Energy and Climate Change Committee - Draft Energy Bill: Pre-legislitive ScrutinyWritten evidence submitted by Greenpeace

Summary

The Energy and Climate Change Select Committee have a particularly important role in this pre-legislative scrutiny period because the stated government position on a number of issues is at odds with the actual proposals. The proposed Energy Bill contains some good elements but some strategic weaknesses, in particular the lack of clear objectives, lack of any demand reduction proposals, the weaknesses of the support mechanism for new renewables, and because it arises from an Electricity Market Reform process that did not, in fact, reform the electricity market. Underlying much of these weaknesses are, over many years, a catastrophic “picking winners” approach to nuclear power which has distorted policy priorities and taken attention away from other approaches. This approach looks to be failing comprehensively, as it would seem that little or no nuclear power will be delivered either.

With the nuclear programme falling apart, and weak support for demand reduction, renewables and CCS, it is plausible that as a consequence, we could end up relying on a new “dash for gas” in the power sector. Contrary to ill-informed media and political commentary, this would come with a host of economic, security and environmental risks which would be bad for Britain’s economic interests, environmental performance, and international credibility. Shale gas will not help.

Thus key changes to the Energy Bill would be to establish objectives including the Climate Change Committee target for the power sector of 50g/kWh by 2030. The CfD model is so complex and inaccessible to a range of players that it should be abandoned and the Renewables Obligation extended several years whilst a more systematic review reforms the electricity trading arrangements and support mechanisms in harmony, informed by recognition that we will be substantially trading with European electricity markets before the end of the decade. Renewable support needs to be simple, predictable, government-backed, whilst limiting liabilities to the bill/taxpayer and promoting diversity of ownership and scale. The Emissions Performance Standard should be tightened to eliminate loopholes and to bear down on gas emissions over time, including the reduction in timescale of grandfathered emissions rights. The capacity mechanism should accommodate both interconnection with other countries and demand side management. National Grid should have obligations to deliver legal targets on emissions and renewable energy. Parliament should have full scope to review the deals being made in the early “investment instruments” as potentially many billions of pounds will be at stake.

1. Context

It is widely observed that the Electricity Market Reform proposals are complex and the implications will be difficult to understand.

One of the difficulties in evaluating the impact of the Energy bill and the Market Reform proposals is that government has public and political lines for wide consumption that are often either irrelevant to—or are just flatly contradicted by—the actual proposals under discussion. Examples of this rhetoric vs reality mismatch follow, although those close to the process will no doubt be able to remember more:

DECC press release on Energy Bill “It will be designed to encourage a balanced portfolio”1

Previous Secretary of State “I don’t believe government should pick winners”.2

David Cameron “unless we pay as much attention to energy efficiency as we do to energy production, then our energy supplies will be neither secure nor sustainable.”3

DECC Press release “Davey puts energy saving at heart of strategy”.4

These are great quotes for consumption by those who aren’t following the issue, but those who are closer observers of what is happening see a different story. For example,

James Murray, Business Green, “the next coalition minister who trots out the lines “we don’t pick winners” or “we’ll let the market decide” should be laughed out the room”.5

Prof Catherine Mitchell, Exeter University, “Are the vast and complex edifice of new energy regulations beginning to emerge there to pave the way for more nuclear power plants? That is the uncomfortable conclusion that many in the industry are reaching”.6

Damien Carrington in Guardian “On the UK’s commitment to “no public subsidy” for nuclear, if there is anyone outside Decc and EDF who thinks that is credible, I have yet to meet them”.7

Keith MacLean, SSE, “The only logic we can see in this is that they [ministers] are still trying desperately to hide the nuclear support. They seem to be prepared to make life more difficult for renewables in a last-ditch effort to keep the nuclear option open”.8

There is no efficiency component of the Energy Bill at all.

This matters because it is harder to understand what is actually going on when the expressed purposes are not the same as what is revealed by examination of the Energy Bill proposals.

The role of the ECC Committee in establishing what the implications of the proposed EMR and Energy Bill becomes extremely important.

2. Overall Objectives and Governance

There appear to be no explicit objectives for the EMR process in relation to decarbonisation, security and affordability.

Our view is that for decarbonisation the objective needs to be through meeting the Climate Change Committee 2030 target for the power sector of 50g/kWh, whilst ensuring this is met sustainably and respecting the natural environment. This would frame the scale of ambition and allow an assessment of whether implementation is delivering in a timely way.

There should be an objective on bills reducing consumers exposure to volatility and maximising opportunities for participation in the power system, and support for improving efficiency to reduce electricity needs.

The electricity system should have an objective to minimise exposure to volatility from system disruption and interruption from primary fuel supplies

Associated with these objectives, there should also be an obligation for National Grid to meet existing legal obligations, in particular carbon budgets and renewable energy targets.

When drawing up their Delivery Plan. The Committee on Climate Change should be made statutory advisers on these draft plans.

Additionally, UK government support for a Europe-wide 2030 renewable energy target backed by binding national targets would send a strong signal to investors that Britain looks forward to our “clean tech” sector continuing to grow beyond 2020.

The EMR package currently proposes significant public support for contractual arrangements for energy generators. It is essential that clauses in the Energy Bill which require these agreements (both the investment instruments and CfDs) with all terms and conditions, to be brought before Parliament are retained and that Parliament has the ability to amend these agreements. It is imperative that MPs and civil society can see what agreements Government is making on our behalf. Transparency should also apply to the preparation of the Delivery Plan by National Grid.

3. The Electricity Market and the Reform Process

3.1 Trading arrangements

One of the ironies of the current Electricity Market Reform is that it is not actually reforming the electricity market—it is amending the support systems around it. We believe it is now questionable whether the purposes of market reform around decarbonisation, security and affordability can be achieved without doing so.

