UK Treasury Leader Eyes Shale Gas

by | Dec 7, 2012

Chancellor George Osborne delivered his Autumn Statement, which reports on economic growth and government finances in the UK, including several items related to energy efficiency.

The Chancellor indicated a strong interest in more natural gas drilling and a less-than-strong interest in renewables.

Although the UK does not have a single shale gas project, Osborne’s report focused on shale as a way for the UK to bring down energy costs, according to BusinessGreen. The Chancellor noted that gas prices are tumbling in the US because of shale and he doesn’t want British families and businesses to be left behind.

A new Office for Unconventional Gas will begin investigating possible tax incentives for developers of shale gas, despite concerns from environmental groups about the environmental effects of fracking.

Jonathan Lane, GlobalData’s head of consulting for Power and Utilities, said there are significant barriers to drilling for shale gas in the UK, including strong opposition from environmental groups and long time-frames to plan and implement such technology.

As far as renewables, Osborne is relying on the Energy Bill announced last week to drive investment in clean energy.

The US is enjoying an abundance of natural gas, largely attributable to shale gas drilling. The Energy Information Administration’s “Annual Energy Outlook 2013” found that growth in energy production is outstripping growth in energy consumption, and that will lead to a decline in net imports over the period 2011-2040.

But how might a glut of natural gas affect electricity prices, of concern to energy managers?

Lori Aniti, an analyst with the Energy Information Administration, said it varies on a state-by-state basis, depending on whether utilities are deregulated, or not. “In states that are deregulated there’s a more competitive supply,” said Aniti. In deregulated states, prices depend more on the open market, so cheaper natural gas will result in cheaper electricity fairly quickly. Texas, Illinois and most states in the Northeast are deregulated.

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