Question to the Department for Business, Energy and Industrial Strategy:

To ask Her Majesty's Government what assessment they have made of the impact on UK natural gas demand of (1) the Carbon Price Floor, and (2) the proposal to end power generation from coal by 2025.

UK gas demand is made up of several components of which demand for power generation contributes approximately a third of the total. Whilst Carbon Price Support (CPS) and our policy to end unabated coal generation by 2025 may result in some coal to gas switching, overall gas demand for electricity generation has fallen by 8% and total UK gas demand has decreased by about 20% over the period from 2000 to 2016.[1]

CPS is a tax on carbon emitted from the burning of fossil fuels by electricity generators in Great Britain. It was introduced in 2013 to provide long term certainty on the overall carbon price and supporting investment in low-carbon generation, including nuclear. In 2012 coal represented 40% (136 TWh) of generation, down to 9% (30 TWh) in 2016. Some of this capacity will have been replaced by gas with gas generation increasing from 28% (98 TWh) to 42% (141 TWh) of total generation, but there has also been an increase of renewable generation from 14% (51 TWh) to 23% (79TWh) of total generation.

Coal closure policy is intended to not only reduce harmful emissions, but also to increase revenue certainty for investment in low carbon and flexible generation capacity, and demonstrate international climate policy leadership. The department’s impact assessment for coal closure policy[2], estimates that around 1.5GW of coal capacity would remain on the system post 2025 in the absence intervention, and thus the direct impact on gas demand is expected to be limited.

[1] Energy statistics in this response are from Digest of UK Energy Statistics (DUKES) - https://www.gov.uk/government/collections/digest-of-uk-energy-statistics-dukes

[2] The Future of Coal Generation in Great Britain Impact assessment - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/671959/FINAL_updated_unabated_coal_Impact_Assessment_Jan_2018.pdf