Inside Out
Future heating – kerosene demand scenarios
THERE REMAINS MUCH UNCERTAINTY AROUND THE FUTURE PROSPECTS FOR THE ROLE OF LIQUID HEATING FUEL IN HELPING
TO ADDRESS THE UK’S DECARBONISATION ‘CHALLENGE’. SINCE LEGISLATION MAY NOT BE PUT IN PLACE FOR SOME TIME TO
COME, WE LOOK BELOW AT POTENTIAL FUTURE DEMAND SCENARIOS FOR THE USE OF KEROSENE IN HEATING.
Past perspective revisited
trajectory of the consumption of heating oil which is currently used by
around 1.5 million homes and 200,000 – 250,000 rural businesses:
Seven years ago in 2013, ‘Inside Out’ considered a range of future
demand scenarios for the use of kerosene as a heating fuel in the UK,
updating these three years later in 2016, in the light of trends and
developments in the intervening period. Since 2020 was the ‘end point’
of those forecasts, it seems timely to revisit the scenarios to see how
they measure up against where we are now.
2016 demand scenarios
1. Government policy on future heating in buildings
A policy statement published last year ‘plans to consult on regulatory
options to phase out the installation of fossil fuel heating systems in off
gas grid buildings’ and ‘to explore and test the different approaches to
heat decarbonisation, for buildings on and off the gas grid, particularly
looking at the role of heat networks, heat pumps, hydrogen and biogas’.
2. The UKPIA ‘Future Vision’
The ‘best’ case assumed an average 1% pa reduction in consumption,
largely driven by improved boiler efficiencies and better building
insulation with a resultant projected 2020 demand level of 2.38 billion
litres (1.90 million mt).
The ‘average’ case, in addition to the above factors, also assumed
a measure of attrition of existing heating oil outlets in the face of
governmental efforts/initiatives to promote renewable sources, effecting
a 3% pa decline in consumption and a resultant projected 2020
demand level of 2.15 billion litres (1.72 million mt).
The ‘worst’ case was built on the previous case but assuming a
more aggressive governmental pursuit of its 2020 goal for adoption of
renewable heating sources, with the projected outcome being a 25%
demand reduction by 2020 to a market of 1.88 billion litres (1.50 million
mt).
Demand evolution
The table below indicates how the actual demand for kerosene for
heating has evolved since the 2016 forecasts.
(000 Tonnes)
Year 2015 2016 2017 2018 2019 (Prov.)
Demand 1,921 1,939 1,886 1,869 1,875
Source: Dept. for Business, Energy & Industrial Strategy-
Petroleum Products, Commodity Balances (Dukes).
As indicated, the overall market has remained remarkably stable
since the demand scenarios were developed four years ago, so that the
actual outturn for 2020 will approximate most closely to the ‘best’ case
scenario.
Unveiled in July last year, this makes two unequivocal statements about
cessation of supply of heating oil for properties off the gas grid in ‘the
2020s’.
Under ‘Options for decarbonisation’ – phase out high carbon fossil
fuel heating for new and existing buildings and housing off the gas grid
during the 2020s
Under ‘All scenarios’ – use of liquid fuels for space heating falls to
very low levels in the 2020s and is only retained for buildings (mostly
historical) which are difficult to retro-fit. The liquid fuels to be replaced
by other energy carriers, especially renewable electricity and green
hydrogen.
3. OFTEC’s ‘An Industrial Strategy for decarbonising oil heated
homes’
Published in November 2019, this research concluded that transition
to a low carbon liquid fuel, B100 (100% biofuel), has the potential to
deliver the highest carbon reduction impact of any off gas grid heating
technology for the lowest overall cost over the lifetime of the appliance.
As a result, the organisation proposes the phased introduction of
sustainable low carbon liquid fuels:
• A 70:30 kerosene: biofuel blend by 2027
• A 100% sustainable low carbon liquid fuel by 2035
As things stand, neither government policy intentions nor the UKPIA
‘Future Vision’ appear to make any explicit consideration of a possible
role for a sustainable, low carbon liquid fuel solution in the domestic
heating sector. With this in mind, three alternative scenarios for the next
five years are framed below.
Looking ahead to 2025 Heating oil demand scenarios for the
period 2020 to 2025
Given that the level of uncertainty is likely to rise significantly over time,
the demand scenarios outlined below take 2025 as a manageable
horizon for projection.
Three factors in particular, will have a critical bearing on the future The ‘best case’ comprises two elements:
A) Continued improvements in boiler efficiencies and building
insulation standards and
B) G
overnment acceptance of a future role for low carbon liquid fuels
20 Fuel Oil News | May 2020