Monday 30 December 2013

Keeping the lights on

In a recent post, I took issue with Friends of the Earth's "bullshit bingo" fracking cards. It seems I'm getting noticed, because Tony Bosworth promised me a response when I met him at a recent IMechE event on shale development, although I've yet to hear back from him.

I know that I shouldn't take these things too seriously, but there was one particular square on the bingo card - Keeping the lights on - that has really nagged away at me, such that I've felt the need for a whole new blog post just to get my feelings off my chest. The nagging has only got stronger since I spent the last couple of weeks travelling around the Yucatan, Mexico, where many communities, away from the flesh-pots of Cancun, really do only have electricity for a few hours a day.

The implication from FoE, as far as I can tell, is that people who talk about "keeping the lights on" are somehow worthy of mockery, or shouldn't be taken seriously (and I would dearly love Tony B to confirm this for me, but that's the only conclusion I can see from the bingo cards). The more I think about it, the more flabbergasted I am that a supposedly reputable organisation could see things this way.

In our modern world, I think we take energy and electricity for granted (among many other things). If we need light or heat, we just flick a switch. If we need to drive somewhere, we pull in to a petrol station and fill up. Power cuts and fuel shortages are very rare disruptions to us these days - although the recent storms provide a timely reminder of how disrupting it can be when the power does go off.

However, keeping the lights on is no easy task, and it appears that in the coming years this task is set to get yet harder still, as ageing power stations are mothballed without adequate replacements. Recent OFGEM figures suggest that the spare margin - the difference between generating capacity and peak demand - could fall to as low as 2%

To deal with potential shortfalls, OFGEM have outlined a new scheme where businesses will receive payment in return for switching off their power during peak times 4 - 8pm on weekdays. While it is good that businesses will be compensated for lost power, of course it adds an extra cost to the consumer to cover these fees. 

Either way, these measures show that "keeping the lights on" is not some laughing matter to go on a Bullsh!t Bingo card, as the good folks at FOE seem to think.

Moreover, I'm not sure what message this sends out to businesses considering investing in Britain? We're all agreed that we want to build up our manufacturing base, to reduce our economic reliance on London's financial services industry. However, given that manufacturing operations generally require a stable and reliable electricity supply, being told that you might be expected to take a power cut for 4 hours a day can't be the most attractive incentive for investment in the UK.

Wednesday 4 December 2013

Shale gas and methane emissions - a perspective from

A major part of the debate around shale gas has focused on methane emissions and climate change. Natural gas, when burned, produces half as much CO2 as coal, so switching from coal fired power stations (still ~40% of our electricity supply) to natural gas could provide substantial emissions reductions. However, if a portion of the methane produced during extraction is allowed to leak into the atmosphere, then this could offset the CO2 gains, because methane is itself a powerful greenhouse gas.

We've seen a number of papers in recent times trying to get a handle on what proportion of methane produced from shale wells is ending up in the atmosphere, rather than in our boilers. Direct measurements at drilling sites have given low estimates, but regional overflight measurements have indicated that overall estimates might be underestimated - although with regional overflights, the source of methane (conventional gas, coal mining, shale gas, agricultural) cannot be determined.

The key question to ask is - how relevant are these estimates to global climate change, and are we seeing changes in methane emission rates impacting on the global concentration of methane in our atmosphere, and therefore on global climate change?

Who better to answer this question than the climate experts at - certainly no stooges for the oil and gas industry.

So - are reported increases in methane emissions bad news for global warming? (my emphasis added)
Not really, because the one real hard fact that we know about atmospheric methane is that it’s concentration isn’t rising very quickly. Methane is a short-lived gas in the atmosphere, so to make it rise, the emission flux has to continually increase. This is in contrast to CO2, which accumulates in the atmosphere/ocean system, meaning that steady (non-rising) emissions still lead to a rising atmospheric concentration. There is enough uncertainty in the methane budget that tweaks of a few percent here and there don’t upset the apple cart. Since the methane concentration wasn’t rising all that much, its sources, uncertain as they are, have been mostly balanced by sinks, also uncertain. If anything, the paper is good news for people concerned about global warming, because it gives us something to fix.
 Also, in more general terms:
The US is apparently emitting more than we thought we were, maybe 30 Tg CH4 per year. But these fluxes are relatively small compared to the global emission rate of about 600 Tg CH4 per year. The Arctic and US anthropogenic are each about 5% of the total. Changes in the atmospheric concentration scale more-or-less with changes in the chronic emission flux, so unless these sources suddenly increase by an order of magnitude or more, they won’t dominate the atmospheric concentration of methane, or its climate impact.
I am not a climate scientist, and there are probably too many non-experts shouting their views from the rooftops, so I will pose my conclusions instead as a tentative question: are we overestimating the importance of shale gas methane emissions with respect to climate change?

