Clive Moffatt: Ministers are still in the dark over achieving energy security

14 Apr

Clive Moffatt has over 30 years of experience as an energy market analyst. He founded and chaired the UK Gas Security Group (UKGSG) from 2017-19.

The inflated long-term targets set last week for nuclear and wind power generation will not ensure security and affordability. What they will do is fuel a rapidly rising spiral in energy charges and taxation for many years before any new power is delivered. As the founder and former chairman of the UK Gas Security Group, what I outline below is what I believe to be a more coherent and realistic strategy.

Well before the Russian invasion of Ukraine, the risks to energy security (supply and price) were rising as the UK and other Western countries turned away from coal and became more reliant on natural gas to support intermittent renewable energy. What sort of policies can the Government pursue to deal with this urgent problem?

1. Abolish Price Cap and Rebates

There is no sense in capping retail energy prices when you have no influence over the wholesale market.

Caps benefit larger, better resourced suppliers by making it quicker and easier for them to grow their market share. Better to let the market compete while tightening the financial tests that are applied to existing and potential suppliers. Ofgem’s failure to check on energy suppliers that have now gone bust has already cost consumers some £2bn.

The retail price rebate scheme is based on the false assumption that the future direction of wholesale prices can be expected to fall long enough to allow suppliers to recoup the loans through higher prices. Furthermore, price rebates are a “blunt” policy instrument benefiting all but in particular those who can afford to pay more.

Fuel poverty should be addressed through the existing benefits system and not via blanket rebates on Council Tax and energy prices.

2. Support New Investment in Gas Security of Supply.

Natural gas has a critical role to play in the energy mix up to and beyond 2050. Increasing on and off-shore gas production will reduce the threat of imported gas supply shortages. Moreover, the rationing of gas and electricity and more gas storage (now only 2% of annual demand) will reduce energy price volatility.

More domestic gas production will also be required. The decision to proceed with additional North Sea gas exploration and development should be welcomed but fracking also has a role to play in reducing the UK’s dependence on gas from the Norwegian and EU pipelines and global shipments of LNG.

More gas storage capacity could be built in the next 5-10 years by imposing an obligation on suppliers and shippers to keep a proportion of their annual gas demand in storage linked to a storage capacity auction. The amount auctioned should include an allowance for the possible growth in hydrogen production to fuel heat and transport.

National Grid does not have responsibility for the real-time balancing of the gas market (unlike its role as SO in the electricity market) and so, if shippers refuse to pay high prices, or cannot access LNG when required, and suppliers see a shortfall emerging, the effect is not only to raise prices but to trigger a gas supply emergency.

More could be done now to avoid blanket industrial rationing and increase short- term liquidity in the gas market through a system of Demand Side Reduction (DSR). An option to curtail incentive would encourage some industrial users to agree in advance to curtail demand in advance of any emergency.

3 Support New Investment in Gas Power Generation

In the next 20 years, with the demise of coal and the retirement of existing nuclear capacity, the UK will be short of both regular baseload and reliable flexible power generation to compensate for the planned expansion in intermittent renewable energy.

The answer is not another 40GW of intermittent wind power which would massively increase the system balancing costs: constraint payments and the need to finance back-up fossil fuel generation. Furthermore, there are growing concerns about the “whole life” costs of wind generation linked to reduce productivity of large wind farm clusters off-shore and the costs of repair and maintenance. The target for new off-shore wind capacity should be halved pending a more detailed analysis of a quantum jump in intermittent supply.

Nor is a massive expansion in large or small nuclear capacity the right way forward, despite the attraction of zero emissions. Large nuclear plant takes too long to build and adding decommissioning it is hugely expensive on a “whole life” basis. Taxpayer underpinning of capital costs, and/or penal price subsidies, are required to make large nuclear viable.

Small modular reactors are potentially cheaper to build but, planning concerns notwithstanding, the technology is unproven and there is no established manufacturing base capable of delivering the economies of scale needed to avoid capital cost and/or price subsidies.

To ensure the delivery of affordable cleaner energy in the next 10-20 years and possibly beyond we need new investment in natural gas. In the medium term, probably some 10GW of new baseload gas generation is required and this should be provided by unabated gas via a new capacity market auction and built in the next five years.

Carbon capture and storage (CCS) to remove the C02 is still an expensive prototype requiring more gas, raising electricity costs. So, initially, some new large- scale gas plant should be CCS compatible.

In addition, a separate auction should be run to procure smaller scale (eg 300MW units) flexible generation with unabated small-scale gas competing with batteries and Demand-Side Reduction (DSR) with strict bidding rules on network locality, reliability and costs with penalties for non-delivery.

4 Cost of Carbon and Competitiveness

It would help underpin both new gas and renewable generation if the Government sets a long term, gradually rising trajectory for the price of carbon up to and well beyond 2050.