The need to undertake major infrastructure and generation capacity renewal, coupled with the decarbonisation challenge and government technology preferences, meant that the EMR process was designed to lower the costs of capital for new build nuclear and renewables. It acknowledged that not all the finance could come from the utility balance sheet, and that new entrants would be required. Typically capital costs of £110 billion or higher are cited as the investment needs over the next decade. Thus keeping capital costs low would be valuable, but would inevitably mean that the risks were transferred to Government or bill-payer. Thus a contractual element was accepted in the CfD, and the need for flexible generation in the capacity mechanism because of the inflexibility or variability of most forms of low-carbon generation. Whilst a Government-backed contractual element was (is) important, a host of other risks are involved in particularly renewable generation in dealing with the liberalised trading arrangements, BETTA, used in UK. These additional risks include route to market/access, political risks, complexity and transaction costs of engaging with the trading arrangements, price risks and balancing costs. All of these risks add to the costs of capital and many are outwith Government intervention as they arise from the actual trading arrangements used, like dual cash-out pricing. Only at the very earliest stages in the EMR process were genuine changes to the trading arrangements considered. But were discounted because of the belief that the liberalised market reduced costs through competition. Yet in practice under EMR proposals, price competition in the market will be substantially complemented (or even replaced) by Government support systems. Nuclear and all forms of renewables will be negotiating for support by contracts, coal should be largely ruled out (although see section on EPS) until CCS can be made to work under Govt demonstration programme, and new gas power will be getting capacity contract payments, although the size and extent of these contracts is still very unclear. Thus all forms of power generation will be receiving direct support, and under these circumstances it is hard to see that the BETTA arrangements offer unequivocal benefits for the bill-payer. Indeed whilst most commentators are apt to say that the Big 6 oligopoly needs to be broken up and new entrants allowed into both generation and supply markets, it is the trading arrangements themselves which promote vertically integrated utilities, as it allows much more effective financial risk management across both generations and retail markets. Thus without changes in those trading arrangements, the same risk management approaches by new entrants would, in the long-term, lead to the same corporate structure.

A Pool or single market-buyer structure would break up vertical integration and allow a wider range of market entrants. It would also reallocate balancing risks away from generators (where much of the investment needs to come and where costs of capital are critical) to a system operator. It would certainly be able to operate in a framework of supporting instruments such as the CfD/capacity mechanism in a much simpler way, reducing the complexity for smaller players.

3.2 The distorting impact of nuclear

The enthusiasm Government across Parliaments has had for nuclear power is one of the reasons Britain now finds itself in some difficulty. In short, the hijacking of political space on energy since the mid-2000s has distorted policy areas including planning as well as energy. During all this time the mantra of “not picking winners” has been applied to parsimonious renewable support, whilst energy policy area has been distorted in order to get new nuclear built. This now looks to have been a disastrous approach leaving consumers and the country open to high costs, insecurity and higher emissions as a consequence of having to default to large amounts of gas power.

The hypocrisy started in 2005. Two years earlier a White Paper on energy had been produced after consultation with a wide range of expert opinion and rigorous evidence analysis—it concluded that the best options for UK were to pursue renewable power and energy efficiency. About 2 years later, after almost no substantive policy innovation in that area, memos were circulating in Whitehall around the need to “take a decision on nuclear” on the assumption that renewables and efficiency had “failed”. (We should note, in passing, that by the same logic DECC should have declared in 2010 that nuclear power had “failed” after not delivering 2 years after the 2008 Energy White Paper but we know logic and nuclear are uneasy bedfellows).

Some of the policies that have been created or substantially reconfigured in order to create the right conditions for nuclear new build are:

Creation of the NPS and nationally significant infrastructure projects.

New reactor appraisal process (GDA) and the creation of ONR in this Energy Bill.

Cap on the waste liabilities (Waste Transfer Price).

Cap on decommissioning costs (Funded Decommissioning Programmes in Energy Act 2012.

Carbon floor price in Finance Act 2011—rewards all low-carbon generation but more useful to nuclear, including existing nuclear, than any other form of generation.

Contracts for Difference, this Energy Bill, which as outlined below work well for nuclear but are problematic for variable renewables.

New nuclear build has not been a policy in one area, but a concerted cross-Whitehall project. No equivalent listing could be done for either renewable power, or for efficiency in the power sector. Yet having bet the farm on delivering new nuclear, with the Horizon consortium up for sale, and the EDF-led consortium facing financing and cost problems, the probability that there will be no new nuclear plants built has to be quite substantial. Thus Government is left conducting price and conditions negotiations with an essentially monopoly service supplier, having publicly put considerable emphasis on delivery of that service. An Office Manager doing this with a company’s stationary order would be considered incompetent getting into this situation, whilst successive governments have done this with critical national infrastructure.

We have not picked winners, but neglected them, whilst distorting the entire policy framework to back a loser.

4. Demand Reduction

One of the greatest weaknesses in the Bill is that there is no measure proposed for supporting energy efficiency or demand reduction in the power sector. We understand that DECC is doing a review (initiated last summer) but no concrete proposals or even consultations have yet emerged. This shows a lamentable lack of urgency given the widely acknowledged potential role for demand reduction in reducing costs and bills. Greenpeace believes that the investment proposition on the demand side and supply side should look equally attractive, such that saving a unit of energy is as good an investment as generating one. It is noteworthy that whilst much of EMR and electricity policy has been about providing additional incentives for types of power generation, no policy has ever been enacted providing direct financial incentives for demand reduction.

The potential for demand reduction and initiatives in other countries has been documented,ⁱ and it is worth noting that energy management companies who have great expertise in demand management have a much greater role in other EU countries and in USA than they do here.

Greenpeace believes that there should be equal support for demand reduction, through for example an efficiency feed-in tariff, and a capacity mechanism designed to encourage demand response. Because there is an immature market for efficiency, Government or their agency may need to proactively seek out demand-side opportunities. Similar mechanisms in the US have demonstrably reduced demand and prices, and are the best means of reducing bills and emissions in the short term. Investment funding should come from recycling revenues from the Carbon Floor Price into efficiency programmes, alongside measures to recoup any windfall profits resulting from the scheme.

Given the lack of clear evidence base for translation of policy elsewhere into UK, the time is ripe for policy experimentation and evaluation rather than hoping that further analysis and studies alone can provide a recipe for success. An energy efficiency feed-in tariff would be one example.

5. Proposed Measures in the Energy Bill

Greenpeace views on each of the proposed measures of EMR in the Energy Bill, and potential reform to improve is contained here. Our full views on the Carbon Floor Price are not recorded here but are available if required.

5.1 Contract-for-Difference

The preferred means of low-carbon support under EMR is the Contract-for-Difference (CfD). As originally formulated this had some good elements, including the contracting dimension to provide some certainty for developers, insulating them from the risk of change of policy. With the abandonment of direct Government backing for the contracts this benefit now seems to have disappeared as complex counterparty arrangements seem to have removed this benefit, and the supposed advantage in reducing the cost of capital will be lost. Thus the underlying analysis for the 2011 White Paper by Redpoint, comparing the CfD with premium and fixed-FIT options would therefore appear to be out of date.

5.1.1 Nuclear and CfD

The government has decided to combine nuclear and renewable electricity together for political reasons. It has committed to not providing public subsidy for new nuclear; in the words of the previous Secretary of State for Energy, “there will be no levy, direct payment or market support for electricity supplied or capacity provided by a private sector new nuclear operator, unless similar support is also made available more widely to other types of generation.” Although there is little doubt that contracts for difference are a public subsidy, the proposals are designed to create just enough cognitive dissonance that the Secretary of State, his ministerial colleagues and the Cabinet can keep a straight face while maintaining that there is no public subsidy. Similarly, they are designed to persuade the European Commission that there is no state aid.

