UK Energy Futures Richard Smith Head of Energy Strategy & Policy September 2012
Our 2012 scenario development Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Stakeholder workshops (London & Glasgow) Bi-lateral stakeholder meetings Stakeholder feedback published >150 stakeholder organisations engaged 2012 scenarios published 2011 scenarios Axioms Stakeholder feedback Feedback key themes: Macro uncertainties: Government policy Costs (new technologies, economics) Economy Fuel price (fuel supply, carbon prices etc) Demand: Capture a range of demand uncertainties Supply uncertainty: Capture a range of energy supply options General feedback: Tension on breadth of scenarios Is a central case? Assumptions Modelling 2012 scenarios Data 2
Axioms and your feedback An axiom is a premise or starting point of reasoning. It is a logical statement assumed to be true. The first GB large scale commercial (gas or coal) CCS station will become operational in: <2025 2025 2030 2030 2035 >2035 Never No view Our 2011 view: Slow Prog. Acc. Growth You said: 13% 39% 18% 4% 15% 11% Our 2012 view: Acc. Growth Slow Prog. 3
Our scenarios Overview Main changes vs 2011 Targets performance Government climate targets missed / abandoned Continued economic hardship, low GDP growth Limited energy efficiency / Green Deal impact Domestic gas demand broadly flat, higher in power generation Electricity demand Nuclear generation Renewable generation Interconnection Thermal generation Heat pump deployment Electric vehicle deployment 2020 2030 carbon 2050 carbon renewable carbon 2020 targets 2011 scenario outcome 2012 scenario outcome 4
Our scenarios Overview Main changes vs 2011 Government climate targets met, balanced approach Modest GDP growth in medium term at historic averages Energy efficiency is driven / Green Deal is effective Gradual decline in gas demand Electricity demand Nuclear generation Renewable generation Interconnection Thermal generation Heat pump deployment Electric vehicle deployment = Targets performance 2020 2030 carbon 2050 carbon renewable carbon 2020 targets 2011 scenario outcome 2012 scenario outcome 5
Our scenarios Overview Main changes vs 2011 Government climate targets met early Sustained economic growth in medium to long term Significant energy efficiency Significant reduction in gas demand Electricity demand Nuclear generation Renewable generation Interconnection Thermal generation Heat pump deployment Electric vehicle deployment = = Targets performance 2020 2030 carbon 2050 carbon renewable carbon 2020 targets 2011 scenario outcome 2012 scenario outcome 6
Economic background EU economic hardship Scarcity of finance Low GDP growth 180 160 GDP growth (indexed to 2011) Modest GDP growth in the medium term Historical average from 2017 140 120 100 Sustained economic growth across Europe High GDP growth 80 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 7
Fuel prices Wholesale prices flat to 2015 Low carbon price 2030 prices similar to today Hydrocarbon fuel prices increase steadily from 2015+ Carbon price increases 160 140 120 100 80 60 40 Wholesale gas price (p/therm) 20 All fuel prices rise strongly Gas & oil prices linked Carbon price at EMR floor 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 8
Transport Modest EV growth More hybrids in early years, more pure EVs in later years Strong EV growth More hybrids in early years, more pure EVs in later years 8 7 6 5 4 3 2 Electric vehicles (million) 1 Robust EV growth More hybrids in early years, more pure EVs in later years 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 9
Heat Modest heat pump growth Limited insulation uptake 14 12 Residential heat pumps (million) Strong heat pump growth Strong insulation uptake 10 8 6 4 2 Robust heat pump growth High insulation uptake 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 10
Electricity demand Annual demand broadly flat Peak demand flat / falling 425 400 Annual electricity demand (TWh) Economic growth, heat & transport electrification Peak demand grows steadily 375 350 325 300 275 Reflects greater economic growth and electrification of heat & transport 250 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 11
Electricity generation Extension of existing plant; new gas generation Slower low CO 2 deployment Balanced approach Contributions from different technologies Faster low CO 2 deployment Strong micro generation deployment 450 400 350 300 250 200 150 100 50 0 2010 : 2012 2014 2016 Power generation (TWh) & carbon intensity (gc02/kwh) 2018 2020 2022 2024 Nuclear CCS Coal CCS Gas 2026 2028 Wind Marine / Solar PV Hydro / Pumped Storage Biomass Imports Gas / CHP Coal Oil / Other Carbon Intensity g CO2/kWh 2030 12
Gas demand Higher domestic & power generation demand Peak demand broadly flat 1,200 1,000 Annual gas demand (TWh) Steady decline in domestic & power generation demand Peak demand ~25% lower 800 600 400 200 Strong decline in domestic & power generation demand Peak demand ~40% lower 0 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 13
Gas supply Higher UKCS & Norwegian supply; higher global LNG New seasonal storage Balanced approach Flexible storage driven by market requirements Lower UKCS & Norwegian supply; tight global LNG Storage under construction 120 100 80 60 40 20 0 2001 : 2003 2005 2007 2009 2011 Gas supply (bcm/year) & Import dependency (%) 2013 2015 2017 2019 2021 2023 2025 2027 2029 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% UKCS Norw ay Continent LNG Onshore Import Dependency Demand 14
The future: efficiency, decarbonisation and electrification Electricity Heat Transport Smart Meters & Appliance efficiency Insulate and reduce Efficiency and innovation Heat pump Decarbonised electricity Gas backup & embedded generation new homes & retrofit Biomethane De-carbonise heat CNG and decarbonise transport 15