Traditionally, domestic and industrial powering has been derived from the fossil fuels. However, due to increased global demand for clean and sustainable energy to power these activities, there has been increased prospects in the production and distribution of energy using the emerging renewable technologies. Domestic power utilities like heating has largely been facilitated by oil and gas products like diesel and LPGs. Notably, the United Kingdom is greatly considering full-scale implementation of the emerging technologies like district heating systems, the electric and plug-in hybrid vehicles. However, these technologies will have very serious ramifications in the oil and gas sector especially in the United Kingdom. In fact, according to the Module Class Notes, heavy duty raises for the government from the sector presently stands at £20bn annually hence partly explaining why the UK government is hesitant to advance to full-scale adoption of the said emerging technologies. But, what entails these emerging technologies? The district heating system uses a network of insulated pipes to deliver steam or hot water to the point of use from the generation station. This is normally done in an efficient fashion. Although these kinds of systems have been in use since the aftermath of the second world war, they have not been fully tapped. Currently, they provide less than 2% of the heat demand in the UK; although the 2030 projections are fixed at 20% (Module notes, no year). The technology is based on the utilization of the wastage energy during power generation by directing the energy losses (in form of heat) to heat a separate system; the district heating. Notably, the system can be configured in two major ways; by either using the fossil fuels like diesel or the recuperationary sources to minimize the energy losses from the power plants. On the other hand, the electric vehicle technology strives to either supplement or eliminate the gas-powered vehicles, thanks to their environmental friendliness and the positive contribution to the ecosystem. Therefore, the aim of this report is to present a discussion on the impacts, drivers and barriers of the said emerging technologies in the wake of fluctuating demand and supply of oil and gas products. It seeks to pinpoint the emerging technology issues that are likely to affect the mentioned sector.
Growth of these technologies are expected to soar in the near future. However, integration of the said technologies continues to have its fair share of challenges amid renewed call for full-scale implementation of renewable energy technologies by the United Nations. Therefore, this section discusses the most notable drivers and barriers in the integration of the said technologies.
The Drivers
District Heating Systems
The following factors will contribute to further growth of the technology:
i. The environmental benefits
Incorporating the value of carbon savings in the residential and industrial buildings is part of the grand plan of the UK government. Various sustainable building codes such as BREAM have been reviewed by incorporating greener architectural principles. Hence coupled with the COP21 commitments, the UK government is likely to adopt policies that will be environmentally beneficial to both the residential and industrial establishments. Admittedly, district heating systems is among the most environmentally friendly technologies that are likely to be adopted on a grand scale.
ii. As a power plant efficiency boost
Over the years, power generation has proven to be among the most expensive projects in the UK. Notably, any opportunity identified in the course of plant performance to bring down the cost is often pursued. Now, in a power plant station there are often losses in the form of heat that are normally utilized hence district heating systems come in handy.
iii. Innovative solutions
Innovation in the sector is also being encouraged as a means to discover superior solutions to the current energy security challenges in the UK. The district heating systems are likely to be considered more than ever before as most studies reveal that it could be a better compromise between environmental conservation and heating efficiency.
Electric vehicle and Plug-in hybrid vehicles
The following will contribute to further growth of the technology:
Government incentives
There have been policies adopted by the UK government that offer incredible incentives both to the customer and the car manufacturers. In the past, concerns have been raised over the cost of the EV cars relative to the gas-powered ones. However, the government swiftly responded by providing subsidies to the EV cars purchasers; Currently, the government offers a maximum of 4500 Euros off as a subsidy to encourage more buyers. Consequently, this has increased the volume of EV car sales hence encouraging more investors in the area.
Government commitment to carbon reduction
According to the Telegraph (2017) the UK government pledged, at the United Nations Climate change conference (COP21) in Paris 2016, to commit to zero-emission by 2050. This is therefore likely to catapult the EV cars production as demand for more environmentally-friendly cars is expected to soar in the coming years. Besides, the government through adoption of various pieces of legislations is likely to focus on measures to reduce the amount of carbon footprints.
