Energy profile of the United Kingdom
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Introduction
The United Kingdom (UK) is an important political and economic power in Europe and the world. It has the second-largest economy in the European Union (EU) with a nominal 2005 gross domestic product (GDP) of $2.2 trillion. The UK economy grew by 1.8 percent in 2005, with growth of 2.2 percent forecasted for 2006. While the UK has been a member of the EU since 1973, it does not participate in the European single currency, the Euro.
The UK is the largest producer of oil and natural gas in the EU. However, after years of being a net exporter of both fuels, the UK became a net importer of natural gas in 2004. Government estimates also predict that the country will become a net importer of oil by the end of the decade. Production from UK oil and natural gas fields peaked in the late 1990s and has declined steadily over the past several years, as the discovery of new reserves has not kept pace with the maturation of existing fields. In response, the government has begun a three-pronged approach to address the predicted domestic shortfalls: 1) increasing domestic production through efficiency gains and the exploitation of marginal fields; 2) establishing necessary import infrastructure, such as liquefied natural gas (LNG) receiving terminals and transnational pipelines; and 3) investing in energy conservation and renewables.
Oil
According to Oil and Gas Journal (OGJ), the UK had 4.0 billion barrels of proven crude oil reserves in 2006, the most of any EU member country. The UK consumed 1.8 million barrels per day (bbl/d) of oil in 2005, mostly flat from the previous year. The importance of oil to the UK economy has declined slightly over the past two decades, with oil's contribution to total energy consumption falling from in 37 percent in 1983 to 35 percent in 2003.
Exploration and Production
The UK Continental Shelf (UKCS), located in the North Sea off the eastern coast of the UK, contains the bulk of the country's oil reserves. There are also sizable reserves in the North Sea north of the Shetland Islands, with smaller amounts in the North Atlantic. Besides these offshore assets, the UK also has the Wytch Farm field, the largest onshore oil field in Europe.
Total oil production (including condensates, natural gas liquids, and refinery gain) in the UK was 1.87 million bbl/d in 2005, a 10 percent decline from 2004 and 37 percent below the peak of production in 1999. The UK government expects oil production in the country to continue to decline, reaching 1.38 million bbl/d by 2009. Reasons for this decline include 1) the overall maturity of the country’s oil fields, 2) the application of new crude oil extraction technologies that lead to field exhaustion at a quicker rate, and 3) increasing costs as production shifts to more remote and inhospitable regions.
Most of the UK crude oil grades are light and sweet (30° to 40° API), which generally makes them attractive to foreign buyers. The UK has been a net exporter of crude oil since 1981. According to the British Department of Trade and Industry (DTI), the largest destinations of crude oil exports in 2004 were the United States (28 percent), the Netherlands (21 percent), Germany (17 percent), and France (14 percent). Much of the crude oil exported to the Netherlands is not actually consumed there, but rather sold at the Rotterdam spot market. In 2005, the UK exported 219,000 bbl/d of crude oil and 167,000 bbl/d of petroleum products to the U.S., contributing 2.2 percent and 4.8 percent to total U.S. crude oil and petroleum product imports, respectively.
Sector Organization
BP is the largest oil producer in the UK, with 26 fields producing a total of 471,600 bbl/d in 2004, according to OGJ. BP also operates the single-largest oil field in the UK, Schiehallion, with 2004 production of 98,900 bbl/d. Other large oil producers in the UK include Shell, ChevronTexaco, and Total.
As UK oil fields mature, the industry has shifted focus from discovering new reserves to increasing the productivity of existing fields and developing smaller, previously avoided ones. This trend has prompted oil majors such as BP and Shell to begin selling their UK assets in order to focus on high growth, international opportunities. The result has been the entry into the UK oil sector of many smaller operators. In 2003, U.S.-based Apache purchased BP's Forties field for $630 million, and other smaller operators, such as Talisman, Perenco, and Paladin Resources, have acquired significant production assets in the country. In late 2004, EnCana announced that it would sell its North Sea assets to Canada-based Nexen for $2 billion. In 2005, Denmark’s Maersk Oil and Gas and UK natural gas company Centrica purchased the North Sea assets of U.S.-based Kerr McGee for $3 billion. These companies find smaller and maturing fields more economically viable than do the oil majors, because they have lower overhead costs, are more flexible, and often employ newer production and recovery technologies.
