A busy week for the fracking debate in Scotland, but a decision still looks some way off.
There was some speculation ahead of today’s publication of the research sponsored by the Scottish Government that the minister would announce a bill on fracking. Instead he announced a public consultation will be launched in January, before any decision is made on whether to allow fracking. At the same time, the government will publish its climate change plan and a full strategic environmental assessment. In the meantime the moratorium remains in place.
The independent research published today covers the following issues in relation to UOG:
Public health impacts
Climate change impacts
Understanding and monitoring induced seismic activity
Understanding and mitigating community level impacts from transportation
Decommissioning, site restoration and aftercare.
The Minister for Business, Innovation and Energy Paul Wheelhouse said: “The extensive package of research published today will ensure the public has access to a comprehensive evidence base on the potential health, economic and environment impacts of UOG.”
FoE head of campaigns Mary Church said: “The economic case for pursuing an unconventional gas industry in Scotland simply doesn’t stand up, while the risks of doing so could be utterly devastating for communities and the environment. No state has had a moratorium on fracking, looked at the evidence and decided it’s a good idea.”
These are initial reactions and it will take all the interested parties some time to digest this research. Meanwhile, other studies will add to concerns over fracking. In particular, a report in TheFerret highlights a new study by scientists at Yale University that indicates chemical contamination from the fracking industry could increase the risk of childhood leukaemia.
Scottish Labour is keeping up the pressure on the Scottish Government by lodging a Holyrood member’s bill aiming to “change the law to ban fracking in Scotland”. Labour MSP Claudia Beamish has launched a public consultation as part of her bid to have fracking banned in Scotland. This follows a vote in the Scottish Parliament last June, in favour of an outright ban.
Her Bill has a focus on the climate change implications of fracking. She said: “Scotland relying on fracking for our energy needs will lock us into an energy infrastructure based on fossil fuels long after our country needs to have moved to clean energy. SNP ministers now face an urgent choice – they can work with Labour to ban fracking, or they can work with the Tories to allow drilling under family homes in parts of central Scotland.”
Climate change is certainly the right focus for a fracking ban. For me there are three key arguments against lifting the moratorium.
Firstly, we rightly follow the precautionary principle in terms of safety. Something our industrial heritage has taught us – just ask anyone suffering from asbestosis or other industrial diseases. Fracking in the wide open spaces of the USA has highlighted significant safety concerns. In Scotland fracking will take place under people’s homes in a densely populated area.
Secondly, there is considerable doubt that gas from fracking is even economically viable. Many experts doubted the financial case, even before the falling price of gas. As for jobs, well, we have seen fanciful claims for other energy sources and few have delivered what was promised.
Thirdly, we don’t need it. We should not compromise Scotland’s climate change targets, or the UK’s broader commitment to limiting global climate change to two degrees. Scotland should be leading the world in moving to clean renewable power, not aiming to extract ever more inaccessible fossil fuels. The risk is that shale gas doesn’t just replace imported gas – it replaces renewables.
The third reason alone is reason enough to ban fracking in Scotland. Launching a consultation alongside the climate action plan is therefore a helpful juxtaposition. At the very least the Scottish Government’s position is significantly less gung-ho than the UK government. However, an outright ban is now the way ahead, so we can concentrate on a clean energy future.
The Scottish Government has missed the statutory target to eradicate fuel poverty this year by some distance. So, new reports on fuel poverty should be welcomed, but only if they are quickly followed by a new strategy.
According to the latest statistics (2014), there are 35% or around 845,000 households living in fuel poverty in Scotland, and 9.5% (229,000 households) living in extreme fuel poverty. This high rate of fuel poverty is largely unchanged since 2009, and has doubled since the Scottish Government‟s fuel poverty target was set in 2002.
The Scottish Fuel Poverty Strategic Working Group and Scottish Rural Fuel Poverty Task Force reports have been published alongside a Scottish Government research paper on the likelihood of being fuel poor in rural Scotland. This is to help identify and target households in rural Scotland who have a high risk of being in fuel poverty.
