Gas supply crunch

[adam2]

To an extent, yes I expect that coal will be used instead, especially for domestic heating.
Building coal fired power stations takes at least a few years, so no help for this year or next year. Existing coal burning power plants will probably see increased use, but building new capacity seems unlikely.
Building coal gas works to produce coal gas instead of natural gas not only takes some years but also requires that gas burning appliances be modified for the different fuel.

Even domestic heating can only be readily changed back to coal in premises with a suitable chimney and preferably also already fitted with a fireplace or stove.

Some rail transport could be switched from electric locomotives (that are in effect burning gas to produce the electricity) to coal burning steam engines, but the number of such locomotives is very limited. Building new ones seems unlikely due to costs and timescales.

Coal burning road transport is possible on a limited scale, but that tends to save petrol or diesel fuel rather than gas. We used coal burning road transport in the last war to save imported oil.

[Default0ptions]

Coal and wood work sort of well enough domestically - for those who have a house with a fireplace. Local supplies of wood that you can scrounge up on a daily walk about run out very fast though if there’s a sudden local demand.

If there end up being gas shortages though I think it’s businesses and industry that get cut off first. To avoid the need to inspect every single domestic property before it’s safe to turn the supply back on.

Industry is going to take a huge hit in gas supply disruptions.

[BritDownUnder]

Won't Poland (and maybe Bulgaria) just turn to burning their reserves of coal? I was under the impression they had plenty but were being cajoled not to use them due to environmental reasons?

I think the Poles were vilified by the EU for still having the cheek to burn their own coal and also the far greater cheek not to buy expensive French Alstom or German Siemens gas turbines that burn expensive imported natural gas supplied by your historic enemies that use the proceeds to destabilise your country, kill your politicians (2010 Smolensk Air Crash) and buy weapons to kill your citizens in future wars.

As a slight aside a few years ago there were plans to use the South Island of NZs extensive, but borderline lignite (so useless for power generation except locally) coal reserves to manufacture urea - remember that chemical - to use for fertilizer. This was shot down by Russian and Chinese (probably) financed Greens who said that friendly countries like Russia, China and Iran could be relied upon to supply such a trivial chemical.

[adam2]

Rather to my surprise, UK gas prices have fallen by about 10% today.
Prices remain very high by historical standards, but are less high then a few days ago.

[PS_RalphW]

Price now down 22% on the day, to 157. Lowest for about 6 months.

I'm wondering if the reports of companies cracking and preparing to pay for their Russian gas in Roubles against EU sanction rules is the cause. The market is anticipating more supply coming on line.

Russia has on paper been making huge profits from this war as it has driven up the price of oil and gas far more than Russian exports have been driven down.

I am sure Putin will crow about how Western resolve is cracking. In private he will smirk as his massive financial interests in oil and gas keep growing.

[adam2]

Despite reducing demand at this time of year, gas prices remain very high. Fluctuating daily but in the region of 160 pence a therm, or twice the historical peak and and about four or five times the historical norm for the time of year. I expect much higher prices next winter.

Rumours suggest that the government are about to introduce some form of grant or rebate to help some customers with these greatly increased bills.

Very high retail GAS prices are understandable, the wholesale cost is set by the international balance between demand and supply and not much can be done about that.

The very high retail electricity prices are in my view becoming harder to justify since about half of our electricity supply is from sources other than gas.

[BritDownUnder]

The very high retail electricity prices are in my view becoming harder to justify since about half of our electricity supply is from sources other than gas.

If the electricity generation trading market in the UK is the same as Australia the day is divided into half hour trading periods which generators bid a sale price and amount of power generation for that half hour in advance. Then when the despatch has been confirmed all bidders get the price that the
final highest bidder that completes the power required for despatch. This price is usually a gas generator when power demand is high and/or the amount of available renewables is quite low.

Gas power plants can be price makers as they can elect to 'sit out' generating as they can sometimes be turned on and off quite quickly. Gas plants also have a fairly small capital cost per MW of generation compared with, say nuclear or hydro, and so don't need to run all the time. Hence they can come in and out of a generation trading system and get a high price for it. Of course you can get negative prices but I doubt the poor old British consumer will ever see them.

Looking at the Gridwatch website the amount of gas generation in the UK is never zero and hence gas is always setting the price. There are probably rules on synchronous inertia and spinning reserve as well that mean that gas is always generating in small amounts.

Australia has a relatively large amount of hydro generation (8GW) that is larger than the UK that can be used as a bit of a big stick to stop gas from dominating the market here especially in the evenings. Here, coal sets the prices and the government owned hydro (nearly all anyway) keeps prices a bit more reasonable. However hydro can only be used for short times and operates in a kind of tag with wind output. Low wind means more hydro and plentiful wind generation means hydro gets used less.

[PS_RalphW]

UK in discussions to reopen the rough storage facility at 50% capacity by next winter. This would use LNG supplies which currently being turned away from UK ports, and supply 6 days of UK demand (not sure if annual average or winter demand)

[kenneal - lagger]

I saw a report on that, Ralph, but I thought that they were opening the whole thing but would only get to fill 50% using what is currently being turned away.

[mr brightside]

Can someone explain to me why the cost of wholesale fuel and energy has gone up? Is it because the cost of things to me is linked to a stock market and financial system that is failing, and not because it actually costs the companies doing the drilling and generating more to acquire it? I can see why a pack of sausages costs more, but the actual oil and gas itself that begins the whole chain...no.

[kenneal - lagger]

It's its rarity value, Mr Bs. Because it is hard to get hold of at the moment "the market" is willing to pay more for it so the bloke producing it gets more for it. Lucky him!! Which is why the government is putting a windfall tax on the oilcos.

Hopefully because of the extreme increase in price of fossil fuel "the market" might decide to invest in renewables a bit more. If they have got any money left to do that, of course. People can't afford to pay their fuel bills, eat and insulate their houses so most people are just going to get cold next winter. They might consider the odd riot in order to get warm or be kept warm by Her Majesty.

[mr brightside]

I have to confess, i get bored of these disorderly protests. The right response is always long term and proactive, like installing a stove perhaps with a heating coil, and growing apples; the worst responses always have the stench of short term thinking and fall into the paradigm of 'The Govt. must fix this, i have the right to be fed and warm'.

[emordnilap]

I've heard several people are asking why the price of fuel is shooting up but a barrel of oil is not much more than a ton.

[kenneal - lagger]

Considering the number of man hours of work you get out of a barrel of oil its still pretty cheap in the west.

[emordnilap]

Considering the number of man hours of work you get out of a barrel of oil its still pretty cheap in the west.

This is very true but people generally hate the truth. Diesel is now around €2.10 in Ireland and so we have truckers complaining of shelling out €1,000+ to fill up.