However, in seeking to avoid accusations of public subsidy and state aid, the government has designed a mechanism which is the worst of all worlds. As several utilities and investors have made clear, contracts for difference would be less likely to engender investment in renewables than the present system of renewables obligation certificates. They provide no certainty for utilities wishing to build new nuclear power, in the short term because they are so likely to be challenged under state aid legislation. Centrica, which is taking a decision on investing in a nuclear plant at Hinkley Point in Somerset next spring, has already admitted that it thinks the proposals would be illegal. Finally, in seeking to construct a wholly artificial Chinese wall between state and aid, the government has driven up the cost of capital, because the proposed counterparties—the UK’s electricity suppliers—are less credit worthy than the British government.

The government has repeatedly asserted that new nuclear would be the cheapest source of low carbon electricity. According to Chris Huhne, the unit cost for electricity from new nuclear plant would be approximately £66 per megawatt hour, compared with £130 per megawatt hour for offshore wind and gas with carbon capture at £95 per megawatt hour. That would suggest that the strike price—the guaranteed unit price for electricity—would be no higher than that offered to utilities proposing to build an on-shore wind farm or a CCS-enabled CCGT plant. The Secretary of State has said as much, writing in Lib Dem Voice that “nuclear will not receive a higher price than comparable generation technologies whether they be renewables or indeed gas generation once its emissions have been abated by carbon capture and storage.” However, Citibank analysis and an energy specialist from University Birmingham have suggested that the strike price for new nuclear would need to be over £150/MWh and perhaps as high as £166/MWh to attract investment—more than the cost of offshore wind. Whilst offshore wind and other renewables can and should be supported as emergent technologies whilst costs come down, there is no real prospect of the costs of nuclear coming down given its track record.

This is partly because the industry has a terrible track record of delays and cost overruns. The latest examples are the new EPRs being built at Flamanville and Olkiluoto. They are notoriously behind schedule; each is around 3 billion euros over budget. Investors are unsurprisingly reluctant to put their money behind plans to build EPRs in the UK, so EDF has told the government that it wants the strike price to cover cost overruns and delays (known as the construction risk). If EDF cannot build reactors to time or budget, then consumers would pick up the tab for its incompetence.

The proposed investment instruments, as forerunners of the CfDs, will be the mechanism whereby the prices (and possibly other subsidies like construction risk) for nuclear power at Hinkley are given for nuclear. EDF and Centrica are determined to drive as hard a bargain as they can. As the only current players in the nuclear game, the companies have clearly decided that they have the government over a barrel and are engaged in a very public brinkmanship exercise. EDF has recently delayed its preliminary works at the Hinkley Point site until 2013, and has deferred signing a £1.2 billion civil construction contract. Neither company has any reason to care about the political decision not to subsidise new nuclear or the risk the lights may go out; their only objective is to maximise shareholder return by securing a very high strike price. As the initial process of setting the strike price is taking place behind closed doors, and between parties with very different objectives, the only foreseeable outcome is that British bill payers find themselves signed up to long-term, unbreakable contracts that are not in their best interests. Towards the end of the process, Parliament will get to see the outcome of the negotiations. Even then, the financing of new nuclear power by EDF and Centrica has to be open to considerable doubt given that neither has the current balance sheet to borrow the required capital. It would seem that the distortionary and damaging grip that nuclear ideology exerts over UK policy (coupled with high likelihood of non-delivery) has some more months, or even years, to go yet.

5.1.2 Renewables and CfD

The CfD concept is relatively simple to grasp. The major drawback is the complexity of administering it because it requires considerable administration and monitoring of prices. Much more so for variable sources of power like wind compared to invariant sources like nuclear. The complexity overhead becomes a bigger issue for the smaller generators (see, for example, work by the DE contact group or notes from Good Energy) and will thus undermine any emergence of decentralised energy. The worries are not confined to small generators however, as recent statements by SSE have confirmed that even major renewable generators believe that the CfD is not workable for them and poses investment risks.

There are further difficulties because of the loss of Obligation element of the Renewable Obligation. When utilities are obliged to take a certain proportion of renewable power, the balancing risk—which is significant issue in association with the market rules, see above—is taken by the large utility with a diverse portfolio. Without the Obligation, that balancing risk is put back onto the generator who may well need to hedge that risk with an option on other generation. Once again this puts up the overheads for renewable and small generators. The CfD mechanism has been chosen because it works well for nuclear. But there is no reason to use the same mechanism for all low carbon generators. The ECC committee should establish WHY there is a need (other than to hide nuclear subsidy) to use the same support mechanism when it seems demonstrably more suited to nuclear than it does to variable renewables.

5.1.3 Contract allocation

Greenpeace is aware of a number of concerns amongst generators about the contract allocation, both timing and quantities, on the assumption that CfDs will operate in an equivalent to the levy-control framework. We will not go over these arguments here because others will cover them elsewhere. But they do add to the complexity of the arrangements and show that even allocation of contracts will attract gaming behaviour. In attempting to reduce price risks, it will introduce contract allocation risks, in particular for renewables given the absence of clear volume certainty in the post 2020 period. Thus a new investor is faced with the possibility of putting in much development effort only to find no contracts available.

5.1.4 Conclusion on CfD

In attempting to support nuclear, a complex mechanism has been adopted which does not help renewables, especially at a small scale. It provides additional barriers to entry for those who cannot engage in trading arrangements, and thus is likely to exclude new forms of finance from communities and substantial finance from companies who are interested in direct sourcing of renewable energy.9 At a time when new forms of funding and new entrants are required, excluding them in chasing hiding state aid in the hope of attracting further utility investment in nuclear is a poor approach.

Support to renewable energy does need to provide investors with long term certainty which is why the original contract formulation had some merit. The support mechanism needs predictability, government backing, simplicity, whilst limiting liabilities to the bill/taxpayer and promoting diversity of ownership and scale. Smaller-scale community energy is particularly ill-equipped to deal with the complexity of current and proposed trading arrangements.

Greenpeace believes the CfD model should be abandoned and the Renewable Obligation extended for several years whilst a systematic approach to attracting renewable supply based on bringing in investors at different scales, with a trading regime that supports integration of renewable power and demand reduction, and when the full ramifications of a future trading regime involving high levels of interconnection with a European market is properly understood.

