SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China’s petrochemical markets might well respond positively to any new economic stimulus measures announced during the delayed Third Plenum government meeting that takes place on 15-18 July. But the scale of economic reforms required are such that I believe the more likely outcome is China remaining stuck with lower growth than during the 1992-2021 Petrochemicals Supercycle. Sourabh Gupta – Senior Fellow at the Institute for China-America Studies in Washington, DC – wrote in an article for the East Asia Forum that reforms needed include: Progressively lifting Hukou restrictions to make public services more equitable. Building a unified and portable social security net more in line with advanced economies. A shift from indirect to direct taxes. Individual income tax revenues comprised 33% of total revenues in OECD countries compared to 9% in China. The tax base must expand as four out of five Chinese households do not pay personal income tax. He cautioned that reform would not be easy in a country that preferred top-down capital-intensive approaches and was disdainful of high welfare spending. China appears to have doubled-down on its capital-intensive approach since the end of the property bubble through investing in export-focused manufacturing. This raises the issue of geopolitical threats to its GDP growth, such as the US and the EU recently raising tariffs on Chinese electric vehicles and batteries. “If China is to maintain growth rates of 4-5% per year, it can only do so if the rest of the world agrees to reduce its own investment and manufacturing levels to less than half the Chinese level” wrote Michael Pettis, Professor of Finance at Peking University, in an article for the Carnegie Endowment for International Peace. The Economist reported that as reshoring accelerated, governments had adopted over 1,500 policies to promote specific industries in both 2021 and 2022. This compared with almost none in the early 2010s. But this latest Third Plenum could be as significant as the ones cited by Reuters in 1978 and 1993. The 1978 Plenum opened China up to foreign investment. In 1993, the Plenum liberalised trading in the Yuan and launched “socialist market” reforms following Deng Xiaoping’s Southern Tour a year earlier. How will we know the outcomes? If China’s polyethylene (PE) and polypropylene (PP) price spreads return to their Supercycle levels over the six-to-12-months.  If this doesn’t happen, more reforms will be needed as too much supply will continue to chase too little demand. Despite recent rebounds in spreads, China CFR high-density PE (HDPE) spreads over CFR Japan naphtha costs remain 116% lower than during the Supercycle with low-density (LDPE) spreads 46% lower and linear-low density (LLDPE) spreads 80% lower. The story is very similar in China PP spreads over naphtha. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

HOUSTON (ICIS)–Hurricane Beryl continued to make its way west toward Mexico and the US Gulf on Tuesday afternoon, with landfall possible some time on Sunday. Meteorologists at the National Hurricane Center (NHC) said Beryl was about 125 miles (205 km) east southeast of Isla Beata, Dominican Republic, and moving west northwest at 22 miles/hour. Source: National Hurricane Center (NHC) The storm is going back and forth between a Category 4 and Category 5 hurricane as maximum sustained winds are at 155 miles/hour but had been at 165 mile/hour earlier in the day. According to the Saffir-Simpson Hurricane Winds Scale, a storm reaches Category 5 when maximum sustained winds reach 157 miles/hour. Saffir-Simpson Hurricane Wind Scale Category Wind speed 1 74-95 miles/hour 2 96-110 miles/hour 3 111-129 miles/hour 4 130-156 miles/hour 5 157+ miles/hour The most recent forecast indicates Beryl could miss southern Veracruz state in Mexico, where Braskem Idesa has its integrated polyethylene (PE) Ethylene XXI complex and where a lot of Mexico’s petchem capacity is located. Altamira is still in the projected path. The regions have been experiencing a drought and rainfall from Beryl could provide the area with much-needed rain but could also impact operations at the multitude of chemical facilities in the area. Another scenario would be if the storm swings to the north, which could threaten oil and gas production in the US Gulf as well as Gulf Coast petchem operations. A producer with capacity in the Corpus Christi area said it was still too early to decide on operations. ACTIVE HURRICANE SEASON The early activity in the Atlantic Ocean is in line with forecasts calling for a busier than usual hurricane season. The US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. Damage from hurricanes can lead to increased demand for chemicals, but hurricanes and tropical storms can also disrupt the North American petrochemical industry because many of the nation’s plants and refineries are along the US Gulf Coast in the states of Texas and Louisiana. In 2022, oil and natural gas production in the Gulf of Mexico accounted for about 15% of total US crude oil production and about 2% of total US dry natural gas production, according to the US Energy Information Administration (EIA). Even the threat of a major storm can disrupt oil and natural gas supplies because companies often evacuate US Gulf platforms as a precaution. Additional reporting by Mark Milam, Al Greenwood and Melissa Wheeler

