UK Liberal Democrat energy secretary Ed Davey could find himself at odds with conservative cabinet colleagues, after he appeared to pour cold water on the potential significance of shale gas to the UK energy mix.
Both Conservative party environment secretary Owen Paterson and chancellor of the exchequer George Osborne are keen supporters of exploitation of shale or unconventional gas, which some analysts argue is a cheaper alternative to both nuclear and renewable options.
Mr Davey is trying to encourage low carbon electricity and nuclear plants in the face of opposition who maintain these are too costly.
The Financial Times reports that in a meeting of senior business executives on Monday night, Mr Davey said he wanted to knock down the “myth” that the bill’s reforms were unnecessary “because a global glut of cheap gas will solve our investment and carbon problems”.
Though gas would continue to play an important role in coming years, and was much cleaner than coal, its price was still volatile, he said, with global gas prices rising 40 per cent last year.
“Yes, prices can go down, as well as up. And yes, unconventional gas can make a difference, although perhaps not as big a difference as some sections of the press would have me believe,” he said.
“Analysts think shale gas extraction in Europe will be more expensive than in the US, and probably won’t happen at scale until the end of this decade,” he said, adding shale gas was forecast to double its share of the market by 2035, but “that will still account for barely a third of global demand”.
“And we’re competing with fast-growing economies which are hungry for gas. Demand in the Middle East is rising steeply . . . China alone is expected to double its demand by 2017. No wonder the consensus is that gas prices will either remain high, or go higher.”
Mr Davey insists that long-term contracts for low carbon and nuclear energy supplies were the best solution to the basic problem in the UK energy system: the rising electricity demand forecast as a fifth of the country’s power plants are due to close.
This means some £100bn of investment in electricity infrastructure has to be made over the next 10 years, Mr Davey said, and some of that investment must go to low carbon plants, such as solar and wind farms, in order to meet the UK’s legally binding carbon emission targets.
For more power policy and regulation news