North Sea moratorium equivalent to just one new offshore wind farm
New poll also finds 54% of Brits want tax cuts for renewables not for new oil and gas drilling
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By George Smeeton
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If new North Sea gas fields were halted, production come 2030 would be 15% or 30 terawatt-hours (TWh) lower, the equivalent gas needed to generate 15TWh of electricity per year, an amount that could be produced by one offshore wind farm.
The new analysis from the Energy and Climate Intelligence Unit (ECIU) is based on statistics from the industry regulator the North Sea Transition Authority (NTSA), and found that installing electric heat pumps in all new homes built from now to 2030 would avoid half as much gas again.
New offshore wind farms generate electricity much more cheaply than gas power stations. A 2.7GW wind farm would generate as much power as from burning the avoided North Sea gas, and could pay back £12bn over the period of a 15-year Contract for Difference (CfD), based on forecasted wholesale prices. The UK is currently building several large offshore wind farms, including Dogger Bank at 3.6GW and there are in total around 100GW of offshore wind projects in the pipeline. [1,2]
New polling has also found that 54% of Britons prefer tax cuts to be focused on renewables, compared to only 15% who think they should be given to oil and gas companies. [3]
Jess Ralston, Energy Analyst at the ECIU said: “There is an opportunity cost in providing tax cuts to oil and gas companies in that you’re not providing those tax cuts elsewhere in the economy. Even with the windfall tax in place, the oil and gas companies are generating record-breaking profits. Meanwhile, renewable investors are warning that they plan to put their money in the US and EU thanks to tax credits on offer there, so the UK is at risk of missing out on private sector cash.
“With more wind farms in place, gas plants will switch on less often meaning the UK needs to find and pay for less gas and is more energy secure. Plans to accelerate offshore wind farms could balance out a moratorium.
“According to the industry itself, North Sea output will continue to decline in the coming years. Jobs will disappear whatever happens. The question for the industry and government is how best to transfer those valuable skills into a growing sector like wind away from one that’s in decline.”
By 2030, according to forecasts by the NTSA, UK gas production will be c.190TWh/yr, 55% below current levels. [4] Of this output in 2030, 85% would be from existing fields, and only 15% (c.30TWh) would be affected by any moratorium on new licencing, either from drilling in new fields or more speculative ‘future discoveries’.
Burning 30TWh of gas in power stations would generate around 15TWh of electricity, owing to inherent inefficiencies in gas power plants. The same amount of power can be produced each year by 2.7GW capacity of new offshore wind turbines, which are the cheapest form of power generation. [5]
New renewables will be paying back billions to household bills in the coming years via Contracts for Difference (CfDs), as they undercut the regular electricity price which is largely driven by the cost of gas. But the renewables industry has expressed concern that the Government’s recent tax changes and decision not to reciprocate tax breaks like the Investment Allowance provided to North Sea drillers will slow deployment, as will planning regulations. [6]
Despite the inexorable decline of North Sea gas production, there are concerns that the government policy might exacerbate UK gas import dependence by allowing housebuilders to install gas boilers in new homes, potentially adding 10% to gas imports in 2035. [7]
On the other hand, a new-build home with an electric heat pump would use just 10% as much gas as one with a gas boiler in 2030, due to renewables replacing most of the gas used in power generation. If heat pumps were installed in all 2.1 million homes that could be built by 2030, they would save half the amount of gas affected by a moratorium on new North Sea licences. [8]
Currently, heat pump manufacturing sites in the UK include those in Cornwall, Derbyshire, Northern Ireland and Scotland [9]. More widely, businesses involved in the UK’s net zero economy are adding more than £70bn GVA according to analysis commissioned by ECIU. [10] But there is now greater competition for net zero investment, with the US Inflation Reduction Act and the European Union’s response, the Net Zero Industry Act.
Notes to editors:
- Dogger Bank Wind Farm (SSE Renewables, 2023)
- https://www.renewableuk.com/store/viewproduct.aspx?id=22248270
- Opinium, 7th - 9th June 2023, 2,150 UK Adults
- Production and Expenditure Projections (NTSA, Feb 2023)
- Electricity generation calculations use an offshore wind load factor of 63%, as per projects coming online from 2025 onwards: CfD Allocation Round 4 Allocation Framework (BEIS, 2021). Cost savings are based on a strike price of £45/MWh (as per AR4 contracts, in 2023 prices) and wholesale price forecasts of at least £100/MWh as per GB Power Market Outlook to 2030 (Cornwall Insight, 2023)
- Britains tax risks blowing green energy off target (Offshore Engineer, 2023)
- North Sea and heat pump analysis (ECIU, 2023)
- Heat pump calculations assume new-build homes built to EPC band B, a boiler efficiency of 85% verses a heat pump COP of 3.0, and a grid mix as per the middle scenario (Government Policies) in the report Getting off Gas (ECIU, 2023). The gas saving in 2030 would be almost 7MWh/yr per home.
- Kensa manufacture heat pumps in Cornwall, Vaillant in Derbyshire, Octopus Energy in Northern Ireland, and Mitsubishi Electric in Scotland.
- Mapping the Net Zero Economy (ECIU, 2023)
For more information:
George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net