Pipelines
There is an extensive network of pipelines in the UK to carry oil extracted from North Sea platforms to coastal terminals in Scotland and northern England. BP operates the 110-mile, 36-inch Forties-Cruden Bay pipeline, linking fields in the Forties system to the oil terminal at Cruden Bay, Scotland. The company also operates a 110-mile, 36-inch pipeline connecting the Ninnian system to the Sullom Voe oil terminal on Shetland Island. Total operates a 150-mile, 24-inch pipeline linking the Bruce and Forties fields to Cruden Bay and a 130-mile, 30-inch pipeline connecting the Piper system with Flotta on Orkney Island. Shell and Esso jointly operate a 93-mile, 36-inch connection between the Cormorant oil field and Sullom Voe. Talisman Energy owns a 37-mile, 16-inch pipeline connection between its Beatrice field and the Nigg Bay oil terminal. There are also numerous, small pipelines that connect each North Sea oil platform to these major backbones. Finally, the UK does have a few onshore crude oil pipelines, including a 90-mile, underground pipeline operated by BP that links the Wytch Farm field to the refinery at Fawley and the nearby oil export terminal at Southampton.
The UK has a single international crude oil pipeline, the 220-mile, 34-inch Norpipe operated by ConocoPhillips. With a capacity of 900,000 bbl/d, Norpipe connects Norwegian oil fields in the Ekofisk system to the oil terminal and refinery at Teesside.
Downstream
The UK had 1.9 million billion barrels per day (bbl/d) of refining capacity in 2006, according to OGJ. ExxonMobil operates the single-largest refinery in the country, the 326,000-bbl/d Fawley facility in southern England. However, BP controls the largest total amount of refining capacity, with facilities in Grangemouth, Scotland (196,000 bbl/d) and Coryton, England (163,000 bbl/d). Other companies with significant refining capacity in the UK include Total (325,000 bbl/d), Shell (296,000 bbl/d), ConocoPhillips (221,000 bbl/d), and ChevronTexaco (210,000 bbl/d). According to DTI, refinery utilization in the UK was near 90 percent in 2004. The UK maintains an active international trade in refined petroleum products, exporting 36.1 million metric tons (mt) and importing 26.4 million mt in 2004.
Natural Gas
According to OGJ, the UK held an estimated 18.8 trillion cubic feet (Tcf) of proven natural gas reserves in 2006, a 10 percent decline from the previous year. Most of these reserves occur in three distinct areas: 1) associated fields in the UKCS; 2) non-associated fields in the Southern Gas Basin, located adjacent to the Dutch sector of the North Sea; and 3) non-associated fields in the Irish Sea. In order to take advantage of its domestic reserves, the UK government has encouraged the use of natural gas, including its substitution for coal and oil in industrial consumption and electricity production. As a result, natural gas consumption in the UK reached 3.4 Tcf in 2003. Further, the percentage of total energy consumption sourced from natural gas in the UK has increased from 20 percent in 1980 to 34 percent in 2003. In 2004, the UK was a net importer of natural gas for the first time since 1996.
Exploration and Production
The UK produced 3.6 Tcf of natural gas in 2003, about the same as the previous year, but a decrease from the peak of 3.8 Tcf in 2000. The country is the fourth-largest producer of natural gas in the world, behind Russia, the United States, and Canada. The largest concentration of natural gas production in the UK is the Shearwater-Elgin area of the Southern Gas Basin. The area contains five gas fields, Elgin (Total), Franklin (Total), Halley (Talisman), Scoter (Shell), and Shearwater (Shell). Most of the leading oil companies in the UK are also the leading natural gas producers, including BP, Shell, and Total. The major gas distribution companies in the UK, such as Centrica and BG Group, also have a presence in this production sector. Like the oil industry, smaller independents have been able to acquire some maturing assets from larger operators, who find it difficult to profitably operate these older, declining fields.