The Strategic Working Group has made 4 high level recommendations:
• The fuel poverty strategy should be firmly based on the principle of social justice and creating a fairer and more equal society.
• The fuel poverty strategy must address all four drivers of fuel poverty: income, energy costs, energy performance, and how energy is used in the home.
• Strong leadership and a joined up approach across several portfolios within national and local government are required to develop and implement the strategy.
• The Scottish Government should review the current definition of fuel poverty and establish a policy objective and monitoring programme that addresses all four causes of fuel poverty
Housing Minister Kevin Stewart said:
“Everyone should be able to heat their home and keep themselves and their families warm, therefore tackling and eradicating fuel poverty is vital and we must make sure action we are taking is making a difference to those that need it most.”
Scottish Fuel Poverty Strategic Working Group chair David Sigsworth said:
“The report explores why current programmes have failed to eradicate fuel poverty and concludes that experience over many years has shown that energy efficiency improvements, whilst important, are not enough. Recent increases in underlying costs of fossil fuel, due to devaluation, will exacerbate this situation.”
It would be hard to disagree with the recommendations in these reports, although it is strange that the Scottish Government chose to highlight a review of the definition of fuel poverty in their press release. The definition probably does need reviewing, but leading with that gives the impression that the problem can be wished away with a new definition.
High level recommendations are fine, but the test is in the delivery. That requires a new action plan. As Energy Action Scotland director Norman Kerr said:
“There is a wealth of information in the two reports which Ministers must now consider in order to review the fuel poverty strategy for Scotland. The Scottish government, and all political parties in Scotland, acknowledge the problem of fuel poverty and must be given credit for tackling the problem and continuing to fund programmes to that end. However, to meet their ambitions to end the blight of cold, damp homes, more action must now be taken. People across Scotland will want to know that one day the right that everyone has to be able to live in a warm, dry home at a price they can afford will be a reality.”
The acid test of today’s announcement will be if Scottish ministers use these reports to set out a new fuel poverty strategy, which includes a new target date to eradicate fuel poverty in Scotland.
The energy story of the week is the decision to go ahead with the Hinkley nuclear power station. Theresa May’s grand review of the project, turned out to be a case of the Grand old Duke of York, marching sceptics to the top of the hill, only to march them down again with the flimsiest of assurances.
George Monbiot, writing in the Guardian got it just about right. Nuclear power can make a useful contribution to a balanced energy policy, but Hinkley is an expensive white elephant. There are serious doubts over the design and the cost is prohibitive.
As Dave Vince of Ecotricity puts it; “it’s just a bonkers thing to do really, particularly when we have so many clean alternatives which are cheaper, faster, cleaner in wind, solar, tidal, wave, and energy efficiency even.” He pointed to a study which suggested that £1 billion spent on energy efficiency could cut energy consumption in half. Meanwhile, £18 billion is likely to be spent on the construction of Hinkley.
However, nuclear power is a low-carbon energy source, roughly comparable to renewables in terms of total emissions. Replacing fossil fuels with renewables, on the timescale in which we need to act, is hard enough, without setting the additional, unnecessary challenge of also replacing nuclear power as some environmental groups advocate.
A more viable alternative might be small modular reactors (SMRs). It is argued that these offer a form of secure, low-carbon energy, the cost of which is comparable to, if not lower than, larger reactors. They also have smaller up-front costs, shorter build times and the option to gradually scale up capacity. However, they will have to overturn a key principle which has historically underpinned nuclear reactor design – economies of scale.
All of this is pretty academic in Scotland because no one is going to waste time and money battling against the Scottish Government’s opposition to nuclear power. They can build in England and transmit the power to Scotland, when the wind isn’t blowing. However, we should remember that existing nuclear power stations still power a third of electricity generation in Scotland.