Additionally, UK government support for a Europe-wide 2030 renewable energy target backed by binding national targets would send a strong signal to investors that Britain looks forward to our “clean tech” sector continuing to grow beyond 2020.

5.2 Capacity Mechanism

An increase in installed capacity would certainly require some attention to overall dispatchable capacity. The argument is that markets will not be able to provide this because Governments or operators will not allow real prices to pertain at very low levels of renewable generation—the “missing money” argument. We note that the chances of very high & unsustainable prices are much more remote with high levels of interconnection with other countries, and with substantial demand side-response. Thus the capacity mechanism needs to be flexible enough to genuinely account for these options.

The important system consideration for the capacity mechanism is that it does not allow more gas plant to be built which could then exclude low carbon generation (see section on the role of gas) and that capacity should be allocated in a carbon merit order as well as price merit order. The lowest carbon capacity is demand side response whilst the worst would be maintenance of unabated coal plant.

Greenpeace believes that the Capacity Mechanism, if introduced, should prioritise demand side management and interconnection, and exclude capacity payments to unabated coal plant.

5.3 Emissions Performance Standard

The EPS was a commitment from both Coalition parties before the election and appeared in the Coalition agreement. Whilst the immediate threat of a large-scale unabated coal fleet has receded, the EPS remains an important tool to prevent unabated coal resurgence. We should not make the mistake of the 1990s when the first dash for gas occurred, when no regulatory block was put in the way of new coal because prices moved against coal new-build, only for the threat to re-emerge over 10 years later. This time a regulatory barrier to unabated coal needs to be enshrined in law.

The Government is currently proposing an emissions performance standard set at 450gCO2/kWh (station acting as baseload) with grandfathering extending out to 2045. This combination of policies has been cited by CCC as threatening decarbonisation because of the role of gas (see below). An emissions performance standard which should have shorter grandfathering provisions and gradually reduce over time in line with the objective of decarbonising the power sector down to 50gCO2/kWh by 2030 is needed to ensure compliance with carbon budgets.

To make the EPS fit for purpose in limiting fossil fuel participation in the power system, there need to be a series of amendments.

First, the level of 450g/kWh does not place any limit on gas power stations. Given the potential “dash for gas” and the economic and environmental concerns set out below (see “role of gas”), relying on gas to prop up a power system seems unwise. One of the few tools government now has for limiting this dash for gas in the longer term is the EPS. Thus Greenpeace believes that the limit should be set lower and to ratchet down over time. Grandfathering should not be extended to 2044 as proposed in the current Bill but be brought back before 2030 to ensure tools are available to deliver compliance with the CCC power system carbon target.

There is an exemption from the 450g/kWh limit for coal plant participating in the CCS demo programme. Further, there seems to be no regulatory backstop should there be a failure of the CCS plant or the costs become unmanageable. Therefore ALL new plant should be covered by the proposed 450g/kWh level. These proposals require that for new fossil stations some level of CCS might be required. Understandably there is a concern given the level of experience of commercial scale CCS. We would therefore propose a review of the EPS clause late in this decade when we have more clarity about the ability of CCS to deliver, and other options available.

In summary, the ECC committee should ensure the Energy Bill has some purchase over the “dash for gas” so that new build of gas-fired power stations do not compromise the decarbonisation target. This should include a lower initial level than 450g/kWh, with much shorter grandfathering rights, ratcheting down over time, and ensuring that the loophole via the CCS demo programme does not produce new unabated coal.

6. The Role of Gas

In the event that there is a delivery failure of low-carbon generation, the default option would appear to be large volumes of gas-fired power generation. Indeed there is an active lobby and media commentary that this would in itself be a desirable outcome. Because this is clearly a live issue, and an outcome with support in certain circles, we have spent some time examining how a significant role for gas in the UK system would actually be a negative outcome, and that whilst gas will have a role as a balancing fuel, that role needs to be curtailed and controlled for economic, security and environmental reasons.

6.1 Energy bills

Figures from Ofgem show that over the last year the average UK bill rose by £150, with £100 of this due solely to the soaring cost of gas.ⁱⁱ Centrica owned British Gas has already warned bills will rise further this year.ⁱⁱⁱ

Analysis by both Ofgem^iv and the Committee on Climate Change^v makes clear that rocketing international gas prices are by far the biggest reason for rising energy bills, which are squeezing families and business across the UK. Ofgem state: “Higher gas prices have been the main driver of increasing energy bills over the last eight years.” Similarly, the CCC states that “recent bill increases are primarily due to increased wholesale gas costs.”

The driving factor behind these price hikes has been growing Asian demand for gas and events such as the nuclear disaster at Fukushima and the Arab Spring which caused huge energy price rises and contributed to high levels of inflation. This is because the UK is now a net importer of gas and must compete for it on volatile global markets.^vi In May the Secretary of State for Energy and Climate Change Edward Davey warned “Only last year, the impact of the Arab Spring on wholesale gas prices, pushed up UK household bills by 20%”.^vii

Merrill Lynch Bank of America has warned that: “With Asian demand resurging, UK and European gas prices will have to increase to stem the on-going diversion of LNG cargoes to Asia”.^viii Energy regulator Ofgem supports this analysis, with Chief Executive Alastair Buchanan recently outlining how the UK could continue to face very high gas prices in future as China increasingly competes for gas on the world market.^ix According to analysts at Wood Mackenzie, China needs to increase its LNG imports by 80% to meet rising domestic demand.^x

Greenpeace believes that to stabilise energy bills and reduce the burden on families and businesses it is crucial that reforms to the electricity market reduce consumers’ exposure to expensive and volatile gas prices.

6.2 Climate Change

In their advice to the government on meeting the carbon targets set out in the Climate Change Act, the Committee on Climate Change (CCC) have said “any path to an 80% reduction by 2050 requires that electricity generation is almost entirely decarbonised by 2030.” The CCC defines this goal more specifically as meaning that by 2030 our electricity system should produce no more than 50g of CO2 for every kilowatt of electricity generated.^xi

DECC state that the emissions intensity of a modern gas plant—a Combined Cycle Gas Turbine (CCGT)—is 350g/CO2/kWh at the point of generation.^xii

Methane—the main constituent of gas—is also a very potent greenhouse gas, 21 times more powerful than carbon dioxide over the medium term according to the US Environmental Protection Agency.^xiii As the UK becomes increasingly reliant upon LNG imports, the impact of gas usage on the climate could also be worse than expected because of emissions beyond those produced at the point of electricity generation.

