From the TUC

No shale gas price revolution

22 Aug 2013, by in Environment

An oddly wide of the mark intervention in the fracking debate from the chair of the Fuel Poverty Advisory Group, Derek Lickorish. Apparently, “Ministers have a duty to promote the extraction of shale gas because it has the potential to drive down the cost of energy.” True, domestic dual fuel bills are now at a record high of £1,365 per annum. But, as analysts Deutsche Bank have concluded, “Those waiting for a shale gas ‘revolution’ outside the US will likely be disappointed, in terms of both price and the speed.”  Fuel Poverty Advisory Group’s last annual report called for carbon taxes to be spent on domestic energy efficiency. It makes no reference to enhanced oil and gas exploitation for fuel poor households in Great Britain.

The government gas price forecasts show prices rises from 61p per therm in 2012 to 72p in 2018 [blue line, central scenario]:

DECC gas prices

Yet, according to Derek Lickorish, protesters against fracking risk worsening the plight of the five million households struggling to pay their energy bills. Lickorish,  previously of EDF Energy, adds that “the voice of the fuel poor has been lost in the current frenzy” at Balcombe, West Sussex.

However, Deutsche Bank’s special report, A first look as EU shale gas prospects, concludes:

Those waiting for a shale gas ‘revolution’ outside the US will likely be disappointed, in terms of both price and the speed at which high-volume production can be achieved. We believe it is too early to judge the recoverable resource size, let alone what commercial production rates may be possible.

Prime among the uncertainties are the size of the recoverable resource, the rate at which production can be achieved, and the extent to which the concerns of local residents and environmental groups can be accommodated.

As a result, whilst we think that EU shale-gas deposits certainly have the potential to contribute meaningfully to indigenous production over the next 10-20 years, we do not expect the impact of shale-gas production on EU gas prices to be anywhere near as great as has been the case with US shale-gas production

And we reported yesterday that Ofgem saw no connection between gas fracking and lower energy prices. .

According to Ian Preston Senior Analyst at the Centre for Sustainable Energy, fuel poverty has rocketed back up to over 5.1m households in England from a low point of 3.5m in 2010. DECC’s redefinition of fuel poverty has reduced the number to 2.8m households, “but 2.8m is still a shocking figure that needs to be addressed. So it’s imperative that those working on fuel poverty or in fuel poverty challenge the Government to set an objective that meets the scale of the challenge.”

The Fuel Poverty Advisory Group latest report called on the Chancellor:

To use carbon tax revenues to fuel poverty proof poor housing for low income households would have multiple benefits in addition to living in a warmer more energy efficient homes, including carbon reduction, improved health, and economic growth. Over the next 15 years £63 billion will be added to consumers’ energy bills through the Carbon Price Floor and EU ETS. The French, Estonian, and Australian Governments are all recycling some on their carbon revenues back to consumers through insulation measures and in Australia, compensatory welfare benefit increases.

The full refurbishment of homes in fuel poverty could provide 71,000, frequently semi-skilled, construction industry jobs by 2015.

3 Responses to No shale gas price revolution

  1. JohnM
    Aug 27th 2013, 10:25 am

    I would not hold your breath counting on shale gas/oil.
    There is a very powerful lobby within the EU that is heavily against shale exploitation.

  2. Let’s not join Osborne’s dash for fracking | Utilities Scotland
    Sep 17th 2013, 9:15 am

    […] the TUC’s Philip Pearson has highlighted the Deutsche Bank special report that says: “we do not expect the impact of shale-gas production […]

  3. Derek Lickorish
    Sep 24th 2013, 10:17 am

    This is what I actually write for The Times:

    I recognise people’s concerns about extracting natural gas from shale are real, but the affordability of energy bills for many is an even bigger concern. The voice of the fuel poor has been lost in the current frenzy taking place at Balcombe where oil from shale is driving local and national concern.

    An alarm bell should be ringing loudly in government following the Office of National Statistics (ONS) announcement last Friday that average total household energy consumption in England and Wales decreased dramatically, by 24.7% from 2005 to 2011. But averages mask a painful reality for some. They also reveal that energy consumption in the East and West Midlands, areas of very high fuel poverty, consumption has reduced by 30%. The fuel poor are not average. It is clear their consumption has reduced even more whilst those who can easily afford to pay for energy and may have some energy effciency measures, but will probably not have reduced it at all.

    Benefits and wages have not kept pace with the escalation of energy bills and the regulator Ofgem is telling us more consumers are getting into debt and the amounts are increasing. The average domestic fuel bill has increased by 133% over a period when average incomes have increased by only 27.4%. Average household expenditure on all fuels rose by 53% between 2000 and 2010. Poor consumers are making difficult choices and many will be cold in their homes again this winter. Homes that are not kept adequately warm can kill and harm. Cold homes increase the likelihood, repetition and the severity of respiratory and cardiovascular diseases. The links of dampness and mould growth on asthma and allergies are also well known and largely well understood.

    Assuming around 25 million UK households spend on average £1,400 per year, we collectively part with £35 billion annually to the energy companies. This is a huge sum of money taken out of local economies and is much more acutely felt in deprived areas, accelerating the demise of local shops and any positive sense of community that remains.

    Meanwhile, North Sea oil and gas tax revenue received by the Treasury in 2011-12 was £11.25 billion. To put this sum into perspective, this is 22 times more than the government’s recent announcement to make £500million available to assist with troubled hospital A&E departments. Gas that has to be imported either as LNG or through interconnectors does not contribute to this revenue stream. Similarly, nor does the huge amount of imported foreign coal currently being burnt in our power stations which is accelerating their closure and the generating capacity crunch which, if not addressed, will drive energy prices even higher and put at risk security of supply.

    We all need to ensure the full range of interests are explored to ensure the right outcome will take us forward to a carbon free and affordable energy future. Extracting natural gas from shale has the potential to reduce the cost of gas for heating and generating electricity. A Navigant Consulting report, commissioned by DECC, concluded that wholesale gas prices could fall from their current level of around 68 pence per therm to 53 pence per therm if shale gas production at scale also occurs in the UK and other European countries. If the right answer for this stage of the journey is through safely extracting natural gas from shale, avoiding vast revenues being sent overseas and a government commitment for a significant slice of all the related energy tax revenues to be used to insulate the homes of the fuel poor and subsequently others, it seems to make profound economic sense to me.