HOUSTON (ICIS)–Although Trinidad and Tobago have seen tremendous rainfall and significant winds the last two days, the island nation and its fertilizer operations escaped the heaviest impacts of Hurricane Beryl. Rated at a category 4 as of late on Tuesday, the storm did cause some harm to surrounding island countries but for most of Trinidad and Tobago what was felt was an extended stretch of unfavorable weather, with fertilizers producers emerging unscathed. Produces Yara, which manufactures ammonia at its facilities, said they had been fortunate as the storm passed by yesterday afternoon with plants not suffering any damage or having any production interrupted. With plant operations also in the same vicinity on the island producer Nutrien reported similar positive outcomes with a spokesperson saying, “Happily, zero impact. All running as usual.” Going forward Beryl is now expected to be impacting Jamaica by Wednesday morning. For now, the domestic fertilizer market is carefully watching the track as there are considerable production, storage and transportation interests which stretch along the US Gulf Coast. The current forecast has the storm potentially downgrading slightly as travels more towards making an eventual strike in northern Mexico, or possibly landing further up in southern Texas by the end of this week.

RIO DE JANEIRO (ICIS)–US Group II base oils spot supply may stay tight through Q3 due to hurricane stock building, but could lengthen by year end, an expert at ICIS said on Tuesday. Amanda Hay, senior analyst for base oils in the Americas at ICIS, said the US manufacturing recession and high interest rates are likely to take their toll in Q4, with supply potentially lengthening. Apart from hurricane stock building, high interest rates in the US and elsewhere are causing that “no-one is building inventories” due to the high costs associated to it. Hay went on to say that only a few months ago most economists and analysts – including those at ICIS – were forecasting interest rates cuts by the US Federal Reserve (Fed) in 2024. However, that has now shifted to 2025 at the earliest, as the world’s major central bank seeks to make sure inflation falls towards its 2% target. The US’ annual rate of inflation stood at 3.3% in May. Hay was speaking to delegates at the 14th International Summit with the South American Market 2024 organized by specialized publication Lubes em Focus, which focuses on base oils. ICIS is a partner in the event. “As the US manufacturing recession continues, exports from that country continue to be widely available. Firm crude prices will also be a factor to keep in mind,” said Hay. “Meanwhile, major interest rates changes are not expected in 2024 anymore – as the year went by, rate cuts have become less and less likely. That, in turn, causes that no-one is really interested in building inventories given the high borrowing costs.” Base oils, also called lubricants, are used to produce finished lubes and greases for automobiles and other machinery. The 14th International Summit with the South American Market 2024 runs in Rio de Janeiro on 2-3 July. Clarification: Re-casts headline, introduction; adds paragraph 3

RIO DE JANEIRO (ICIS)–In just a few years, global automotive majors have switched their focus from an all-electric production to a more hybrid model, an executive at US crude oil major Chevron said on Tuesday. Chris Castanien, global industry liaison at Chevron and lubricant additive expert, said that most automotive majors who had set up targets to go all-electric or nearly all-electric by 2030 have dropped those plans as intake among consumers remains slow. This has happened even after authorities in North America or Europe have poured “tremendous amounts of money in trying to force everyone” into the energy transition. Castanien was speaking to delegates at the 14th International Summit with the South American Market 2024 organized by specialized publication Lubes em Focus, which focuses on base oils. ICIS is a partner in the event. BILLIONS – BUT THE JUMP IS NOT HAPPENINGAnyone in the lubricants industry would be pleased to see the