UK Coalition on Energy: Dumb and Dumber

By Peter C. Glover

UK Energy plc is not in the best of hands. Quite honestly, the Muppets could have come up with a more coherent script than that contained in the coalition’s new energy bill.

With investor interest in developing North Sea oil and gas fields running at an all-time high, and parts of the UK onshore and offshore sitting on potentially world class shale gas reserves, it beggars belief that David Cameron’s coalition partners could end up presenting UK energy as a bad news story.

Somehow they managed it.

Faced with a choice of looking across the English Channel to Europe or across the Atlantic to the United States to see how best energy is ‘done’, the new UK draft energy bill has ‘sponsored by Brussels’ stamped all over it. In short, the bill prioritises nuclear power and renewables overlooking what actually drives the economy (and will for decades): fossil fuels, especially shale gas. While nuclear is important in the mix, the UK would benefit greatly by extending the life of existing power stations – were it not for the pointless obsession of meeting EU emission targets. And, in electricity generation terms, wind and solar are just ‘kids’ stuff’: overly-expensive kids’ stuff at that.

In socialist Europe, centralized energy controls have stymied shale gas development through crassly stupid fracking bans and swathes of greens taxes and subsidy regimes which have greatly increased fuel poverty via some of the highest electricity prices in the world. Over in the States, despite President Obama’s centralizing socialist ambitions that saw him derail the Keystone Pipeline project, America’s more free market energy industry is currently transforming the entire face of US energy. The US shale revolution has already halved gas prices with the switch to gas more generally fuelling a manufacturing revival, including an estimated one million associated new jobs.

A no brainer? Not it seems for the UK coalition. The architect of the UK’s reversal of economic fortunes in the 1980s, partly via energy deregulation, Lord Nigel Lawson, neatly sums up the philosophy of the new bill. Now Chairman of the Global Warming Policy Foundation (GWPF), Lawson warns: “The Energy Bill constitutes a disastrous move towards a centrally planned energy economy with a high level of control over which forms of energy generation will be favoured and which will be stifled. The government even seeks to regulate the prices and profits of energy generation.”

GWPF Director, Dr Benny Peiser, adds, “At a time when most major economies are gradually returning to cheap and abundant fossil fuels, mainly in the form of coal and natural gas, Britain alone seems prepared to sacrifice its economic competitiveness and recovery by opting for the most expensive forms of energy.”

If creating a business climate attractive to the major investors currently buzzing around North Sea oil and gas and shale gas prospects was envisaged by the bills drafters, it has achieved the polar opposite.

As part of the consultation process, there was also the strange case of the ‘UK shale gas summit’ attended by David Cameron and energy secretary, Ed Davey. In the immediate aftermath, according to a report in The Independent, “senior coalition figures have agreed that shale gas has the potential to be deeply controversial without securing major benefits in lowering carbon emissions or reducing energy costs”. Let me translate: Whilst the UK may well be sitting on a huge domestic energy bonanza that could eclipse North Sea oil and gas, this would upset Eurocratic emission targets, not to mention a few NIMBY voters. Try telling that to the Americans. Anyone in any doubt that market forces alone do not have the power to transform the world is simply not paying attention to America’s revitalized energy sector.

And exactly which “senior coalition figures” agreed, we do not know. If they had been Conservatives it would have made a headline story. More likely, it was Lib Dem, Ed Davey, and his merry green anti-fossil fuellers who had ‘heard what they wanted to hear’. A closer look at the fallout from the meeting reveals that the few companies involved, including Royal Shell and UK gas suppliers, Centrica, are actually clueless about how much shale gas the UK has but would “take a look”.

In the wake of the meeting UK shale gas expert, Nick Grealy, in his post “Misinformation on UK shale at highest level”, points out two key facts. First, that shale gas exploration was put on hold over a year ago by the government (so nobody has actually been looking for it) – and the particular companies invited mostly have a vested interest in keeping gas prices high.

Meanwhile the British Geological Society and Cuadrilla, who have already “taken a look”, suggest a world class 200 trillion cubic feet of shale gas at the very minimum, with UK offshore promising still more. And that’s just the Bowland Shale in the north-west of England. There are other prospects further south.

Currently, shale gas development is the victim of its own success. The effect of the US shale revolution has been to not only drive down prices in America but it has also held prices steady on the international market. However, that doesn’t change the fact that the resources exist and are massive – with early development proving it to be commercially viable and providing a raft of associated benefits to industry and consumers.

So how could Russian, Norwegian and Qatari imports be a better economic option for the UK? And what about the effect of a burgeoning domestic shale gas industry on UK job creation? Or would it be just too cynical to think that Lib Dem support for shale gas development would undermine investment in their ideologically-preferred wind and solar developments? British economist Tim Worstall sums the UK energy situation up well in his recent Forbes column posting, “The British Government Being Fools About Shale Gas”.

When David Cameron took office in 2010 he clearly had to cut cards with the Lib Dems when it came to dealing out Cabinet posts. It seems that Cameron felt energy was one he could safely hand to the Lib Dems with whom he shares a predilection for green-at-any cost-to-the-consumer agenda. He might as well have handed it to Greenpeace. As if the Huhnatic’s – Chris Huhne’s – legacy of an incredibly over-generous solar panel fiasco scheme that the government is still trying to wriggle out of, not to mention an increasingly unpopular and electricity bill-inflating wind industry was not enough, Ed Davey’s new energy bill threatens an entire regime of centralized regulatory energy controls. Meanwhile, all that Energy Minister Davey can do in presenting his bill is to admit lamely that UK electricity bills – unlike those in the shale-impacted United States – will only soar further.

David Cameron could do worse than reading Fracking: A Tale of Two States. It reveals how the farmers and landowners of New York State (where there’s a shale fracking moratorium) look on with envy at the economic benefits accruing across the border in Pennsylvania (where fracking is allowed). If his government runs with this draft energy bill, he will soon know how the New Yorkers feel.

All of which only fuels a long-held suspicion about the UK coalition: that Conservatives may be on the bridge, but it’s the anti-fossil fuel Lib Dem greenies steering the course.

Peter C Glover is the International Associate Editor, Energy Tribune & author of Energy and Climate Wars, Power Politics: The Inside Track On EnergyFor more: http://www.petercglover.com

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