Energy and Climate Change CommitteeWritten evidence submitted by Friends of the Earth (England, Wales and Northern Ireland) (ISG 21)
1 What is the potential impact on climate change objectives of greater use of shale gas?
1.1 Friends of the Earth believes that greater use of shale gas could make it much harder to meet our climate change objectives. We consider this initially globally, and then at the UK level.
1.2 The UK, with many other developed countries, has stated that to avoid dangerous climate change, global temperatures must rise by no more than 2 degrees Celsius above pre-industrial levels. However, more than 100 developing countries have called for a maximum temperature rise of no more than 1.5 degrees. This is because more recent science suggests that a 2 degree target is far more dangerous than previously believed. Scientists suggest that it could lead to more severe and frequent direct impacts, such as floods and droughts, with some suggesting much higher risks of “tipping points” or “large-scale discontinuities”. This new evidence supports the position of the developing countries for a target lower than 2 degrees. To give ourselves a reasonable chance of keeping the global temperature rise to 1.5 degrees and a strong chance of staying below 2 degrees means keeping to a global carbon budget which requires steep emissions cuts from developed countries.1
1.3 These maximum temperature rises stand in very stark contrast to the impact of the “Golden Rules” scenario developed by the International Energy Agency in its work on the “Golden Age of Gas”. This envisages “an accelerated global expansion of gas supply from unconventional resources” which more than triples to 2035.2 This “puts CO2 emissions on a long-term trajectory ... consistent with a probable temperature rise of more than 3.5 degrees Celsius in the long term”.3 This is well above the threshold for triggering catastrophic climate change: as the IEA admits “we are not saying that it will be a golden age for humanity—we are saying it will be a golden age for gas”. 4
1.4 The IEA has estimated that recoverable resources of conventional gas are equivalent to more than 120 years of current global consumption, with all major regions of the world having recoverable resources of at least 75 years’ worth of current consumption. Resources of unconventional natural gas are as large as conventional resources.5 The IEA estimates are similar to those of the US Energy Information Administration which notes that its estimates do not include figures for Russia and Central Asia, the Middle East, South East Asia and Central Africa because “there was either significant quantities of conventional natural gas reserves noted to be in place (ie, Russia and the Middle East), or because of a general lack of information to carry out even an initial assessment”. 6
1.5 Given the emissions cuts needed, we simply cannot afford to burn even a small percentage of this gas. If unconventional gas were substituting for coal, then there could be some benefit. However global energy demand is increasing and without a global agreement to cap carbon emissions, it is more likely that shale gas will be burnt as well as coal, not instead of coal. As shale gas use has increased in the US in recent years and the proportion of coal-based electricity generation has fallen, US coal exports have risen significantly, trebling from 2007–2010.7
1.6 The Tyndall Centre for Climate Change Research has calculated that if half of the total global shale gas resource is extracted by 2050, then this could increase global concentrations of carbon dioxide by up to 16 parts per million, depending on the recovery rate. Emissions would take up over a quarter of a global carbon budget associated with a better than 50:50 chance of avoiding a 2 degrees global temperature rise.8 If shale gas in the regions not included in the estimates is also extracted, emissions could be greater still.
1.7 This means that the use of shale and other unconventional gas must be strictly limited, probably to use in developing countries only as a short-term substitute for coal in a transition to renewables. This will only be of benefit if it can be definitively proven that shale gas has a lower overall climate impact than coal. This is the subject of lively academic debate at the moment, and the jury is still out.
1.8 At the UK level, Friends of the Earth believes that the future of shale gas must be seen within the context of broader energy policy. Friends of the Earth has calculated that if the UK, as a developed country, is to play its full part in avoiding catastrophic climate change, then emissions cuts of 7% a year are needed, starting immediately.9 These reductions are based on carbon budgets starting in 2010. However since then, global emissions have risen despite the recession, meaning the future cuts needed to stay within carbon budgets are even greater still.
