The price of natural gas is going up. As there is supposed to be a world glut of the stuff just now – the government’s medium term energy plans are all gas based – that seems a little odd. During 2010, the actual cost of domestic gas fell after being adjusted for inflation (which is fine if your income is keeping pace) and further to steep rises in previous years. Recent price rises show it was probably a short-term dip. You can check out the Department for Energy & Climate Change figures here and their assessments on trends in prices here. It covers gas, electricity, heating oil, petrol, diesel…fascinating reading if you’re bored.
Last year, the amount of gas imported by the UK was greater than the amount extracted from our North Sea reserves for the first time since 1968 (before North Sea production began).
That means the future price of the gas we consume is increasingly exposed to uncertain international factors. To begin with, continental gas is contractually tied to the oil price and look where where that’s going. Much of our gas comes from safe havens such as Norway and the Netherlands, but an increasing amount comes from further afield. Historical energy prices are littered with price spikes due to political unrest. Cold, harsh winters – we’ve had a few in succession now – consume a great deal of gas resulting in demand spikes that create competition between countries for the available gas, pushing up prices. To help offset these issues, costly terminals are being built to receive ship loads of Liquefied Petroleum Gas (LPG) and pipelines are being invested in, such as the impressive Nord Stream pipeline now being laid under the Baltic Sea to efficiently transport Russian Gas to Europe. The Interconnector pipeline runs from Belgium and presently brings the Russian gas via a supply network that also feeds most of Northern Europe. Their home page shows the current flow direction of the gas, whether it is exporting our gas or importing. As I write this, we’re exporting gas due to the recent milder temperatures resulting in less home consumption. One thing is for sure though, Britain’s days of cheap home-grown gas are nearly gone. We’re in with the rest of Europe now; dependant on Russia’s need for our money in exchange for their gas.
By 2030 the government predicts we may be 80% reliant on imported gas and yet by that time, all known global gas reserves are likely to past “Peak Gas Production” and in decline – meaning that extraction costs, amount available to extract and demand are all heading in opposing directions. It will be a roller coaster ride as new pipelines and terminals may cause price dips through transport competition and new reserves come on stream as higher prices make them them economically viable, but long term the prices will forever trend only one way…up!
The bottom line is that our gas-fired central heating costs will continue their inexorable rise, although hopefully not too quickly!
So what options are available to the domestic customer? Economy 7 again?
It will be a couple of decades before any other power generation comes on stream in meaningful megawatts – such as renewables – which the government is only playing with at the moment – or the proposed new nuclear power stations ( suffering from the delays of not in my back yard syndrome) , so electricity will continue to be generated increasingly by gas and so will track gas prices. What about electricity from coal? Burning it produces loads of CO2 and new EU rules on nitrogen emissions further kibosh the fuel. Perhaps clever and economic carbon sequestration technologies may help in the future, but not yet. The UK’s largest coal fired power station, Drax hardly makes a profit.
People in rural places, where piped gas is unavailable, often use heating oil. They will be the first to tell you what a bumpy price ride they have had of late. If the tank approaches empty as prices are low, then great, but run-out when near the top of the price curve and feel a substantial pain in the wallet. On average, heating oil prices rose 20% during the first 3/4 of 2010. Price volatility seems even greater than with petrol.
What does that leave? Well there’s biomass. I think along with micro-generation such as solar, wind & ground source heating, this will become increasingly familiar in the near future. Bookmark YBC-Blog to review these options in a later posting.
And of course there is the ever popular multi-fuel stove. Mostly a fashionable addition to a fireplace that once held an old gas fire, they can be a cheap way to supplement your heating. Even better with a back-boiler that can heat your water too. There are things to bear in mind with these stoves though and the next YBC-Blog will deal with those.
Rather than thinking about the source of your heat, though, lets consider how best to keep it from escaping.
Before the YBC-Blog came online, I posted on the YBC Facebook page about the new Green Deal. The Green Deal is another way for the government to avoid any handouts, by encouraging the private sector to do it for them. Basically, as a home owner, you will be able to borrow money from your energy supplier in order to undertake insulation improvements, solar installation, etc and then pay off the loan through your energy bill, which should be a reduced amount due to the work you’ve had done. It still needs quite a bit of fine tuning, so again bookmark YBC-Blog for further details. The previously available grants are still available, but will end this year.
They remain the best option and the budget isn’t that far away really, so I thought it worth posting the Facebook article again:
Green Deal to insulate our homes in news today. New government initiative from 2012. Financially complicated. But grants still available until end 2011, but better to get it sorted before the next budget! With 50% grant, cavity wall insulation will cost ~£200 for the average house. 35% of heat lost through walls of average detached house. Worth doing. Pay back in just a few years, less if fuel costs rise.
You can find out more about the grants available here. If your own home lacks insulation, I strongly advise you act now.
Catch you next time on Multi-Fuel Stoves.
