Gas prices up again

This week we have received two announcements of retail gas price increases. The first was from EDF who own London Energy, Seeboard and SWEB and the second came from British Gas (also Scottish Gas).

EDF are to increase their gas prices by 19% and British Gas theirs by 12.4%. These price rises need to be taken together with the quarter one increases from these companies of 14.7% and 22% respectively - together this means both companies (coincidentally?) have increased the retail price of gas by 37% this year.

According to media reports the average household gas bill has approximately doubled from £350 a year in 2003 to £700 in 2006.

In other news, in a bid not to be out done by New York, London today saw power cuts to thousands of people in the posh West End district of the city. (BBC Link).

I have been critical in the past of the BBC coverage of these price hikes since they always failed to mention the root cause, UK North Sea peak, depletion and our subsequent reliance on imports but the coverage is improving... a little bit:
Q&A: What's behind gas price pressure?
Gas prices up nearly 13% - that's massive, what's the reason?
The problem for all energy suppliers is that the price they have to pay for gas and electricity, the wholesale price, has kept on going up.

EDF energy says that wholesale prices are now 80% higher than a year ago and have more than tripled since 2003.

What's been going on?
A variety of factors have been at play. Most of our gas still comes from the North Sea, but production has been declining faster than was expected.

As a result, the UK has had to import 5-10% of its total gas supplies. Meanwhile, the wholesale price of gas - which is linked on the continent to the price of crude oil - has been driven higher by record oil costs.

So what is wrong with importing more?
Not only has imported gas become more expensive, it's also been hard to get hold of.

However government remains woefully detached from reality regarding fuel poverty. This graph is from the recent (July 2006) energy review publication:


Click to enlarge (source: Energy Review, page 56)

The increases since 2003 are represented by a doubling of the number of people in fuel poverty... however clearly the trend is about to shift abruptly since by 2010 government are forecasting the numbers affected by fuel to come right down again (note the central price scenario assumes an oil price of US$40/barrel). Someone better tell British Gas.

Hi friends!

Check this out: A cloudless UK.

I guess on the 18th Pisa was a litle bit cooler than that!

Regards.

Here's an interesting graphic on this subject:


Click to enlarge

It's from the Telegraph: Millions Hit by Record Gas Price Rise

The differences between price rises between suppliers is almost meaningless, the cheaper ones just haven't announced their more recent hike yet.

Interesting to see how the important things in life like water, energy, shelter and transport are increasing in price far quicker than the official rate of inflation. I guess it's okay though since DVD players can be bought for £20 these days compared to over £100 3 years ago.

Figures issued by the economists Ernst & Young show that people have 10 per cent less money for so-called discretionary spending than five years ago.

Ruth Lea, the director of the Centre for Policy Studies, said the rise in fuel bills hit the poorest people hardest.

"People will have to borrow more if they want to maintain their current way of life, or they will have to cut their spending. Inevitably some will get into more debt, but it is like a hangover: they will need to sober up the next day. Some people keep drinking, of course, but they will end up with a worse hangover."

I would like to re-iterate a point I have said before, because I think the wider implications are disastrous..

In the UK we need some form of house heating about 1/2 the time - agreed?

We have 2 usual choices: electric or piped gas.

Back in the 50s, coal gave way to seperate gas fires in rooms.

Then the fashion for gas central heating arrived in the 60s/70s based on 2 things:

1] cheaper North Sea gas than electric

2 central timing control for the whole house. This coincided with 2 adults working lifestyles, where the old coal fire would have been impractical [too slow to start]

The downside of GCH is the impracticality of gas pipes, CORGI, water pipes, motors, boilers, pilot lights [or worse - new systems require electric supply], control panels, header tanks [ball valves], seized taps, bleeding gas out of radiators, sludge, cutting floorjoists, weeping connections..etc. We put up with all this rubbish because of 1] and 2] above.

Well, 2] doesn't require gas. There are people who make centrally managed electric [though it's rare stuff] and it makes more sense than an internet connected fridge.

My point is that at some transition, gas heating will inevitably fall out of favour as the price rises versus electricity.

When this begins, we WILL see an unfixable runaway electricity supply crisis unless the population decreases.

Dear Pondlife...

I left UK in 1984... and  often fondly (NOT!!) think back to those days of "hydronic/wet" central heating systems... being awoken by the creaking and banging as hot water made it's way around the pipes & radiators of my Victorian terrace. And as for those ugly radiators taking up one wall of every room... (not to mention trying to "wallpaper" round them!!)

However, life in the New World is no better... with their forced air systems. Recently designing a new house only to find that all my ceiling heights were screwed because of the installation of huge forced air ducts... (the guys even custom-bash the "tin" as they are installing it... it's like a trade from the Victorian era). And now instead of rumbling pipes I have the "jet engine effect" every time the heating/AC kicks in.

And it is not that I didn't try for 21st Century technology... I am using a "geothermal" heat pump... (horrendous up-front cost but ultra-cheap to run) but you still need forced air...