The right-wing think tank, Reform Scotland, this week published a paper by Stuart Paton, ‘Power of Scotland’. He argues that the proposed power stations at Hinkley Point and Sizewell in England would generate 6.4MW of power, equivalent to the entire capacity of all the current windfarms in Scotland, without the damaging environmental impact of wind farms. He also argues that the cost difference isn’t valid because the agreed strike price at Hinkley Point of £92.50/MWhr compares favourably with £95/MWhr for onshore windfarms and £155/MWhr for offshore windfarms. However, this conveniently ignores the fact that renewable prices are falling. He does make the valid point that public opinion in Scotland isn’t as anti-nuclear as we might think.
Sadly, an otherwise decent analysis of energy needs in Scotland is undermined by his advocacy of fracking. He fairly criticises the contradictions in the Scottish Government’s policy of supporting oil and gas, but not fracking – but then makes similar contradictions by supporting carbon-free energy production and a dirty emission producing process like fracking. He is certainly right to criticise the UK government’s decision to abandon CCS and to support a greater focus on energy efficiency.
He is right that Scotland has to develop its energy policy beyond a fixation on wind power and point scoring with Westminster. However, this package of contradictory polices isn’t that alternative.
The Scottish Government’s plan for the coming year includes few surprises for the utilities sector. The Labour leader Jeremy Corbyn also announces his new energy policy.
Unsurprisingly, the focus is on low carbon energy provision with a new Energy Strategy for Scotland in 2017. One of the aims is to send signals to investors of Scotland’s long-term energy priorities. The new Energy Strategy will reaffirm the Government’s overarching commitment to reducing energy demand and supplying clean energy, driving a host of economic, social and environmental improvements and promoting sustainable, inclusive growth. There is a continuing commitment to the target for the equivalent of 100% of electricity demand to be supplied by renewables by 2020.
The new Scotland’s Energy Efficiency Programme (SEEP) will commence in 2018 following new powers for the Scottish Parliament over the regulated energy suppliers. SEEP will be a coordinated programme to improve the energy efficiency of homes and buildings in the commercial, public and industrial sectors. £9.5 million of funding will be provided to 11 local authorities to carry out SEEP pilots in 2016-17 with further funding being made available next year.
There will also be a consultation on the regulation of private rented sector housing to increase efficiency standards and heat regulations. They will also consult on phased regulation of existing buildings to bring them up to higher energy efficiency standards as well as look at financial incentives.
£10 million of funding will be made available for community energy through the Community and Renewable Energy Scheme (CARES) and they will also consult during 2017 on plans to deliver a Scottish Green Energy Bond and a possible government-owned energy company, as part of new models of support for the growth of local, community-led energy.
The government recognises the impact of legal challenges to offshore wind development, while arguing that it continues to be an essential part of Scotland’s future energy requirements. They reference the £2.6 billion Beatrice offshore wind farm and the new European Offshore Wind Deployment Centre in Aberdeen bay.
Scotland will play its part in delivering on the Paris climate change commitment. However, the new Climate Change Bill, including a target of reducing actual Scottish emissions by more than 50% by 2020, isn’t in the legislative programme. There will be a consultation early in 2017. The Climate Challenge Fund will make £10 million available to fund projects which deliver the greatest reduction in carbon emissions and support Scotland’s most deprived communities.
Jeremy Corbyn is also going big on renewable energy with a pledge to create an energy policy “for the 60 million, not the big six”, including the creation of 300,000 jobs in the renewables sector. He will set a target of generating 65% of UK electricity from renewable sources by 2030 in a bid to make the country a world leader in green technology.
The delivery mechanism will be through community energy, democratising the energy system. He will create 1,000 energy co-operatives and 200 local, not for profit, energy companies with the support of a network of regional development banks, and legislate to give them the right to sell energy directly to the communities they serve. He is also promising to ban fracking and meet our climate change obligations.
In summary, no surprises from the Scottish Government and quite a lot of common ground with the Labour leader over renewable energy. The big difference is in delivery. The Scottish Government’s community energy plans are very modest, while Jeremy Corbyn is going for a very radical shift in energy ownership.
