Debate: Will fracking be good for the UK?

Written by Civil Service World on 12 July 2013 in Analysis
Analysis

America’s fracking revolution has driven down energy prices and given the economy a boost – but could the same happen here? CSW asked the Institute of Directors’ Corin Taylor and energy expert Professor Jim Watson of the University of Sussex to address the question: will fracking be good for the UK?

The British Geological Survey has confirmed that there are very large quantities of shale gas in the ground, but further exploration will be needed to find out whether it can be extracted commercially. If this phase is successful and production begins in earnest, Britain stands to benefit in energy, economic and environmental terms.

Firstly, energy. According to the central production scenario presented in our recent report, Getting shale gas working, shale could be meeting around a third of the UK’s gas demand by 2030, reducing gas import dependency and slashing import bills.

Secondly, economic. At its peak, shale gas production could support 74,000 jobs across Britain. The industry will require geologists, engineers, construction workers, business analysts and truck drivers, among others. Cement and steel manufacturers, drilling services companies and water treatment specialists would form important parts of the supply chain. And spending by the employees of the industry and its supply chain would benefit local businesses.

Given the location of much of Britain’s shale gas resources, production at scale has the potential to rebalance the economy in favour of the North of England and Wales. And with heavy industry crying out for more indigenous gas, shale development could support wider manufacturing, giving economic rebalancing a further boost. At the same time, the Treasury could use the new tax revenues to fill the gap left by declining North Sea output.

Thirdly, environmental. European Commission studies have shown that well-regulated shale gas production has lower emissions than imported liquefied natural gas, while the UK’s Committee on Climate Change has concluded that shale gas is compatible with decarbonisation and renewable energy targets. And natural gas has great potential as a transport fuel, helping to clean up city air.

The US shale gas revolution is widely discussed. But here in Britain we can learn from our own history. North Sea production allowed gas to replace coal as the most important source of energy, made Britain self-sufficient in oil for 25 years and contributed enormously to tax revenues and economic output, with Aberdeen still the second richest region in the UK. Shale gas development may not reach quite the same scale, but it could provide a sizeable boost just the same.

The sceptic: Jim Watson, professor of energy policy at the University of Sussex

Whilst gas will continue to be important to the UK for many years, its use needs to be compatible with the need to limit greenhouse gas emissions. This applies whether we get our gas from conventional sources or from shale. The UK’s climate change targets mean that our energy system will need to shift away from gas and other fossil fuels, and carbon capture and storage technologies will be deployed at fossil fuel power plants and industrial facilities that continue to operate.

There is a lot of speculation about the prospects for shale gas in the UK. The excitement that this has generated is understandable. Shale gas has led to a dramatic shift in the energy mix in the United States, where greenhouse gas emissions have fallen and so have natural gas prices. There is no reason to prevent its development in the UK too, as long as strict environmental standards are met and there is public consent.

However, excitement about the prospects for UK shale gas is premature. When the chancellor George Osborne said that he wanted “Britain to tap into new sources of low-cost energy like shale gas”, he was making some bold assumptions. There are two reasons to be cautious about claims that shale offers a low cost energy future for the UK.

First, there is insufficient evidence about how much shale gas could be economically recoverable in the UK. There are some detailed studies of the size of the shale gas resource – including the recent British Geological Survey produced for the government. These studies emphasise the huge uncertainties associated with their estimates. Many experts argue that UK shale will be more expensive to develop than shale in the USA, due to differences in geology, land ownership, regulations and population density.

Second, even if shale were developed in large quantities in the UK, the impact on consumers might not be significant. This is because the UK’s gas supply system is more interconnected with international markets that that of the USA. These connections have brought us advantages. They have added to our energy security as our own gas supplies have declined by facilitating access to a range of international sources of gas. They also mean that any additions to gas supplies from UK shale resources will be accessible to international markets and consumers – and any downward pressure on prices is likely to be limited.

See also:

Our feature on the passage of the Energy Bill
Our interview with DECC permanent secretary Stephen Lovegrove

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