Friday, January 8, 2010

U.K.'s natural-gas market is no laughing matter

From the Wall Street Journal:

As Britain struggles to cope with its latest cold snap, at least it can be thankful for one thing: It has coincided with the country's deepest recession in decades, which has knocked back industrial demand for natural gas.

With demand approaching record levels, National Grid, the operator of Britain's gas network, was forced this week to warn of tight demand-supply balance. That had the desired effect of getting industry to switch to alternatives and luring in imports. In more clement economic climes, the country might have faced more serious shortages.

The cold weather has exposed real weaknesses in the U.K.'s energy security. In part, the problem reflects the contradictions of a European energy policy focused more on reducing carbon-dioxide emissions than ensuring security of supply. It has helped trigger a dash for gas as well as encouraged investment in wind power, no good for base-load electricity generation.

Complacency during the North Sea gas boom, which left the U.K. a net exporter, and the focus on renewable energy have left Britain with gas-storage-capacity equivalent of just 4% of annual consumption compared with 19% in Germany and more than 100% in the U.S. Yet depletion of those reserves and the emergence of gas as the preferred fuel for power generation have left Britain dependent on imports. Britain may import 70% of its gas by 2015, about half of which will be used for electricity generation....MORE