Managed Gas Transition

Securing UK Gas Supply While Scaling Up Clean Energy Managed Gas Transition

Overview

The UK is undergoing a significant energy transition, with rapid expansion of renewables, electrification of heat and transport and a long-term commitment to phase out unabated fossil fuels. Despite this trajectory, natural gas remains critical to system resilience—providing over 35% of electricity generation in some periods and supplying more than 80% of heating demand. The central policy challenge is balancing near-term security with long-term decarbonisation, avoiding both supply risk and stranded fossil assets.

Strategic Priority

Maintain sufficient flexible gas capacity and robust storage while accelerating investment in clean, firm alternatives.

This ensures reliability in the 2020s and early 2030s without locking the UK into unnecessary fossil fuel dependence.

Key Policy Measures

A. Strengthen Gas Security Without Expansion of Long-Term Reliance

• Extend life and maintenance support for existing flexible gas plants through the Capacity Market.
• Secure diversified LNG contracts to reduce dependence on any single supplier.
• Maintain strategic cooperation with Norway, Qatar, the US and EU gas network operators.

B. Rebuild UK Seasonal Gas Storage

• Introduce targeted investment mechanisms (CfDs for storage capacity or regulated asset base models) to accelerate expansion.
• Prioritise low-leakage, high-integrity storage aligned with future hydrogen storage where possible.
• Set minimum winter readiness levels for strategic storage.

C. Accelerate the Build-Out of Clean Firm Power

• Expand long-duration energy storage (LDES) through a dedicated revenue model.
• Expedite development of small modular reactors, CCUS-enabled generation and green hydrogen-ready peaking plant.
• Increase interconnector capacity, enabling cross-border balancing and reduced domestic volatility.

D. Reduce Structural Gas Demand Through Heat Decarbonisation

• Scale heat pumps via targeted grants, zero-interest finance and installer workforce expansion.
• Support local authorities in deploying low-carbon heat networks and thermal energy storage.
• Implement demand flexibility markets to shift heating load away from system peaks.

E. Provide a Clear, Managed Phase-Down Pathway

• Introduce a declining carbon-intensity limit for electricity capacity market entrants.
• Set a long-term trajectory for reducing unabated gas use in power and heat with periodic review points.
• Align regulatory frameworks (Ofgem, DESNZ, National Grid ESO) to reward flexibility, not fossil fuel throughput.

Economic and Security Benefits

• Reduced exposure to global LNG price spikes and geopolitical shocks.
• Lower system costs due to avoided emergency gas procurement and improved use of flexible assets.
• Increased investor confidence in clean energy and storage projects.
• Enhanced resilience as renewables become the dominant energy source.

Risks and Mitigations

• Risk: Over-reliance on gas during a slow build-out of clean firm power.
  Mitigation: Clear timelines, accelerated permitting and strong LDES incentives.
• Risk: Gas storage market failure due to insufficient commercial returns.
  Mitigation: Government-backed financing models.
• Risk: Public resistance to heat pump transition.
  Mitigation: Consumer education, grants and improved installer standards.

Conclusion

A secure, low-carbon UK energy system requires managed reliance on flexible gas in the near term, combined with a rapid, decisive scale-up of clean firm power, heat electrification and storage. By prioritising storage, diversification of supply and market reforms that reward flexibility, the UK can safeguard energy security while accelerating the transition to net zero.

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