But manufacturing in the UK should be protected by a carbon equalisation tax on countries with more lenient emissions regimes and manufacturers should be able to claim tax rebates or receive subsidies to help fund high energy efficiency processes.

5 No Deadlines on Sale of Gas Boilers

There are some 25 million domestic gas boilers in the UK which are reliable and cost-effective and run on an established network. Decarbonising domestic heating is essential to the 2050 Net Zero target. But, right now, the costs involved in switching to heat pumps or using “green” hydrogen are prohibitive, and user benefits doubtful.

6 Take the Politics out of Energy

Advocacy rather than rigorous analysis has so far dominated the Net Zero energy debate and the time has come to create an independent Strategic Energy Authority (SEA.) The proposed independent ISO for power and gas addresses only one part of the problem – the conflict of interest within National Grid.

An SEA would go further and set long term investment targets for generation transmission and distribution based on the need to balance emissions reduction against security and affordability. It would also create a consistent and cost-effective policy framework to ensure fair competition between different forms of energy supply. Moreover, it would oversee the system operation of the electricity and gas market and facilitate greater liquidity in the short term balancing market. Finally, it would be able to liaise directly with Treasury to define and publish long- term budgets for taxes and levies impacting on consumers and industry.

The Prime Minister asked for a “grown-up” approach to energy. These proposed policies would deliver it.

Sanjoy Sen: The Government should address the implications of pursuing Net Zero

13 Apr

Sanjoy Sen is a chemical engineer. He contested Alyn & Deeside at the 2019 general election.

We engineers prefer to keep things simple. I’ve enjoyed working in a wide range of industries, from the traditional (such as steel and petro-chemicals) to the modern (including in renewables and clean transport). And I believe all of those sectors will evolve and continue to play vital roles in our society and economy. It’s not an either-or choice between old and new.

But things are always more complex with politicians: witness the deepening schism between the Conservative Environment Network true believers and the Net Zero Scrutiny Group outsiders.

Net Zero is fast becoming a highly polarised issue with little room for nuanced debate. That is especially the case for those of us who are positive about new technology opportunities but want to ensure that plans and costs stay realistic. Whilst internal differences can be played down for now, as rising bills start to bite and the next general election looms, positions are likely to harden. Before picking a side, we should reflect on some of the implications of Net Zero.

Does Net Zero empower or hinder Putin? 

Since the Ukraine crisis began, Net Zero has been widely touted as the answer to tyranny: an autocrat can turn off your gas supply but he can’t stop the wind blowing or the sun shining. Unfortunately, the reality is more complicated. The penny is finally dropping in the USA that swapping Arabian crude for Chinese battery lithium just creates a new form of energy insecurity. Meanwhile, Germany has long embraced green growth – yet now finds that solar and wind aren’t enough, and that it is terrifyingly dependent on Russian gas.

Here in the UK, establishing gas pipelines from a much friendlier neighbour (Norway) and constructing liquefied import terminals to access global supplies have served us better. Closing down our gas storage was perhaps less wise. But whilst Germany remains ideologically anti-nuclear (despite it being its best route for reaching Net Zero), Hinkley Point C is slowly taking shape with more to follow via the new Energy Security Strategy. But perhaps the biggest lesson from Germany is in the speed of transition: we need to prioritise establishing our new power generators before taking old stuff off-line if we are to avoid being left exposed.

Is Net Zero important to (Conservative) voters? 

It’s perhaps telling that the Energy Security Strategy makes relatively little mention of Net Zero. It’s possible that come the next election, after months of soaring energy costs, relatively few voters will genuinely have green issues as their top priority, especially if going green means being willing to accept major associated financial and lifestyle implications. Moreover, the minority that do are most likely not Conservatives, let alone Conservatives in swing seats. And, poised to help focus minds on where our core vote exists, once again looms Nigel Farage. His Net Zero referendum idea could gain traction in the no-nonsense Red Wall.

Going into the next election, selling Net Zero on emissions reductions alone is unlikely to cut it. Many voters do reflect on their personal carbon footprint (and adjust certain lifestyle choices accordingly). But most know that China emits substantially more and thus have a keen sense of their relative impact. To succeed, Net Zero is best re-framed in terms of more tangible gains. It’s a positive sign that we are starting to see these in two crucial areas: jobs and transport.

Can Net Zero ever be a vote winner? 

New employment opportunities will be key to Net Zero acceptance. EDF reckons some 22,000 are now at work on Hinkley Point C. Expect similarly impressive numbers if other large-scale nuclear projects (most likely Sizewell C and Wylfa) are signed off on the back of the current crisis. Although further off, the government is also finally backing small modular reactors: Rolls-Royce envision 40,000 regional jobs and £250 billion in export potential. Meanwhile, Red Wall industrial clusters Humberside and Teesside look set to be re-invented around hydrogen.

