Numerous national newspapers are reporting that Osborne’s economic plan will involve a sophisticated gas strategy that could see the UK’s energy mix become heavily dominated by fossil fuel-powered gas plants.
The Financial Times reports that Osborne’s new gas strategy could call for more overall gas capacity than at the moment. Indeed, under one of the proposed scenarios which would see Britain’s carbon reduction plan being scaled back, there could be “37GW of new gas plants in the UK by 2030”, accounting for half of the UK’s generation capacity. It is also reported that Osborne will consult on tax breaks for shale gas exploration and set up an Office for Unconventional Gas to simplify regulation and mediate in disputes between the industry and opponents.
But commenting on the threat of a new ‘dash for gas’ Ben Caldecott, Head of Policy at Climate Change Capital, said: “Another dash for gas in the UK will be a mistake, for there are reasons to question the idea of low global gas prices over the long term, as well as the supposed benefits of shale gas in terms of lower life-cycle greenhouse gas emissions.
“In heavy coal users, such as the US, China, India, and South Africa, efforts to switch from coal to gas could make a significant dent in global emissions. But in countries like the UK, Germany and Japan – all undergoing structural energy reforms – more gas might not just displace coal. Instead it could end up displacing renewables, which would make tackling climate change more challenging, not less.
“While some gas in the UK will be needed for flexible generation capacity, higher levels of penetration will hold back the development of the low carbon technologies needed to ensure cleaner, cheaper and more secure power over the long term. What we need is a more robust, future-proofed energy strategy, so that Britain can manage long term uncertainty and volatility. Going for gas in a big way fails this test, as it shields us from nothing, but exposes us to a wide range of risks that the UK has little or no control over.”
Osborne’s backing of increased gas capacity will not surprise the clean tech industry, but will still come as a bitter disappointment. The Chancellor has been involved in a highly-publicised dispute with the Energy Secretary, Ed Davey, over the future of the UK’s energy policy. Davey framed the increased low-carbon support of £7.2 billion in last week's Energy Bill as a significant victory. However, the increased gas capacity could threaten the development of renewable resources by diluting the value of Renewable Obligation Certificates (ROCs).
Media reports ahead of tomorrow's statement have worried the Renewable Energy Association (REA), which is calling on government to ensure that gas fired power generation complements, not competes with achieving 30% of electricity from renewable sources by 2020. The REA points out that the Chancellor personally signed up to a communiqué in Mexico City last November alongside other G20 finance ministers, which promised to “rationalise and phase-out over the medium-term inefficient fossil fuel subsidies that encourage wasteful consumption”.
“The IEA and the World Bank are sounding the alarm that we need to transform our energy systems urgently to avoid a temperature rise of four degrees. It will be ironic if the Chancellor fires the starting gun on a second 'dash for gas' – controversially shale gas at that – even as his colleagues scrabble for progress in Doha,” said REA Chairman, Martin Wright.
He added: “There should be no question of a conflict between gas and renewables. Gas could complement the growth of renewables, but a massive expansion will jeopardize climate change objectives. It is significant that last week the Energy Bill was announced by DECC, whereas it is the Chancellor who is announcing the Gas Strategy. When taken with the failure to set a carbon reduction target in the Bill, and an Emissions Performance Standard for gas that fails to bite until 2045, it appears that central Government is prioritising fossil fuels over renewables.”
Meanwhile, Solar Power Portal also understands that the highly anticipated RO banding announcement for solar has been delayed – another signal that will begin to worry industry investors.
But the Department for Energy and Climate Change said the announcement would be made “shortly”.
