UK government targets shale gas growth

Today’s announcement from Danny Alexander, chief secretary to the Treasury, follows yesterday’s Spending Review in which the chancellor George Osborne outlined plans to save £11.5bn whilst promoting economic growth through investment in sectors including energy, transport and science.

The government says it is taking action to provide the support and policy certainty needed to enable up to £110bn of private sector energy investment, which include a comprehensive package of reforms to enable shale gas exploration.

This burgeoning form of gas is extracted through hydraulic fracturing or ‘fracking’ and it received a boost today with the publication of a report from the British Geological Survey which looked at the potential volume of shale gas across 11 counties in northern England.

It concluded that there is likely to be some 40 trillion cubic metres (1,300 trillion cubic feet) of shale gas in the ground in this area - the Bowland Basin - although the amount that can be extracted will be determined through future exploratory drilling.

To this end, government says it will ‘publish a comprehensive package of reforms to enable shale gas exploration including proposals for the tax regime, for planning, and for community benefits, to give the UK a world-leading regime for investment.’

In a statement, energy secretary Michael Fallon said, ‘Shale gas represents an exciting new potential energy resource for the UK, and could play an important part in our energy mix.

‘The next step for industry is to establish how much gas is technically and commercially recoverable.

‘With the package announced today on planning, environmental regulations, and community benefits, it is clear that we want to encourage a shale industry that is safe and that doesn’t damage the environment.

Sounding a note of caution, Prof Jim Watson, research director, UK Energy Research Centre said, ‘It remains to be seen whether it will make economic sense to develop these resources – and how much can be extracted cost effectively.

‘Even if significant shale gas production develops in the UK, this would need to be compatible with stringent environmental regulations and climate targets.’

Nuclear and renewables

Further announcements on energy infrastructure include a ‘multi-billion pound guarantee’ for a new nuclear power station at Hinkley Point C, and the allocation of an additional £800m in 2015-16 for the Green

Investment Bank (GIB), which will enable it to invest in low carbon projects including renewable energy, waste management and energy efficiency.

Investors received further reassurances with the announcement of strike prices for renewables. Subject to consultation, draft strike prices will be applicable to offshore and onshore wind, wave, tidal, biomass conversion and large solar.

Dr Tim Fox, head of Energy and Environment at the Institution of Mechanical Engineers, said, ‘Today’s raft of announcements on energy infrastructure initiatives including nuclear, renewables and shale gas are long overdue and will go someway towards creating investor confidence.

‘While we welcome today’s announcement of proposed strike prices for renewable energy sources…it is worrying that no strike price has yet been set for nuclear.’