Conservatives and Liberal Democrats are at odds over whether Britain’s plans to exploit shale gas is likely to bring down household bills.
In a fresh Coalition split on energy, the Prime Minister, the Chancellor and John Hayes, an energy minister, have hailed the potential for “fracking” to reduce gas prices.
However, Edward Davey, the Liberal Democrat Energy Secretary, urged caution, saying he thinks it is “unlikely” that bills would be kept down by new shale gas.
The row arose after Mr Davey gave the green light for Britain to explore and drill for shale,which is extracted by fracturing rocks to release gas reserves. This morning, he lifted a ban on fracking, which was imposed after the first project to start drilling caused minor tremors near Blackpool.
Senior Conservatives are very excited about the potential for shale gas to boost the economy, creating jobs, making the UK more self-sufficient and bringing down energy costs.
The Prime Minister’s spokesman today said there is “great potential for prices to come down” because of shale gas.
“That is something that is attractive about finding another source of energy,” she said.
In a hearing on Tuesday, David Cameron suggested the “revolution” could help keep down household bills.
“It would be a big risk just to ignore what is happening in the gas market,” he said. “If we ignored it completely, you could be giving your economy much higher energy prices than is necessary.”
Mr Osborne also flagged up the impact of shale gas on prices, as he announced tax breaks for the industry in his Autumn Statement last week.
“America’s success in unconventional gas is giving them low energy costs and cutting their carbon at the same time,” he said. “We don’t want British businesses and families to be left behind as gas prices tumble on the other side of the Atlantic.”
However, Mr Davey today slapped down Conservative claims that exploiting shale gas will lead to cheaper prices.
“Some people though have looked at North America and are very excited that if we go for shale gas then we’ll get cheaper energy,” he told Sky News.
“I’m afraid I wish I could we would definitely have cheaper energy as a result of this but I can’t say that,” he said.
“First of all we don’t know whether we will find lots of technically recoverable shale gas in the United Kingdom and the chances that it will affect our gas price I think, most experts think, is unlikely.”
Experts are unclear over the potential for shale gas to bring down energy prices. Britain has trillions of cubic feet of shale reserves covering up to 60 per cent of the country but companies do not know how much – if any – can be extracted and at what cost.
Pöyry, a group of consultants, has found that prices could be 2 per cent to 4 per cent lower if Lancashire shale gas started to ramp up in the next decade.
Ofgem, the energy regulator, has also concluded that only a shale gas boom in Europe would lead to significantly lower gas prices in the UK. It said this kind of a boom is “a low probability outcome”.