Net Zero is also (fairly or unfairly) perceived as an excuse to punish motorists. The government’s recent £7 billion announcement goes beyond merely swapping diesel buses for zero-emission (electric or hydrogen) alternatives. By also making bus usage easier via some long overdue and obvious measures (clearer fares, integrated networks, infrastructure upgrades) motorists outside London should begin to see some realistic alternatives to driving. Meanwhile, as technology improves and prices fall, drivers are increasingly going electric by choice, not coercion (or even wokeness). So far in 2022, 15% of new car sales have been electric. The Government can encourage further take-up by maintaining purchase plug-in grants and lower tax rates for company cars.

And should we give in to those protestors? 

The Putin-induced rush to increase domestic energy supply first has to get past some pretty determined opponents. How significant are these? Fracking potential remains something of an unknown for now (as exploration was pretty swiftly curtailed). Moreover, whilst onshore wind can play a useful role, it is perhaps not as pivotal as proponents claim. Instead, the Energy Security Strategy backs further North Sea gas investment; this can deliver more domestic production in the short term. But let’s be aware that future output is never going to get anywhere near the millennium peak.

The Energy Security Strategy is very much focused on increasing supply, not tackling demand. But as every engineer knows, the heat losses from uninsulated pipes and structures can be eye-watering. UK buildings often perform far worse thermally than those in Europe. Improving our building stock could well prove a quick and cost-effective means of reducing utility bills and import dependence. Polling suggests little public sympathy for protestors and their glue-based antics – but whilst we might not be too impressed with Insulate Britain, we should not lose focus on how vital it is to insulate Britain.

The best energy strategy possible – in the absence of fracking and onshore wind.

8 Apr

Yesterday brought us the long-heralded arrival of the Government’s new ‘Energy Security Strategy’. With the crisis in Ukraine demonstrating how relying upon Russian oil and gas might not be the best option from a geopolitical perspective, this strategy promises to end decades of ducking the big decisions on the UK’s energy needs. Did it deliver?

The proposals are certainly ambitious. The Government aims for 24 GW of Britain’s power to come from nuclear fission by 2050, delivered by eight new large reactors and several smaller ones. Since Britain is on track to have only one nuclear power station by 2035, this is a rather large change of tack. The strategy also calls for 50 GW of offshore wind by 2035 – more than the UK’s current average electricity consumption.

Alongside these headline proposals is also mentioned new oil and gas exploration in the North Sea and a push to expand the number of solar farms. All in all, it is certainly the most forward-thinking approach to energy in living memory. But since it took a major land war in Europe to shake ministers out of the torpor that usually surrounds energy policy, this is not saying much.

There are a few very obvious issues with the policy, the biggest being that it does not address the primary current political problem with energy: household bills. Launching your big new energy strategy with the confirmation that bills may not fall for five years was hardly the best look for Kwasi Kwarteng. These measures are good comfort to the consumers of 2050, not 2022.

Due to Treasury penny-pinching, there is nothing in the strategy on insulation. Some have touted insulation as the fastest way to reduce demand for energy by plugging Britain’s heat-leaky homes. Households could save up to £500 a year, according to reports. But the Treasury balked at the £200 million cost for a scheme designed to help the lowest paid insulate their homes, so any strategy to reduce household demand appears a non-starter.

Indeed, this strategy focuses entirely on supply at the expense of demand, and, in that context, looks at only those forms of supply which are least likely to set off Tory backbenchers. When the Prime Minister’s Chief Whip is the man who bounced his predecessor but one into opposing onshore wind farm construction, it is hardly surprising that Johnson’s energy strategy prioritises offshore turbines.

Onshore wind does get a mention, but it is a far cry the potential push for mass liberalisation of planning rules that Kwarteng and Michael Gove were reportedly pushing for in Cabinet two weeks ago. Instead, the Government only says it will be aiming to develop partnerships with a limited number of supportive communities who want new wind infrastructure for guaranteed lower bills.

This idea of bribing local communities with lower bills in return for new energy infrastructure is one Craig Mackinlay highlighted on this site earlier this week. But he did so in the context of fracking. For those for whom the f-word is the solution to our energy needs, this strategy is not a shale of a time. Fracking does not get a mention, although Kwarteng did announce a review into it earlier this week.

That onshore wind and fracking do not feature in this strategy is unsurprising. Again, this is an energy policy driven not only by the obvious necessity of securing our energy supplies in a dangerous geopolitical environment, but also of securing the Prime Minister’s own position in an oft-dangerous domestic political environment for him personally.

