Don’t let the Energy Bill threaten Britain’s shale revolution, says former Chancellor Lord Lawson
Some 30 years ago I was Secretary of State for Energy. In those far-off days the purpose of energy policy was to ensure a reliable supply of energy, for business and households alike, at the lowest possible cost.
No longer. The Energy Bill now before Parliament is the worst energy bill within living memory. Its sole purpose is to enable the UK to reach the ambitious decarbonisation targets enshrined in Labour’s Climate Change Act.
This is to be achieved by giving the Secretary of State the arbitrary power, without any parliamentary oversight whatever, to lock us into long term (15 years or more) contracts for the supply of high cost nuclear energy and even higher cost renewable energy (in particular wind power).
This made no sense even when the bill was first devised, during the dying days of the last Labour government (it was published in draft in 2010, since when the essence of the bill has remained unchanged). Yet since then everything else has changed fundamentally.
The Climate Change Act was explicitly designed to set out the UK’s contribution to an ambitious global decarbonisation agreement, along the lines of the more limited Kyoto accord of 1997. Since then, however, Kyoto has expired and all that remains is an ‘agreement’ to try and achieve a global agreement to take effect in 2020. For the UK to proceed unilaterally is highly damaging in economic terms and futile in climate terms.
The other big change is the shale revolution. Geologists have long known that there are vast quantities of gas and oil trapped in shale, a black rock which is widely distributed around the world, not least in the UK. But it has always been too expensive to extract economically. That has now changed, with the technological revolution known as ‘fracking’.
The pioneer in the use of this revolutionary technology has been the United States, which, as a result, has already overtaken Russia as the world’s foremost producer of natural gas, and may in due course overtake Saudi Arabia in oil production. This has led to US gas prices plummeting, which is an important reason why the US has recovered from the world recession better than Europe, including the UK. And US experience has proved, too, that the widely-touted environmental concerns about fracking are entirely groundless.
Despite the hundreds of thousands of shale wells that have been drilled in the US, there is not a single authenticated case of groundwater contamination. This is hardly surprising, as groundwater (as its name implies) is near the earth’s surface, whereas shale is drilled deep, deep down, and there usually at least a mile of solid rock between the two. As for earthquakes, while there have been a few instances of minor tremors deep down where the fracking occurs, these have no effect whatever on the surface, where we all live.
Moreover, the benefit of the shale revolution is not merely economic. There is also a major geopolitical prize, as the Western world need no longer rely for its energy on an unstable Middle East and unreliable Russia.
Happily, the British Geological Survey has found that we have in the UK what are almost certainly the largest reserves of shale gas in Europe. In Lancashire and Yorkshire alone they reckon there is enough to supply all the UK’s gas needs for at least the next 50 years, and probably much longer. And that is without surveying the rest of England, which is known to contain substantial shale deposits, or offshore, which is believed to contain even more.
But the malign effect of the Energy Bill, if enacted and implemented in its present form, will be to lock us into binding long-term contracts for high-cost nuclear and (even more) renewable energy, leaving little or no space for much cheaper shale gas.
This is the energy policy promoted by our Liberal Democrat Energy Secretary. Fortunately, we also have a Conservative energy policy. George Osborne is to be warmly commended for having come out strongly in favour of the fastest practicable development of our shale reserves, and has been unequivocally backed by David Cameron.
This is good news. But it makes no sense for the UK to have two separate and conflicting energy policies at the same time. It is quite clear which we must choose, and which we must junk – the sooner the better.
Lord Lawson is a Conservative peer and former Chancellor of the Exchequer