1.9 The need for such rapid cuts in carbon emissions makes it clear: the UK has to get out of fossil fuels as quickly as possible. As the Prime Minister said while Leader of the Opposition: “we must wean ourselves off our dependence on fossil fuels and go green. I’m talking about reconfiguring our whole economy and overturning our whole hydrocarbon dependency…. The choice isn’t between the economy and the environment. The choice is between progress and the past”.10
1.10 Decarbonising our economy does not need just the right end goal. It also needs a credible path to get us there: what happens between now and 2030 is critical to get us on the right path to 2050. The Committee on Climate Change has said that emissions must be cut by 60% by 2030 as an essential milestone on the road to 2050. To help achieve this, the CCC has concluded that “it is crucial in the context of economy-wide decarbonisation that the power sector is almost fully decarbonised by 2030” 11 and has repeatedly recommended a target of reducing power sector emissions to 50g/kWh by 2030.12 Analysis for the CCC found that policies to reduce emissions intensity to around 40g/kWh by 2030 are relatively robust to a range of gas prices.13
1.11 Friends of the Earth believes that we should move from generating roughly three-quarters of our electricity from fossil fuels currently, to generating three-quarters from renewable sources in 2030.14 Within this, there is a role for gas but this must be clearly defined and limited to balancing the system, as argued by the CCC.15 However we fear that failures to deliver in other areas of Government energy policy, such as energy efficiency and new nuclear, could mean the UK sliding back into a greater role for gas by default rather than by design. Of greatest concern here is the Government’s expectation that nuclear power will generate 40% of the UK’s electricity by 2030. This now looks highly unlikely, despite the recent life extensions for existing nuclear plants. Failure to deliver new nuclear capacity—though Friends of the Earth does not believe this to be the right course—must not lead by default to a greater role for gas.16
1.12 The only way in which gas could play a greater role in electricity generation, while still achieving the goal of power sector decarbonisation, would involve greater use of Carbon Capture & Storage (CCS) technology. Although Friends of the Earth believes that CCS is a vital part of the UK’s energy future, both for power stations and for energy-intensive industry, placing blind faith in the ability of industry to deliver CCS which works at scale and which is cost-effective, is extremely risky. This is because:
CCS has not yet been demonstrated at scale anywhere in the world and there is no certainty that it will work. This view is shared by at least some of the utilities: Ian Marchant, Chief Executive of SSE, recently told this Committee “we do not know that this technology will work”.17
Despite the UK Government’s recent announcement, global progress developing CCS is slowing.18
The proposals in the current draft Energy Bill to grandfather permitted carbon emissions to 2045 reduce or eliminate the incentive to fit CCS, and a loophole remains with proposals to exempt CCS demonstration plants from the Emissions Performance Standard.
Proposed new gas plants currently being consented are required to be CCS-ready, but questions remain around whether these plants are actually located close to sites suitable for geological storage.
An illustration of this uncertainty is that the IEA’s “Gas” scenario, which looks out to 2035, does not allow for CCS in this period.19
1.13 What should be the source of the gas to fulfil this limited and defined role? Friends of the Earth believes that shale gas is neither needed nor a sensible choice, environmentally or economically:
It is far from certain that shale gas would bring any climate benefit over using conventional gas. A recent European Commission report found that emissions per unit of electricity generated from shale gas could be higher than for electricity from conventional pipeline gas from within Europe but lower than for electricity generated from conventional pipeline gas from outside Europe and for electricity generated from Liquefied Natural Gas imported into Europe. However under a worst case scenario for shale gas operations, emissions would be similar to those for imported LNG.20 A recent study published by Weber et al found that the carbon footprints of upstream production of shale gas and conventional natural gas are broadly similar.21
It is unlikely that using shale gas would bring any cost benefit in terms of lower household energy bills. Shale gas has cut gas prices significantly in the US, and advocates of shale gas seem to believe that the same will be true in the UK and Europe. However experts do not believe this will happen:
Deutsche Bank has said “we do not expect the impact of shale-gas production on EU gas prices to be anywhere near as great as has been the case with US shale-gas production”.22
A report for OFGEM concluded that only a shale gas boom in Europe would lead to significantly lower gas prices in the UK, and that such a boom was a “a low probability outcome”.23 Also, the impact on gas prices depends on what happens elsewhere in Europe: UK production is not significant in this respect.