So turbines are pushed into the sea, deadlines are pushed into the future, and the centre piece of the strategy becomes a big announcement on nuclear – the likes of which, as Peter Franklin has shown, have been made by many previous governments. This strategy is not so much for facing the future, as for facing down backbench revolts. A depressing prospect for a government with an 80-seat majority.

It also suggests that ministers have missed out on a subtle shift in the political mood. In the same way that Russia’s invasion has forced the Government to confront an energy security issue it would much rather duck, voters appear to have grasped that surging bills require hard choices over supply. That’s if they want to see costs come down any time before I’m middle-aged.

Robert Colville has highlighted how polling suggests that onshore wind is more popular than often thought. A poll from Savanta ComRes has shown that more voters support an expansion of fracking than do not. A strategy that pushed further with Mackinlay’s idea of winning around local communities to both these two approaches could have achieved something much more radical.

But, alas. Even if Number 10 was in a mood to be radical at the moment, the Treasury is unwilling to stump up the cash for it to be so. So whilst the ‘Energy Security Strategy’ may be a worthy attempt to tackle a long-neglected topic in a way that addresses pressing needs within a hostile political climate, its bold ambitions are not backed by bold actions.

And with voters worrying about tripling bills, this will not enough to spare the Government the political pain this cost-of-living crisis will inevitably bring. It may have kept a few backbenchers and ministers happy, but it is not the answer to Britain’s current energy needs.

Fracking? No thanks. Onshore wind? Certainly not. Nuclear power? We’ll get back to you. Why energy security is hard to deliver.

5 Apr

The war in Ukraine has made how we get our energy central to political debate. Of course, before Putin’s barbaric invasion, prices were already rising as the bounce back from the pandemic strained global supplies. But the crisis has highlighted our continental neighbours are sufficiently hooked on Russian oil and gas that the Kremlin assumed they would offer only token opposition to his invasion. As such, as well as introducing even greater instability into the global market, we are also forced to confront the issue of energy security.

That’s why Boris Johnson’s new energy strategy (expected on Thursday) is designed to outline Britain’s essential energy infrastructure for decades to come. Having been net energy importers for 18 years, this is an opportunity to end the embarrassing process of going cap in hand to the Saudi Arabians, the Americans, or even (horrifying as it is to say) the French whenever we want to cut prices or change suppliers.

Foremost in ministers’ minds must be avoiding the energy rationing currently being touted in Germany. The hope should be to aim for the same American energy independence that has made worrying about a Middle East oil shock one of the few areas where Joe Biden isn’t currently imitating Jimmy Carter.

But whilst all this may be beneficial for Britain’s longer-term energy security, it also raises questions about two more pressing political priorities: keeping prices down, and reaching Net Zero. Proponents of the latter may say that this push for energy security exactly aligns with their objectives. After all, who needs Saudi Arabia if you are already the Saudi Arabia of wind?

That seems somewhat less facetious when one points out onshore wind is the fastest way to increase domestic energy production and reduce bills ahead of the next election. Wind turbines can go up surprisingly quickly, especially if we liberalised planning laws.

Alas, as with any proposal that involves those NIMBY-terrifying words “liberalising” and “planning laws”, onshore wind won’t happen in a big way any time soon. Despite the reported support of Kwasi Kwarteng, opposition to them is great both within the Cabinet and across the parliamentary party. When Grant Shapps called them an “eyesore” on Sunday, he was voicing the natural prejudices of many a Home Counties Tory. Admittedly, that includes myself – as much as I long for energy security, I do think the things are bloody ugly.

There are also the twin problems of storage and what to do when the wind isn’t blowing. By some estimates (based on 2019 figures) we only have 38 minutes of storage for wind power. So when those big ugly turbines aren’t whirling around producing energy and murdering birds, we will still require other energy sources to have any hope of being independent.

Many in the party – and especially in the Net Zero Scrutiny Group – would point in the direction of fracking as an obvious solution. The debate is hot between those who believe it provides a fast and bountiful solution to Britain’s energy needs, and those who believe it is an over-hyped and costly rabbit hole that we should not venture down. Nevertheless, achieving our own version of the shale gas boom that has turned parts of America into a carbon-neutral remake of Dallas is an enticing prospect.

But as with onshore wind, the same problems of aesthetics and geography rear their heads. One may agree with me that a lot of the anti-fracking messaging out there is Greenpeace guff, but is has undoubtedly lodged itself in the minds of many voters.

And although Craig Mackinlay may have made a good stab here yesterday of highlighting how financial incentives can be used to encourage local residents to agree to fracking in their area, one has to imagine the moratorium on fracking that found its way into the 2019 manifesto has a good chance of being there in 2024. Voters in the North and Midlands just don’t want it – and the Tories need voters in the North and Midlands.

