The Impact Of District Heating System And Electric Vehicles On The Retail Of Oil And Gas In The United Kingdom

Current Trends in UK oil and gas retail

The oil and gas industry in the United Kingdom has enormously produced approximately to 1.42 million boepd (which translates to equivalent barrel: this averagely commensurate the amount of energy per unit barrel of crude oil). This report entails a study that depicts the current trends existing in the United Kingdom oil and gas retail within the cross dimensions of the emerging technologies. The production scale is on the rise while the general demand for oil and gas is declining, however, there are quite a number of challenges which come alongside the emergence of district heating and cooling system and electric vehicles and plug-in hybrid vehicles.

The penetration of these new technologies is influenced by buyers who also have less confidence in their efficiency (Seba, 2014). Through research, it is evident that there will be some potential demand for oil and gas because largest population depends on the public transport where the Internal Combustion Engine vehicles are on the widespread. New existing technologies have played a significant role in the retail of oil and gas by providing alternatives more advanced and economical and extensively protects the environment from pollution.

The retailing of oil and gas in UK markets has been greatly influenced by a number of sub factors such as the demand and supply.

Demand has a number of determinants like; the cost of hydrocarbon fuel alternatives, the technologies that are currently implemented, and the country’s gross economic growth. Supply has the following determinants; the extraction technology for oil and gas, the aspects of the risks possibly encountered, fuel interest rates, and the availability of the resources (Brian Rivas, 2011).

There have been an outstanding records or oil and gas retailing in the United Kingdom’s market. The trends are outlined below

1. A decline in the number of petrol fueling stations in the UK to a value less than 87000 evident as from the end of 2011 from the peaks of 40000 in the early 19^thCentury
2. An increase in the amount of automotive fuel consumed between 2004 and 2007 but contrary to the high fuel prices in 2007 accompanied by increased efficiency and economic slowdown have led to a reduced extraction volume.
3. The change of ownership identity of petrol stations in which quite a number are owned by the large business entities in the country(Deloitte Touche Tohmatsu Limited, 2014).

The United Kingdom’s oil and gas retailing systems have relatively lower retail price margins and the providers of the fuel have different market strategies and modelling structures. In comparison table, the demand for oil and gas in the UK is majorly determined by the transport sector which includes the automotive and other sectors though some proportional percentages are consumed by industries whereas the larger share is consumed by road transport.

There is a significant increase in the retail prices of oil and gas over the previous year’s precisely over the last decades in which there has been a noticeable doubling of the prices over the same period of time (Deloitte Touche Tohmatsu Limited, 2014). The changes in the fuel prices are predetermined by extraction of crude oil being the main component of retail fuel prices among other factors such as refining, refining, taxes and duty rates, transportation and distribution.

District Heating System

United Kingdom’s market is driven by the fuel volumes that are consumed.

• The type of fuel sold to the vehicles operated in the country has impacted on the sale of oil and gas. Most vehicles by 1997 were 89% petrol driven automotive while the rest were diesel driven(Wiltshire, 2011). There has been a significant increase in the number of diesel driven vehicles to 31% and the rest were petrol driven by 2011.
• The average annual distance travelled by vehicles (mileage) has been a determinant in the fuel volume retail prices.
• The average fuel consumption is a significant factor which drives the fuel retail and retail prices in the country. It is evident that technology has impacted greatly in the consumption of fuel with an essential aim that CO₂is minimised (Downey, 2009).

With respect to the to the following emerging technologies in the country, some crucial technological advancements which define the retailing of oil and gas in the United Kingdom include the following;

1. District heating systems (heating and cooling systems)
2. Electric vehicles and plug in hybrid vehicles.
3. District heating systems (heating and cooling systems).

District heating system has a sole mission to distribute energy that is generated in a centralised location for domestic and commercial purposes such as water heating and space heating. The heat generated is usually from an energy generation unit plant depending on fossil fuels as raw materials but has an increasing usage of biomass (Seba, 2014). However, other sources such as geothermal heating, heat pumps, nuclear power, central solar heating are also used.