Sector Organization
Private companies control the UK natural gas sector, including production, distribution, and transmission. The largest gas distributor in the UK is now Centrica, a spin-off of the distribution assets of formally state-owned British Gas. National Grid Transeco (NGT), formed in 2002 through the merger of Lattice and former parastatal National Grid, controls the domestic gas transmission system.
Pipelines
Domestic System
There are four main pipeline systems in the UK that carry natural gas from offshore platforms to coastal landing terminals. First, the Shearwater-Elgin Line (SEAL), operated by Total, transports gas from the Shearwater-Elgin area to the landing terminal at Bacton, England. Second, ExxonMobil operates the 200-mile, 30-inch Scottish Area Gas Evacuation (SAGE), which transports associated natural gas from UKGS fields to the landing terminal at St. Fergus, Scotland. Third, the 250-mile, 36-inch Central Area Transmission System (CATS), operated by BP, links fields in the Graben area of the UKCS to Teeside. Finally, Shell operates the Far North Liquids and Gas System (FLAGS) linking associated gas deposits in the Brent oil system with St. Fergus. Once brought onshore, the responsibility for transporting natural gas throughout the country belongs to NGT. The company operates over 4,200 miles of transmission lines in the UK.
International Pipelines
A consortium of companies, led by BG, Ruhrgas, and Distrigas, operates the Interconnector pipeline between Bacton, England and Zeebrugge, Belgium. The Interconnector, inaugurated in 1998, is capable of bi-direction operation, meaning either it can export natural gas from the UK to continental Europe (“Forward Mode”), or it can import natural gas into the UK (“Reverse Mode”). For most of its career, the Interconnector operated in Forward Mode, with a capacity of 1.9 Bcf/d. However, since mid-2005, the system has operated mostly in Reverse Mode, with a recent expansion increasing this capacity to 1.6 Bcf/d. The operators of the Interconnector plan to expand the system’s Reverse Mode capacity to 2.3 Bcf/d by the end of 2006.
The UK also imports natural gas through the Frigg pipeline system, operated by Total. Frigg connects the St. Fergus gas terminal with the Frigg gas field in the Norwegian sector of the North Sea. Finally, the UK-Eire Interconnector connects the UK with the Republic of Ireland, running from Moffat, Scotland to Dublin.
In 2003, the UK and Norway finalized the necessary political conditions for construction of the Langeled pipeline system linking Norway's Ormen Lange natural gas field to Easington, England. The 750-mile Langeled would be the longest subsea pipeline in the world, with an initial capacity of 1.9 Bcf/d and planned maximum capacity of 2.9 Bcf/d. Construction on the project has begun, with completion expected by 2007. Gasunie plans to build a 146-mile gas pipeline linking Balgzand, the Netherlands to Bacton, England. Initial construction on the Balgzand-Bacton Line (BBL) began in October 2004, with completion of the project expected by the end of 2006. According to Gasunie, the BBL will have an initial capacity of 1.1 Bcf/d, with a maximum capacity of 1.7 Bcf/d.
Liquefied Natural Gas (LNG)
Currently, the UK has a single liquefied natural gas LNG import terminal, the NGT’s Grain LNG on the Isle of Grain. The facility has a sendout capacity of 420 Bcf/d, which NGT plans to expand to 1.3 Bcf/d by the end of 2007. Algeria’s Sonatrach and BP are the principle importers using the terminal.
ExxonMobil and Qatar Petroleum have received regulatory approval for the South Hook LNG receiving terminal in Milton Haven, Wales. The terminal will receive its LNG from the Qatargas II liquefaction project in Ras Laffin, Qatar, which is also a joint project between the two companies. The South Hook LNG project should come online by 2007, with an initial capacity of 1.0 Bcf/d and a maximum capacity of 2.1 Bcf/d by 2009.
Finally, BG has collaborated with Netherlands-based Petroplus and Malaysia-based Petronas to also build an LNG receiving terminal in Milton Haven, on the site of an existing natural gas storage facility owned by Petroplus. Dragon received regulatory approval from Ofgem in early 2005, and the project should start receiving cargos by the end of 2008 at an initial sendout capacity of 580 million cubic feet per day (Mmcf/d).