So that brings us to the option that it appears the Government has decided upon – nuclear. Despite the combined efforts of Chernobyl and Godzilla  to resurrect our worst atomic fears, it has the benefit of being popular – supported by the public by a margin of 22 percent, in the most recent polling – and not climate-dependent. Hence why the Prime Minister is reportedly planning to increase UK capacity to 24 GW by 2050, via up to two new large and several smaller new nuclear power stations.

The problem for ministers here is that that does not deliver falling bills for voters soon. And although voters may say they want more nuclear power stations when asked by pollsters, one suspects their answer may be rather different when they see concrete and metal monstrosities emerging in the distance.

Undoubtedly, nuclear has a large role to play in our long-term energy security – if the French can get 71 percent of their energy from nuclear power, why can’t we? – but its prominence in this week’s headlines does not reflect its ability to help those crying out for help with burgeoning bills right now.

Which brings us back to the reason for our current discussion. Energy bills are looking like doubling, and may be on track to triple or even quadruple by October. Already, the Government is being lambasted for not going further in helping voters. That it hasn’t has been down to the same department that has resisted this new energy strategy for weeks: the Treasury.

As the Chancellor made clear in the Spring Statement, there really is no money. Rising inflation and anaemic growth means higher debt repayments and a stagnant tax base. If Tories want tax cuts and spending on energy bill subsidies, spending elsewhere is going to have to be cut, or other taxes are going to have to rise. This is hardly an optimal situation for Number 11.

So despite all the recent talk over whether Rishi Sunak’s personal wealth means he cannot relate to ordinary voters, if anybody is going to be pulling their hair out at a shockingly high energy bill this October, it will be the Chancellor.

Sarah Atherton MP: Russia’s Ukraine war. We must review our army cuts, reconsider fracking – and park Net Zero

14 Mar

Sarah Atherton is a member of the Defence Select Committee and is MP for Wrexham.

The invasion of Ukraine is a dreadful, shameless crime, perpetrated by a corrupt leader entertaining a fantasy of rebuilding the old Soviet Union. In the same way that the Soviet Union and Eastern Bloc were brought to an end by the brave people that lived there, we can only hope that Russia’s own people and the heroic people of Ukraine will defeat him. The occupation and destruction of a peaceful European nation in the twenty-first century is truly horrifying.

Events have also shown that the West and our shared defence aims have been left lacking: whilst Russia and China have built formidable military forces, used misinformation tactics to exert pressure and resorted to domestic genocide and international war crimes, one might say that the West has been too focused on woke minority issues.

There have also been signs of what was to come: the illegal annexation of Crimea, the Salisbury poisonings, and widespread allegations of election interference. But what did NATO do – as a defence organisation and military alliance – to counter these events?

Yes, there were stern words of condemnation and the expulsion of Russian diplomats, but the West’s responses to these events look now to have been lacking. If NATO is to prevent future aggressions, we must all have ‘big sticks’ to back up our words of diplomacy and our democracy.

Francis Fukuyama famously declared the post-Cold War era to be the ‘end of history’. There was an assumption that the threat of a European land war was over, and we have allowed ourselves to forget the hard-fought lessons of European history. We have sleepwalked into these current events, believing that the collapse of the Berlin Wall meant that we could take our eye off the defence of our nation. The ‘end of history’, the so-called ‘peace dividend’ of Thatcher and George H.W. Bush, has proved to be a false dawn.

Whilst I welcomed the recent Integrated Review and continue to believe it proposes a solid plan for the future, looking towards the Indo-Pacific whilst recognising the changing nature of warfare, we must fundamentally rethink our national and global aims in light of what has happened in Ukraine. The belief is that defence spending should be linked to the threat that the UK faces, and this is why I believe we should increase spending to at least three per cent of GDP. The Foreign Secretary said this recently, and I agree with her.

To start, we must reconsider the cuts to personnel – particularly to the infantry and our armoured capability.

But defence – and our nation’s safety – should also look at our reliance on foreign energy sources and supplies. To ensure that we are no longer reliant upon Russia, directly or indirectly, this Government has been right to rethink how we supply energy to our nation. Recent announcements are welcome but the Government must come up with more – and fast.

We must roll out a new generation of nuclear reactors, and quickly, and we should be re-assessing fracking and tidal enhancement. Radical new energy policies will take time to take effect, but the longer-term implications for energy security will be welcomed.

As part of this, we should also park, for the time being, the Net Zero endeavour. Of course, it can and should remain a long-term aim but ensuring that we can, as a nation, generate the energy we need without a reliance on overseas sources should come first.

In my constituency of Wrexham, we have a large and hardworking Polish community – the largest outside of London and a history dating back to World War Two. We should be engaging a similar welcoming spirit this time around by welcoming into our town, and nation, those displaced from Ukraine who are true European refugees and victims of Europe’s latest war. It is right that the Government are engaging and re-evaluating support for refugees as this crisis evolves.