initially quick transition to electric mobility some authorities had planned is not happening. At the end of the day, they are an interested party which would lose out much if ICE engines – combustion engines – went out of the market. Therefore, Castanien was somehow pleased to list the many plans in the EU and the US which had planned for a quick electric vehicles (EVs) implementation, including the US’ $1 trillion New Green Deal in 2021 or the consequent $67 billion investments contemplated in the CHIPS Act or the $369 billion of the Inflation Reduction Act (IRA). “The US’ EPA [Environmental Protection Agency] had forced a ruling that by 2032 around two thirds of cars should be EVs; the EU issued a ban on ICE engines by 2035 – well, I think those targets will not happen,” said Catanien. “Moreover, now we are seeing a lot of protectionist tariffs against Chinese EVs: we want people to make and use EVs, but we don’t want the Chinese to make them.” The Chevron executive went on to say that the US is still a “long way” to meet its own targets on charging points, for instance, which, added to the considerably higher cost of EVs, would be putting off consumers. And this consumers’ reluctance, he went on to say, is even happening when many jurisdictions are implementing fiscal incentives and rebates for EVs. “In the US, you even get the case of California, where HOVs [high occupancy vehicle lanes] are now allowing EVs even if it’s only the driver inside the car…” he said. Thus, the initial change planned by automotive majors – even with thousands of redundancies of ICE engines engineers – is giving way to a slower implementation of the EV push. Castanien mentioned the case of Germany’s major Mercedes. “Only a few years ago, Mercedes said they would be making all vehicles electric by 2030 – they don’t say that anymore. Their updated target is aiming to make 50% of its fleet electrical by that year,” he said. “[US major] Ford has said it is losing $64,000 every time they sell an EV. Tesla was planning a gigafactory in Mexico: they have dropped those plans. The shift towards more hybrid vehicles and not purely EVs is happening – this is a big change.” The automotive industry is a major global consumer of petrochemicals, which make up more than one-third of the raw material costs of an average vehicle. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). Base oils, also called lubricants, are used to produce finished lubes and greases for automobiles and other machinery. The 14th International Summit with the South American Market 2024 runs in Rio de Janeiro on 2-3 July.

RIO DE JANEIRO (ICIS)–The US remains the largest exporter to the Brazilian base oils market, with the country’s lead widening in 2024, according to an expert on Tuesday. Pedro Nelson, editor-in-chief of the Brazilian specialized magazine Lubes em Foco, said Brazil deficit in base oils is set to continue for years to come due to the lack of homegrown supply. Lubes em Foco is the organizer of the 14th International Summit with the South American Market 2024, which focuses on base oils. ICIS is a partner in the event. In 2023, Brazil imported basic base oils worth $851 million, said Nelson, totaling 775,084 cubic meters (cbm). Of those, the US was the origin of 72.4% of all Brazil’s imports. Second on the list but well behind was South Korea, with 4.9%. Malaysia (4.7%), India (3.8%), Qatar (3.4%), Bahrein (3.3%), Singapore (1.9%) and Taiwan (1.0%, all of it coming from producer Formosa) complete the list of countries with over 1% of market share in the Brazilian import market for basic base oils. 2024: THE US INCREASES LEADThe US dominance in the market share of Brazil’s imports basic base oil is widening in 2024. According to Nelson, in the January-May period the US captured 76.2% of market share, followed by Malaysia (5.0%) and South Korea (3.5%). In the five-month period, Brazil imported basic base oils worth $372.4 million, said Nelson. “Brazil is likely to remain a net importer of base oils for years to come due to the country’s lack of capacity to produce them. The US is set to continue benefit also for years to come due geography,” he added. Despite is trade deficit in base oils, Brazil also exported 79,583 cbm of lubricants in 2023, worth $200.3 million, mostly to neighboring countries Paraguay, Argentina and Bolivia. Not surprisingly, Brazil’s southeast region was the highest consumer of base oils in 2023, with 44.8% of market share. That region includes the most industrialized states of Sao Paulo, Rio de Janeiro and Minas Gerais. Base oils, also called lubricants, are used to produce finished lubes and greases for automobiles and other machinery. The 14th International Summit with the South American Market 2024 runs in Rio de Janeiro on 2-3 July.