It is unlikely that shale gas will be brought to market quickly or transform the UK energy market:
Energy Secretary Ed Davey has recently said that “unconventional gas can make a difference, although perhaps not as big a difference as some sections of the press would have me believe”.24
National Grid Executive Director Nick Winser has said that National Grid did not expect shale to have a major impact in Europe this decade, “if ever”.25
Fracking for shale gas involves big risks to environment and human health:
A recent study for the European Commission concluded that several aspects of fracking pose high risks for people and the environment: groundwater contamination, surface water contamination, water resource depletion, air pollution, biodiversity impacts and noise.26
There is considerable evidence from the US of problems of water contamination and air pollution arising from fracking.27
It diverts attention from renewables. If people believe that gas prices will fall, despite evidence to the contrary,28 this could have a significant impact on investment in renewable energy. This is explored further below.
1.14 Of course gas is also used in other energy sectors, particularly for space heating. Decarbonisation of the power sector will help cut emissions in other sectors such as homes and transport by shifting from gas to electricity for heating, and from petrol and diesel to electricity for powering vehicles. The CCC agreed that with a decarbonised grid it would be “more carbon efficient to provide hot water and space heating with electricity than with gas burned in a condensing boiler”.29
2 What are the effects on investment in lower carbon energy technologies?
2.1 As we have stated above, Friends of the Earth believes that the UK’s electricity should be largely generated from renewable sources by 2030. Meeting forecast demand will also require much greater energy efficiency. The notion that this is the best way forward has also been made clear by the IEA, whose chief economist has said “the optimum path would be to see more renewables, more efficiency and more low carbon technologies”.30
2.2 In addition to emissions benefits, whole-hearted Government support for and investment in renewables would bring other significant benefits for the UK:
Job creation: according to DECC, investment in renewable energy in the UK between 1 April 2011 and 31 July 2012 totalled £12.7 billion and created approximately 22,800 jobs.31 The Renewable Energy Association says that the industry already supports 110,000 jobs across the supply chain and could support 400,000 by 2020.32
The UK has as much offshore wind capacity installed as the rest of the world put together, and its huge potential could give the UK a world leadership role in this vital technology, as the Prime Minister has acknowledged.33
2.3 The Tyndall Centre has calculated that the capital investment needed to build 8GW of shale gas-generated electricity capacity (well costs plus CCGT power station costs) could displace 12.5–21GW of onshore wind capacity, and 7–12GW of offshore wind capacity, depending on the discount rate used and whether CCS is fitted to the gas-fired capacity. The higher wind capacity figures would generate about the same amount of electricity as the gas-fired capacity, given the lower load factor.34
2.4 Researchers from the Massachusetts Institute of Technology, modelling different scenarios for the development of US energy policy found that the use of shale gas suppresses the development of renewables. In one scenario a renewable fuel mandate is imposed. The research found that when shale gas is used, use of renewables does not go above the 25% minimum standard set in the scenario but when shale is removed from the market, renewables gain more ground.35
2.5 Concerns about the potential impact on the development of renewables from a greater use of gas in general, and shale gas in particular, have been expressed by Government advisors, leading think-tanks and international bodies:
The CCC’s recent letter to Energy Secretary Ed Davey states that “The apparent ambivalence of the Government about whether it is trying to build a low-carbon or a gas-based power system weakens the signal provided by carbon budgets to investors… damaging prospects for required low-carbon investments. This has been made clear to us in our extensive discussions with the energy and supply chain companies who it is hoped will fund the very significant investments needed in power generation over the next two decades, and who have suggested to us that the sector investment climate is currently very poor”.36