LNG imports are understood to be particularly damaging with a recent research note by Scottish Widows Investment Partnership noting that the emissions for processing and transporting gas, added to methane leakage from gas production, undermine the benefits of gas over coal for electricity generation. Their research concluded, “If you combine the additional 15–20% CO2 emissions from the LNG process with the warming impact of the fugitive methane emissions…the climate benefits of gas are further eroded”.^xiv

A study at Carniege Mellon University^xv found that the lifecycle emissions of burning a gas mix containing just 20% LNG were 21% higher than the emissions at the plant, for which generators purchase carbon credits. It also found this brought total lifecycle emissions close to coal, reducing the benefits of burning gas for the climate.

Moreover, given the influence of the International Energy Agency’s report “Are we entering a golden age of gas” on DECC policy formation^xvi it should be noted that a series of peer reviewed studies have found the life-cycle climate emissions from shale gas are close to that of coal. DECC appears to have based its confidence about a “benign global supply picture”^xvii on IEA assumptions about the growth of shale gas, both in the US and beyond. In the unlikely event that shale gas is as successful in Europe and beyond as the IEA claims, the fugitive emissions from the fracking process, added to the increased emissions from processing and transporting LNG, will hugely undermine the benefits from a coal to gas switch.

A further peer-reviewed study^xviii from the National Center for Atmospheric Research (NCAR) in the United States concluded that “shifting from coal to natural gas would have limited impacts on climate” because coal-burning also emits tiny dust particles, aerosols, which have a cooling effect, and because of likely methane leaks associated with relying upon gas.

6.3 Gas Capacity and emissions

In doing an impact assessment for their Emissions Performance Standard (EPS) proposal, DECC commissioned Redpoint to model gas-build to 2030. “The model baseline... suggests that there will be some 12GW of new CCGT gas plants [by 2030]”.

A recent report for Friends of the Earth^xix shows that some 9GW of new gas build is already in the pipeline and likely to be built by 2016, whilst Bloomberg^xx anticipate 11GW new gas built by 2016, with a further 2GW built between 2016 and 2030. Crucially, Bloomberg also anticipate this plant to be generating c.125, 000 MWh per year in 2030—ie not just covering peaking load.

If Bloomberg are correct and the UK has CCGT generating 125,000 GWh of electricity in 2030—that would mean emissions of some 44MtCO2/yr. In contrast, the CCC have said that to meet the 2030 carbon goal power sector emissions in 2030 should not be more than 16 MtCO2 annually. There is therefore a clear need for the market reforms to prevent this outcome.

Example figures from Committee on Climate Change scenarios, provided to Greenpeace, suggest that around 33 GW of gas may be built and running by 2030, assuming that there is significant deployment of low-carbon generating capacity. Unless the majority of this were either mothballed, running at very low load factors (as “peaking plant” to meet peaks and troughs in demand/supply), or fitted with full Carbon Capture and Storage, the UK would not be able to meet its legally binding carbon reduction targets.

Despite this, Ministers have signalled they support a lot of new gas investment—and in a midnight announcement on “budget weekend” revealed they will exempt gas plant from emissions regulations until 2045.^xxi Lord Turner recently wrote to the Energy Secretary^xxii on behalf of the CCC to warn this would lead to “the risk that there will be too much gas-fired generation instead of low carbon investment” and that the policy could take emissions “beyond the limits implied by carbon budgets.”

The attractiveness of the business case for new gas plant, relative to lower carbon alternatives, will be shaped by the capacity payment arrangements that emerge from the government’s electricity reforms and therefore these decisions will also have a significant impact on how much gas gets burned and consequently levels of emissions.

If the “Capacity Mechanism” is set at a level that means gas plant only end up operating occasionally at any one time, with resultantly low total emissions (even though per kWh they will remain high carbon) the average mix on the grid could still decline in carbon intensity. However, this would mean effectively mean taxpayers paying energy companies not to use their gas stations except when they were needed for times of “peak” demand—and it should necessarily see limits on the numbers of gas plant built.

6.4 Carbon Capture and Storage

Another means by which gas burning could theoretically be consistent with decarbonisation by 2030 would be if Carbon Capture and Storage (CCS) were to be rolled out at commercial scale on almost every gas station in the country by 2030. However, this is not currently a credible scenario—and relying on the potential for ambitious levels of CCS deployment as the means to achieve decarbonisation is incredibly risky, and potentially extremely expensive.

There is currently only an obligation for new build gas to be “CCS ready” (with a vague definition lacking in any credibility) and there is no obligation to actually fit CCS, even if it became commercially viable. The announcement that energy utilities needn’t worry about needing to abate emissions from gas plant until 2045 will also have discouraged CCS investment and deployment. Why would a utility fit CCS voluntarily?

With extremely limited public funding for CCS demonstration, and no regulation requiring CCS, and no terms and conditions about, for example, siting of new gas plant to be better suited for CCS in future—there is no indication the government is thinking about this technology as anything other than a fig leaf to provide political cover for new unabated gas build.

Greenpeace believes, as stated elsewhere in this submission, that the Energy Bill must have a clear and legally binding goal of decarbonisation of the power sector by 2030 in line with the recommendations of the Committee on Climate Change.

It is our view that proposals to exempt gas plant from emissions performance standards until 2045 are clearly inconsistent with this necessary decarbonisation goal.

Instead, new emissions standards should apply to all fossil fuel plant and be set at a lower level that is consistent with ensuring power sector emissions in 2030 are no more than 50g/Co2/Kwh.

6.5 Security of supply and price shocks

Last year the UK imported more gas than it produced for the first time since 1967. It has been a net importer since 2004.

Less than 50% of UK gas demand is now met indigenously, with imports forecast to rise to between 75% and 80% of UK demand by 2020.^xxiii This rising import dependency has serious implications for both consumers and the UK economy.

The UK has become increasingly dependent upon shipments of Liquefied Natural Gas (LNG) from Asia and Africa. According to National Grid, LNG is set to become the single biggest source of the country’s gas by 2020–21, meeting almost 40% of total demand.^xxiv

The global reach of LNG tankers however, means that competition from booming Asian economies is fierce. UK imports of LNG have plummeted 30% this year because prices climbed due to increased Asian demand.^xxv Dozens of LNG cargoes that were originally destined for EU countries have been sent instead to Japan, enticed there by higher prices for gas.^xxvi

Figures from Deutsche Bank show non-Qatari cargoes heading to the UK fell steadily from 56% in 2009 to about 10% in 2011, despite British government efforts to promote greater diversity.^xxvii Figures from HMRC reveal that from January-March 2012, the only other country the UK received LNG imports from was Iran. Other sources for LNG include Algeria, Yemen, Nigeria and Trinidad and Tobago.

