There is much debate about how levels of subsidy should influence new power generation but could the recent developments in extracting shale gas be the biggest factor in shaping the UK’s new energy capacity.
In the US, where shale gas drilling is much more mature, the natural gas and energy market has been completely altered, trumping predictions made ten years ago.
The knock-on effect is that renewable energy projects are falling out of favour because of their high costs compared to gas.
“Ten years ago the USA imported 15% of its natural gas, and it was predicted to rise 20% by 2010,” says USA policy institution Center for Strategic and International Studies (CSIS) Energy and National Security Program senior adviser Guy Caruso.
“As a result there were huge amounts of investment in terminals to import natural gas on the coast of Texas and Louisiana,” adds Caruso, who previously worked as an analyst for the US Department of Energy.
“The renewables industry doesn’t like the price of energy being brought down”
Guy Caruso, Center for Strategic and International Studies
But in the past 10 years advances in horizontal drilling, the development of hydro-fracking, and then developing these into commercial techniques, have allowed engineers to extract the shale gas.
“It’s been known for years there has been the shale gas, but previously there’s not been a way to crack the code,” says Caruso.
The effects on the greater US energy market has been stark.
“The renewables industry doesn’t like the price of energy being brought down,” adds Caruso.
Caruso says that major solar and wind projects that gathered momentum from 2005 to 2010 have fallen out of favour because of the high price to produce electricity and the subsidies required.
Furthermore, the gas terminals built to import supplies are now underutilised with many owners applying for permits to convert them for export.
Increase in gas use is also predicted by the International Energy Agency’s (IEA) latest report which estimates use doubling by 2035.
“Its increased use could muscle out low-carbon fuels, such as renewables and nuclear - particularly in the wake of the incident at Fukushima,” says IEA executive director Nobuo Tanaka.
But how could this effect the UK with shale gas exploration in its infancy, and should it prevent renewable energy developments because it is a fossil fuel?
UK shale gas
Two weeks ago MPs gave the green light for shale gas drilling in the UK, but drilling at a site near Blackpool was halted after two minor earthquakes were recorded (see News last week).
The British Geological Survey (BGS) is working with Keele University to see if there is a correlation.
University of Manchester professor of structural geology Ernie Rutter explains the that whilst there were two earthquakes, the first measuring 2.3 magnitude and the second 1.5, it is only the second one that may cause a concern.
“The first tremor was at a depth of 9km, where as the second was at a depth of 2km, much closer to the drilling at a depth of 2.7km.”
Developer Cuadrilla has suspended its operations at the site but hopes this will be a temporary measure.
Rutter confirms that while there has been no evidence of shale gas extraction causing earthquakes, subsurface drilling has. “We have to put it into context - it’s a small tremor and most people won’t have felt a thing.”
But is the environment being sacrificed for cheap gas?
Caruso adds that key to enabling the production was a regulatory regime that was used to dealing with gas exploration. “Authorities in Texas [where the main discoveries took place] have experience with drilling on their land.”
The UK authorities have much less experience with onshore gas drilling, and are bound by renewable targets not applicable in the US.
But even if the UK’s vast reserves, up to 150 billion cubic metres according to BGS estimates, can be tapped concerns have been raised over the environmental impacts of drilling.
Cornell University ecology and environmental biology professor Robert Howarth argues that shale gas produces a more severe greenhouse gas effect than burning coal.
“Compared to coal, the footprint of shale gas is at least 20% greater and perhaps more than twice as great on the 20-year horizon and is comparable when compared over 100 years,” says his new report - Methane and the greenhouse-gas footprint of natural gas from shale formations.
The Department of Energy and Climate Change has put in measures to protect investors from a sharp drop in energy supplies through its contract for difference and the planned introduction of carbon floor price.
However, if shale gas does offer cheap, abundant and stable energy production, and costs for renewable energy fails to come down, it will present a difficult decision for the politicians who need to balance reduction in carbon with price inflation and protecting consumers’ electricity bills.