Coal
The UK had an estimated 243 million short tons (Mmst) of recoverable coal reserves in 2003. The country produced 30.6 Mmst in 2003, the fifth-most in the EU. Coal production in the UK has declined steadily and dramatically over the past several decades. Decreasing domestic consumption and a surge of low-cost imports have been the principle causes of the production decline. According to DTI, the UK now imports more coal than it produces domestically, with South Africa and Australia representing the principle source of these imports.
In order to meet its obligations under the Kyoto Protocol, the UK likely will continue to phase out coal consumption and production. Nevertheless, the UK government continues to provide financial support to the industry. In June 2003, the UK government launched the Coal Investment Aid program, with a budget of up to $111 million. The goal of the project is to create or safeguard jobs in the UK coal industry by encouraging coal producers to enter into investment projects that maintain access to reserves.
Electricity
The UK had installed electricity generation capacity of 74.0 gigawatts (GW) in 2003. Also in 2003, the UK generated 369.9 billion kilowatt-hours (Bkwh) of electricity while consuming 346.1 Bkwh. Most electricity generation comes from conventional thermal sources (74 percent), followed by nuclear (23 percent), other renewables (2 percent), and hydroelectricity (1 percent).
Sector Organization
The UK has a privatized electricity sector, where generators and distributors trade electricity on a wholesale market. The largest power producer in the country is British Energy (BE), which controls most of the nuclear power capacity and generates about 20 percent of the total electricity supply. Other important generating companies include E.ON UK, RWE npower, Scottish and Southern Energy (SSE), and ScottishPower (SP). Twelve regional monopolies control electricity distribution in the UK, most of which are owned by the leading generation companies. NGT owns and operates the national transmission system in England and Wales, whereas SSE and SP operate the grid in Scotland, and Northern Ireland Electricity (NIE), a subsidiary of the Viridian Group, operates the grid in Northern Ireland.
The UK has slowly integrated the formally-separate electricity markets of its component parts (England, Northern Ireland, Scotland, and Wales). The British government formed the New Electricity Trading Arrangements (NETA) in 2001 to integrate the electricity markets of England and Wales. In 2005, the British government extended NETA to Scotland as the British Energy Transmission and Trading Arrangements (BETTA). There are plans to eventually incorporate Northern Ireland in to the BETTA. In addition, SP and SSE have increased the transmission capacity between England and Scotland to allow them to sell more electricity to English and Welsh customers.
Conventional Thermal
As mentioned above, conventional thermal plants provide the bulk of the electricity supply in the UK. According to DTI, conventional thermal generation in 2004 consisted of natural gas (53 percent), coal (44 percent), oil (2 percent), and other (1 percent). One of the largest power plants in the UK is the Drax facility in North Yorkshire, which consists of six coal-fired units with total capacity of 4,000 megawatts (MW). The long-term trend in UK power generation has been a move from coal-fired plants to combined-cycle, gas-fired turbines (CCGFT). As a result, according to DTI, electricity generation from CCGFTs increased from zero in 1989 to 137.7 billion kilowatt-hours (Bkwh) in 2004.
Nuclear
BE operates eight nuclear power stations in the UK, including seven stations using advanced, gas-cooled reactors (AGR) and one (Sizewell B) using a pressurized-water reactor (PWR). All of the AGR reactors will reach the end of their designed lifetime by 2023. British Nuclear Fuels Limited (BNFL), owned by the UK government, operates four nuclear plants containing first generation, magnesium-oxide (Magnox) reactors. The UK originally built 11 of these plants in the 1950s, and BNFL will close the remaining four by 2010. BNFL plans to convert one closed plant, Chapelcross, into a co-firing plant burning a combination of coal and locally grown willow trees.
Renewables
The UK government has introduced regulations that require electricity distributors to source a portion of their electricity supply from renewables (including hydroelectricity), currently 3 percent but set to rise to 10 percent by 2010. Investments in wind power have increased substantially, aiming to take advantage of the natural geographic advantage that the UK has in this regard. Another area of increased interest has been wave power. In 2004, the Pelamis project off the coast of Orkney delivered the first ever supply of electricity from wave energy to the UK national grid. Finally, hydroelectricity has regained attention, especially in Scotland, including the potential construction of the 100-megawatt (MW) Glendoe project.
