The Impact of Shale Gas on Energy Markets – Energy and Climate Change
Friday saw the Parliamentary Committee on Energy and Climate Change release its report entitled
The Impact of Shale Gas on Energy Markets – Energy and Climate Change
Over at Fracking Digest they have done a great job at summarising the meat of the report for easier digestion. Having read the report ourselves we can confirm that it is not a particularly satisfying experience unless you are a supporter of the crazy “dash for gas” being promoted by the Treasury.
Tory Energy Minister Michael Fallon sums this up. He labelled the report a “helpful analysis” on shale gas, which he said had “potential to play a role in our energy security and to create valuable jobs.” Tim Yeo, the Committee’s Chairman can consider his job well done then as he obviously set out to be as “helpful” as he could to Mr Osborne, without appearing to be a complete tart.
The report is a string of statements of the obvious linked with so many conditional statements that it is almost totally meaningless.
All we can deduce is that gas isn’t going to be cheap, OFFUGO is a terrible idea (even Egan admits in his evidence that the poacher can’t be the gamekeeper), and the government wants this so badly that a weak committee will deliver it to them on a plate. Knighthoods all round no doubt.
Here is Fracking Digest‘s take on the report:
Introduction
My comments below are based on the report summary only – it will take a little while to digest the full report and its evidence – these are available for download from the Committee website at –
and the conclusions/recommendations here
Shale Gas Estimates
The conclusions state that the Government should exercise caution over shale gas estimates because of uncertainty and “confusion over definitions”. The Committee recommend that the Government should talk about the figures in terms of what means most to the public, namely recoverable resources. This, of course, begs the question of how one works out from guesstimates of total resources to what percentage is extractable.
Unfortunately for the case against any fracking, the Committee suggest that in order to determine reliable estimates we need practical production experience.
The Committee report is therefore encouraging the Government to go ahead with not only initial exploration, but test production. This is one of the most damaging outcomes of the report.
The Committee again refers to the fact that there are substantial shale gas reserves offshore, estimated at many times those onshore, and recommends a urgent action to encourage exploration of this possibility. This is a strong argument, as the Committee recognises, in that it would avoid public concern about and opposition to onshore development. It does not tackle the objections that will be raised on wider environmental and climate change grounds.
Public Perception
The Committee appears to believe that opposition to fracking is based on “scare stories” which the Government must counter by a “robust factual response”. This ignores the fact that the Government has no robust science to go on. It also fails to suggest that industry propaganda needs similar rebuttal. This week’s Advertising Standards Authority’s upholding of claims against Cuadrilla have demonstrated that the industry must be “robustly” challenged. The government should in my opinion not reject anti-fracking arguments without strengthening rules to prevent industry promotion. Yet the Committee encourages the generation of such industry propaganda by indulging in “community engagement”.
The Committee suggest that the new OUGO should “provide advice and support” to local communities threatened by fracking. It would be interesting to see how that could avoid becoming yet another industry promotional tool, and indeed the Committee express the concern that the Office should not be seen as too closely linked to industry. This is not the point, how it is “perceived”. It should be totally severed from industry in practice.
The Committee’s main recommendation which will promote debate is how to reward local communities for having the frackers put their countryside at risk. They suggest substantial material benefit should accrue. Cuadrilla have already said that the industry should not pay these “benefits”, so it will be interesting to see how the Government responds. It would be amazing if Government agreed to dip into the national pocket. In any event the whole plan amounts to sheer bribery. If the Government can 100% guarantee no danger will be caused by fracking why on earth should the local community be recompensed? Why can the local community not enjoy the economic benefit that the frackers promise?
There is a reasonable conclusion to be made from this. The Committee and the Government are not persuaded of local economic benefit demonstrably coming the way of fracked communities. And they do fear that environmental damage might occur.
Regulation
It was not the purpose of this report to go into detail of regulation, and the Committee make little comment. But what is significant is that whilst later advocating strong regulation they say ”We welcome the Government’s attempts to minimise the burden on companies…”
and again they make the point that OUGO should be seen to be avoiding conflicts of interest.
Tax
The Committee notes briefly that the Government should make an assessment of whether tax breaks should continue to be required during commercialisation. Another coded warning to the Government maybe that tax breaks should not be necessary at all, and to the rest of us that fracking will happen.
Gas prices
The Committee conclusions try hard to avoid saying gas prices will rise regardless. They only express reservations that gas prices may not fall, either because of imported shale gas from the US or by home production. The report is already out-of-date in that agreements have already been signed for the import of US shale gas.
The report says it is “too early to say” whether domestic production of shale gas in the UK could result in cheaper gas prices in the UK. It will take a reading of the report detail and evidence to see why the Committee can not come to the firm conclusion that all other recent reports on the subject have come to, that thinking consumer gas prices will fall is pie in the sky thinking.
The main reason the Committee expresses so much uncertainty about prices and does not come down on one side of the fence seems to be because they use this uncertainty to encourage the go-ahead for further shale gas exploration. They say this quite explicitly –
“For all these reasons the Government should encourage exploration to establish whether significant recoverable reserves exist.”
Climate Change
The Committee recognises that US shale gas development has had the effect of not only reducing the US’s own emissions but has increased worldwide emissions by exporting its coal.
As far as the UK is concerned the Committee says the Government should complete its studies into shale gas impact on emissions as soon as possible. But the conclusion is clear – unchecked development of gas-fired generation, which shale gas will facilitate, might (“might” – yet another occasion where the Committee is incredibly mealy-mouthed) be incompatible with meeting the UK’s climate change obligations.
The Committee is frustrated that CCS has not developed. No doubt they and the Government will also be frustrated when development of CCS is proposed, and it is realised that pumping carbon dioxide into the ground at high pressure is also geologically invasive and likely to be viewed with apprehension by the public. The Committee pays lip service to the real alternative of renewables by welcoming the Energy Bill, which they say, optimistically, will create a “favourable investment climate” for low-carbon technologies (ie NON-GAS!)
Security of Supply
The Committee welcome the invasion of the fracking industry into academia by praising the partnership between Cuadrilla and the University of Central Lancashire. They encourage the Government to encourage more like this, to develop fracking skills. A clear indication the Committee expect to see fracking thrive.
They do, however, recommend that the Government should not rely on shale gas contributing to the UK’s energy system when making strategic plans for energy security. Again – for the third time – they seek reassurance that OUGO doesn’t have a conflict of interest when advising the government.
My Conclusions
As I suggested above, my first impression is that this is a very mealy-mouthed set of report conclusions. The main flavour that comes across is that the Committee feel obliged to say that shale gas exploration should continue (despite climate change implications). And that the rest of the recommendations are working on the assumption that exploration, test production and full production are “in the pipeline” whatever the Committee says.
