Credit: iStock
New analysis from ECIU calculates that reduction in energy production from halting new North Sea gas projects could be easily covered through new renewables projects and heat pump roll out
Blocking new fossil gas projects in the UK would have a limited impact on UK energy security through to 2030, which could be easily managed through continued renewables deployment.
That is the conclusion of a new report from the Energy and Climate Intelligence Unit (ECIU) think tank today, which estimates that imposing a moratorium on new drilling projects in the North Sea, as currently proposed by Labour, would result in a 15 per cent reduction in gas production by 2030. The resulting 30 terawatt-hours (TWh) of lost gas could generate around 15TWh of power a year, which is equivalent to the power from just one new offshore wind farm.
The analysis is based on statistics from the industry regulator the North Sea Transition Authority (NTSA). It also found that installing electric heat pumps in all new homes built from now to 2030 would avoid half as much gas demand again, further reducing the need for new gas production capacity.
In addition, the report stresses how new offshore wind farms generate electricity much more cheaply than gas power stations. For example, it highlights how a 2.7GW offshore wind farm could generate as much power as could be generated from the North Sea gas that would be foregone through a moratorium on new drilling. At current power prices for offshore wind set through the Contract for Difference (CfD) regime, the new wind farm would pay back £12bn to billpayers over the period of a 15-year contract, based on forecasted wholesale prices.
The report comes in the same week as an update from trade body RenewableUK confirmed there is almost 100GW of offshore wind projects in the pipeline in the UK.
Equally, confirming a ban on gas boilers in new homes could slash gas demand given a new-build home with an electric heat-pump would use just 10 per cent as much gas as one with a gas boiler in 2030, due to renewables replacing most of the gas which is used for power generation.
According to previous ECIU figures if heat pumps were installed in all 2.1 million homes which could be built by 2030, they could save half the amount of gas affected by a moratorium on new North Sea licenses.
In contrast, allowing housebuilders to continue to install gas boilers in new homes could add as much as 10 per cent to gas imports in 2035, according to the analysis.
Separately, new polling from ECIU found that 54 per cent of Britons said that they prefer tax cuts to be focused on renewables, compared to only 15 per cent who said that they think tax breaks should be handed to oil and gas companies.
"There is an opportunity cost in providing tax cuts to oil and gas companies in that you're not providing those tax cuts elsewhere in the economy," said Jess Ralston, energy analyst at ECIU.
"Even with the windfall tax in place, the oil and gas companies are generating record-breaking profits. Meanwhile, renewable investors are warning that they plan to put their money in the US and EU thanks to tax credits on offer there, so the UK is at risk of missing out on private sector cash."
The Treasury recently confirmed the windfall tax on oil and gas companies would continue, but could be cut ahead of schedule if fossil fuel prices fall back to historic averages. Ministers failed to provide similar clarity to clean power generators, who have also been hit by a windfall tax in the wake of soaring energy prices.
Ralston highlighted that the UK's growing wind power pipeline means that gas plants will switch on less, which should mean the UK needs to source and pay for less gas and would therefore be more energy secure.
"According to the industry itself, North Sea output will continue to decline in the coming years," she added. "Jobs will disappear whatever happens. The question for the industry and government is how best to transfer those valuable skills into a growing sector like wind away from one that's in decline."
According to forecasts from the NTSA, UK gas production will be around 190TWh/yr by 2030, which is 55 per cent below current levels. Of this output in 2030, 85 per cent would then be from existing fields, and only 15 per cent - or around 30 TWh - would be affected by any moratorium on new licensing, either from drilling in new fields or future discoveries, which it acknowledges are 'speculative'.
The analysis comes amidst a fierce political debate over Labour's proposals to end new oil and gas licensing in UK waters in line with recommendations from the International Energy Agency and others. Labour is expected to provide more details on its plans and its wider Green Prosperity Plan next week.
But the proposals have sparked criticism from both government ministers and trade unions, who have argued that ending new projects in the North Sea could undermine energy security and result in job losses.
Campaigners have countered that the net zero transition will result in a net increase in employment and accused Ministers of failing to adequately explain how new fossil fuel projects can be made compatible with the UK's net zero goals.
BusinessGreen readers can sign up now for their free pass to this year's Net Zero Festival.