Environment
Environmental conditions in the United Kingdom have improved in recent years. While some pollutants, such as nitrogen oxides, have not decreased substantially, sulfur dioxide emissions have. As a major component of acid rain, this reduction in sulfur dioxide has produced noticeable environmental benefits. Furthermore, the United Kingdom finds itself in the company of only three other Western European countries-Finland, Germany and Luxembourg-in experiencing a decline in carbon dioxide emissions since 1990.
The United Kingdom is an Annex I country under the United Nations Framework Convention on Climate Change. (Annex I countries include the countries of the Organization of Economic Cooperation and Development, as well as the countries designated as Economies in Transition). The European Union, as a whole, agreed to an 8% reduction below 1990 levels of a "basket" of greenhouse gases by the 2008-2012 commitment period. Among countries of the European Union, the United Kingdom agreed to a more challenging target of 12.5% below 1990 levels. The government went even further and suggested a domestic goal of 20% below 1990 levels by 2010.
Reductions of carbon emissions in the United Kingdom, as well as reductions in other pollutants, such as sulfur dioxide, have resulted primarily from deregulation of the country's electricity industry. Privatization led to a reduction in coal subsidies, thus narrowing the price differential between coal and natural gas. As a result, consumers are switching to natural gas, and the benefits of burning this "cleaner" fuel are being realized.
Air Pollution
Air pollution in the United Kingdom results in thousands of premature deaths annually and has contributed to acid rain and smog in several parts of the country. The country is concerned with both domestic and transboundary pollution. On the domestic front, the United Kingdom National Air Quality Strategy was launched in 1997, establishing targets for key pollutants such as nitrogen dioxide, ozone, particulate matter, sulfur dioxide, and carbon monoxide. One of the primary sources of air pollutants in the United Kingdom is road traffic. In an effort to reduce traffic and pollution in central London, the city government instituted a "congestion charge" of £5 ($8) per day per motor vehicle. Rather than setting up toll booths, a network of cameras identifies license plates, and charges are sent to the vehicle's owner. Those who live inside the zone pay only £0.50 per day (about 80 cents). The charge went into effect in mid-February 2003. On the international front, the December 1991 Protocol to the 1979 Convention on Long-Range Transboundary Air Pollution required the United Kingdom to achieve a 30% reduction in volatile organic compounds (VOCs) by 1999 from a 1988 baseline. The 1999 figures show the United Kingdom achieved a 34% reduction. Additionally, the UK National Atmospheric Emissions Inventory (NAEI) estimated that in 2001, most pollutants would have fallen considerably from their 1990 levels. The list includes: sulfur dioxide down 68%, dioxins and furans down 70%, lead down 80%, mercury down 71%, particulate matter down 39%, nitrous oxide down 36%, methane down 28% and ammonia down 5%.
These improvements can be attributed to the introduction of catalytic converters on cars that reduced emissions of some pollutants; improved waste gas abatement techniques at industrial sites; use of low-sulfur and lead-free gasoline; a switch away from coal and oil to natural gas in power generation; and a reduction in coal used for domestic heating.
Central to realizing these pollution reduction targets is the United Kingdom's set of policies for an integrated transport system, the introduction of cleaner burning fuels, and improved vehicle technology. The integrated transport strategy requires improving all aspects of transportation, including construction of bike paths, increasing accessibility to bus routes, and improving fuel efficiency in automobiles. Other aspects incorporated into an integrated transport strategy include implementing parking fees at the workplace and "gating", whereby traffic patterns are designed to prevent pollution in open areas where pollutants can be most easily dispersed.
Water Pollution
The United Kingdom production in primarily offshore oil and natural gas has environmental implications, including oil entering the marine environment from disposal of contaminated water, and refineries discharging oil as waste. The Pollution Prevention and Control Act of 1999 attempts to integrate environmental regulations with offshore oil and gas production, as well as to provide the government with more power for taking control of offshore accidents.
