For some time now, the UK Government has taken an open-minded approach to the potential development of UK shale gas, stating that it has the capacity to provide the “UK with greater energy security, growth and jobs” (HM Government, 2017). Recent technological advancements have seen hydraulic fracturing and horizontal drilling transform a previously inaccessible resource into a genuinely viable option. The UK development of fracking has been relatively slow when compared to its US counter parts, with only two companies, Cuadrilla and Third Energy leading the way. Despite this slow progression, both companies have plans to commence tests on the gas flow rate in the coming year to establish whether wells are commercially viable. Hydraulic fracturing has the potential to satisfy several short-term supply and price issues, whilst providing a preferential source of energy over its dirtier coal counter-part. Below are some of the benefits and costs associated to the energy source.
Since the UK will not be a part of the EU customs union, it is possible that a poor Brexit deal would revert the cheaper prices secured through interconnecting flows between the EU and Britain (ipa Advisory, 2017). However in the US, fracking has recently led to substantial gas price decreases. Following the exploitation of the natural gas, a stable Henry Hub price of $3.50-4.00/mmbtu was achieved. This can be compared to the UK’s whole sale price of roughly $10/mmbtu even before a potentially harmful Brexit deal. As most other forms of energy are unable to compete with these prices, the construction of new nuclear generating facilities have been put on hold whilst coal power plants are being decommissioned early.
Considering the issues surrounding fuel poverty, this price reduction appears very attractive as it would ease the burden of costs on households throughout the UK.
Security of Supply
Without adequate development of fracking, the UK will continue to increasingly rely on imported gas, with forecasts suggesting that the UK could import three quarters of its gas by 2030 (Taylor and Lewis, 2013). This is due to the fact that year on year, the United Kingdom is consuming more gas with a 3.2% increase between 2015 and 2016 (HM Government, 2017). Without sufficient conventional domestic reserves, foreign gas is the only other option to meet this demand. Additionally, storage capacity is set to fall substantially, with Centrica’s decision to cease operations of its Rough storage on the 20th June (chart 4). Furthermore, there is increased uncertainty surrounding the impending exit from the EU. The combination of these factors in the context of depleting North Sea Oil supplies, risks making the UK’s energy supply extremely vulnerable to demand or supply shocks, thus present a need for “further interventions” in the UK’s energy provision to secure stability (ofgem, 2014). The capacity for fracking to positively impact the UK’s supply can be seen by the US transitioning from a net importer of gas to an exporter with the capacity of 9.3 billion cubic feet per day (V. Arora, Y. Cai, 2014)
Relative Pollution Impact
Fracking has the ability to be a legitimate alternative to more polluting sources. Per kilowatt of power, gas releases half the CO2 emissions compared to coal, leading it to be labelled as a ‘bridge’ fuel to a low carbon future (Howard Rogers, 2011). In the US, the high use of shale gas has substantially contributed to the observed 11% reduction in GHG emissions since 2007 (Mason et al, 2015). The adoption of fracking in the UK would most likely increase the rate at which coal power stations are phased out, positively contributing to emission reduction, whilst additionally helping the government to meet their pledge to eradicate coal power by 2025.