BARCELONA (ICIS)–Chemical companies can expect to pay even more for container space along the Asia to Europe route as attacks against shipping persist, port congestion grows, and demand rises. Shipping rates soar amid congestion, rising demand, echoing post-pandemic era Shipping reliability, customer service levels have fallen Shippers reorganizing routes, focusing on big ports like Singapore Global container shipping capacity growing by 20% year on year Container fleet utilization over 90% despite rising supply End of Houthi Red Sea attacks would cause freight rates to collapse Demand rising for containers even though industrial demand is flat Huge investment in port, road, rail infrastructure especially in Asia Logistics problems leave oversupply trapped in Asia More trade barriers may protect regional markets In this Think Tank podcast, Will Beacham interviews Thomas Cullen, chief analyst at Transport Intelligence, ICIS Business Solutions Group senior executive Nigel Davis, ICIS senior consultant Asia John Richardson and Paul Hodges, chairman of New Normal Consulting. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson’s ICIS blogs.

LONDON (ICIS)–Inflation in the eurozone resumed its downward trend in June, falling to 2.5% from 2.6% in the previous month, according to official data on Tuesday. The rate of inflation has been ticking down consistently over the past few months, with the exception of May which saw a 0.2 percentage point increase from April. June’s annual inflation was mainly driven by services, followed by food, alcohol & tobacco, non-energy industrial goods and energy, statistics agency Eurostat said in its flash estimate, which is subject to revision. The European Central Bank (ECB) cut its key interest rates for the first time since 2019 on 6 June as inflationary pressures broadly eased.

UPDATED: On 27 June 2024, ICIS updated this analysis to include a review of the impact that manifesto pledges could have on UK power prices On 24 June 2024, ICIS updated this analysis to include a review of the renewable capacity pledges from manifestos and their likelihood of being met On 21 June 2024, ICIS updated this analysis to include a breakdown of the impact of new gas licenses on British gas supply On 20 June 2024, ICIS updated this analysis to include the Scottish National Party’s manifesto plans for energy. The manifesto table now includes these details Initial analysis published with detailed table reviewing energy policies from announced manifesto pledges, original analyses covering nuclear power and gas-fired power generation, a UK election special episode of the ICIS Hydrogen Insights podcast LONDON (ICIS) — On 4 July 2024 the UK public will elect a new government, but what do the different parties have in store for energy? The following analysis reflect core pledges from manifestos and reviews those pledges in detail using ICIS data and insights. This analysis of UK political pledges and announcements will be continuously updated by the ICIS energy editorial team. Lead authors include: UK power reporter Anna Coulson, British gas reporter Matthew Farmer. UK ELECTION PLEDGES UNLIKELY TO IMPACT POWER PRICES UK power prices out to 2030 could remain relatively unchanged regardless of which party wins the UK election ICIS analytics forecasts UK power prices to range between £46-85/MWh in 2030 LONDON (ICIS)–UK power prices could remain relatively unchanged to 2030 regardless of which political party wins in the UK’s general election on 4 July, ICIS analysis shows. The development of the power market and new capacity faces continued hurdles, despite numerous parties intending to rein in energy prices according to their manifestos. An analysis of the Conservative, Labour, Liberal Democrat, Green Party, Reform UK, Scottish National Party (SNP) and Plaid Cymru manifestos shows that all parties present different policies aimed at helping manage energy bills. Some policies presented by the main parties suggest direct consumer initiatives, such as Labour’s plan to issue grants and loans for insulation, or the Green Party policy pledge to develop an insulation scheme, or the SNP’s financial relief for consumers in the Highlands and Islands of Scotland. However, some policies seek to address the wholesale power market through measures such as new licenses for gas-fired power generation or the build-out of renewable capacity. Renewables, volatility and risk Broadly speaking, energy policies proposed by UK parties present three different paths. Firstly, there are policies focused primarily on expanding renewable capacity as ageing gas-fired and nuclear power plants are decommissioned. Such policies would lead to periods of lower power prices, but balancing this would drive more volatility across short-term power prices. This pathway is most closely resembled by the Green Party, which has ambitious targets for renewable deployment by 2035. As the party plans to phase out existing nuclear power and stop the development of new plants, this would increase price volatility as nuclear would no longer operate as a baseload source of generation. The Green Party’s manifesto did not specify a timeline for the nuclear