The United Kingdom has experienced two major oil spills over the past decade. In January 1993, 84,500 tons of crude oil spilled off of the coast of northern Scotland's Shetland Islands, and in February 1996, 40,000 tons of crude oil spilled, creating a four-mile oil slick.
Water pollution from farming is also a serious environmental issue for the UK. In 2003, farmers in England's new Nitrate Vulnerable Zones (NVZs) were told to begin immediately taking measures to help reduce water pollution. These measures will help the UK to comply with the EC Nitrates Directive, which will hopefully improve the quality of drinking water. Approximately 55% of the England's farmland is located in NVZs, and measures include limiting nitrogen fertilizer use to crops only and controlling the spreading of organic manure.
Energy Use and Carbon Emissions
In 2000, the United Kingdom accounted for 2.5% of total world energy consumption and was responsible for 2.3% of total world carbon emissions. Under the Kyoto Protocol, the United Kingdom has set a target of reducing greenhouse gas emissions by 12.5% on 1990 levels by 2008-2012, and to cut carbon emissions 20% by 2010. Energy-related carbon emissions in the United Kingdom have fallen from 167.4 million metric tons of carbon in 1990 to 147.8 million metric tons in 2000, almost a 12% reduction. The decline in carbon emissions has been due to a decrease in the share of coal (the most carbon-intensive fossil fuel) in the total fuel mix. Coal has been replaced by less carbon-intensive energy sources such as natural gas, nuclear and renewable energy.
Over the past two decades, energy consumption in the UK industrial sector has increased slightly, energy consumption in the residential and commercial sectors has remained steady, and transportation-sector energy consumption has risen fairly quickly. The industrial sector was the primary consumer of energy in 1998, accounting for 37% of total primary energy consumption, followed by the transportation sector (26.1% of total primary energy consumption), the residential sector (25.4%) and the commercial sector (11.5%). Energy consumption in the transportation sector has risen from 1.84 quadrillion British thermal units (Btu) in 1980 to 2.60 quadrillion Btu in 1998, a 41% increase.
Carbon emissions from the industrial sector, as well as from power generation, have declined over the past 30 years. Again, this is partially as a result of the removal of subsidies in the coal industry, making cleaner-burning fuels like natural gas more competitive. While carbon emissions in these two sectors have fallen, carbon emissions from road transport have increased. In 1998, carbon emissions from the transport sector were responsible for 31.3% of the UK's total energy-related carbon emissions.
Energy and Carbon Intensity
Energy intensity in the United Kingdom has declined steadily over the past two decades. In 1999, UK energy intensity registered 7.8 thousand Btu per $1995, decreasing to 7.6 thousand Btu per $1995 in 2000, a 2.6% decline. The carbon intensity of the United Kingdom's economy has mirrored the trend in energy intensity, although the decline may have reached a plateau. Carbon intensity in 2000 registered 0.11 metric tons of carbon per thousand $1995, remaining the same as 1999 levels. During the last twenty years, though, the relatively larger decrease in carbon intensity reflects the conversion from more carbon-intensive coal to less carbon-intensive natural gas.
The United Kingdom is likely to experience further declines in energy and carbon intensity in the near future. With the Climate Change Levy that came into effect in 2001, industries are examining ways to use energy more efficiently. Under the Climate Change Levy, "clean" sources of energy are exempt. Most combined heat and power (CHP), as well as solar- and wind-powered plants also are exempt. The Climate Change Levy was initially announced in the March 1999 budget and is expected to prevent at least 2 million metric tons of carbon emissions per year. In addition to the Climate Change Levy, the government has introduced several other new measures to improve energy efficiency. The government has increased the amount of money available for energy efficiency, announced a target to increase energy generation through CHP by at least 10,000 megawatts (MW) by 2010, altered transport taxation to stimulate fuel efficiency, and agreed to measures on the European level to improve the fuel efficiency of new cars 25% by 2008.
