The Covid pandemic has thrown up unprecedented challenges for the gas sector, and that is the topic that Eddie Proffitt, technical director of the MEUC tackled in his presentation during The Energyst’s “Gas: What’s in the pipeline” webinar.
“Day-ahead prices have fallen dramatically over the past two years,” he said. The price of gas went down from about 60p/therme to as low as 8p/therme — and has recently settled around the 30p/therme level.
But the pressure of carbon targets on government policies is leading to taxation rates for gas and electricity to diverge increasingly. Gas rates are now 38% against electricity rates of 17%.
As far as security of supply is concerned, gas storage in Europe is at its peak in eight years, according to Proffitt, so there should be no problem with availability of gas in the near future. The picture is more complex for the longer term, however.
Proffitt is concerned about how differences of opinion between the National Grid Gas Transmission (NGGT) and regulator Ofgem may impact the sector. “The NGGT assumes that several assets are older and need replacing. But Ofgem disagrees, and therefore has moved several assets into the ‘uncertainty mechanism’ where funding is only available on a case-by-case basis,” he explains. “This is concerning because Ofgem’s decision-making is not the quickest, so we could run into security of supply problems over the next five years.”
A new charging methodology for the period from April 2021 to March 2026 is being developed, having recently been submitted to Ofgem by National Grid Gas Transmission (NGGT).
On gas quality, there are calls for the Wobbe Index parameters to be broadened to allow wider use of unaltered LNG at one end of the spectrum and unblended green gas from anaerobic digestion at the other end.
But the real game changer is hydrogen, says Proffitt, for which several pilot projects are currently taking place across the UK.