shale

On the Today programme recently, Tim Considine, professor of energy economics at Wyoming University, said that as shale gas production has increased from 1% of total gas production to 20%, the price of natural gas has halved in America. Among its other “considerable benefits” he listed lowering business gas bills, lowering the cost of electricity, increasing the demand for labour, raising tax revenues.

With inflation running at 5%, another recession looming in Europe, and energy price rises dominating the news, shale gas should be ascendant, especially since Cuadrilla Resources announced a finding of 200 trillion cubic feet of gas. But the energy minister recently said, “We do see shale gas as a game-changer in places like the US, but we don’t see the same potential here in the UK at the moment.”

After some small tremors near the drilling site the government has suspended Caudrilla’s operation. It seems, as Philip Johnston in The Telegraph suggests, that we are being kept in the dark about cheap energy.

It isn’t just America that has seen the benefits of shale. China’s National Energy Administration are planning to auction off blocks of gas for exploration and development. But the only thing Chris Huhne talks about is the chance of a glass of tap water catching on fire. Indeed, he told a fringe meeting at conference that shale gas wasn’t going to happen here.

But the race for energy is on. China Petrochemical Corp spent $2.1 Trillion gaining oil and natural gas reserves. Meanwhile we are still obsessing about renewables. In huge wins for the green lobby across Europe, there are bans and moratoriums in France, Germany and England. Instead thousand of wind turbines are being put up, state-subsidised, backed by coal-powered stations. Last year the costs of subsidising renewable energy topped £1 billion. That was an annual cost of £13.50 on an electricity bill, up from £7 three years earlier. Instead of pursuing policies that could halve the cost of gas, we have doubled the costs of electricity subsidies in three years – without reducing carbon output.

Indeed, we are not only paying £20,000 per wind turbine, but because of the variability of wind the amount of electricity they produced fell last year. We are paying more for less. And this is happening whilst nearly a hundred years of energy supply sits un-fracked in Lancashire. And that is only the first discovery.

Shale gas produces 40% less carbon than coal per unit of energy. By running their buses on gas Bejing solved their smog problem. Wind turbines are constantly backed by coal – so the reduction we are paying for in nil. As Matt Ridley points out one shale gas well in Pennsylvania will produce as much electricity as eight wind turbines in its first ten years. And whilst on-shore wind is three-times as expensive, off-shore is nine times as expensive.

Renewables won’t lead to growth. They cost too much and produce too little. Gas is the new coal. The eighteenth century ran on coal; the twenty-first will run on gas. China knows it and America knows it. Russia are so angry that their domination of the gas market is under threat they have been spreading propaganda about the health effects. And whereas renewables cost billions, shale is really very profitable: Halliburton reported a record $6.5 billion in third quarter revenue; in 2001 Devon Energy Corp made a large shale gas purchase, they now have a 50 story office building.

And in response to the claims that fracking is dangerous, early indicators are not as dramatic as the greens who claim that fracking will contaminate water. A recent report by Duke University biologist Rob Jackson showed high concentrations of methane in 85 percent of those that were within 1,000 yards (meters) of a drilling site. But crucially, they did not find any evidence of fracking chemicals in the well water. This was the conclusion after studying 60 wells in Pennsylvania. That state had up 300,000 oil and gas wells before fracking, dating back to 1859. Nor do the figures include abandoned coal-mines, which leak gas.

The debate is far from over. But there are some clear conclusions to be drawn at this stage. Shale gas is significantly cheaper than renewables (see table here). It doesn’t rely on coal-powered back-up generators. It will be a constant, reliable supply. It will produce jobs, growth and tax revenues. The government just needs to get out of the way.