Tuesday 3 December 2013

Bullsh*t Bingo!

I love a game of Bullsh*t Bingo (usually deployed in business settings to mock overly jargonistic speakers). Something I have in common, it seems, with Friends of the Earth, who have come up with their own B-B card for UK shale development. Let's investigate their tiles:

We need gas for decades to come
FOE get off to a good start by "bullsh*tting" something that they themselves have agreed and accepted. FOE's energy ambitions are set out in their Clean British Energy report. For obvious reasons their plans are very ambitious in terms of what might be achieved in the next 20 years. Nevertheless, even they have gas providing 25% of our electricity in 2030 (not to mention the remainder of our gas use in domestic heating and cooking, and industrial processes). From a more neutral source, the National Grid considers two scenarios in their Future Energy Scenarios reports - a "slow progress" and a "gone green" option, the gone green option representing the fulfilment of the majority of clean-energy objectives. The difference in total gas demand in 2036 between these two end-member scenarios is 600TWh for the gone green, and a shade under 800TWh for the slow progress. So to conclude, we do in factneed gas for decades to come, regardless of future energy policies. Even FOE actually agree with this.

UK Gold Standard Regulation
It is well established across the world that UK (and western Europe in general) have some of the tightest regulations anywhere in the world for oil and gas activities. The are 2,000 wells drilled onshore in the UK, with imperceptible environmental impact, while there are many 1,000s more drilled offshore in the North Sea. So beyond the slight ambiguity inherent in who gets to define 'gold standard', it is a statement generally accepted around the world.

74,000 jobs
For obvious reasons, it is impossible to know exactly how many jobs will be created by a UK shale gas boom. Some reports have said lower (AMEC: 20,000), some have said higher (IoD: 74,000). Either way, even 20,000 new jobs is still something to cheer, rather than jeer, in these tough economic times, is it not?

Lower energy bills
Like the exact number of jobs created, the effects of shale development in the UK on gas prices is difficult to predict. At its simplest, the increase in supply should put downward pressure on prices. However, the impacts probably depend in part on what happens in the rest of Europe. A recent Poyry report, looking at shale development across the EU, predicted a 14% reduction in wholesale gas prices for the high shale scenario. Regardless, focussing on gas prices alone misses many of the other economic benefits of domestic shale gas development - one of which is...

Our gas supply
I'm really not sure why FOE merit this statement with inclusion on the bullsh*t board. Self evidently, this is a new and domestic gas resource. This means that the jobs it creates are created here, and the taxes it pays are collected here. The IoD estimate that by 2030, we will be importing £15.6 billion pounds of gas per year. UK shale development could see this reduced to £7.5 billion. That means £8 billion pounds re-invested in the UK every year, rather than lost to us and handed straight to the Qataris and to the Norwegian Sovereign Wealth Fund. This is before we begin to consider the geo-political insecurities inherent in a long and tenuous energy supply chain.

No risk of water contamination
I'm not sure that anyone has ever claimed that there is 'no risk' - no activity on this planet comes with zero risk, even just staying home. However, both the Royal Society and Public Health England have stated that the health risks posed by shale development are low and can be managed. The majority of studies conducted have found no evidence of systematic water contamination due to shale gas drilling in the US.

Communities will benefit
The UKOOG has committed that £100,000 will be given to local communities for every well site, plus 1% of the resulting revenues. This could easily run into the millions of pounds for a single site. FOE must know some very well funded local councils if they think a benefit payment of this scale deserves to go onto the bullsh*t board.

