When the Wind Stops Blowing, an Energy Storm Brews

An anonymous reader shares a report (paywalled): Gas made up the largest share of the UK's energy mix in 2020, at 34%; followed by wind on a quarter; nuclear at 17%; biomass at 6.5% and solar at 4.4%. Despite the progress of renewables, detractors note the problems arise when the sun doesn't shine and the wind doesn't blow. Until reliable battery storage for renewable energy is developed, these sources can only ever be intermittent, critics argue, and some infrastructure will continue to use oil for back-up generation. It is a case made by the nuclear industry, which says that it is uniquely placed to provide the zero-emissions baseload the grid requires. Runaway gas prices are already sparking concern across the energy sector, with fears that consumers are facing a 'bill shock' this winter. Personal finance expert Martin Lewis warned his readers last week: 'This autumn's signature noise will be a deep thud... the sound of jaws hitting the floor as people finally see the practical evidence of the energy bill catastrophe laid bare.'

UK gas prices reached 130p per therm last week, compared to 30p a year ago. In an unusual inversion, gas prices are trading above the equivalent price of Brent, the benchmark for crude oil. Both supply and demand factors are at play. The reopening of economies after Covid lockdowns has pushed up demand for gas. Countries are also trying to cut their use of coal, and switching to less polluting gas as a result. Europe is thus competing with Asia for shipments of liquid natural gas (LNG), a more mobile form of gas that is increasingly popular. Supply is also tight: a particularly cold winter meant Europe used up more reserves than usual and these have not been replenished. A spate of outages at gas production plants in different parts of the world have compounded the problem. To make matters worse, the UK has relatively low levels of gas storage. The country has eight gas storage sites that can hold an estimated 12 days of supply. Storage capacity was drastically reduced when the Rough site under the North Sea was closed in 2017 for safety and economic reasons. Rough, a disused oil field, could hold around 70% of UK gas reserves. 'The market hasn't been able to fill up storage as we move into this winter. And hence we are very exposed, especially if it is another cold winter like last year,' said James Huckstepp, analyst at S&P Platts. 'Consumers are starting to recognise that their energy bills are going to be much higher this winter.'

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