Transition Edge - UK has gassy problems...

Published: Thu, 10/07/21

Transition Edge

October 2021 - Year two of the disrupted decade

Looking at UK's gas issues - Perhaps some early warnings for NZ?

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I’m Grant Symons. I convene Transition Edge to help us understand how we can transition to a low carbon sustainable world using leading thinking and practices.

The situation and causes

Over the past few months UK natural gas prices have spiked to record levels, causing several industries to stop or reduce production and consumers to be faced with rising energy bills.

The apparent causes are varied, according to main-stream media, including:

Low gas stocks in general, with several gas plants off-line for repairs. The UK has low storage capacity and relies heavily on uninterrupted supply from the North Sea wells and Europe. (We wonder how well thought through this is, considering Brexit?)
Above predicted demand for gas, due to lower than expected output of power from wind generation (Wind is an intermittent power source after all)
Slower than expected efficiencies being delivered through home insulation improvements and replacement of gas boilers with heat pumps. In other words, government programs have not been as effective as hoped
Geopolitical brinkmanship by Russia, which is maintaining its contracted levels of supply to Europe when there is a case for supply to be increased to meet real demand.
Strong economic recovery in China and parts of Asia has accelerated demand for LNG (liquefied natural gas) with increased competition in the market and higher prices
US shale gas producers are producing less for the global market than they have in the past
Backup electricity supply from France has been temporarily hampered by a significant fault to the transmission lines between countries

It appears that the UK is very exposed to Gas as a transition energy source.

The bigger picture

The UK Onshore Oil and Gas organisation summarises the primary uses and emerging future:

Natural gas currently provides more than 84% of UK heating needs and around 40% of electricity generation.

Oil and natural gas provide the energy source, or raw material, to make a wide range of products and plastics. In fact, it is nearly impossible to get through a day without using multiple products that started off either as oil or gas. Shampoo, toothpaste, contact lenses, shaving foam, lipstick, washing powder and clothing all contain petroleum products.

Most of the UK’s domestic sources of natural gas have historically come from the North Sea since the early 1960s, with only about 1.5% coming from onshore. As the amount of gas coming from the North Sea is expected to decline significantly, by 2030 the UK will be buying at least 70% of its gas from outside of the UK.

In addition to electricity generation and heating, the primary users of gas are manufacturing industries such as:

Chemicals
Food and beverages
Mineral products
Heavy engineering

Natural gas is a key component in the manufacture of fertilisers. The Haber-Bosch process uses natural gas to provide hydrogen, which is combined with nitrogen in air as part of the process to create ammonia. Ammonia is a vital ingredient for other nitrogen-based fertilisers, and with up to 90% of the costs of the fertiliser coming from natural gas.

There are a variety of by-products of these energy intensive processes which include the production of industrial grade CO2. To date it has been assumed that such products will always be available in large quantities and at commodity prices.

Problems that are surfacing in the UK

Homeowners are likely to be faced with increasing heating bills and if the winter is particularly cold, some analysts predict the possibility of power shortages, blackouts and rationing.
Future production of fertiliser is likely to become increasingly expensive, which will have flow on effects on food production, availability, and prices.
The recent price spikes have caused shortages in the supply of CO2, which have had a range of impacts on food supply:

Food and drink manufacture – Fizz (Beer is under threat!), packaging, storage, chilling
Abattoirs – required for a variety of processes
Food production , including ripening processes

As we pointed out in our recent article – there is a ‘The silly sardine experiment’ at play, contemporary manufacturing and food production is extremely complex and relies on large quantities of cheap energy and raw material inputs.

So, as gas becomes less available, the price increases, in turn it increases the price of hydrogen, ammonia, CO2 and so on, all the way to the price paid at the check-out.

What can New Zealand learn?

Gas is a very useful energy and chemical source that comes with the problem that it adds to the green house gas load in the atmosphere.
Lack of a well thought out plan may cause significant and unnecessary economic and societal disruption.
Complex manufacturing, storage and delivery processes, that are dependent on high energy and other manufactured inputs, are vulnerable in future.
Industrial processes and value chains that depend on large amounts of cheap gas will need to be reinvented or replaced.
Transition of complex systems is a mash-up of bio-physical and financial/economic drivers that will impact societal order and behaviour.
Just in time delivery of any key resource was once considered desirable because inventory and associated holding costs could be reduced. The vulnerability of this system has now becoming apparent as supply lines become disrupted. (We do seriously wonder about the wisdom of closing our own oil refining capacity of Marsden Point?, but that is another story).

Good news!

New Zealand is not as dependent on gas as the UK, because we:

were never as heavily industrialised in the first place
have a smaller population
have more temperate climate
meet more of our energy requirements through renewable resources
are not as locked into fossil fuel assets for generating electricity
have local supply of gas

For example, Nitrogen fertiliser is currently an important part of the mix in our agricultural operations, and we are self-sufficient in it through the Kapuni manufacturing facility in Taranaki, which uses local natural gas.

This means we are not reliant on importation of gas to make this fertiliser through the transition to a zero emissions economy. Although, according to the Ministry for the environment, emissions coming from this activity make up 6.1% of the agricultural emissions mix, which will be subject to further consideration by the government.

Perhaps the most favourable thing of all is the already evolving level of interest, investment and activity, in agriculture and food production that is increasingly less reliant on manufactured fertilisers and industrial processes in the first place.

Regenerative and circular practices are likely to become increasingly important, because they provide sustainable production of foods which doesn't rely on fossil fuel inputs. Regenerative agriculture and composting of organic waste seeks to be a closed loop system where additional fertilisers are not required.

We will be keeping an eye on the UK as they go through this winter, there might be a thing or two we can learn.

Other news

This week Grant was appointed to the board of Trustees for the Global Association of Transition Engineering.
Our first Real Transition Leaders course is scheduled to start at the end of October.

Grant Symons - The Transition Guy

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