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Osborne to fill energy gap with gas

George Osborne will reveal how gas is set to play a key role in his Autumn Statement this week.

power stationsThe chancellor will unveil a new gas strategy that will explain how gas and renewables will combine and increase the sustainability of the UK’s energy supply.

According to Mr Osborne, the UK will require up to 30 new gas-fired power stations to help produce 26 gigawatts of energy, and replace or modernise existing coal, nuclear and gas plants.

The strategy will explain that, in 2030, the country will need more overall gas capacity than it has today.

“Both now and in the future we need a diverse generation mix that balances risks and uncertainties of different technology options … the government expects that gas will continue to play a major role in our electricity mix over the coming decades, alongside low-carbon technologies as we decarbonise our electricity system,” it will read.

The chancellor is also set announce a relaunch of the private finance initiative (PFI) in a bid to attract private investors to public construction projects, with new rules improving transparency and risk sharing and removing excess profits.

Backing for fracking?

As part of the gas strategy, Mr Osborne will reveal how the government is set to consult on tax breaks for shale gas exploration, in a bid to increase the use of the controversial energy source.

In order to abate fears about the production of shale gas and the highly contentious hydraulic fracturing (fracking) process – which has been linked to earthquakes and tap water being set on fire – the coalition will set up an Office for Unconventional Gas.

This will help to simplify regulation and also mediate in debates between the industry and those opposing the fracking process. Fracking involves drilling and injecting fluid into the ground at a high pressure in order to fracture shale rocks to release natural gas inside.

Though effective, there have been several reports of the process contaminating water supplies, leading to tap water becoming flammable, while the process also disturbs the earth and causes tremors. If the government is to convince the public that the process is safe, the Office for Unconventional Gas will be an essential tool.

Divide and debate

george osbourneThe launch of the gas strategy is once again set to open debate about the divide between the Tories and the Lib Dems.

Only last week, the government shed light on the details of its Energy Bill, which aims to ensure that the UK has a secure and affordable energy supply, while also adhering to European legislation on so-called ‘dirty’ power stations.

In a bid to meet its long-term carbon emissions targets, the coalition has pledged to shut down the country’s biggest coal-fired plants over the course of the next five years and also place more of a focus on renewable sources of power.

However, Mr Osborne’s latest announcement will raise a few eyebrows, particularly among those who see it as a shift towards reneging on promises to shut down power stations producing non-renewable forms of energy.

Energy and climate change secretary Ed Davey recently said he expects the Tories to promote gas when the new strategy is unveiled in the Autumn Statement, but described the term ‘dash for gas’ as an “over-used phrase”.

“We are some way off from thinking we have too much gas. I am quite relaxed about the gas strategy. Liberal Democrats have always said gas has a role. If there is a danger that we are locking in too much gas, we will still have tools to reduce it,” he added.

His stance appears to correlate with that of other Lib Dems, who are aware that gas needs to play a part in future UK energy production.

In it for the long term

However, the chancellor’s new strategy leads up to 2030 so it is unlikely to be a short-term solution – as evidenced by the proposed creation of 30 new power stations around the country over the next 18 years.

In spite of this, Lib Dems have noted that gas prediction is preferable to the use of fossil fuels such as oil and coal, which are not only more expensive, but also more carbon intensive.

The coalition is in agreement on one matter – that there is an urgent need to keep the UK’s energy prices low and help to ease the burden on consumers. For George Osborne, this will mean turning to gas.

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