District heating systems are tested to be more efficient and provide better pollution control measures than the localised boilers (Brian Rivas, 2011). By research and analysis, the district heating systems with combined power and heat systems are the most affordable and cost effective method of cutting down carbon emissions and has a relatively lower carbon content traces of the variety of fossil plants. Stockholm basically applies the exhaustive use of combined heating and power for its multi energy supply system. This leads to the production of heat energy through electricity when the full range of intermittent power is produced and subsequent cogeneration of electricity and district heating and power systems when the intermittent power production is low.

District heating system becoming a technology development in the recent times, it is associated with various dynamic components. The major generation unit for the system is the heat only boiler station and sub-production plant which is added in parallel to the boiler (Karlson, 2012). For instance, a fossil fueled cogeneration plant, the energy produced is set up to a value range of its half maximum heat but annually the output can be optimised to a peak up to 90% of the heat supplied. It’s uneconomical to size the cogeneration plant on its own to be able to cater for the full heat load.

A combination of district heating system and cogeneration is an energy efficient production system with high efficiency of up to nearly 80% whereas some can reach up to 100% and above based on the lower heating value by cooling the flue gas to condensation (Alberto Piatti, 2013). The reduction of carbon gas production is brought down to lower concentrations by utilising waste heat energy from nuclear power plants in the district heating systems whereby the same principles for convection combination of cogeneration and district heating utilises the same for the nuclear and thermal power station.

Electric Vehicles

Research shows that district heating and power systems have significantly played the key role and potentiality in producing very minimal dosages of carbon into the environment based on combustion and it rapidly competes with insulation of the atmosphere (Yoshiyuki Shimoda, et al., 2012). The system is regarded to be the best acknowledged for minimising carbon to zero levels.

District heating systems are consumed rather by human beings whilst oil and gas are consumed by automotive though both the commodities are human driven in demand for energy required on a daily basis. This has a great essence in reducing the over reliance on the fossil fuels as these are alternative green methods of energy production in the current technology spearheaded generation. It has been in the guts of scientist to reduce carbon (basically from fossils) from emissions (Falk. & Rudlin, 2009). This fossil-free heating is a super-efficient, for supply to low-energy buildings that do not need much heat.

This is a system recognised as a local system which is equipped with a pipeline or a system of a properly installed network providing hot water or steam from one or series of sources to a multiple of buildings with the sole purpose of providing heat during the cold winters which are very extreme due to proximity to the north pole (Wiltshire, 2015). Buildings are connected the grid unit system hence it’s not necessary to own boilers or generation source units.

The reason for setting up the district heating systems is to manipulate and bring down to the lowest level possible usage of natural gas. This leads to a subsequent reduction of natural gas supply for the same purpose when people are maximising on its full exploitation.

1. Electric vehicles and plug-in hybrid vehicles.

Electric and plug-in hybrid vehicles are currently being adopted in the United Kingdom with a comprehensive government support through plug-in cars, van grant schemes and some other incentives. Closely to more than 100000 electric and plug-in hybrid vehicles have been manufactured in London (Inkpen, 2008). The British government has taken into consideration the rapid growth of technology and the approach to the growth of ultra-low emission vehicles in their markets.

Plug-in electric vehicles have an internal combustion engine (ICE) with a battery capacity of 40 kW/h. The cars have very effective and reliable features from battery electric vehicle motors combined with a range of petrol and diesel engines.

Stipulated and well legislations have been put into an account to categorise the vehicles into zero-emission capable mileage with technology neutral approach with un-exceptional of hydrogen fueled cars as listed.

• First manufactured type: CO₂ emission lower than 50 kg/km and zero emission range of at least 110 km
• Second manufactured type: CO₂emission lower than 50kg/km and zero emission distance coverage range of 16-111 km
• Third manufactured type: CO₂ emission of 50-75 kg/km and zero emission distance coverage of at least 32 km(Leitman, 2011).

