Betting on a Horse Named Shale
DECC’s gas strategy is a huge gamble for the UK energy consumer. The Government just took your future energy bills and placed them on a horse named Shale.
Whichever way you cut it, the Gas Strategy will see the UK’s medium term energy future hugely reliant on gas power stations – up to 37GW. Running that amount of plant means a lot of carbon dioxide pumping into the atmosphere, but it also means that your energy bills will be dependent on the price of wholesale gas. That price fluctuates, but in recent years it is pretty rare to see it drop, even when wholesale prices tumble.
DECC and the Treasury sit on the fence in relation to wholesale gas prices, but the reality is gas prices in the UK have been a one-way bet.
That makes the following statement (Para 4.12 in the Gas Strategy) very telling:
“Forecasters generally expect prices will rise over the coming decades, but increases in unconventional gas production make it likely that this growth will be more moderate than in the absence of unconventional sources.”
The implication is clear – the only chance of gas prices staying within moderate price forecasters is through the commercialisation of significant shale gas reserves.
We know that the UK has significant shale gas reserves, but the extent that we will be able to extract them, and at what cost is fiercely debated. If Shale was a racehorse, we have not seen it produce more than a trot in this country. We are now expecting it to gallop in to defeat the gas markets.
Investors and consumers wanted a clear direction on UK energy policy, and the gas strategy goes some way to achieving that. Billions will need to be invested to make the strategy a reality and billions more consumer pounds will follow that investment.
Is it wise to put our money on a horse that could be lame?