This week, my focus has been on the UK’s position. Given that I have already conducted general background research, this post will focus primarily on the UK’s energy strategy.
SUMMARY: The UK is opposed to the pipeline from a security perspective, and a desire to support Ukraine. They have voiced this publicly, though tactfully (given the context of Brexit and fear of alienating Germany). In terms of energy strategy, the UK’s energy mix is fairly diversified, and they rely very little on Russian imports, though that amount will likely increase over coming years in the form of gas imports through continental Europe, which will likely include Russian sources.
As a brief summary of the UK’s position, they are generally opposed to the Nord Stream 2 project, aligning closely with the US (though not explicitly calling for the pipeline to be stopped). Their opposition is based on security concerns from increased Russian political and economic influence, and a desire to support Ukraine. The UK has voiced these concerns publicly, but on a more subdued level, given the fear of alienating Germany given the context of Brexit.
Beginning in October of 2017, the UK government launched the Clean Growth Strategy to help reach its long term carbon reduction goals set out in the Climate Change Act of 2008, which states an overall goal of reducing CO2 emissions by 90% below 1990 levels by 2050. The Clean Growth Strategy includes provisions for:
- Green financing
- Improving business and industry efficiency
- Improving energy efficiency of homes
- Shifting to low carbon transport
- Phasing out coal for electricity
- Increasing use of nuclear
- Improving the route to market for renewables
- Low carbon heating
And other provisions.
By way of these actions, the government projects that renewables will replace much fo the gas used by 2035 (the current energy composition is 40% gas, 29% renewables, 19% nuclear, 6% interconnectors, 5% coal, and 1% other sources). However, this transition is not a done deal, given that there is some evidence of commitment to green options being shaken in recent years, with green energy investments falling 56% in 2017 (which is steeper than the 26% average fall for Europe as a whole).
In any event, gas is likely to play a significant role in UK energy policy for some time. Gas demand is highly seasonal in the UK, given that a large amount is used to heat homes, leading to higher demand in the winter. In fact, nearly 85% of the 26 million homes in the country are heated by gas. Over the last few years there has been a notable increase in gas usage, largely due to the transition from coal to gas.
Currently approximately half of the UK’s gas supply comes from their own North Sea gas fields, though this is a finite resource that will not last forever. The six largest energy companies who supply Britain’s gas and electricity are all UK companies. Until 2004, the UK could supply almost the entirety of its own supply, though now the UK is a net importer of gas, with imports accounting for 47% of domestic demand in 2017.
Of the gas that is imported, more than half comes from pipelines out of Norway, Belgium and the Netherlands, while the rest is shipped as LNG, primarily from Qatar and in the future likely from the US. While there are no pipelines that transport Russian gas from Norway to the UK (the largest import source), it isn’t possible to establish the source of gas flows through Europe to the UK, and throughout Europe approximately 37% of gas demand was supplied by Russia in 2017. Based on UK government estimations, this means that it is likely that only 1% of the gas ultimately supplied to the UK comes from Russian sources.
The expectation is that gas imports will continue to grow, both due to the limitations on the North Sea gas fields, and because of the government’s Clean Growth provisions, because imported emissions are not considered part of the UK’s emissions for the purposes of achieving their goals.
Overall, from my research it is not evident that Nord Stream 2 would have a significant direct effect on UK energy strategy. In the case that UK gas imports continued to rise, and they relied more on sources from continental Europe as opposed to Norway, they would also be exposed to any potential supply risks that entails. However, their energy is relatively diversified, and they have many other options that play a much larger role in the current composition.