The appalling invasion of a democratic and sovereign European nation in the twenty first century will change our lives forever. It has already caused a seismic shift in global politics. Just look at Germany, where Olaf Scholz’s has executed an about-turn on German domestic and international policy. Scholz’s decision to increase defence spending and cancel Nordstream 2 goes in the face of German political orthodoxy under Angela Merkel.

The Government is rightly considering how to act in the face of this new reality – because some of the decisions of 2021 are now up for debate.

Sarah Ingham: A real war puts the West’s culture warriors in cruel perspective

4 Mar

Sarah Ingham is author of The Military Covenant: its impact on civil-military relations in Britain.

Emily Carver: Scrap the tax rise, reform planning, and get fracking to ease the cost-of-living crisis

2 Mar

Emily Carver is Media Manager at the Institute of Economic Affairs.

Lewis Preston: There is no market argument for domestic fracking

24 Feb

Lewis Preston is Chief of Staff to Elliot Colburn MP. He was a senior researcher for Lee Rowley, now BEIS minister, who established the APPG on Fracking.

Last summer, in a discreet corner of North Derbyshire, residents of Marsh Lane and the nearby historic mining town of Eckington quietly celebrated what they thought was the final victory in the battle to stop fracking in their community.

On 16 August, planning permission for exploratory drilling for shale gas in Marsh Lane finally lapsed without a single spade in the ground, two years after permission was granted, and almost half a decade since the plans were first mooted.

After a combination of fracking-induced earthquakes in Little Plumpton, Lancashire, and an unrelenting campaign from Parliamentarians, campaign groups and members of the public, a moratorium was imposed on hydraulic fracturing in England by the Government in 2019.

Following the fuel crisis in September, global gas supply shortages, energy price hikes and a cost of living squeeze, it was inevitable that the dead debate on fracking would be resurrected. It was reported recently that Jacob Rees-Mogg was urging colleagues to re-explore fracking, and multiple commentators are starting to throw the suggestion around again.

It’s not difficult to imagine the sense of dread that residents of Marsh Lane, Eckington or Little Plumpton feel as the biggest threat to their communities is unearthed and discussed again in Parliament and the press, so soon after the debate had been buried in the first place.

Two years since the moratorium, and despite the energy concerns we are currently experiencing, there still remains no convincing market or practical arguments for fracking in the UK.

Firstly, there is no reliable assessment or understanding of how much shale gas is in the UK or how much of it could be extracted. Nor has there been any assessment of the cost and impact of extracting it.

A recent study by Cardiff Business School estimated that the UK would need to drill between 4,000 – 30,000 fracking wells to replace all gas imports. This is heavily dependent on the geology, however; the only fracking operations to take place in the UK were unviable because of the seismic activity they generated, and one of the last exploratory shale operations to take place in the UK (in Barnby Moor near Worksop) failed to locate substantial amounts of shale gas.

The sheer level of infrastructure and activity for each fracking site would also have huge cumulative impacts. This isn’t a quick drill and drop operation. We are talking about thousands of vehicle movements, removal of street furniture, a 60 metre drill, acres of land, the erection of buildings and huge lighting fixtures, as well as the installation of pipelines (the extent of which has not been estimated) and a decommissioning operation (the cost of which, a recent House of Commons Committee report suggested, could fall into the lap of taxpayers), as well as much, much more.

All of this for just for one fracking site. Multiply this by the 30,000 potentially needed and it paints an unrealistic picture of monstrous state intervention and cumulative impacts. It’s easy to call for fracking now to solve the energy price hikes, but it’s just not realistic.

Second, the fracking argument fails to take into account the current short-term nature of the gas supply concerns and culmination of numerous global influences. Demand for gas has been steadily decreasing in the UK as we strive to reduce our carbon emissions and find renewable energy solutions (the capacity of which has more than quadrupled since 2010).

Conversely, global gas supply was steadily increasing, up until the Covid-19 pandemic, and is likely to climb again in the future. The most recent gas supply forecasts by the UK Government also assume that no domestic shale is needed to satisfy demand.

UK gas is traded on a European market, so it’s highly unlikely that domestically fracked shale would have any impact on energy prices, unlike the US where there have been some consumer positives.

Threats of Russian interference are also heavily exaggerated. Less than five per cent of the UK’s gas supply is imported from Russia, with the vast majority coming from domestic North Sea reserves, Norwegian pipelines and shipped from elsewhere in the world, including Qatar.

As for the viability of fracking for the industry, there isn’t evidence to suggest that it can work. Fracking has been a disaster for shareholders in the US, and their geology is far more favourable for fracking than on the British Isles and the Bowland Shale.

