One of Theresa May’s first energy announcements has been to redouble efforts to kick-start the UK’s fracking industry. Last weekend, government sources briefed the media that residents living near fracking sites would receive a cash payment to compensate them for disruption. That was followed by the Treasury releasing a consultation on a ‘Shale Wealth Fund’ earlier this week. It contains proposals to give local communities up to 10% of the total tax revenue from shale gas developments, with a proportion of the fund paid directly to individual households. A version of this policy was set out in the Conservative Party’s 2015 manifesto.
Bright Blue has been sceptical in the past about the environmental and economic case for fracking. This blog will examine the evidence on whether the UK needs to produce shale gas, and whether it would have a negative impact on our environment.
Do we need gas?
Gas currently provides heating to 90% of UK households, with little prospect of an alternative heating technology achieving significant market penetration any time soon. Even on the National Grid’s optimistic ‘Gone Green’ scenario, gas will still provide the majority of UK households with heating in 2040. However, improvements in energy efficiency and increased deployment of renewable heating technologies will slowly reduce gas demand in this sector.
The Government has committed to phasing out coal-fired power stations in favour of additional gas and offshore wind generation. The effects of this can already be seen, with gas generating 37.8% of the UK’s electricity in the first quarter of 2016, up from 24.7% in the same quarter in 2015. Moreover, with a growing share of renewables on the grid, gas is needed to provide some flexible generating capacity to ensure the lights stay on when the wind doesn’t blow and the sun doesn’t shine.
But the maturing of new smart technologies, such as storage, demand-side response, and interconnection, will in time reduce the need for gas to balance power supply and demand. Moreover, as we found in our last report, too much gas in the power mix will cause carbon targets to be missed. The use of gas in electricity production therefore is unlikely to continue at its current high levels.
Do we need to produce our own gas?
Around 55% of the total supply of natural gas in the UK is imported. With declining levels of production in the North Sea, this figure is expected to increase in future years, with National Grid predicting an increase of as much as 38% by 2030. Most of the imports come from Norway or, in the form of Liquefied Natural Gas (LNG), Qatar.
There is some evidence that fracking would create jobs in the UK, particularly in areas with relatively low levels of economic activity. Ernst and Young have claimed that at its peak a UK fracking industry could generate around £3.3 billion of spending and support some 64,500 jobs, of which 6,100 would be direct.
However, given demand for natural gas will decrease in the long-term, the UK risks locking itself into an industry with a limited lifespan. Energy companies that are being encouraged to invest in fracking could instead be incentivised to invest in innovative clean energy. The UK has a great opportunity to lead globally in these new low-carbon technologies.
What would be the environmental impact of fracking?
Earlier this year, the Committee on Climate Change released a report examining whether developing fracking in the UK would be compatible with meeting the government’s legally binding carbon budgets. They specify three conditions for compatibility. First, methane leakages from the wells must be prevented, as methane is a highly potent greenhouse gas. Methane emissions can be controlled with new technology and proper monitoring. Second, gas consumption must not increase overall. So fracked shale gas must replace imported gas, not nuclear or renewables, in the power mix. Third, additional greenhouse gas emissions from the production process must be offset through deeper emissions reductions elsewhere.
Overall then, the climate impact of fracking can be mitigated, although fracking is not going to play a role in emissions reduction. These findings broadly matched those of DECC’s then Chief Scientific Advisor David Mackay from 2013.
A number of concerns have also been raised about the non-climate environmental impacts of fracking, for instance concerning water pollution and earthquakes. The Royal Society and the Royal Academy of Engineering published a report in 2012 that found these environmental risks could be managed with robust regulation, particularly of the integrity of the fracking well.
Conclusion
There is a case for allowing short-term shale gas extraction in the UK, provided that it displaces coal and imported LNG. Stringent environmental regulations are essential to limit methane leakage, and tighter planning controls could reduce the impact on the natural environment.
But the long-term energy needs of the UK will not be served by fracking. The Government should proceed with caution, and should not exaggerate the benefits. With the new Government’s emphasis on industrial strategy, fracking is not the best long-term bet for Britain’s energy and economic future.