A report published by the natural gas programme of the Oxford Institute for Energy Studies finds that the use of natural gas for power generation in Europe will increase substantially over the next decade, but not as much and not as fast as is generally believed.
Moreover, says the report, without significant numbers of new combined cycle gas-fired power stations (CCGTs), it is hard to see where the major gas markets of Europe will use the substantial additional gas supplies due to arrive by pipeline and LNG over the next decade.
The report, Future Natural Gas Demand In Europe – The Importance of the Power Sector, finds that natural gas will be the fastest growing fossil fuel source in Europe over the next two decades, driven mainly by the demand from the power sector. However, the study shows that the future of gas to power varies substantially between countries and regions and depands largly on gas prices. The 2003-2005 increase in gas prices makes it difficult to sustain a decision to invest in gas-fired generation in most countries in Europe, says the study. If high gas prices remain, it will delay new CCGTs and prevent existing capacity from running on baseload. Depending on whether gas-fired plants run on baseload or on a lower load factor will produce a difference of 60 bcm in gas demand for power in the EU25 by 2015. Only lower gas prices up to 2015 will lead to a huge increase in gas demand and in the most likely scenario the EU25 will require about 49 bcm of additional gas by 2015, depending on operating load factors.
Increases in gas demand for the power generation sector in EU25 are highly sensitive to the development of gas-fired generation in Italy and Spain, the study finds, with 76% of all CCGT projects under construction or recently operational in the two Mediterranean nations. The UK brings up a distant third with a further 8%.
“If significant numbers of currently anticipated CCGT power plants in Spain, Italy and the UK are either delayed or abandoned, increases in gas demand will be correspondingly reduced. The UK requirements are already covered by projects under construction. The only two other markets where we see significant growth are Spain and Italy,” the report concludes.