The solution?? As I see it a modern heating system should follow the German "passive-haus" design... start with a super-insulated shell, install heat retrieval system... any minimal extra heating would be underfloor electric...silent & invisible.

Of course this doesn't help retrofitting all that crummy British housing stock... nor all the new "Wimpy houses" (do they still build those?)

Maybe there comes a point where it is just better to start from scratch???

There is a large amount of capital tied up in gas fired boilers, radiators etc.  If as you suggest a switch to electric heating occurs when gas prices rise to a critical point then up to 20 million heating systems would effectively become obsolete.  One of the key issues with such a transition is that many households will undoubtedly put it off until gas prices are simply too painful, by which time average budgets will probably be too stretched to re-invest in a completely new system.  At this point it would not be surprising to see many returning to heat just 1 or 2 rooms by electricity and only when rooms were occupied using electric fan heaters or similar - these are pretty cheap to buy.

Electicity is, of course, very inefficient for heating houses v piped natural gas.  Chris V doubtless has better numbers but I suspect the combination of power generation and transmission losses result in around 30 - 40% overall efficiency for electric home heating.  By contrast burning gas via a conventional home boiler is around 80 - 85% efficient...and more like 90% for a condensing boiler.  Btw these are unresearched numbers I've read somewhere; maybe someone can correct them if they are badly adrift.  On this basis a big switch to electricity for home heating does not look a good idea....even if the existing grids could handle the extra load (and I strongly suspect they couldn't).

On a personal basis I'm in the process of ordering a 2nd wood stove to reduce my oil dependency, there being no gas supply in this area.  Those of us who read this site regularly are doubtless making individual arrangements so as to be 'ahead of the pack' when fuel prices enforce transition.  We are, however, only a tiny percentage of the UK population and the vast majority are almost certainly totally unprepared for a situation which looks increasingly inevitable.

Thanks for both your comments.

Hi canbrit - yes they still make 'xxxxx houses' and other tasteless shoeboxes in the UK. Its the only new house option for people who don't want the maintenance and heating bills of an older house [our house is the creaking victorian type]. Radiators! how did I miss them off my 'pain ita' list..? I think there there is a critical mass of people who would love to live in a better house, but choice is not available in the UK.

zceb90, electric losses before the meter will be of no interest to someone who is spending £1000s replacing worn out central heating and is trying to guess gas prices for the next 20 years. The cost and supply of gas vs electricity are the only factors. A full blown GCH could be £5000. That buys a lot of electricity for the cost difference even today.

Wood stoves if you have endless supplies are great for the individual, but what of 50 million 'townies'?

I too read those numbers of 89% [my exact Potterton model] for gas boilers on that database someone linked last time I brought this up. Personally I think thats comparing apples and oranges.

The manuf will write whatever tripe he can. Maybe 89% of the heat from burning gas reaches the water - so what? An electric fire is 99% efficient. Even a filament light bulb is a 98% efficent heater with about 1 - 2% light output.

My modern '89%' efficient boiler requires a constant electric standby wasted, electric ignition, and an electric pump for both hot water and heating. So the old boiler used more gas and less electricity..thats progress!

I can see the changeover to electric creeping up on our gov who, I think we largely agree, seems unprepared for every national resource planning from water to climate change. Zceb90, yes I fear the electric suppliers could not cope with the demand [the grid presumably is matched to their outputs and would be OK]

cheers all.

zceb90, electric losses before the meter will be of no interest to someone who is spending £1000s replacing worn out central heating and is trying to guess gas prices for the next 20 years. The cost and supply of gas vs electricity are the only factors. A full blown GCH could be £5000. That buys a lot of electricity for the cost difference even today.
Individuals doubtless won't concern themselves with the matter of energy efficiency on the supply side of the meter but UK plc as a whole surely will.  Given energy losses in burning fuel at power stations to generate electricity it has to be approximately twice as energy efficient to burn whatever gas is still available in home boilers as opposed to power stations.

I could understand a switch to electric power for domestic heating generated from combination of renewables, coal or nuclear but all 3 have major problems.  Renewables are growing from a tiny base and wind and wave power alone cannot provide a constant base load on calm days.  There a major CO2 issues with coal and, unless UK revives its coal industry in a big way increasingly expensive imports are required.  Nuclear power has a long lead time and it's unlikely that the first batch of new builds (which are not even at the planning stage yet) could do any more than replace plant being decomissioned up to around 2020.

My view is that the most likely course of action will be for trends to occur whereby the number of rooms in houses being heated will reduce, heating will be run upon occupation as opposed to 24/7, number of occupants per house will increase, temperature settings will reduce and more clothing will be worn.  A big program of insulation for existing houses would be an ideal step but I'm rather afraid that Gov'ts will wait until a full blown crisis is upon us before acting by which time financial resources (in the inevitable recession) will be a limiting factor.

I appreciate wood stoves are only an option for a tiny minority; I just happen to live in a very rural area with no natural gas supplies where, at present, large quantities of wood are available free of charge to me.  The local council advises the nearby estate that they have to remove unwanted wood and they find it much cheaper to deliver it to me v hauling it further away.