Per Capita Energy Consumption
Per capita energy consumption in the United Kingdom has risen gradually over the past two decades, the pattern is similar to that of other Organisation for Economic Co-operation and Development (OECD) countries. In 2000, per capita energy consumption in the United Kingdom was 166.1 million Btu. This is slightly less than per capita energy consumption levels in France (176.8 million Btu), Germany (170.4 million Btu) and, Japan (171.6 million Btu), and significantly less than in Norway (399.6 million Btu) and the United States (351.0 million Btu).
UK per capita carbon emission levels have fallen over the past two decades, from 3.0 metric tons of carbon per capita in 1980 to their current level of 2.5 metric tons of carbon per person. Like per capita energy consumption figures, per capita carbon emissions in the United Kingdom also are comparable to most OECD countries. In 2000, France emitted 1.9 metric tons of carbon per person, Japan, 2.5 metric tons of carbon per person and Germany 2.7 metric tons of carbon per person.
Renewable Energy
With introduction of the Climate Change Levy in 2001, and its exemption for renewable energy resources like solar and wind, renewable sources of energy are beginning to gain more attention. The United Kingdom hopes to increase the share of electricity generated by renewables from 3% in 2001 to 10% by 2010. This effort was recently bolstered by the Industry and Energy Minister's announcement in July 2001 of "a new deal for hydro" that will include a 10-20 megawatt (MW) increase in output that is expected to result from the refurbishment of 30 hydroelectric power stations.
Additionally, the British government is investing over $364 million over the next three years into renewable energy sources including solar, biomass and wind. The UK now has 1000 wind turbines operating throughout the country and offshore, providing 555 MW of electricity. Over the next two years, the UK hopes to add an additional 400 MW generation capacity, and to have 15% of its electricity generated through (mostly offshore) wind turbines by 2020.
The Non-Fossil Fuel Obligation (NFFO), created by the Electricity Act of 1989, is the primary piece of legislation providing a premium-price, market-enabling mechanism which attempts to encourage renewable-based electricity generation. Under the NFFO system, the difference between the premium price paid to "green" electricity suppliers and the market price is financed by the Fossil Fuel Levy, a tax paid by licensed electricity suppliers and ultimately passed on to consumers.
The New Electricity Trading Arrangements (NETA) are currently being discussed and attempt to address new ways of ensuring that generators fueled by "green power" can be competitive in the market. Discussions center around examining network access and charging arrangements to ensure that both combined heat and power and renewable energy sources have fair access to the distribution network at competitive prices.
Outlook
Environmental conditions in the United Kingdom have improved in recent decades. With deregulation of the electricity industry and the removal of coal subsidies, conversion from coal to natural gas in industries and households followed quickly. Subsequently, sulfur dioxide emissions declined significantly. While carbon dioxide emissions decreased over this time period as well, this trend may not continue.
A rapid increase in the number of cars on the road could counteract many of the benefits obtained from reduced coal use. Reference case scenarios by the Energy Information Administration's International Energy Outlook project predict that energy-related carbon emissions in the United Kingdom will rise to 191 million metric tons in 2020, up from 147.8 million metric tons in 2000, an average annual increase of 1.1%. This increase represents a higher annual projected growth rate than much of the rest of Western Europe. At the same time, total energy consumption is projected to be at 12.2 quadrillion Btu in 2020, an average annual increase of 1.0%, equal to the Western European average. However, renewable energy consumption in the United Kingdom is expected to grow to 0.4 quadrillion Btu, compared to the 1999 level of 0.1.
Another important aspect of the United Kingdom's attempts to address environmental concerns includes its interaction with the rest of the European Union. Unlike a few decades ago, when environmental concerns were predominantly local in nature, many of today's environmental problems are not constrained by national boundaries and the energy choices that one country makes may readily affect another. The United Kingdom's recent agreement to the Convention on Long-Range Transboundary Air Pollution is just one example of the level of cooperation that will be needed to address international environmental concerns in the 21st century.
Further Reading
- BG-Group
- British Energy
- British Petroleum
- British Wind Energy Association
- Department of Trade and Industry
- EIA: Country Information on the United Kingdom
- EIA: Electricity Restructuring and Privatization in the United Kingdom
- Society of British Gas Industry
- UK Coal
- UK Petroleum Industry Association
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