The Scottish Affairs Committee has published a report into the renewable energy sector in Scotland. It reports that significant growth of the renewable sector in Scotland in recent years has demonstrated the benefit of a supportive policy environment. Electricity production from sources as diverse as wind, hydro and biomass has attracted significant investment. Growth has been strong enough that it is estimated 21,000 people are now employed in the Scottish renewable sector, which produces almost 30% of the UK’s renewable electricity. However, the committee also warns that its successes could now be undermined by changes to UK ¬government policy. Committee Chair Pete Wishart MP said:
“We have urged the government to clarify the future ¬support which will be available to the renewable sector, and set out how they will work with the Scottish Government to develop a clear, long-term plan that will allow renewable energy to remain a central part of the energy mix”.
Part of the challenge is cutting costs. A study by Scottish Renewables claims the total cost of Scotland’s 7GW project pipeline could be slashed by as much as £150 million each year. The biggest saving comes by reforming the planning system to make it “smarter”. The most effective single change would be to use planning guidelines to encourage developers to use the latest technologies featuring larger rotor diameters and hub heights. This alone could cut the levelised cost of energy by as much as £11/MWh.
The problem with ‘smarter’ is that wind farm developers really mean easier. Planning staff have to balance the needs of developers for bigger turbines with the concerns of local residents. The Scottish Affairs Committee recognised the ‘serious concerns’ among many Scottish residents about the impact of onshore wind ¬turbines on the environment.
Much of the output from wind farms can be lost when it is not needed and this can also incur constraint payments. The solution to this is better storage. The Energy and Climate Change spokesperson for the SNP in the Westminster parliament has written to Greg Clark, Secretary of State for Energy, urging his department to invest in new technologies to encourage the production and storage of renewable energy and electricity. Callum McCaig MP said:
“For the potential of renewable energy to be fully realised we will continue to need newer and better storage technologies; mastering that is the solution to making renewables as attractive financially as they are environmentally.”
Someone may have been listening because National Grid has awarded eight contracts worth a total of £65.95m to energy storage companies to balance system frequency in the UK energy system. This is the first time storage will be used to balance system frequency to protect appliances from damage.
The service is to be provided at an average price of £9.44/MW and will cut costs by £200m. National Grid system operator Director Cordi O’Hara said:
“We are constantly looking to the future to understand how we can make the most of the energy available to us. These awards show that we can work with industry to bring forward new technology and I believe storage has much to contribute to the flexible energy system of tomorrow. This is the beginning of an exciting new chapter for the industry.”
Some positive news offshore today with the news that a Scottish energy firm’s tidal turbine system, off the Shetland isles, has become the first in the world to deliver electricity to the National Grid. Simon Forrest, managing director of Nova Innovation said: “We are absolutely delighted to be the first company in the world to deploy a fully operational tidal array. Deploying the second turbine truly sets us apart and showcases our technology.”
Less positive for offshore wind was the Court of Session finding in favour of RSPB Scotland’s judicial review action against the Scottish Government for failing to fully consider the potentially adverse impact of four projects on bird life. The Inch Cape project off the Angus coast was a proposal for up to 110 turbines: Neart na Gaoithe east of Fife Ness was up to 75 turbines, and the Seagreen Alpha and Bravo projects off the Angus coast were for up to 150 turbines. Former Scottish Energy Minister Brian Wilson has declared the offshore wind industry in Scotland ‘pretty much dead’ after the decision.
In a desperate attempt to sell more dirty energy to a sceptical public, the UKGovernment is proposing cash bribes to households impacted by fracking.
INEOS has announced the first delivery of US shale gas to its Grangemouth petrochemical plant next month and used this as an opportunity to, yet again, make the case for exploiting indigenous supplies. Unlike the USA there is no commercial shale gas production in the UK as yet, although approval has been given for a site in North Yorkshire. In Scotland, development was halted by the 2015 moratorium, while expert reports are prepared.