''My view is that the most likely course of action will be for trends to occur whereby the number of rooms in houses being heated will reduce, heating will be run upon occupation as opposed to 24/7. ''

You have hit the nail right on the head. My in-laws lived in a very large house. When they retired, they shut down a number of rooms to cope with heating costs. Ultimately, they moved.

The Brits, over the last 4 decades have become used to shirt sleeve order, even in December, January and February.
This will change with time.

The deregulation of the energy market has reduced prices up until now. From last winter onwards we will start to examine more closely our efforts to 'gather winter fuel'.

Most households can slash fuel budgets by 15% over night. With thought, by as much as 25%.

But, and this is the biggest BUT of our times, will those who can afford fuel conserve? OK , so a fixed income pensioner cannot do anything but switch it off and thereby freeze and die, But will an upper middle class family behave in the same way?

Regrettably, I think not. The people who can afford to burn gas and electricity will continue to burn it. Until they, in turn can no longer afford to burn it.

Rationing by price will kill the fabric of our society. Just now, on the news, Teachers, Police, health workers are being priced out of Cities in England. Add heating and transport fuel costs to this, and the fabric irretrievably erodes.

And we get to the 'great unwinding'

"Nuclear power has a long lead time and it's unlikely that the first batch of new builds (which are not even at the planning stage yet) could do any more than replace plant being decomissioned up to around 2020."

In all the excitement (?) about the Dear Leader's apparent change of heart re nuclear power, this simple irreducible fact seems to have have escaped scrutiny - what will happen of course is that current stations will , by waving a magic wand in Whitehall have their working lives extended beyond design life to fill the gap - as has already happened I think with Dungeness B. Let us hope that such decisions are based upon a proper scrutiny rather than simply by desire.

What frightens me is that we have had under this lot of myopic  midgets, no serious attempt to grasp the energy requirements of a cold wet island off the western coast of Europe for the next 50 years. One example, Pilkington's Glass has been taken over within last 2 months ( whopping £1.8BN cash deal !!) by JPG, (incidentally they with other Japanese co.Asahi Glass have 80 /90% of worlds flat glass capacity) - it is evident they intend to move production within say 3/4 years to Poland - making sense of cost , security of energy supply, lower labour costs in addition.

Aluminium smelter powered by Wylfa will close and production fed by Dubai , now world's largest smelting capacity - again plus lower labour costs.

These iterative decisions driven by enery cost/securty will naturally affect the core manufacturing economy - with all that it entails - Chris is right to point to energy poverty.

This is happening (with a vengeabce) in the US , especially in the Mid West - see this

http://www.hud.gov/offices/cpd/library/energy/homelessness.cfm

Just to add another perspective.

If most homes in the uk were heated electrically then we need not suffer capacity problems.

Heat is one of the few things that we can (almost) store.  To put it another way, a well insulated home is better served by keeping the temp constant rather that cyclic heating and cooling. If I recall this is more efficient.
In a home such as this, you can choose when you apply power to heaters etc.

Imagine a system that links heating systems to the internet and the national grid.  During periods of low demand the grid can stabilise itself by stimulating heating demand automatically.   Further heating demand can be rotated so that the whole population does not run its heaters simultaneously.  

My house is all electric as we have no gas.  (Its one of the aforementioned Barrett/Wimpy boxes)  All of our heating/hot water/cooking is done with electricity.  We have a crude form of demand management in the form of off peak low priced electricity.  We have 3 off peak time periods every 24 hours.  These are 00:00 - 00:05 then 13:00 - 16:00 then 20:00 - 22:00.

This allows us to heat our water and heat our home on the cheap, while stimulating grid demand when the utilities need it (to allow them to run their plants at economical levels)

In a more sophisticated system proposed above the heaters and hot water tank could be linked to the power output of a wind farm.  So when there is power we can consume it and when there is none its not a disaster.  So long as the average power delivered is adequate.

I will admit that CONSUMPTION of electricity would increase if we all used electricity to heat our home but don't get this confused with grid CAPACITY which is a different thing entirely.  Properly managed we need not have capacity problems if we're careful.

Having said that with the incumbent government in charge we are, of course, screwed.

In the UK magazine "New Civil Engineer" published on 3 August the leading article headline is "Blackouts Loom as Gas Projects fall behind Schedule".

In summary the article states that there are delays to two of the four major UK gas import projects under construction.

On the Langeled pipeline project, the four compression trains that need to compress the gas before it can be fed into the pipeline from Norway are suffering delays in construction. A source is quoted as saying the project is running six months behind schedule and will not be delivered in time for the winter peak. It is hoped that one train will be on line in late December/early January, but this is "a hope not a guarantee".

There is also meant to be a delay on the Bacton Balgazand Line.

These two delayed projects between them would be able to supply 84M cu m of gas per day (if it is available!), some 20% of peak demand.

It will be interesting to see how this gets reflected in the updated National Grid Winter 2006/2007 Consultation document due by the end of September. Fingers crossed for a mild winter!