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Unpredictable fuel prices and emissions reduction premiums

An oil rig

The cost of the fuel makes up a significant proportion of the cost of generating electricity using gas. The UK’s own North Sea gas reserves peaked in 1999 and are now in decline. The UK is therefore becoming increasingly reliant on imported gas. This means that the cost of generating electricity with gas-fired power stations is affected by the price of gas on the international market.

The UK is aiming to make a transition to a low-carbon economy. If gas is to be part of a low-carbon energy mix, gas-fired power stations may need to be fitted with carbon capture and storage (CCS) technology. CCS captures carbon dioxide (CO2) emitted when gas is burned and stores it rather than releasing it into the atmosphere. Incorporating CCS into gas-fired power stations carries an upfront cost, and is also expected to make them less efficient and therefore more expensive to operate.

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