We should look to the US
FOE seem to want to both have their cake and eat it when it comes to the US, suggesting that while we should not use it to compare potential economic impacts (and it's difficult to overstate how significant the economic impacts have been in the states), we should draw all our negative examples from US with respect to other impacts. So we can all tick this box whenever FOE are making their claims. The US has very different infrastructure, regulations, and economics. This means that both the positive and negative impacts cannot be imported to the UK without a fair bit of thought and deeper analysis. However, I do think that it is acceptable that both sides of the argument draw some of their evidence from the USA, so long as the appropriate caveats are included.

Shale gas is a bridge to the future
To be honest, I'm not really sure what this means, so I guess in that respect it does belong on the bullsh*t board. Personally, unless someone actually invents a time-travelling bridge, I don't think anything should ever be described as a bridge to the future. How about instead of worrying about bridges we concern ourselves with powering the country over the next 20 years as cheaply, yet as green-ly, as possible, where even FOE accept that large amounts of gas-fired power will be needed.

Beyond Petroleum
A reference to BP, I presume. A strange one, given that BP have shown no interest in developing UK shale gas, and sold off the majority of their conventional onshore assets in the 1990s and early 2000s.

No conflict of interest
It is true that the government has a conflict of interest in shale development. The large amounts of tax they might be able to collect, plus all of the other economic benefits, will be of great use for the government of the day, whoever they might be. Look at how useful the North Sea oil boom was for Margaret Thatcher. It is a conflict of interest for all of us, because improved government finances *should* (and I accept that this isn't always the case) mean more investment in our public services. This is why none of the major political parties have suggested that they would prevent shale gas development in the UK.

Shale gas can help us tackle climate change
Gas fired power produces 50% less CO2 than coal, and we still get something like 40% of our electricity from coal. So more abundant gas would help lower CO2 emissions if this fuel switching occurs, as we have seen in the USA (sorry, looking to the US again there I know). Moreover, the flexibility of gas turbines is crucial for coping with the intermittency of renewables - numerous head honchos of US renewable operators seem to think that the shale gas boom has been helpful to them. Ideally, the UK government should ring-fence some of the UK shale tax take to spend on renewables and energy efficiency measures, as I have discussed here.

Tax breaks
Currently, conventional oil fields are taxed at 62%. However, smaller or more technically challenging fields can receive an allowance to promote the development of these otherwise less profitable fields, ensuring more investment and a larger tax take in the long run. In a similar manner, current shale developments will receive this allowance, and be taxed at 30%. This is still higher rate than the standard corporation tax (payed* by everyone else) of 24%. I'm not sure I agree with this allowance (I think shale development will be profitable enough anyway), but either way the operators will still be paying a higher tax rate than most other sectors.

*of course, we all know that many major corporations are not paying as much corporation tax as they should. One of the benefits of hydrocarbon producers, however, is that it is very difficult to 'offshore' your operations - the oil is where it is - making it very difficult to get around the tax system. This means you don't tend to see oil and gas companies "pulling a google".

The desolate North
This one tends to be used by opponents of shale gas, in order to rinse Lord Howell. Shale should be careful who its friends are. The North is clearly not desolate, but I don't think that shale gas development will change that.

Myth and misinformation

Indeed, it would be good to see a little less misinformation.

Keeping the lights on
Luckily, I wasn't around for the 3-day-week in the 1970s, but most people who went through it will tell you that it wasn't much fun. Given the potential harm caused either by blackouts or by increasing energy prices, keeping the lights on at the right price is a deadly serious matter. The fact that FOE seem to think that 'keeping the lights on' is a bit of a joke says something worrying about their mentality.

Tax revenues
are paid by all UK operators. Taxes on the whole UK oil and gas sector amounted to £30 billion in 2011, 5.5% of all taxes paid, and a third of all corporation taxes. We all want good public services, so tax revenues are an important aspect to consider.

Indeed, much like myths and misinformation, it would be nice to see a little less of that.

Low carbon transition
I think we're beginning to cover old ground now. Perhaps FOE were scraping the barrel for their final few slots. I believe this is fairly well covered in the tackling climate change post above.

Balcombe wasn't a local protest
From what I've seen and heard, the protests at Balcombe divided the village, with some in favour and some against. It's worth noting that the locals' biggest concern prior to drilling was the impact on traffic levels, and it seems likely that the protesters caused far more traffic disruption than the drillers. Also worth noting is that, where the major, national-level opposition groups haven't got involved, drilling this summer went relatively unopposed.

So there we have it - I've covered every block....