Paul Stevens of Chatham House has recently written that “There is a real fear among many analysts that shale gas may substitute not for coal but for renewables” and that “Many see the increasing use of gas as a ‘transition’ fuel to a lower carbon economy rather than building expensive renewables facilities. Thus the anticipation of cheap natural gas could inhibit investment in renewables. But again, if the revolution fails to deliver a lot of cheap gas, by the time this is realized it could well be too late to revert to a solution to climate change based upon renewables”.37
Nobuo Tanaka, then Executive Director of the IEA said in 2011: “while natural gas is the cleanest fossil fuel, it is still a fossil fuel. Its increased use could muscle out low carbon fuels such as renewables. An expansion of natural gas use alone is no panacea for climate change”.38
2.6 The Government’s forthcoming Energy Bill must ensure that financial support mechanisms for low carbon energy are designed to support renewables. The current proposal for Contracts for Difference Feed-In Tariffs seems driven by a desire to support nuclear power rather than look at how best to support the deployment of large-and small-scale renewable energy. The Government must ensure that the Energy Bill introduces a simple, predictable and Government-backed financial support mechanism for renewables at all scales, and ensures that they have preferential access to the electricity market.39
References
1 Friends of the Earth 2010 Reckless Gamblers
2 International Energy Agency 2012 Golden Rules for a Golden Age of Gas p63
3 ibid p91
4 BBC Campaigners’ anger over agency’s shale gas report 29 May 2012
5 International Energy Agency 2011 Are we entering a Golden Age of Gas? p7
6 US Energy Information Administration 5th April 2011 “World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States”
7 Broderick et al 2011 Shale gas: an updated assessment of environmental and climate change impacts p38
8 ibid pp68-69
9 Friends of the Earth 2010 Reckless Gamblers
10 David Cameron 16 June 2008 “The choice isn’t between economy and the environment”
11 Committee on Climate Change 2011 The Renewable Energy Review p40
12 Committee on Climate Change 27 March 2012 CCC comments on Emissions Performance Standard (EPS) for gas-fired power generation
13 Redpoint 2012 “Modelling the trajectory of the UK power sector to 2030 under alternative assumptions”
14 See Friends of the Earth September 2012 A plan for Clean British Energy http://www.foe.co.uk/resource/briefings/plan_cbe_report.pdf
15 Committee on Climate Change Unabated gas-fired generation 24 May 2012
16 See Bradshaw for Friends of the Earth 2012 Time to take our foot off the gas?
17 ECC Select Committee Pre-Legislative Scrutiny of the Draft Energy Bill Q12 12 June 2012
18 See for example The Guardian Carbon capture progress has lost momentum, says energy agency 22 September 2011
19 International Energy Agency 2011 op cit p38
20 AEA for the European Commission DG CLIMA, September 2012 “Climate impact of potential shale gas production in the EU”
21 Weber et al, 2012, Life Cycle Carbon Footprint of Shale Gas: Review of Evidence and Implications
22 Deutsche Bank “European Gas: A First Look At EU Shale-Gas Prospects”
23 OFGEM “The impact of unconventional gas on Europe”
24 Financial Times 10 September 2012 “Minister plays down role of shale gas”
25 Utility Week 17 May 2012 “Gas operations keep National Grid returns buoyant - with shale unlikely to change things”
26 European Commission “The identification of potential risks for the environment and human health arising from hydrocarbons operations involving hydraulic fracturing in Europe”
27 Food & Water Watch “Fracking: the new global water crisis”
28 Friends of the Earth March 2012 Gas prices: is the only way up?
29 Committee on Climate Change 2008 Building a low-carbon economy p66
30 EurActive 31 May 2012 Shale gas strategy “not the optimum path”: Fatih Birol
31 DECC 2012 Renewables Investment and Jobs
32 Renewable Energy Association 2012 “Renewable Energy: Made in Britain”
33 David Cameron 19th March 2012 “Speech on infrastructure to the Institute of Civil Engineering”
34 Broderick et al op cit pp70-72
35 Jacoby et al, MIT, 2012 “The Influence of Shale Gas on U.S. Energy and Environmental Policy”
36 CCC 13th September 2012 Letter to Ed Davey “The need for a carbon intensity target in the power sector”
37 Ref Chatham House August 2012 “The ‘Shale Gas Revolution’: Developments and Changes”
38 Guardian 6th June 2011 “Natural gas is no climate change ‘panacea’, warns IEA”
39 Friends of the Earth, WWF, Greenpeace & RSPB 2012 “Jobs, investor confidence and consumer protection through decarbonisation”
October 2012