plans; therefore, it is difficult to determine when this could affect UK power prices. However, the party states it would rapidly expand energy storage capacity, which would balance renewable energy intermittency, although more detailed plans are not specified in the party’s manifesto. The SNP also intends to develop renewable energy, outlining “significant growth” in renewables alongside expansion in storage for energy. The Liberal Democrats also lean towards renewable development but present a decentralized approach when considering solar. The party would seek to build solar panels on new homes, therefore reducing power demand for residential offtake. A more central approach can be seen from both the Conservative and Labour parties, which both present clear plans for renewable growth, but also consider building new nuclear capacity or, in the case of Labour, also extending the life of the existing nuclear fleet. Furthermore, the Labour party intends to maintain a strategic reserve of gas-fired power plant which could limit price volatility but would result in higher power prices linked to natural gas prices. The Conservatives plan to build new gas power stations which would also reduce price volatility but would create an even stronger link to gas prices. However, the party’s manifesto did not state how much capacity would be added and when, therefore it is hard to determine when this could impact prices. Finally, the third pathway is presented by Reform UK, which presents plans to fast-track small-modular reactor (SMR) build out for nuclear capacity while reviewing the potential for tidal power, both baseload generation-supporting activities. Further, with the party’s intention to explore new UK gas field licenses, gas-fired power supply could remain in the mix into the future. ICIS analyst view Despite multiple power market pledges, the potential for manifesto points to translate into price movements appears limited, according to ICIS analyst Robbie Jackson-Stroud. Jackson-Stroud notes that the development and construction of new capacity, such as gas-fired power plants, requires time to agree upon at a policy level, plan and then construction. Adding to this, “cost constraints in the current climate are the driver of investment in renewable capacity, and a change of party does not shift that,” he added. Regardless of the party to come out as winner of the 4 July elections, there may simply not be enough time to deploy new capacity for wholesale power prices to ease, be that renewables or fossil-fuel based generation. Considering the challenges facing parties in delivering power-market change ahead of 2030, it is unlikely that they would present notable shifts to forecasted power prices before the next decade. ICIS long-term power data indicates that in 2030, depending on the development of the carbon price, UK power prices are expected to range between £46-85/MWh. In comparison, ICIS price assessments show that the UK power front-month baseload price averaged £66.62/MWh between January to June this year, which is £49.34/MWh lower than the same period last year. The drop in price is due to more stable market conditions this year in the UK and on the continent. UK PARTIES COULD STRUGGLE TO MEET RENEWABLE CAPACITY ELECTION PLEDGES – Added to analysis 24 June 2024 UK parties unlikely to meet capacity targets Key to onshore wind would be change to regulation Offshore wind could struggle following recent CfD round LONDON (ICIS)–For the UK general election, Labour, the Conservatives and the Green Party are the only three of the main parties to present outright capacity targets for renewable energy deployment across their manifestos. However, ICIS data and analyst insight suggests that meeting such targets could face difficulties due to recent setbacks in the UK’s Contracts for Difference (CfD) bidding process and restrictive regulation for onshore wind. The Labour party manifesto states it will double onshore wind, triple solar power, and quadruple offshore wind by 2030. To present an idea of this, ICIS has multiplied its forecasted capacity for these technologies in the UK by the end of 2024 by their respective factors according to Labour’s pledges. Actual intended capacity may vary. ICIS had contacted the Labour party for comment but received no response by the time of publication. Onshore wind Labour plans to double onshore wind capacity by 2030, while the Green Party would deploy 53GW of capacity by 2035. The Liberal Democrats would ‘remove the Conservative’s unnecessary restrictions on new wind power’, likely referring to the requirements the current government introduced in 2015 and changes to the law in 2016. Planning policies were updated in September 2023 to allow locations suitable for new wind farms to be identified in several ways, rather than only in the area’s development plan. However, decisions continue to be made by local planning authorities which differs to the process for other infrastructure projects where decisions on major projects are made by the Secretary of State. The current government does not have an onshore wind capacity target and the Conservative’s manifesto has no mention of one however, it