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‘No guarantee’ that shale gas will reduce energy bills

Was George Osborne wrong?

UK shale gas reserves 'could heat country for 100 years'Tapping the vast resource of shale gas under the UK provides no guarantee that energy bills can be reduced, MPs have claimed.

A new report carried out by the Commons Energy and Climate Change Committee has concluded that the government’s plan to help bring down rising energy bills by taking advantage of the resource present on UK shores may not be the money-saving exercise that chancellor George Osborne believes.

In last month’s budget, Mr Osborne unveiled a series of tax breaks for companies tapping the UK’s shale gas reserves and indicated that financial incentives may be put in place to persuade local communities to allow exploration to take place nearby.

However, the way in which shale gas is extracted, through a process known as fracking, is a major bone of contention among those who may be affected by any exploration, as well as environmental groups.

Frack to the future

Hydraulic fracturing, to give fracking its full name, involves fracturing various layers of rock with a pressurised liquid, and accounts for the way in which around 60 per cent of new oil and gas wells are now tapped across the world.

However, critics claim that it has severe environmental side-effects, and can also cause significant disruptions to people who live in the vicinity of the activity, with some reports of earth tremors and fire emerging from taps in certain areas.

However, the government remains convinced that shale gas presents an excellent opportunity to secure the UK’s energy future and provide consumers with a reliable supply for years to come.

Mr Osborne says the benefits of using shale gas to heat homes could extend to a reduction in energy bills, as the cost of importing the resources is eliminated.

“I want Britain to tap into new sources of low-cost energy such as shale gas. Shale gas is part of the future. And we will make it happen,” he added.

However, the new Commons Energy and Climate Change Committee study has argued that the chancellor’s assertions may not be as accurate as believed, with the jury still out on whether shale gas can be the miracle cure that curbs rising fuel prices.

“It is by no means certain that prices will fall as a result of foreign or domestic shale gas development,” the report states.

Bumps in the road

Tim Yeo, chairman of the committee, said he is in support of the country’s shale resources being exploited, but claims this may prove difficult considering local opposition to drilling.

The coalition therefore needs to think carefully before making shale gas a key part of any future policies on energy, he added.

“We shouldn’t base energy policy on the supposition that we have 50 years’ worth of this gas to exploit. Some people seem to think shale gas is in the bag, that it is the answer to our energy problems, but it would be very rash to make that judgement now. We don’t know enough about it,” Mr Yeo explained.

The committee’s conclusions were based on the fact that soaring demand for fuel in Asia is likely to drive up prices across the board, while the finite amount of UK shale gas that is accessible means the country is unlikely to become self-sufficient, and will still rely on imports.

The committee suggested that the government’s suggestion of sweetening the deal by offering financial incentives to local communities may work, but only if the rewards are substantial enough to benefit the members of the public who will be affected by any fracking.

“It’s not just a question of building a new car park or a bypass. It might be cash incentives, and it might have to be very local – not to a borough council but to individual villages near the sites,” Mr Yeo said.

Mixed reaction

Reaction to the report has been mixed, with exploration company Cuadrilla, which is currently the only organisation licensed to carry out fracking in the UK, welcoming the committee’s recommendations.

Francis Egan, chief executive of Cuadrilla, told the Guardian: “I’m delighted with the committee’s central conclusion that exploration companies like Cuadrilla should receive strong support from the government to get on and drill, in order to establish the extent of the recoverable resources of natural gas.”

However, environmental groups interpreted the study differently, with Friends of the Earth energy campaigner Tony Bosworth saying it does little to “back the case” for a UK shale gas revolution.

“Fracking is dirty, unnecessary and a threat to our climate and environment – it’s little wonder so many communities are in opposition,” he said.

Greenpeace’s Leila Deen added that the only thing the report confirms is that shale gas and fracking remains a grey area, with no guarantee that it will reduce consumers’ energy bills.

“Fracking remains a fantasy and a dangerous distraction from renewables, which continue to fall in cost. The government needs to start backing energy winners, instead of gambling with consumers’ pockets and the climate,” she added.

The government has reiterated its intention to press ahead with a UK shale gas revolution, but the chancellor and the Department of Energy and Climate Change will now need to take the committee’s study findings into account before implementing any new energy policies.