The UK government has launched a consultation on plans to distribute payments to the communities affected by the drilling. They are proposing a Shale Wealth Fund, which would distribute 10% of all shale gas tax revenues to local communities. Unlike traditional planning gain, the UK government proposed that payments could be made to households directly – a straightforward cash bribe.
The problem for the government is that even cash bribes might not deliver public support for such a controversial technology. Surveys undertaken by the Department for Energy and Climate Change in April, showed public support for fracking stood at only 19%, while 31% were explicitly opposed.
In a more recent YouGov poll since the government announcement, only a third of those surveyed said they would support fracking in their local area “if individual households received a direct payment in exchange” of up to £10,000. More than 43% said they were opposed, 26% of them “strongly”. Another quarter said they didn’t know whether they supported it or not. The greatest opposition is in Scotland where 51% are opposed. Clearly the INEOS ‘summer offensive’ hasn’t had much impact!
Liz Hutchins for FoE said: “The government are desperate to show support for shale gas exploration, and recent headlines that offered cash payments were meant to bolster, not diminish, support. But when you look at the details of the scheme, any cash for households would only be after shale exploration, and would be derived from taxation on profits. It all seems a pretty unlikely and distant proposition. What we do know is that the more people learn about fracking and what it could mean for their health and environment, the more opposed they could be. And it’s clear from this survey that they haven’t been fooled by the government’s latest bribe.”
Joseph Dutton from the University of Exeter is even sceptical that significant household payments can be delivered. He argues: “that the ultimate value of the fund and therefore the payments it would distribute is wholly dependent on the tax regime in place when production begins, and the revenue a company derives from a shale gas site once costs are taken into account. Until actual gas production begins, it’s impossible to estimate how much tax the operating company will pay – or even if the shale industry would be a success in the UK at all.”
He also makes the point that as the price of oil and gas has plummeted in the last two years, the economic case for developing potentially expensive shale gas deposits has weakened.
The Ferret has highlighted further concerns over another unconventional gas technology, underground coal gasification (UCG). A new report says plans to set fire to coal under the seabed at up to 19 sites around the UK (including east central Scotland) would cause massive climate pollution, groundwater contamination and toxic waste. Cluff Natural Resources has licences for nine potential undersea coalfields amounting to 640 square kilometres, valid until 2018-2020. Two are off the coast near Durham, two off Cumbria, two off Wales and three in the Firth of Forth in Scotland.
Friends of the Earth Scotland says: “Given what we know about this technology’s terrible history around the world, Cluff’s plans to burn coal seams off English coasts are utterly reckless. The UK Government should stop this industry now before Cluff gets his foot in the door.”
So, we have had PR offensives, ministerial lobbying and now bribes to persuade us that these technologies make sense. The problem for the industry is that the public isn’t convinced on safety grounds. The UK is a much more crowded space than the UK, with less room if things go wrong, as they have in the US. It also assumes that unconventional gas is economically viable. Even if it is, should we really be relying on another dirty fossil fuel when renewable alternatives are available?
For now, the answer is no on all counts.
Despite the best efforts of successive governments to create an energy market, it remains notoriously uncompetitive. In Europe, municipal energy is commonplace and growing – we should do the same in Scotland.
The so called market is dominated by the big six utility companies, whose pricing practices have been criticised by the competition watchdog. Consumer trust in the market is low and they are reluctant to switch suppliers for a better deal given the hassle of switching. In fairness, the Big Six are often unfairly criticised and new entrants have been guilty of some pretty poor practices as well. The fault is in the system.
The IPPR, has made a convincing case for local authorities to set up municipally-owned energy companies that can supply electricity and gas at competitive prices and don’t have to distribute profits to private shareholders. By targeting those on low incomes, they can also help tackle fuel poverty. The local authority “brand” may also encourage otherwise reluctant low-income households to switch suppliers and save money. Nottingham and Bristol have followed this model and London, under a new Labour Mayor, looks likely to follow.
