amount of gas we import as liquefied natural gas (LNG) has been steadily increasing and now makes up around 45% of imports. Increasing reliance on imported gas exposes the UK to a competitive and volatile global market. With the Asia Pacific region absorbing 64% of LNG in 2022 and 25% of LNG coming from the Middle East, the greater the role of LNG imports in the UK’s energy system, the more vulnerable the UK is to geopolitical shocks.[4]

[4] Energy Institute (2023), Statistical Review of World Energy: 2022 figures

The gas transition will vary across sectors

There is no silver bullet to the gas transition with a different combination of approaches needed in different sectors. In this series, we will explore how the three most significant users of gas will decarbonise, along with what is required to develop the necessary supply chain and skills.

Power

The UK Government has set a target for the electricity system to be decarbonised by 2035. To achieve this, the vast majority of gas in the power system will need to be replaced by renewable energy sources. Indeed, renewables now provide a greater share of the UK’s electricity than fossil fuels.[5]

However, gas currently provides most of the flexibility in the system for meeting demand when renewables aren’t sufficiently generating. This will need to be replaced by a combination of technologies that provide a secure supply of electricity whilst meeting the UK’s Net Zero targets such as storage (e.g. large batteries and pumped hydro), hydrogen, biomethane, flexible demand (such as charging electric vehicles at night) and gas-fired power stations where the carbon is captured and stored (power CCUS).

[5] RenewableUK (2023) New renewable electricity generation records confirmed in Government’s energy bible

Heating

In the UK, most (74%) homes are heated by gas.[6] This is much higher than many other developed countries which use greater shares of electric and district heating.[7]

A combination of measures will be needed to reduce the UK’s dependency on gas for heating, which will primarily include electric technology such as heat pumps, heat networks and potentially the use of hydrogen. This change in heating must also coincide with a significant rollout of energy efficiency measures to reduce the overall demand.

[6] Nesta (2023), What does the latest census data reveal about how homes are heated across England and Wales?: home in England and Wales using only mains gas according to 2021 Census

[7] IEA (2022), Proportion of residential heating energy consumption by fuel source in selected countries, 2020

Industry

Industry uses 19% of the UK’s gas in sectors including steel, cement, refineries, glass and ceramics. These industries are critical to the UK’s economy and must be decarbonised to reduce our reliance on imported gas and meet UK Net Zero targets.

This transition will require a combination of solutions, including switching sources of heat from natural gas to low-carbon fuels (for example, hydrogen), electrification and the use of CCUS to abate emissions resulting from manufacturing processes.

Uncertainties in regulation are slowing the rollout of low-carbon alternatives to unabated gas

The transition to Net Zero requires a significant amount of funding, the vast majority of which will come from the private sector.[8] For businesses to choose to invest in the UK, regulation needs to be made as simple and predictable as possible. Uncertainty increases costs and the time it takes to build infrastructure.

The exact mix of technologies that are used in our future energy system will be a result of a combination of private sector investment, research, innovation and technological developments, economic conditions and Government policy. Although some technologies like wind turbines are mature and can be built at scale, others such as hydrogen and CCUS still require policy action to support the scale-up of capacity.

Although the UK Government has strategies in place, more strategic direction is needed for hydrogen and CCUS. Likewise, there needs to be greater clarity over intermediate targets, including clearly outlining the definition of what a Net Zero power system ‘subject to security of supply’ looks like. 

[8] Energy UK (2023): The Clean Growth Gap: The Path to Prosperity

Progresssing the gas transition for Net Zero

Gas plays a critical role in the UK’s current energy system, however, with the Government’s target to decarbonise the power sector by 2035, significant changes to regulatory and policy frameworks are necessary to facilitate the deployment of alternative solutions. Understanding the gas transition is essential to achieving this target and while gas is likely to remain on the system to meet demand, as the energy transition gathers pace, its role will evolve and its emissions mitigated, which underscores the importance of a clear government roadmap to outline this transition.

Energy UK

Energy UK is the trade association for the energy industry with over 100 members – from established FTSE 100 companies right through to new, growing suppliers, generators and service providers across energy, transport, heat and technology.  

Our members deliver nearly 80% of the UK’s power generation and over 95% of the energy supply for 28 million UK homes as well as businesses. The sector invests £13 billion annually and delivers nearly £30 billion in gross value – on top of the nearly £100 billion in economic activity through its supply chain and interaction with other sectors. The energy industry is key to delivering growth and plans to invest £100 billion over the course of this decade in new energy sources.

The energy sector supports one in 48 jobs, in every corner of the country. Energy UK plays a key role in ensuring we attract and retain a diverse workforce. In addition to our Young Energy Professionals Forum, we are a founding member of TIDE, an industry-wide taskforce to tackle Inclusion and Diversity across energy.

www.energy-uk.org.uk

X: @energyukcomms

LinkedIn: https://www.linkedin.com/company/energy-uk

CCSA

The CCSA is the trade association promoting the commercial deployment of Carbon Capture, Utilisation and Storage (CCUS), an essential solution to deliver net zero emissions across the economy, predominantly in power, industrial and transport sectors.

It works with members, governments and other organisations to ensure CCUS is developed and deployed at the pace and scale necessary to meet net zero goals and deliver sustainable growth across regions and nations.

The CCSA has over 100 member companies who are active in exploring and developing different applications of carbon capture, CO2 transportation by pipeline, ship and rail, utilisation, geological storage, and other permanent storage solutions, both end-users of the technology and those in the supply chain, as well as members from management, legal and financial consulting sectors.

www.ccsassociation.org

X: @The_CCSA

LinkedIn: https://www.linkedin.com/company/carbon-capture-and-storage-association

To discuss this series of reports, please contact kisha.couchman@energy-uk.org.uk