does state that the party will ensure democratic consent for onshore wind. ICIS analytics forecasts 25.85GW of onshore wind capacity in 2030 and in 2035, under a base case scenario, which is below Labour and the Green Party’s targets. ICIS analyst, Robbie Jackson-Stroud, stated that planning permission is one of the main challenges onshore wind projects face. “Costs for turbines have also risen and so they are then squeezed into a CfD funding pot where they have to compete with solar”, he added. Jackson-Stroud noted that onshore wind could be a key component to the development of renewable capacity in the UK, changes to regulation permitting. “One aspect that is likely to change is regulation and approval of onshore wind projects, which require less budget and time to build. However, it is difficult to envisage a new government being timely enough to sufficiently improve the approval process and have enough projects apply to shift onshore capacity before 2030. It should be noted, however, how much potential a change to regulation would have to long term capacities, and you can expect more capacity in the 2030s”, Jackson-Stroud said. Offshore wind The Conservatives, Labour and the Green party all position offshore wind as a key technology to support the decarbonization of the UK’s power system. However, achieving such targets appears difficult following an unsuccessful fifth auction of the CfD scheme in 2023, in which there were no bids for offshore wind amid a low strike price. The current government increased the strike price for the upcoming sixth auction round, raising the maximum strike price from £44/MWh to £73/MWh. Jackson-Stroud highlighted the difficulty facing the next wave of auctions when considering 2030 targets. “Both parties [Labour and the Conservatives] have pledged unachievable targets without a huge budget increase for the CfD. Taking into account the time it takes to build offshore wind sites (that are getting increasingly larger on average) there are only two CfD auctions at most that can fund capacity to come online by 2030. “There is roughly 27GW of offshore wind already under CfD, under construction or operational, suggesting the need for a further 23GW across two auctions, which would be a record at a time where costs are higher than they have ever been. While the budget for the latest round has been raised to an all-time high of £800m for offshore and £1.2bn total, this would still procure only 12GW of wind in even the most conservative estimates. “This means regardless of Labour increasing 2030 targets for offshore, even the 50GW already in place will not be met, and a change of party doesn’t change the blockers to this,” Jackson-Stroud said. ICIS analytics forecasts that offshore wind capacity will be 39GW in 2030 under a base case scenario, therefore falling short of the Conservative and Labour party targets. Similarly, offshore wind capacity is forecast to be 48.04GW in 2035 under a base case scenario, well below the Green Party’s target. Solar Labour plan to triple solar capacity by 2030, while the Green Party and Conservatives have set targets for 2035, 100GW and 70GW respectively based on manifesto and recent policy announcements. However, reaching such targets may prove challenging based on recent CfD results. ICIS analyst Matthew Jones previously noted that for the UK to meet its 70GW by 2035 target, CfD capacity awards would need to average 4.5GW/year. However, over the last two CfD rounds, just 2.2GW was awarded in each. Further, ICIS analytics forecasts 42.97GW of solar capacity by 2030, and 48.54GW by 2035, under a base case scenario, therefore missing the Labour, Conservative and Green Party targets. Since the closure of the renewable obligation and feed-in tariff schemes, the CfD scheme is the only subsidized route to market for solar. The forecast models cited in this story are available as part of ICIS Power Foresight. If you would like to learn more about ICIS Power Foresight, please contact head of power analytics Matthew Jones at Matthew.Jones@icis.com UKCS LICENSING – Added to analysis 21 June 2024 Several parties have committed to end the issuing of new licenses for extraction of oil and gas on the UK continental shelf (UKCS), however ICIS analysis shows the inclusion of new licenses may have a minimal impact in mitigating output decline. Gas production on the UKCS started declining in 2000, but held steady during the 2010s. It currently accounts for approximately 40% of Britain’s gas supply mix, with the bulk of remaining volumes coming through Norwegian imports and LNG. From the late 2020s, UKCS production is expected to decline by approximately 6% per year. Licenses on new discoveries would not reverse the decline in British production expected in coming years. However, they would have accounted for another 0.80 billion cubic meters (bcm) of British gas production in 2030, increasing to 1.5bcm in 2035. In contrast to the other parties, the Conservatives and Reform UK have committed to annual licensing rounds and “fast-track” licenses, respectively. Both have done so with a justification of maintaining British energy independence, citing the rising price of energy caused