Deutsche Bank also found that “UK import volumes from Qatar in the first two months of the year dropped 50% versus 2011 as consumption rose in Japan, South Korea, China and India.” They “conclude that there is a very real risk that these developments intensify rather than recede through 2013.” Analysts at leading energy consultancy, Wood Mackenzie, have outlined how the UK is “incredibly dependent on Qatar from an LNG perspective. If you are going to change that you are going to have to start contracting on a firm basis”.^xxviii

British Gas owner Centrica, the biggest gas supplier in the UK, has identified securing long-term LNG contracts as key to demonstrating that increasing our dependency on gas will not endanger UK energy security and lead to spiralling prices.^xxix CEO Sam Laidlaw outlined how “additional destination specific gas contracts to replace our North Sea production are essential for security of supply”.^xxx

But privately the company has concerns about its own deals to secure supply. In internal briefings for the UK’s Department of Energy and Climate Change, obtained by Greenpeace, Centrica expressed concerns about its 2011 three year, £2 billion deal with Qatargas, one of the UK’s largest gas suppliers. “The draft agreement presented by the Qataris is not acceptable to Centrica,” said the private Department of Energy and Climate Change briefing, written shortly before the signing. “The cargoes could be fully diverted, and price is high, and the contract duration (three years) too short.”

In contrast, Qatargas has entered into more lucrative, 20+ year contracts with Malaysia’s Petronas International and China’s Petrochina; while Qatar’s Rasgas signed a 20 year deal with Taiwan’s state-owned oil refiner.^xxxi This underlines the fact that LNG producers will only enter into long-term contracts if they are linked to the oil price. Last year Qatar called for this way of setting gas prices to continue, meaning that the lack of security in obtaining supplies not linked to oil prices will continue to make its impacts felt on consumers and the wider economy.^xxxii

The table below reveals the top five sources of UK gas imports by value. The UK’s huge dependence upon Qatar is clear here:

The UK’s top five sources of gas imports by value (£) (source HMRC)
Qatar	4,251,336,852
Norway	2,662,157,566
Nigeria	250,808,662
Yemen	145,513,816
Trinidad and Tobego	116,083,417

6.5.1 Price shocks

The UK’s increasing reliance on LNG imports from Qatar has been questioned by UK military leaders, who recently warned that almost half the UK’s gas imports would be halted if, as it has threatened, Iran blocks the Strait of Hormuz. Lord West, former head of the Royal Navy, recently argued that if the strait were blockaded, the sharp fall in the UK’s gas supplies would be the country’s single most critical issue.^xxxiii

The other countries the UK imports LNG from are no more secure and include; Algeria, Yemen, Egypt, Libya, Iran and Nigeria.

David Cameron has previously identified the need to harness alternative sources of energy to ensure that “our national security is guaranteed, regardless of decisions by volatile governments elsewhere to close pipelines or restrict supply”.^xxxiv Yet the UK’s increasing reliance on gas imports threatens precisely this.

Secretary of State for Energy and Climate Change, Ed Davey, recently argued that: “the more we can shift to alternative fuels, and use energy efficiently, the more we can ensure that our economy does not become hostage to far-flung events and to the volatility of market forces”.^xxxv

However, National Grid conducted a study in January 2011, an unusually mild month, to see how the gas supply would react to shocks such as the closing of the Suez Canal or an international increase in demand for gas imports. It found that if this had taken place, consumers would have faced gas supply interruptions.^xxxvi

Exacerbating this problem is a lack of storage capacity. The British Chamber of Commerce has warned that “at present the UK’s current storage capacity amounts to only 14 days’ of gas supply compared to 87 days in France and 69 in Germany. ^xxxvii Yet gas companies, such as Centrica, are refusing to invest in storage capacity, saying that they see higher returns available elsewhere.^xxxviii

This increases the threat of energy price shocks damaging the UK’s fragile economic recovery. Oxford Economics has found that “compared to an oil or coal price shock, a shock to gas prices has a greater impact at the whole economy level and across all sectors other than transport. This reflects the importance of gas-fuelled power stations in electricity generation and the relatively large share of electricity in energy inputs”.^xxxix

Oxford Economics concluded that: “once the UK fully transitions to a low-carbon economy, the negative impacts of energy price volatility on these 4 factors are halved:

Halving the impact of energy price volatility on disposable household income, and therefore reducing amount households would have to put aside to spend on energy bills.

Halving the negative impact on the level of business investment.

Halving the impact on inflation.

Halving the impact on levels of unemployment, which could rise through increased economic inactivity caused by high energy prices”.^xl

Although outside the scope of the current Energy Bill, Greenpeace believes that the Government should be taking strong measures to insulate UK consumers from volatile global gas markets and insure the UK economy against price shocks. The emphasis in parts of Government in encouraging a fresh wave on investment in gas plant, and other gas infrastructure, reveals that they are failing to do so.

6.6 Economic growth

A recent report by Oxford Economics for the Department of Energy and Climate Change argues that: “high and volatile energy prices have a negative effect on the economy of a fossil-fuel importing country such as the UK: they dampen economic activity and they lead to an increase in the price level and potentially an increase in the inflation rate. Since fossil fuels are an input into many goods, both consumers and producers bear losses”.^xli

This is the situation now facing the UK as it seeks to emerge back out of recession. Other fuels currently account for 7.5% of the UK trade deficit,^xlii predominantly gas. Electricity generation accounts for around 1/3 of total demand for gas^xliii so the proportion of the trade deficit due to gas for electricity generation alone accounting for 2.5% of the trade deficit and set to rise as imports and gas prices increase.

The CBI recently warned that “the UK’s rising energy trade deficit, as North Sea oil and gas production declines, will increase the need to find alternative sources. Diversifying towards renewable energy will both decrease energy imports and stimulate business investment. The UK is already one of the most energy-efficient economies in the world and can take advantage of medium-term opportunities offered by emission reduction targets”.^xliv

A report by Innovas for the Renewable Energy Association found that just meeting the UK’s renewables targets by 2020—instead of relying on gas for power—would displace £60 billion worth of fossil fuel imports and create 110,000 jobs in the UK.^xlv

Last year the average UK household spent £71 on gas imports from Qatar alone—a number that is set to double.10

Greenpeace believes that rather than send increasing amounts of capital overseas to purchase gas, it is prudent economic policy to encourage investment in demand reduction and renewable energy here at home. This can help to rebalance the UK economy, aid a fragile economic recovery, and create high-skilled, long-term jobs.

6.7 Shale gas and fracking

6.7.1 Limited supply and high cost

The argument has been made that falling gas prices in the US, resulting from shale gas extraction, could be replicated in the UK, driving down the cost of electricity generation. But this argument is based on numerous false assumptions.