Technology improvement
A part from the prohibitive cost of EV cars, the technology has been confronted with the realities of battery storage problems. However, it has partly been solved by companies such as Tesla which has innovatively produced a device that can store energy for longer periods hence reducing the frequency of charging per day as more power can now be stored and later used by the car while it is on the move. Besides, another issue that has come up is with the charging stations. Since it is still a relatively new technology, other supporting infrastructure are also currently being rolled out in full-scale to cater for the increasing demand by the EV car users. This is being viewed as a potential area that can boost the use of these cars should further technological breakthroughs be realized.
The Barriers
District heating systems
Prohibitive costs in installation
The installation costs are relatively higher especially in installation of the distribution pipes. Besides, most residential homes had invested on the gas heaters and making a shift may be difficult.
Institutional issues
Reportedly, there are people within the local authority structure who are highly unwilling to implement the technology owing to the fear of unknown. Besides, some have decried the technology as being unsustainable in the long run.
Economic barriers
Comparative analyses with other heating systems reveal a significant economic disparity in which district heating system is being said to be a less investment venture. However, more evaluations are needed to further substantiate the notion.
Project and technology risks
Being a relatively new technology, investors are going cold turkey on it. It is still being considered a greater risk venture.
Electric vehicle and Plug-in hybrid vehicles
i. Cheaper alternatives available
The gas-powered cars are still the best choice for most people in the UK largely due to its relative affordability and less maintenance cost. This has stifled the growth of EVs.
Figure 1: Cost Parity between electric and oil powered cars (Courtesy of Gomez, Jonathan, Jochem, & Fichtner, 2013)
ii. Storage and support infrastructure issues
It should be noted that EVs require frequent charging at a relatively higher cost than the gas-powered ones if car mileage is anything to go by. Besides, since the technology is commercially at an infantile stage, most of the support systems are not fully developed. On the other hand, the filling stations for gas powered vehicles are strategically located along the roads and highways. This has discouraged potential buyers who would rather go for the gas-powered ones even though there is need to curtail their use due to the carbon emissions problems. However, currently in the UK, about 27 000 ‘POD points’ have been manufactured to facilitate the full implementation of the EV technology (Power technology, 2017)
It should be noted that heating in the UK accounts for 49% of the total energy demand for both residential and industrial purposes (Class Notes, no year). Furthermore, 47 % of carbon emissions come from heating with natural gas and heating oil being the major heating fuels both in the urban and rural areas. Notably, district heating promises a cost-effective and a viable alternative to individual renewable technologies hence this is likely to further upset the oil and gas market. Additionally, the electric vehicle technology also promises a revolution in the auto-industry should the mentioned barriers be alleviated (Bp Inc, 2017). But what exact impacts has the emerging technologies realized so far in the oil sector?
Impacts of district heating systems and electric vehicle technology
In over 50 years now, the oil demand and supply have haphazardly fluctuated with no meaningful trend; although between 2007 and 2009, when there was the global recession, the oil demand and prices dramatically reduced to a low of $31 per barrel (Kutasovic, 2012). However, there was a considerable growth in the oil demand between 2000 and 2010 with an increase of 9.4 mbd although this is attributed to the accelerated growth in the emerging economies mainly from Asian and Scandinavian countries.
Kutasovic (2012) opines that the recent growth in oil supply and the falling of oil prices are largely attributed to the fact that the OPECs (Oil Producing and Exporting Countries) have increased their financial wherewithal and production technology hence creating further uncertainty in the oil market. However, the emerging technologies such as the ones mentioned above have proportionately contributed to the spiraling of the oil market situation. Notably, district heating technology allows production of low carbon heat through the use of combined heat and power (Maunsell, 2009 & RAC Foundation, 2012). Consequently, this has led to a significant drop in the use of fossil fuels to heat both residential and industrial rooms as the climate change mitigation measures take shape. In fact, according to Maunsell (2009) a 30% reduction in fuel utilization has so far been registered in the United Kingdom. Besides, environmentalists are greatly vouching for full-scale implementation of the technology as it enables significant reduction in carbon footprints and emissions.
Furthermore, futuristically, there is a possibility of a significant replacement of gas-fired boilers with more efficient ones. Currently, building designers in the UK are adopting more sustainable construction principles like the renewable energy generators; this is likely to slice away the market share of oil and gas products. However, as Maunsell (2009) argues, this will be a difficult transition given the relatively higher installation costs of the district heating technology. Besides, the gas-fired CHP technology is well established and therefore, technically, it would be shaky to wholly replace it owing to the thousands of jobs and government revenue that are at stake. However, some scholars in the field have disagreed with this notion and instead projected a further growth in employment opportunities as a result of increased investment in the said technologies.
