Natural gas is traded internationally and transported around the world by pipelines and LNG tankers. This global trading system is influenced by various factors across numerous countries. These variables all determine its relative availability, with supply and demand economics dictating the subsequent price.
The National Balancing Point (NBP) sets the wholesale price for gas in the UK regardless of its origins. The NBP is used to manage supply and demand for UK gas markets, with the price set in pence per therm.
Gas plays a key role in UK energy production. In 2018/19 natural gas accounted for 60.3% of the UK’s residual fuel mix. This includes both the gas used in homes and businesses and the gas burned in power stations to produce electricity. During the same period around a quarter of our electricity was produced through power plant combustion.
The UK currently produces nearly half of our required gas supply, at 44%. This gas comes primarily from the North Sea and Irish Sea. Due to the decline in the amount of oil and gas that can be extracted from these reserves, imports are expected to rise in coming years.
In 2017 the UK imported around 47% of its gas from Europe. Norway is by far the largest gas supplier to the UK, with the Netherlands and Belgium in second and third respectively.
Gas is carried to the UK by undersea pipelines and interconnectors from Europe. These connect mainland Britain with Belgium, Norway and Ireland. The pipelines allow for bi-directional transportation, enabling trading to place in both directions, to and from the UK and continental markets.
UK gas imports in 2017 also included around 9% liquified natural gas (LNG). These LNG imports come to the UK by shipping tankers with the majority originating in Qatar.
The National Transmission System (NTS), is a high-pressure gas network that transports gas from production facilities and import entry terminals, through to distribution networks and power stations, or large industrial users.
Britain has eight gas distribution networks (GDNs). These companies are licensed by Ofgem to transport gas in the UK and each one covers a separate geographical region.
There are four companies that own and operate these eight networks:
There are also smaller networks owned and operated by Independent Gas Transporters (IGTs) located within the regions covered by GDNs.
Green gas is a fully renewable and virtually carbon neutral source of energy, meaning it doesn’t contribute towards climate change. Green gas is made by the anaerobic digestion of organic matter such as plant, vegetables or animal waste. Bacteria break down this biodegradable material in an oxygen free environment to produce biomethane. The gas produced is then ‘scrubbed’ to remove CO2, before being mixed with fossil fuels from the grid and distributed. This reduces the overall carbon impact of the gas grid.
Gas is measured in both therms and kWh. Therms are non-SI units of heat energy and equate to burning 100 cubic feet or 1CCF (2,83 cubic metres) of natural gas. One therm equates to 29.3 kWh in SI units.
As GDNs are natural monopolies, they are regulated by Ofgem to protect consumers and ensure they do not abuse their position. The licences GDNs must obtain from Ofgem to operate limit the amount they can charge for their services. This ensures the best value for consumers, as these charges are ultimately passed on.
To find out more about the ways your organisation can benefit from shifting demand to help balance, contact out team today.