Drivers and Barriers

In relation to the United Kingdom’s oil and gas extraction, electric vehicles and plug-in electric vehicles has greatly impacted on petrol and diesel retailing: the low and zero emission vehicles make up a small fraction of the overall market although the government outlaws petrol and diesel driven vehicles to minimise carbon pollution (Denton, 2016). The government has imposed and implemented some legislations to promote the zero emission industry by subsidies, range, charge point availability, emission rates of CO₂ and revenue preserving tax consideration.

Plug-in electric vehicles can be changed at any public charging point or even at homes equipped with the systems. There is an increased demand for these zero emission vehicles leading to a subsequent diminishing demand for petrol and diesel.  

Currently, there has been vertical restraints in the supply of diesel and petrol which has been affected by the double marginalisation principle due to some negligible existence of the monopoly. Demand for crude oil at the global scale has significantly gone down due to rise in the number of manufactured electric vehicles.  

District heating system (heating and cooling system) has some major key drivers and barriers as follows.

1. Drivers

• This technology has been emphasised on due to its reliability and potential availability unlike the crude oil exploitation which is unreliable and the sources too are unpredicted of the quantity available.
• Energy efficiency, for instance, the rapid development of district heating systems has led to substantial energy savings relatively affordable compared to crude oil.
• Energy costs are quite economical to the country because the heat energy is generated at low costs at the district heating systems thereby contributing to lowering the fuel poverty(James Jamine, 2012).

Barriers to district heating and cooling systems technology.

• Obstacles caused by physical features causes disturbance to the pipe routes for installation of the systems. This affects the construction efficiency of the district heating system thereby it necessitates insurance policies to cover the construction risks.
• Fuel storage is insufficient in the central energy centre thus hindering the competent production of steam to the system. The technology that had been implemented for the project is new and has been under a minimum number of tests for future confidence in reliability (Burton, 2013). This hinders the long term project on the same at large scale.
• Economic barrier leading to the thrashing of small scale systems since the UK government has not created a favourable environment for competition between the small scales and the large scales commercially (Andreas, 2009). The initial large capital endorsed in the project causes the cost of capital to be the key driver of the cost competitiveness of the district heating and cooling system.

Electric vehicles and plug-in hybrid vehicles have the following barriers.

• The price of the electric vehicles is relatively high compared to the cost of internal combustion engine vehicles. This impedes the potential customers from making the purchase, therefore, less growth and development in the industry.
• Technologically the electric vehicles require more advanced expertise on the driving experience due to the fact that it’s an emerging technology whereas common drivers aren’t conversant with the vehicles.
• There are rising cases of concern in charging of infrastructure deployment and the driving range and the power rating of the vehicles.

The drivers to electric vehicles include.

• They will contribute to a significant decrease in oil consumption hence enabling substantial savings to the country. It has led to the input of much more financially and infrastructural resources from the United Kingdom’s government to the industrial manufacture of the electric vehicles.
• The electric vehicles only depend upon electricity and low fossil fuels dependent which impacts on carbon emission(Ninian(Kerr-McGee), 2010).

Conclusion.

Provided that there is global development, increase in population, urbanisation and technological advancements, the United Kingdom’s road transport faces serious energy and environmental challenges. The carbon emission can be mutually reduced through government legislation and vehicle manufacturers. Major government role can be enabling the penetration of electric vehicles into the market. Provision of grants to the electric vehicles manufacturing industry can lead successful management of carbon pollution from fossil fuels. The increase in the number of zero emission vehicles subsequently leads to the reduction in demand for oil for the ICE vehicles.

The usage of natural gas for similarly heating up urban houses at the expense of district heating systems is a challenge that can be well dealt with by construction of the systems commercially and at large scale. Supplying heat and cooling system to houses in the urban United Kingdom reduces dependency on natural gas. The aim of the country to succumb the environmental pollution in the future can only be achieved by embracing such emerging technologies. Considering the depletion of oil and gas resources being that they are non-renewable sources of energy, the country can eventually run into an energy crisis in case the production versus demand and supply is not at equilibrium.

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