In the UK, the most recent shale drilling sites missed their targets and wasted millions. Research commissioned by Friends of the Earth found that, due to the unpredictable nature of the UK’s geology, it could very well take ten attempts of fracking at each site for commercial levels of gas to be extracted. Fracking in the UK is just not a viable business model.

Even without the 2019 moratorium on fracking, it’s unlikely we would be any closer to a domestic shale gas industry in the UK today. The current energy supply and price issues are concerning, but they are part of a global energy crisis, worsened by poor weather, Covid-19, spot market dependency and a fall in coal supply. Fracking in the UK has no realistic place in the current debate.

As for the long term, fracking is certainly not a free market silver bullet for achieving energy self-sufficiency. We aren’t simply sitting on an invisible shale gas store that we can turn the taps on at a moment’s notice. For domestic shale to have the slightest impact on UK energy, it would require a level of state intervention unseen for decades with unparalleled cumulative impacts.

Politically speaking, fracking would also be a disaster for the Conservatives.  Almost half of the 200 constituencies potentially targeted for fracking are held by Conservative MPs – including many in the “red wall”. Now is perhaps not the right time for the Prime Minister to rub his colleagues up the wrong way on this issue.

Foreign and domestic governments have a lot of work to do in securing global energy supplies for the future. However, the residents of Marsh Lane, Eckington, Barnby Moor, Little Plumpton and other potential fracking sites shouldn’t let this keep them awake at night just yet. Fundamentally, there is no need for fracking in the UK and the unavoidable practicalities involved should keep it buried for the foreseeable future. The Government would be unwise to resurrect fracking any time soon.

Fracking may not be popular, but a proper debate on our energy sector is worth having

15 Feb

There is such an air of futility around the fracking debate that it is difficult to understand how a group of Conservative MPs have managed to bestir themselves to call on the Government to lift the ban (sorry, ‘moratorium’) on it.

But then, one could say the same about housing reform. And the two debates have quite a bit of overlap, hinging as they do on our planning system, the myths it rests on, and the tension between the local interests of property owners and the greater interest of the nation as a whole.

Writing on this site, Peter Franklin points out that a strong domestic fracking industry would not, in itself, bring down domestic energy bills, as the output would be sold on the international market. Concentrating the benefits here in Britain would require at least import control, he points out, and “would the free marketeers of the Net Zero Scrutiny Group be up for that?”

It’s a fair question, although the alternative of fixing prices to subsidise nuclear and renewables is scarcely a doctrinaire free-market approach either. Besides which, without import controls the implication is that the UK would have an extremely valuable export resource, which would be no bad thing.

And the international-markets argument cuts both ways. It is meaningless to point out, as Zac Goldsmith does, that we import our energy from an ally, Norway, rather than Russia, when Norway is selling into the same market and the price of Norwegian gas gets pushed up by Moscow’s actions.

His real killer argument, setting aside the stuff about “trucks ferrying toxic chemicals”, which has echoes of anti-nuclear hysteria, is simply that fracking is extremely unpopular. Whether or not it would have any benefits nationally, the downsides would be concentrated. See also why we struggle to expand our airport capacity or build new railways.

Again, the ur-example is surely housing. There is disagreement about whether or not a mass housebuilding programme in the areas of the country that need it (i.e. where demand is greatest) will actually bring down prices.

But really, it shouldn’t matter. If it does, great. If it doesn’t, that’s only because those units have sold at current market prices – meaning we’ve just created a huge stock of wealth, and expanded capacity so people can enjoy more space for the same money. (This latter is the difference between ‘house prices’ and ‘the cost of housing’.)

Yet we don’t. The vast potential gains are too abstract and too widely spread to offset the concentrated costs of telling voters in sought-after areas that towns and villages must grow over time and the urban/rural footprint of post-War Britain is not suitable for modern conditions.

And if we aren’t prepared to fight that fight for such a slam-dunk as a housing boom, is there any prospect of it being done for so contestable a case such as shale gas?

But then, I would be the last person to suggest that we actually abandon the fight for planning reform. Resignation in the face of powerful vested interests never got anything done.

At the very least, a strategic argument on the virtues of an on-shore fracking industry might help to focus minds on issues such as security of supply, and avoid the abject short-termism which led to the shuttering of the UK’s offshore gas reserve storage site in 2017.

Peter Franklin: An energy crisis is no excuse to go slow on Net Zero

14 Feb

Peter Franklin is an Associate Editor of UnHerd.

With household bills set to soar — and the threat of an even deeper energy crisis if Russia invades Ukraine — is it time for a change of priorities?