by the full-scale Russian invasion of Ukraine. GAS-FIRED POWER DEMAND LIKELY UNMOVED Both the Conservatives and the Labour party show support for the continued use of gas for power generation, bolstering a key area of demand for British gas market participants. However, of the two parties, the Conservatives presented a more bullish mentality by noting intensions for new gas plants, aligning with previous announcements to support new capacity. Labour meanwhile take a muted approach, noting the need for a strategic reserve of gas for power generation. Both Labour and the Conservatives have therefore presented policy that could reduce power-market price volatility as renewable capacity grows, with gas offering baseload generation at periods of low renewable output. Gas demand for power to remain From a gas-market perspective, the use of gas for power amounts to a large share of overall demand. In 2023, gas offtake for power accounted for 26% of total gas demand. The UK is heavily reliant on gas-fired power generation, with it contributing 26% of the UK’s electricity mix in the period 1 January to 31 May 2024, according to data from National Grid. Similarly, gas-fired generation provided an average 36.3% of the mix over the 2019-23 period, therefore making a significant contribution to the UK’s electricity stack. While the capacity of new gas generation is not mentioned in the Conservative party’s manifesto, ICIS analytics forecast data indicates that gas capacity is set to increase through to 2026, under a base case scenario. This would suggest that offtake for power generation could well remain a key share of overall gas demand under either a Conversative or a Labour government. Further, ICIS data shows that there will be 7.92GW of gas capacity in 2050 under a base case scenario, which itself raises uncertainty around the prospect of pledges to decarbonize power grids by around the 2030s. NUCLEAR Nuclear power represented a large focus for the Labour, Conservative and Reform UK parties, which each announced plans to increase nuclear capacity through a mix of measures, such as plant life extensions, new large-scale projects, or Small Modular Reactors (SMRs). Despite this, the overall pledges presented for the election suggests need for further capacity build-out in the run up to 2050 in order to meet the government’s target. While the Conservative’s manifesto did not mention a specific nuclear capacity target, the current government has a target to reach 24GW of nuclear capacity by 2050. ICIS analytics forecasts that, under a base case scenario, nuclear capacity will be 12.76GW by 2050. Plant life extensions Although Labour’s manifesto did not provide details on which nuclear plants it intended to focus on for life extensions, or for how long, the intension is in line with former market announcements from EDF, which stated plans in January 2024 to extend the lives of five UK nuclear plants. EDF plans to invest an additional £1.3bn in these power stations over 2024-26, with the aim to maintain output from the four advanced gas-cooled reactors (AGR) for as long as possible, and for the Sizewell B plant to operate for an additional 20 years. The lifetimes of the four AGR stations would be reviewed by the end of 2024. New capacity From a new capacity perspective Labour pledged to get the 3.2GW Hinkley Point C project over the line and that new nuclear power stations, such as the 3.2GW Sizewell C project, will play a key role in helping the UK to achieve energy security and clean power. In January, the Conservatives announced plans for a new large-scale nuclear power plant, which would be as large as Hinkley Point C or Sizewell C, which are both 3.2GW in capacity. The current government announced in May that Wylfa would be the preferred site for this new plant however, a commissioning date is still to be confirmed. This aligns with the party’s manifesto pledge to deliver a new gigawatt power plant at the same location. The new plant in Wales could well boost UK nuclear capacity, but it would still present a capacity gap between the current ICIS forecast for 2050 and the government’s target of 24GW. Small modular reactors Labour, the Conservatives, and Reform UK all mention SMRs in their manifestos however, the Conservatives will approve two new fleets of SMRs within the first 100 days of the next parliament. This is likely through the competitive process that Great British Nuclear (GBN) launched in 2023 to select SMR technologies best placed to be operational by the mid-2030s. GBN plans to announce successful bidders for the competition by the end of 2024 and to take two SMR projects to a final investment decision by 2029. However, it must be noted that SMRs are a new technology, and none are commissioned yet in Europe.    HYDROGEN In this UK general election special, ICIS hydrogen editor speaks with Rob Dale, founder and director of UK consultancy Beyond2050, which aims at supporting market participants in achieving their energy and sustainability goals. Over the course of the episode, Jake and Rob review which parties have committed to hydrogen for the election and what makes this election the biggest for hydrogen so far.