Economically falling gas prices in the US are a one-off—the result of large amounts of new wells coming on stream just as the economy flat lined. But the dynamics are starting to change. Producers, unable to make a profit, are cutting back on new rigs and curtailing production. Indeed the latest figures from oil field services firm Baker Hughes show the “rig count” for gas there has steadily fallen, down nearly 30% since October last year,^xlvi and likely to keep falling. As the rig count has fallen—the price has gone up^xlvii with Shell now amongst many predicting the price in the US will increase by around 100% between now and 2014–15.^xlviii

Even if they wanted to keep drilling, there appears to be far less gas to drill for than first thought. In a powerful illustration of the exaggerated claims of gas industry lobbyists, the 2012 Annual Energy Outlook from the US Energy Intelligence Agency (EIA)^xlix revised down its estimate of the technically recoverable shale gas resources in the US by a staggering 42%.

And the shale revolution from the US is extremely unlikely to travel to Europe—for economic, political and geological reasons.

Two recent reports, one by respected energy consultancy Poyry^l for regulator Ofgem, and the other by Deutsche Bank,^li have warned that Europe’s shale is unlikely to have a substantial impact on the price of gas, as it did in the US. Aside from the obvious difficulties of locating hundreds of thousands of wells in a far more densely populated region (in the US 1.2 million wells have been drilled so far), drilling and water costs are also likely to be far higher in Europe where the shale is generally deeper, the water more scarce, land rights less helpful and the regulations justifiably tighter. The world’s largest gas services company, Schlumberger, was recently reported as saying the price of drilling in Poland was already three times that of the US^lii and the Polish geological institute has already significantly cut its shale gas estimates.^liii

The UK government, following consultation with Shell, Centrica the EA and other agencies has come to a similar conclusion saying that if all the UK’s shale reserves are exploited it could provide “5, maybe 10%” of our energy needs. Even Cuadrilla who are actively seeking investment partners and whose shale reserve estimates are 40 times less than the last estimate by the British Geological Survey^liv admits “Nobody on either side has said it would transform Britain.”^lv Cuadrilla has also admitted that as little as 5% of its estimated reserve may be obtainable.

Meanwhile shale is unlikely to mitigate rising global gas prices driven by demand in Asia. Even in China—estimated to have the world’s largest shale reserves—large-scale extraction is years if not decades from reality. The geology and infrastructure in China—as in Europe—is very different to the US and water supplies are a major problem.^lvi In Argentina, another potential shale producer, the energy company with the rights to drill for shale was recently nationalised leaving investors sceptical as to whether it still has the resources or expertise.^lvii

In the IEA’s controversial recent report “Golden Rules for a Golden Age of Gas”^lviii the western nation think tank claimed that shale gas in Europe will be 50% more expensive to extract than in the US (where prices will rise as they are currently below cost) and that gas prices in Europe will rise by almost 40% on 2010 levels by 2020 partly to meet the higher extraction cost of shale. The IEA also claimed that shale gas extraction outside the US would not occur at scale for a decade or more saying “Most of the increase comes after 2020, reflecting the time needed for new producing countries to establish a commercial industry.”

But the agency admits that its price forecasts are based on no increase in global investment in energy efficiency or renewable energy^lvix reducing energy demand and increase supply from alternative sources. If such investments were made, Greenpeace believes, much of the investor logic for investment in shale would fade. It is therefore vital government resists the lobbying of the shale gas industry to limit investment in alternative sources of energy, and initiatives to reduce UK gas demand.

6.7.2 Climate change implications

Even if reserves exist there is increasing evidence that in addition to the known local environmental risks, including earthquakes and water pollution, shale poses a greater than expected threat to the climate. A study by the US-based National Oceanic and Atmospheric Administration (NOAA) found average leakage from shale production of 4%, enough to make burning gas from shale worse than coal.^lx Scottish Widows Investment Partnership (SWIP) recently highlighted these concerns in a report which warned that methane leakage cancelled out the benefit of switching from coal to gas.^lxi

The IEA hope these issues can be mitigated through tougher rules. But these techniques, like carbon capture and storage, remain unproven and in practice the IEA envisages tougher regulations for new fracking in China—for example—that currently exist anywhere in the planet. Should these rules not be implemented—or prove impossible to implement—the lifecyle emissions of gas from shale could be as high as coal.

The most worrying assertion in the IEA’s report, however, was the claim that widespread exploitation of shale reserves—instead of investment in efficiency and renewable energy—would result in catastrophic warming of 3.5 degrees C, far above the globally agreed 2 degrees target.^lxii In order to avoid this the UK has adopted stringent carbon budgets and the Committee on Climate Change, are warning the UK it must ensure the power sector is almost carbon-free by 2030 if the country is to remain on track with the emissions reductions set out under the Climate Change Act.

With global and UK new shale gas production—if even possible—not due to come on stream until the mid-2020’s it is hard to see how it could contribute meaningfully to the electricity mix if the UK is to stick to its climate targets.

Overall with almost all analysts expecting gas prices to rise over the next decade, with new production from shale even in the 2020’s limited and potentially environmentally unsound it is not clear what role, if any, shale gas could play in the UK’s electricity mix beyond delaying investment in renewables, accelerating climate change, driving up bills for consumers and leaving the UK dangerously dependent on imported gas for both its heating and electricity needs.

Greenpeace believes that shale gas neither should, nor could, play a role in powering the UK’s electricity mix.

In order to restrict the UK’s dependence upon expensive gas imports the Energy Bill must implement an emissions performance standard applying to all fossil fuel plant and be set at a lower level than proposed, consistent with ensuring power sector emissions in 2030 are no more than 50g/Kwh

References

ⁱ See for example, submission by D3 expert group to the EMR consultation, 10 March 2011

ⁱⁱ http://www.ofgem.gov.uk/Markets/RetMkts/rmr/smr/Documents1/SMR%20update%2028-03-12.pdf

ⁱⁱⁱ http://www.bbc.co.uk/news/business-18031209

^iv http://www.ofgem.gov.uk/Media/FactSheets/Documents1/Why%20are%20energy%20prices%20rising_factsheet_108.pdf

^v http://downloads.theccc.org.uk.s3.amazonaws.com/Household%20Energy%20Bills/Energy%20bill%20impacts_pressnotice.pdf

^vi http://www.decc.gov.uk/assets/decc/11/stats/publications/dukes/2306-dukes-2011-chapter-4-natural-gas.pdf, pg.97.