In Scotland a slightly different model is being adopted. Our Power is a community benefit society established and owned by a number of local authorities and housing associations. It too aims to tackle fuel poverty through the supply of affordable energy, focusing on social housing tenants, and seeks to buy a minimum of 30% of its energy from renewable sources. The Scottish Government is also at least considering setting up its own energy company, although details are limited.
The problem with these models is that they are simply playing the failed market and are relying on the same wholesalers. An alternative approach is for councils to establish genuine energy companies that generate renewable electricity and help households to install energy efficiency measures, funded from the long-term savings in their energy bills.
The APSE research paper, ‘Municipal Energy: Ensuring councils plan, manage and deliver on local energy’, found that:
- For every £1 invested in renewable energy schemes there is a further £2.90 in cashable benefits
- 17 jobs can be created from every £1 million in energy saving measures on building
- Energy efficiency and renewable energy can create 10 times more jobs per unit of electricity generated than fossil fuels
- The local government sector annual energy bill of £750 million could be reduced by up to half by leveraging in spending power and using readily available and low cost technologies existing buildings.
Fife Council has done some of this with its £1.3 million turbine at the council’s recycling and resource recovery facility near Ladybank. This is expected to generate enough electricity to power 200 homes. They also generate clean energy from garden and food waste at the council’s anaerobic digester and from landfill gas. Aberdeen has similar projects as well as the city’s district heating scheme. A number of councils use solar photovoltaic panels.
Glasgow City Council is in the process of setting up an energy services company which will oversee the creation of renewables and low carbon projects in the city. It has mapped sites, but progress has been slow.
A more radical plan for the city has been proposed by Jim Metcalfe, based on research carried out by the Energy Saving Trust. This would involve the creation of a locally-owned company which would be able to reinvest profits from power generation on improving building insulation and reducing fuel poverty. The council should be leading on this, using council bonds, available at historically low levels, to finance the plan.
While electricity generation is important, we also need to make progress on heating homes. This is where district heating schemes come in. The Energy and Climate Change Select Committee heard in January that the £300 million government scheme to develop district heat projects needs a “regulatory investment framework” during this parliament to support future growth. District heating is a 50-80 year long investment and so you want to attract the lowest possible cost of capital to ensure the lowest cost for consumers. Councils are again in the best position to do this. In Scotland, work has begun on tapping into geo-thermal heat from disused mine workings.
Governments could help more by making energy efficiency a national infrastructure project. In Norway, the introduction of legislation to support district heating has shown a 150% increase in the installed capacity over the last 10 years. This has helped make it possible for the city of Drammen to create a district heating network that supplies several thousand homes and businesses with clean, affordable heat. This system didn’t rely on Scandinavian engineering, but the expertise of Glasgow-based Star Renewables.
There are a number of interesting municipal energy projects in Scotland and the rest of the U.K. However, they are patchy, small scale and not nearly radical enough. We need councils to take the lead, establishing full scale energy companies that can provide energy efficient homes with cheaper electricity and heat. They would also generate desperately needed revenues.
This would be municipal enterprise of the sort councils in the 19th Century created to revitalise our towns and cities. We now need 21st Century municipal leadership to take this forward.
One of the first acts of Theresa May as Prime Minister was to abolish the Department of Energy and Climate Change and merge it into an expanded Department for Business, Energy and Industrial Strategy. There are differing views on the impact.
The New Economic Foundation (NEF) argues it’s a bad idea along with most environmental groups. When Gordon Brown first created the Department it was a signal that the UK at last recognised and understood the dangers of climate change – an issue that will define the 21st century and the future of our global society. The least it deserved was a strong dedicated government department.
They also argue that tackling climate change should not be just an adjunct to other policy issues. It requires a central co-ordinated strategy; if we leave it to the afterthoughts of various departments then we will fail. DECC gave strategic direction and emphasised the opportunities, whereas May seems more focused on costs. Adapting our economy for a clean future would be an opportunity – a chance to nurture new industries, improve health and wellbeing, and rebalance our economy.
Abolishing DECC also raises the question, is the 2008 Climate Change Act safe? Including the commitment to an 80% reduction in emissions by 2050.
Matthew Bilson from the University of Sheffield, while accepting the positive role DECC played in climate change negotiations, can see some advantages. He argues a focus on business is necessary if the UK is going to continue to reduce its emissions: the switch from coal to low carbon sources means electricity supply is doing its bit, but other sectors – notably heat and transport – need to up their game. The country needs new policies, and the restructuring should help move low carbon thinking into the business and industry mainstream.
The business department has traditionally championed key sectors, including the aerospace, automotive and construction industries. Aligning those sectors with the low carbon energy priorities could ensure greater progress on electric vehicles, zero carbon homes or alternative aviation fuels. Somewhat more optimistically, he also argues that it could result in more stable energy policies on renewables, heavy industry, modular nuclear reactors and even getting CCS back on the agenda.
What really matters is the direction of government policy, rather than where the civil servants sit. The new business secretary, Greg Clarke, clearly stated the importance of clean energy and tackling climate change. However, the acid test will be the UK’s approach to the EU 2030 climate targets, and ratification of the Paris Agreement. This will keep up momentum, confidence and commitment going into COP22 in Morocco.
For now, the jury is still out.
Ineos is using the Brexit uncertainty to make a new push for fracking in Scotland.
Their CEO has called for an overhaul of UK energy policy and for manufacturing to be placed at the heart of the economy as Britain faces up to life on the outside of the European Union (EU). He urged Scottish ministers to review its current moratorium on granting consents for fracking in Scotland, declaring that industry would be transformed if companies such as Ineos were free to tap into indigenous shale resources.
This follows Ineos’s decision to send their fracking team down south, much to the joy of campaigners here, but less so in Lancashire and Yorkshire. This is partly to take advantage of the more favourable policy position and because the Scottish government’s line appeared to harden when the new energy minister Paul Wheelhouse said he was “deeply sceptical” of proposals to exploit shale gas reserves beneath the ground.
The fracking industry has spent years watching lengthy slumps in both international gas prices and public support for the technology. These trends aren’t about to turn around quickly despite the planning decision in North Yorkshire. As Howard Rogers from the Oxford Institute for Energy Studies puts it, “there could not be a worse time to embark on challenging gas projects.”
The UK Government would like to emulate the US shale bonanza, however, the UK has no equivalent to the plains of the USA. Fracking in the UK will be done near populations, if not right under people’s houses. The USA is also a growing source of evidence on the worrying economics of fast-depleting shale wells – not to mention flammable water and other industry misbehaviour. The climate impact of shale may be far higher than first suspected.
It’s also not cost free for the taxpayer. New figures reveal that capital allowances for fracking infrastructure will cost the UK taxpayer £25 million.
Few would dispute that the UK economy needs to be rebalanced with a shift from services to manufacturing. However, fracking isn’t the way to do it.
Keeping the lights on at a reasonable price and meeting decarbonisation targets is a complex business and not without controversy.
The Future Energy Scenarios (FES), launched today, is National Grid’s view of plausible and credible pathways to 2050. This drives planning and investment decisions in the system. It’s also probably the best look at where the energy industry is going in the foreseeable future.
FES uses four scenarios to model changes to the energy system. They start with the optimistic ‘Gone Green’ which assumes high prosperity and high green ambition, with carbon targets met through investment and innovation. Then ‘Slow Progression’ which assumes a still ambitious, but a less prosperous economy, with compromises on carbon targets and less investment. Next is ‘Consumer Power’, still a prosperous economy but one driven by consumer desire for innovation, with high levels of distributed generation and storage. The worst scenario is ‘No Progression’ in which business as usual prevails with low growth and limited innovation.
Scenarios are not about predicting the future. Just as well, because the track record of energy scenarios since the 1970’s is not great. They are about giving us some numbers under different economic and policy circumstances. More a planning tool than a crystal ball.
Given past forecasts, it is surprising that all the scenarios now assume a continued reduction in electricity demand until around 2025. Partly due to the slow climb out of recession, but also due to more efficient appliances and the collapse of heavy industry. However, demand starts to rise again under the more prosperous scenarios. Gas demand, after an initial fall, looks likely to maintain a significant part of the mix. The prosperous scenarios assume moving away from carbon intensive sources and/or more local generation.
There is a little more regional analysis this year, something National Grid is weak on. They map the regional sources of generation and identify some regional differences in demand.
The key message for me from this year’s FES is that energy supply is becoming increasingly diverse. Fossil fuels will continue to decline with an extra 5GW closing by 2016. Potentially 18GW of additional storage could be available by 2040. The constraints appear to be more market and regulatory than technological, although this is still more about short term storage than addressing seasonal imbalances. They assume a big increase in imported electricity and gas, from 4GW at present to 23GW by 2040. 54% of gas could come from alternative sources by 2040, including shale, biomethane and bio-substitute natural gas.
More action is needed in the next decade if the UK is too achieve the 2050 carbon reduction target. None of the scenarios indicate that the UK will meet the 2020 target of 15% of energy coming from renewable sources. Progress is reliant on key technologies, nuclear, renewables and CCS. It can be done without one of these, but becomes more challenging. In practice two of them are looking dodgy and renewables suffer from investor uncertainty. However, it is heating and transport that needs to do much more.
Gas is seen as vital to facilitate decarbonisation. It’s flexibility can be used to balance the system and they assume there will be 11GW of CCS enabled gas plant by 2040. It will still be important in heating homes, with 70% of households still using gas in 2030. Hopefully district heating will play a bigger role, although heat pump take up so far is slower than anticipated. While shale gas has been delayed, they are still assuming it will play an important role, in particular under the consumer power scenario. The was some scepticism about this amongst today’s audience, many of whom doubt the economic viability, never mind political and environmental factors.
With the greatest minds in the energy industry present at the conference, only a handful, on a show of hands, thought we would meet 2050 decarbonisation targets! That doesn’t mean it isn’t desirable, but it does reflect scepticism about government taking the necessary actions. It certainly looks challenging. National Grid are rightly also concerned about security of supply and keeping energy bills down, so balancing objectives is an additional complexity.
The external speaker, Professor Jim Watson, emphasised the importance of doing more on energy efficiency, something we should be aware of in Scotland as we will miss the statutory fuel poverty elimination target this year. He was also not convinced that shale gas will be economically viable or the case for gas bridging the gap on carbon reduction. Relying on CCS when the UK government has pulled the plug on funding seems pretty optimistic as well. He also made the important point that we need to look more carefully at the distributional impact of scenarios on different income groups. National Grid can be a bit fixated on technology rather than people.
Some wonder if there is a disconnect between the scenarios and the market mechanisms that will be needed to deliver them – my own view is that they never will. National Grid take the view that they will change to meet demand. Unsurprisingly, they are not keen on an independent system operator as recommended by the Commons Energy Committee. They don’t think there is a significant conflict of interest, or if there is, they can manage them. They claim their scenarios are not driven by commercial interest of National Grid, but they do use them for their business planning.
The elephant in the room today was of course Brexit. How it will impact on the energy industry depends on your view of the economic and political impact of leaving the EU. If you think it will mean lower/higher growth and less/more green ambition, then this will impact on the energy scenarios. In particular, the big assumptions of additional electricity import capacity may depend on staying in the EU energy system. With the U.K. voice gone from the table, it remains to be seen what impact that will have on EU policy. Maybe less market oriented?
While some of the assumptions made in FES may be controversial, it remains the the most comprehensive study of future energy planning for the UK. There is lots of detail in the documents that can downloaded. Perhaps one to dip into, rather than a bedtime read!