Instead of going all out to decarbonise our economy by 2050, shouldn’t we prioritise the British consumer instead? That’s certainly the opinion of the Net Zero Scrutiny Group of backbench Conservative MPs.

According to the Telegraph, they’ve got allies — front bench allies. A front page story from earlier this month claims that “senior Cabinet ministers believe there should be a rethink of the Government’s net zero plans.”

The identity of these ministers isn’t revealed, but there is one name we can probably rule out: Kwasi Kwarteng’s. Last week, the Secretary of State for Business, Energy and Industrial Strategy made a big announcement, which is that the Government is accelerating the deployment of renewable power.

Every two years there’s an auction in which developers bid to build wind turbines, solar panels and other sources of green electricity. But from next year these will take place annually. Far slowing down on net zero, the Government intends to go twice as fast.

So though they’ve succeeded in getting their message out, the eco-sceptics have once again failed to persuade. And there’s a reason for that: their arguments don’t add up.

Net zero is all about reducing our use of fossil fuels. So how can it be held responsible for a crisis caused by a worldwide surge in fossil fuel prices?

Well, there is one possible line of attack, which is to claim that the emphasis on decarbonisation has distracted us from the other priorities like ensuring the affordability and security of our energy supplies. Specifically, if we’d done more to develop our domestic natural gas resources, then we wouldn’t be paying through the nose for imported supplies.

Well, it’s a theory – but net zero hasn’t nothing to do with it. This country pumped money into import infrastructure (e.g. LNG terminals and pipelines) instead of boosting domestic production because that’s what the market wanted. When international gas prices were low, it was cheaper and easier. But it wasn’t greener. In fact, importing gas is more carbon intensive than producing it at home because of the energy consumed by shipping and processing.

Ah, but what about the UK’s shale gas industry? Wasn’t that kiboshed for environmental reasons? Britain has abundant shale formations from which gas and oil could be extracted by a process called hydraulic fracturing, or ‘fracking’ for short. Sadly, things haven’t gone well. Returning to this issue for the Mail on Sunday, Andrew Neil claims that ministers were “cowed into submission by the propaganda of the green lobby”.

But, as I pointed out the last time around, what actually happened was that the Oil and Gas Authority called a halt after earthquakes were recorded at the UK’s only active fracking site near Blackpool. Neil describes this series of unfortunate events as the “mildest of earth tremors” which “barely registered on the Richter scale.”

In fact, the heaviest of them registered at 2.9 — which, by definition, is not the “mildest” of tremors. People felt their houses shake.

Neil thinks we’re far too intolerant of these things. He may be right. But if rampant seismophobia is holding our country back, then what are pro-fracking politicians doing to challenge this irrational prejudice? Perhaps the MPs of the Net Zero Scrutiny Group could declare their constituencies to be ‘earthquake-friendly zones’.

What would have happened if we had kept calm and carried on fracking? Would we be swimming in shale gas by now, the envy of less happy lands? I’m afraid not. It took decades for the industry to become a major player in the US and Canada. There is no credible scenario in which the much younger UK industry could have made an detectable difference to the current energy crisis.

Furthermore, even if this country were producing large amounts of natural gas, our energy bills would still be going through the roof. We know this for a fact because this country does produce large amounts of natural gas. This is from the North Sea, not fracking; and though it’s not as much as we used to produce, it’s still enough to cover roughly half what we consume.

The reason why this makes little difference to British gas prices is that, these days, we’re joined up to the European gas market — which is linked, via the LNG tanker trade, to Asian gas markets. That’s why gas exports from the UK have increased during the energy crisis — our producers are simply chasing the best price for their product.

Pro-frackers in this country love to point to America, with its successful shale sector and much lower natural gas prices. The bit they don’t mention is that gas exports from the US are constrained by government policy and the limited capacity of the country’s LNG terminals. As a result, US consumers aren’t competing against consumers elsewhere.

If we wanted to create the same conditions in Britain then we’d have to stop our domestic producers from selling abroad. That would mean imposing export controls or even nationalising the oil and gas industry. Would the free marketeers of the Net Zero Scrutiny Group be up for that?

Luckily there is one market that is working well for British consumers. The auctions I mentioned earlier have succeeded in driving down the cost of new wind and solar power. They work by using a mechanism called a Contract for Difference or CfD. Providers bid to supply electricity at a fixed price , known as the strike price.

If the market price for electricity is lower than the strike price, then the Government (and ultimately the consumer) pays the difference. If, on the other hand, the market price exceeds the strike price, then the provider returns the excess to the Government.

Because gas prices drive the electricity market, that’s exactly what’s happening at the moment. Which means that, in effect, renewable power providers are subsidising the consumer, not the other way around.

Anyone who cares about household bills should welcome this fact. So instead of obsessing about failed technologies, let’s celebrate the industries where this country is succeeding.