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 Shale Gas and a Whole System Approach to Decarbonisation

The Government support for high cost offshore wind has achieved a breakthrough in terms of cost reduction and it is clear to me that the combination of high load factor offshore wind backed up by low load factor gas generation will be the future for UK electricity and has the potential to deliver long term secure and low cost electricity.

Whilst gas will be required for windless periods, over the course of a year the gas load factor will be <10% as a result of smart metering load shifting, interconnectors etc. Secure and low cost, clearly a success and a windfall for UK as an island nation, with low cost electricity (beyond 2030) providing the opportunity to help to fund reduction in domestic customer gas demand (so in effect the low load factor back-up gas has a zero or negative carbon footprint as a result of its partnership with offshore wind).
Shifting cars to electric is inevitable and the course is set and whilst large trucks may need to use biomethane, the majority of vehicles by 2040 will be fuelled by electricity.
However, it is the decarbonisation of heating that is the hardest challenge for our economy (air travel apart) as a result of our cold winters, poorly insulated housing stock and reliance on gas central heating. There are two distinct models, one involves making hydrogen (using gas with CCS and electrolysis) the other involves installing heat pumps, either standalone or backed-up with gas as per the innovative Queens Quay scheme using heat from the River Clyde in Glasgow.
The major issue with heat decarbonisation is one of funding. The CCC recent report “UK Housing: Fit for the Future” identified this as one of the 5 priorities, they said:
Finance and funding. There are urgent funding gaps which must be addressed, including secure UK Government funding for low-carbon sources of heating beyond 2021….
UK total annual gas demand is around 850 TWh and forecast to remain above 600 TWh from 2030. By then it is estimated by National Grid that we could be importing 500 TWh/annum of gas. Looking at forecast gas prices, this is likely to cost around £10 billion a year. Whether paid to US shale gas producers, Norway, Qatar or Russia is academic, it is a huge transfer of wealth out of the UK.
We need a ‘whole system’ strategy in the UK if we are to decarbonise our economy and that has to include huge investment in gas demand reduction and heat pumps, in excess of £20 billion a year from now to 2050 and beyond. Given competing claims for funding, unless we take ‘emergency action’ we will have no chance of meeting this target. The Paris Agreement will allow the UK to pay other countries to reduce GHG and it is inevitable that we will have to follow this course of action unless we take action. The action I am suggesting is as follows:
  • Allow a scientific review of the shale gas traffic light system to make an adjustment of the limits that is safe for people but allows exploration to progress and can also support development of geothermal resources in the UK
  • In parallel, establish a compelling vision that links taxation from UK shale gas production to funding for heat pumps and insulation
  • If we are as successful in UK as the Marcellus has been in Pennsylvania, we can aim to receive £6 billion a year in tax by displacing gas imports
  • £6 billion a year tax can underpin the £20 billion a year we need to invest in insulation and heat pumps
  • Coupled with the offshore wind/gas back-up benefit we can create the resources for a transformation in heating
  • Clearly there are impacts associated with producing our own natural gas instead of importing it. But if we are investing shale gas taxes to reduce gas demand that will be a GHG saving thatwould otherwise not be achieved. This is obvious but no one ever makes this link. And if US shale LNG does not have a market in the UK but has to go to China or India and displaces coal that will also deliver a planet wide reduction in GHG.
It is time to take a whole system approach and get us on a pathway to a decarbonised economy by 2050. The potential benefits from shale gas taxation is a windfall that we cannot afford to ignore. It is not “shale gas or renewables or insulation or heat pumps or H2”. It is all of the above. If we find
out that the shale gas taxation windfall is not achievable then we will have lost nothing. There is no Planet B.