Another issue that is likely to cause further confusion in the sector is the possible loss of market control by the OPEC players. Admittedly, these countries have often arm-twisted the oil dependent countries to play by their foreign policies; which most likely hurts the energy security in developed countries like the United Kingdom (Blazquez & Moreno, 2012). By UK investing more in the emerging technologies, the supply of crude oil is likely to shrink leading to possible divestment of production of oil and gas products to other markets (Gomez, Jonathan, Jochem, & Fichtner, 2013). Although as mentioned earlier this will likely be far-fetched owing to the great existential investments in the sector.
However, on the other hand, the players in the oil and gas sector will likely wrestle it out with the emerging technologies by changing their marketing tact (Deloitte, 2015). They are likely to pile more pressure at the production stage of the supply chain by refining the products to offer a further competitive edge in the energy arena. To partly achieve this, they are likely to effect technology changes in the making of the oil and gas products by leaning more towards efficiency and quality. Connectedly, the consumer is likely to benefit as more efficient gas and oil products will be expected in the market hence closing the supply and demand gap.
Conclusion
The emerging technologies discussed above will certainly revolutionized both the energy and auto industries. In fact, there are valid reasons to be confident about this. As mentioned earlier, the next decade offers an opportunity for the global community (with UK included) to rethink about its policies in combating the global warming and the climate change. Notably, the technologies, if implemented on a full-scale, are likely to cause stronger shocks to the oil and gas market. In the recent past, price of crude oil has dramatically fallen owing to the improved harnessing technologies. However, one thing is clear; more countries are on the journey to be more energy secure even as global demand for energy skyrockets (Getwestlondon, 2017). It will be interesting to observe how the markets will respond with a bold entrance of these threateningly emerging technologies.
Reference
Module Notes. (no year). Understanding Future Technologies and the Impact on the Retail Oil and Gas market. University of Plymouth.
Gomez,V., Jonathan J., Jochem, P., & Fichtner, W. (2013).The Impact of Electric Vehicles on the Global Oil demand and CO2 emissions. Available from: https://www.wctrs.leeds.ac.uk/wp/wp-content/uploads/abstracts/rio/general/1659.pdf
Bp INc. (2017).The impact of electric cars on oil demand. Available from: https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/electric-cars-and-oil-demand.html
RAC Foundation. (2012).UK fuel market review. Available from: https://www.racfoundation.org/assets/rac_foundation/content/downloadables/racf_deloitte-crude_oil-jan13.pdf
Deloitte. (2015). Oil and Gas Reality Check: A look at the top issues facing the oil and Gas Sector. Available from: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Energy-and-Resources/gx-er-oil-and-gas-reality-check-2015.pdf
Blázquez , J & Moreno, J.M. (2012). The rise of emerging markets and its impact on global energy security. Available from: https://itemsweb.esade.edu/research/esadegeo/The%20rise%20of%20emerging%20markets%20impact%20security.pdf
Kutasovic, P.R. (2012). Changes in Supply of and Demand for Crude Oil: Implications for Oil Price. Available from: https://www.nmims.edu/NMIMSmanagementreview/pdf/april-may-2012/01-changes-supply-demand-crude-oil.pdf
Maunsell, F. (2009). The Potential and Costs of District Heating Networks. Available from: https://webarchive.nationalarchives.gov.uk/20121205193015/https://www.decc.gov.uk/assets/decc/what%20we%20do/uk%20energy%20supply/energy%20mix/distributed%20energy%20heat/1467-potential-costs-district-heating-network.pdf
Power Technology. (2017). Building the UK’s electric vehicle infrastructure with POD Point. Available from: https://www.power-technology.com/features/featurebuilding-the-uks-electric-vehicle-infrastructure-with-pod-point-5742813/
Getwestlondon. (2017). New innovations in electric vehicle technology as councils look to cut congestion and clean the air of London’s streets. Available from: https://www.getwestlondon.co.uk/news/west-london-news/new-innovations-electric-vehicle-technology-12652843
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