UK government targets shale gas growth
The UK is to become a world-leading centre for shale gas investment following an announcement today from government that includes £100bn for infrastructure projects.
Today’s announcement from Danny Alexander, chief secretary to the Treasury, follows yesterday’s Spending Review in which the chancellor George Osborne outlined plans to save £11.5bn whilst promoting economic growth through investment in sectors including energy, transport and science.
The government says it is taking action to provide the support and policy certainty needed to enable up to £110bn of private sector energy investment, which include a comprehensive package of reforms to enable shale gas exploration.
This burgeoning form of gas is extracted through hydraulic fracturing or ‘fracking’ and it received a boost today with the publication of a report from the British Geological Survey which looked at the potential volume of shale gas across 11 counties in northern England.
It concluded that there is likely to be some 40 trillion cubic metres (1,300 trillion cubic feet) of shale gas in the ground in this area - the Bowland Basin - although the amount that can be extracted will be determined through future exploratory drilling.
To this end, government says it will ‘publish a comprehensive package of reforms to enable shale gas exploration including proposals for the tax regime, for planning, and for community benefits, to give the UK a world-leading regime for investment.’
In a statement, energy secretary Michael Fallon said, ‘Shale gas represents an exciting new potential energy resource for the UK, and could play an important part in our energy mix.
‘The next step for industry is to establish how much gas is technically and commercially recoverable.
‘With the package announced today on planning, environmental regulations, and community benefits, it is clear that we want to encourage a shale industry that is safe and that doesn’t damage the environment.
Sounding a note of caution, Prof Jim Watson, research director, UK Energy Research Centre said, ‘It remains to be seen whether it will make economic sense to develop these resources – and how much can be extracted cost effectively.
‘Even if significant shale gas production develops in the UK, this would need to be compatible with stringent environmental regulations and climate targets.’
Nuclear and renewables
Further announcements on energy infrastructure include a ‘multi-billion pound guarantee’ for a new nuclear power station at Hinkley Point C, and the allocation of an additional £800m in 2015-16 for the Green
Investment Bank (GIB), which will enable it to invest in low carbon projects including renewable energy, waste management and energy efficiency.
Investors received further reassurances with the announcement of strike prices for renewables. Subject to consultation, draft strike prices will be applicable to offshore and onshore wind, wave, tidal, biomass conversion and large solar.
Dr Tim Fox, head of Energy and Environment at the Institution of Mechanical Engineers, said, ‘Today’s raft of announcements on energy infrastructure initiatives including nuclear, renewables and shale gas are long overdue and will go someway towards creating investor confidence.
‘While we welcome today’s announcement of proposed strike prices for renewable energy sources…it is worrying that no strike price has yet been set for nuclear.’
Today’s announcement forms part of a much larger range of measures aimed at providing £100bn for infrastructure projects in Britain (including HS2, investment in roads and flood defences, and the repair or build of homes) whilst ensuring the science base and investment incentives are there to achieve them. Full details are here.
- HS2 - The government is applying lessons from the successful delivery of the London 2012 Olympic Games to HS2 and is setting a funding envelope of £42.6bn (in 2011 prices) for construction costs and £7.5 billion for rolling stock together with a strong cost control framework
- Confirm support for Network Rail to invest over £9bn in major rail projects between 2014-15 and 2018-19
- The government will repair the national road network, investing over £4bn by 2020-21 to enable the Highways Agency to repair and renew the national road network, including resurfacing around 21,000 lane miles
- Between £30bn to £50bn over a 10 to 15 year period will be made available to upgrade the nation’s roads to an entirely new standard
The Spending Round commits to maintain resource funding for science in cash-terms at £4.6bn in 2015-16, as well as providing a real increase of £185m in resource funding for the Technology Strategy Board to support innovation. The government will increase science capital funding in real terms from £0.6bn in 2012-13 to £1.1bn in 2015-16, and in line with inflation to 2016-17
Devolve economic power to Local Enterprise Partnerships (LEPs) through the creation of a Single Local Growth Fund and Growth Deals