^vii http://www.decc.gov.uk/en/content/cms/news/pn12_061/pn12_061.aspx

^viii http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/9132260/UK-gas-price-risk-over-LNG-supplies.html

^ix http://www.bbc.co.uk/news/science-environment-18121885

^x http://www.businessweek.com/news/2012-05-22/china-may-need-to-boost-lng-imports-by-80-percent-wood-mackenzie-says

^xi http://www.theccc.org.uk/sectors/power

^xii http://www.decc.gov.uk/assets/decc/11/policy-legislation/emr/2179-eps-impact-assessment-emr-wp.pdf

^xiii http://www.epa.gov/outreach/scientific.html

^xiv http://www.swip.com/sites/docs/SiteCollectionDocuments/SWIP%20Document%20Test%20Folder/May-2012-Sustainability-Research-Note.pdf

^xv http://www.ce.cmu.edu/~gdrg/readings/2005/10/12/Jaramillo_LifeCycleCarbonEmissionsFromLNG.pdf

^xvi DECC, Long Term Role for Gas in the UK – Initial Analysis, Annex A.

^xvii DECC, Long Term Role for Gas in the UK – Initial Analysis, Annex A, pg.4.

^xviii https://www2.ucar.edu/atmosnews/news/5292/switching-coal-natural-gas-would-do-little-global-climate-study-indicates

^xix http://www.foe.co.uk/resource/briefings/enough_is_enough_2012.pdf

^xx http://bnef.com/WhitePapers/download/64

^xxi http://www.decc.gov.uk/en/content/cms/news/pn12_025/pn12_025.aspx

^xxii http://downloads.theccc.org.uk.s3.amazonaws.com/Letters/EdwardDaveyMP_Letter270312.pdf

^xxiii http://www.centrica.com/files/pdf/the_economist_uk_energy_summit.pdf, pg.3. and http://www.guardian.co.uk/business/2011/feb/23/centrica-liquid-gas-deal-qatar

^xxiv http://www.thesundaytimes.co.uk/sto/public/roadtorecovery/article680216.ece

^xxv http://www.ft.com/intl/cms/s/0/6ada8a28-960c-11e1-a6a0-00144feab49a.html#axzz1v8MnrArH

^xxvi http://www.ft.com/intl/cms/s/0/6ada8a28-960c-11e1-a6a0-00144feab49a.html#axzz1v8MnrArH

^xxvii Deutsche Bank, Commodities Special: UK Gas: Are UK Gas Prices High Or Low?, 2/03/12.

^xxviii http://www.ft.com/intl/cms/s/0/c403bec6-3f63-11e1-ad6a-00144feab49a.html#axzz1v8MnrArH

^xxix http://www.centrica.co.uk/managed_content/newsandviews/2009/pdf/2009_strategic_challenges_transcript.pdf

^xxx http://www.centrica.co.uk/managed_content/newsandviews/2009/pdf/2009_strategic_challenges_transcript.pdf, pg.4.

^xxxi http://www.naturalgasasia.com/qatargas-supply-lng-malaysia and http://www.bloomberg.com/news/2012-01-07/qatar-s-rasgas-delivers-first-natural-gas-cargo-to-taiwan-s-cpc.html

^xxxii http://en.rian.ru/world/20111115/168723406.html

^xxxiii http://www.ft.com/cms/s/0/b52cdf90-3f8b-11e1-ad6a-00144feab49a.html#ixzz1vWILfp4Y

^xxxiv http://www.conservatives.com/news/news_stories/2009/01/our_plan_for_a_low_carbon_economy.aspx

^xxxv http://www.decc.gov.uk/en/content/cms/news/pn12_061/pn12_061.aspx

^xxxvi http://www.carbonbrief.org/blog/2012/05/crunch-coming-for-uk-gas-says-ogfem-ceo

^xxxvii http://www.britishchambers.org.uk/policy-maker/blog/reform-of-the-electricity-market.html

^xxxviii http://uk.reuters.com/article/2012/02/23/uk-britain-centrica-storage-idUKTRE81M0WY20120223

^xxxix http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/international-climate-change/5276-fossil-fuel-price-shocks-and-a-low-carbon-economy-.pdf pg.4

^xl http://www.decc.gov.uk/en/content/cms/news/pn12_061/pn12_061.aspx

^xli http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/international-climate-change/5276-fossil-fuel-price-shocks-and-a-low-carbon-economy-.pdf pg.3.

^xlii http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-258403

^xliii http://www.decc.gov.uk/assets/decc/11/stats/publications/energy-trends/4821-pn-12-032.pdf

^xliv http://www.cbi.org.uk/media/1231301/cbi_rebalancing_the_economy_report_301211.pdf, pg.5.

^xlv http://www.r-e-a.net/news/report-on-employment-and-skills-in-the-uk-renewable-energy-sector-to-be-launched-with-greg-barker

^xlvi http://online.wsj.com/article/BT-CO-20120427-716796.html

^xlvii http://online.wsj.com/article/BT-CO-20120427-716796.html

^xlviii http://www.ft.com/cms/s/0/741d32c4-a012-11e1-90f3-00144feabdc0.html#axzz1vUena8U9

^xlix http://www.upstreamonline.com/live/article299492.ece

^l http://www.poyry.co.uk/News_items/1328616116.html

^li http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CGcQFjAA&url=http%3A%2F%2Fwww.guardian.co.uk%2Fenvironment%2Fdamian-carrington-blog%2F2011%2Fnov%2F03%2Fshale-gas-game-changer-fracking&ei=J4XHT4jEIeak0AWQn4GpDw&usg=AFQjCNE8PWLuHnWwRzmHPRL0gMI1MkFmHA&sig2=Fe-sLAsVzpyL7ZcpQGzOrw

^lii http://www.bloomberg.com/news/2011-11-29/shale-gas-drilling-cost-in-poland-triple-u-s-schlumberger-says.html

^liii http://online.wsj.com/article/SB10001424052702303812904577295790442844470.html

^liv http://www.guardian.co.uk/environment/damian-carrington-blog/2011/sep/23/cuadrilla-shale-gas-uk-energy

^lv http://www.telegraph.co.uk/earth/earthnews/9290026/Fracking-is-not-the-answer-to-energy-crisis-UK-Minister-admits-as-he-orders-shale-gas-survey.html

^lvi http://www.naturalgasasia.com/china-shale-gas-potential-great-uncertainty-remains-despite-growing-optimism

^lvii http://www.forbes.com/sites/afontevecchia/2012/04/17/shale-gas-wars-on-argentinas-nationalization-of-repsol-ypf/

^lviii http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf

^lix http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf

^lx http://www.nature.com/news/air-sampling-reveals-high-emissions-from-gas-field-1.9982

^lxi http://www.ft.com/cms/s/0/136103ae-a3f8-11e1-8878-00144feabdc0.html#axzz1vg5T7mjC

^lxii http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf