i. District Heating Systems
The report focuses on the future challenges of the Oil and Gas Industries of UK. From last few decades, the oil and gas industry of UK has been the nation’s major supplier of energy. The industry is now facing the number of challenges which will be very critical to meet so that the future of the industry can be shaped. There are few technologies which have significant impact on the supply and demand of oil and gas products in UK. These technologies include District Heating Systems and Electric Vehicles and Plug in Hybrid Vehicles. The future demand of oil and gas will be huge and the supply will be limited. For meeting the demand and controlling the supply of oil and gas, the alternative technologies and fuel sources have to be found. The electric vehicles and the technologies like District heating systems are used to control the demand and supply of Oil and Gas in UK which is analysed in the report. There are certain drivers and barriers which are faced by these emerging technologies. This will also be covered in the report.
District Heating Systems are those which use insulated pipes to deliver the heat in the form of Hot water or steam. This is done from one point to other point i.e. from the point of generation to the point of usage. District heating systems can be different in size depending upon the distance between the communities and societies where the energy supply is done. This provides valuable energy to the households and businesses and it proves to be a good alternative for Oil and Gas. Because of this, the additional need of Oil and Gas can be met. This is not only cost efficient but also helps in saving the Oil and Gas sources for future generations (UKGovernment, 2013).
Because of this, the customers need not to be dependent on the single source of energy supply. It helps in matching the demand and supply of the Oil and Gas sources of energy which are continuously depleting due to high usage of energy by the end consumers. In UK, the District Heating Systems are located across England and Scotland and there are domestic as well as commercial customers which use this source as the energy source. District Heating Systems are meeting 1-2% of the total demand of heat in UK and it is found that if District Heating Systems will be used appropriately in UK it could supply up to 14% of the total heat demand of UK. It is cost effective and also a good alternative to the renewable energy systems. It is also advantageous because the customers need to pay less for this source of energy (Johnson, 2014).
The department for Energy and Climate Change (DECC) in UK has already stated that District Heating systems will be taken to another level till 2020 because it has potential to save carbon and bill amounts of consumers. Till now limited use is made in UK but now it will be promoted for saving the OIL and Gas sources. The CHP Capacity of UK by sector constitutes Oil and Gas terminals the most and then the chemicals. Since these are natural fossil fuels and energy resources, the alternative ways need to be finding out. The use of these systems of District Heating will help in tackling the increasing demands of heat and decreasing supply (Whitehead, 2014).
Drivers and Barriers
the countries like Denmark have built an enormous network of pipes in its cities which collect waste heat from factories, transport systems and other sources and combine it with the heat generated from the solar energy plants and wind turbines so that the low cost and highly efficiently heat could be produced and supplied. The British government is now making efforts to increase connections of households to the district heating networks. For this, the Department for Environment and climatic Change (DECC) has made an investment of £7 million so that the feasibility studies can be made for the district heating systems (Johnson, 2014).
Figure 1: District Heating Pipes
The Government of UK has also launched the Urban Community Energy Fund with £10 million which will help in improving the infrastructure for District Heating System in UK. It will aim at developing the digester which will convert the local food waste into the green gas and then this will be used to generate the heat and power (Dawson, 2014).
According to Agha-Hossein (2016), there is a demand of low energy options and the sources which results in the reduction of carbon emission from the environment. It leads to carbon savings. The growing prices of energy have led to the use of alternative sources of energy. The new housing and commercial buildings are developing which demands the low heating and energy option which can be provided by the District Heating systems which are both in budget and environment friendly. The successful implementation and use of district heating has been seen in many countries which are setting a good example. The prices of oil and gas are reaching heights which are increasing the expenditure of government, business and individuals. This has led to the increase in the demand of District Heating systems which have not only reduced the fuel bills but also the carbon emissions (Danestig, 2009).
The current District Heating market of United Kingdom is underdeveloped and it has potential in future to connect more users in the future. It is because the District Heating Systems do not receive sufficient financial support from the government. There are many barriers for these systems to develop. The government has provided the widespread delivery of cheap gas and electricity which has stopped the expansion of District Heating. Little attempt has been made in integrating the heat and electricity production which aims at maximising the utilisation of the fuels. The supply of Heat is unregulated in the markets of UK which creates uncertainty in its production and distribution as well. Also there are high capital costs to develop these systems a people lack in the awareness of operations and understanding of these technologies (Maunsell, 2009).
With the increase in the demand of fuel and energy, the demand of alternative fuel sources have also increased. One of the technologies which affect the demand and supply of Oil and gas sources of energy is Electric vehicles or Plug in Hybrid vehicles. Electric or hybrid vehicles are those which use a combination of internal combustion engine and electricity to run. As per Murray (2016), the demand for the electric vehicles increased in the recent years and this shows that people are now getting awakened for reducing the harmful emissions from fuel in the environment. This has reduced the demand of the vehicles which uses Oil or gas. The population is rising and so does the vehicles and transportation. The ownership of vehicles is increasing which is increasing the demand of oil and gas sources of fuel for the vehicles. Electric vehicles are also continuously rising in numbers and there are number of factors which affect its success in the market. For example the speed at which the cost of the batteries fall, the subsidies provided by the government, the policies and regulations of the government, the improvement and modifications in the electric vehicles and the preferences of the customers towards electric and hybrid vehicles.
ii. Electric Vehicles (EV) and Plug-In Hybrid Vehicles (PV)
According to Randall (2016), there will be a rise in the electric cars which is shown in the graph below:
Figure 2: Projected Increase in the number of electric cars
Source: Randall (2016)
In the view of BP Global (2016), the electric vehicles are well placed to increase its share in the market. The world at present is consuming 95 million barrels of oil per day. As per the forecast done by the company, in the next two decades, the demand of oil will continue to increase but the rate of increase will be reduced because of the increase in the use of electric vehicles. In short, it can be said that the electric vehicles will have an impact on the demand of oil and gas but the impact will not be huge. But the impact can be game changing if more attention will be paid on the efficiency of the electric vehicles. The electric vehicles are a very good idea because of several reasons like it will improve the quality of air and will reduce the carbon emissions from the environment provided that more gas and less coal is used in the power generation. It could lead to power savings in the coming years.
As it has been already discussed that the demand of transportation will increase in the coming years, the need of vehicles will also increase and the CO2 emissions and fuel consumption will also enhance with the time. The demand of the oil and gas depends on the degree of market penetration of Electric Vehicles. According to the research conducted by Vilchez, Patrick & Wolf (2013), the impact on carbon emissions depends on how electricity is generated. The hybrid vehicles and the plug in hybrid vehicles performs better in terms of environment and also shows annual savings of carbon but the savings are low and the benefits are not as high as expected. But the use of electric vehicles also benefit in noise pollution and air pollution therefore saving the environment specially in the urban areas where there is high usage of vehicles.
The expected increase in the global population and urbanisation has posed severe environmental challenges. The global transportation and vehicle stock will also increase which will create huge problem to the environment. The demand of oil and gas has increased and it has also increased the economic burden on the government and the public. The policies and regulations by the government can improve the conditions for the future (PWC, 2016).
The use and increase in the electric vehicles have been seen in recent years. This is because of severe environmental problem occurring because of harmful emissions from oil and gas form of fuels used in vehicles. The British Government has supported the production and selling of the electric vehicles and promoting Electric vehicles as an excellent alternative for fuels. Electric vehicles are emerging technology which is promoted due to the environmental factors. They do not produce or emit the carbon di oxide and have capability to maintain sustainable environment for future generations (Smithers, 2013).
On the contrary there are many barriers to the adoption of electric vehicles. One of them is customer’s perception. The customers do not find satisfaction in purchasing and using electric vehicles as they are slow and does not provide as smooth drive as the other vehicles. There are technical barriers as well which creates huge difference between the electric vehicles and fossil fuel powered vehicles (Wang, et al., 2017). The time taken for charging is too long which creates a problem for the consumers. There is a cost barrier as well. The electric vehicles are expensive and therefore it takes so long to cover the benefits of the electric vehicle (Nathan, 2014). The technology may become outdate which creates dissatisfaction in customers. It is clear that technological advancements are one of the biggest challenges which are faced by the electric vehicles. The companies are working on it but it will take time to match the requirements of the customers from the usage of electric vehicles (UK Government, 2015).
Conclusion
It can be concluded that the technological advancements have made great impact on the demand and supply of Oil and gas. The District Heating systems and the use of Electric vehicles have been discussed with their present situation in UK and how does it impact the demand and supply of Oil and gas in UK. It has also been discussed that what are the drivers for these technologies and what challenges they have to face. The technologies have the capability to improve the current environment and availability of fuels provided they are supported by the government and public as well.
References
Agha-Hossein, M 2016, ‘Low carbon heating and cooling – drivers and challenges’, Building Services Research and Information Association.
BP Global, 2016 ‘How will electric vehicles affect oil demand?’, Retrieved from https://www.bp.com/en/global/corporate/bp-magazine/observations/spencer-dale-on-electric-vehicles-and-future-energy-demand.html.
Danestig, M 2009, ‘Efficient Heat Supply And Use From An Energy-System And Climate Perspective’, Linköping Studies in Science and Technology.
Dawson, K 2014, ‘Heating trends by 2020 UK’, BSRIA.
Johnson, C 2014, ‘District heating: a hot idea whose time has come’, The guardian.
Maunsell, F 2009, ‘The Potential and Costs of District Heating Networks’, Poyry Energy (Oxford) Ltd.
Murray, J 2016, ‘UK demand soars for electric and hybrid vehicles’, the guardian.
Nathan, S 2014, ‘Barriers to electric car uptake’, The engineer.
PWC, 2016, ‘New Energy Futures: transforming the oil and gas industry to meet future challenges – PwC report’. Retrieved from https://pwc.blogs.com/press_room/2016/02/new-energy-futures-transforming-the-oil-and-gas-industry-to-meet-future-challenges-pwc-report.html.
Randall, T 2016, ‘Here’s How Electric Cars Will Cause the Next Oil Crisis’, Bloomberg.
Smithers, B 2013, ‘Driving forward electric vehicle adoption in Britain: Overcoming the barriers’, Metering and Smart Energy International.
UK Government, 2015, ‘Uptake of Ultra Low Emission Vehicles in the UK’, Office for Low Emmission Vehicles.
UKGovernment, 2013, ‘The Future of Heating: Meeting the challenge’, Department of Energy & Climatic Change.
Vilchez, G, Patrick, J & Wolf, F 2013, ‘The Impact Of Electric Vehicles On The Global Oil Demand And Co2 Emissions’, 13th WCTR, July 15-18.
Wang, F, Yu, J, Yang, P, Miao, L & Ye, B 2017, ‘Analysis of the Barriers to Widespread Adoption of Electric Vehicles in Shenzhen China’, MDPI.
Whitehead, F 2014, ‘Lessons from Denmark: how district heating could improve energy security’, The guardian.
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