It’s shale – the clean green gas of the future! (official).

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Green giant?

The new wonder substance shale gas, is apparently now, according to ministers, not only bursting to get out of the ground from the solid rock within which it is currently encased at record breaking rates, but has hitherto unknown qualities as a sunrise fuel of the future. The Prime Minister himself, at the recent liaison committee meeting considered it to be ‘clean energy’ and in Prime Minister’s Questions yesterday, went further in declaring it to constitute ‘green energy’. Michael Fallon the Energy Minister (who I congratulate for adding ‘Minister  for Portsmouth’ to his already bulging portfolio bag) referred to ‘shale gas …and other  renewables’ on a recent Today programme appearance, and praised it as ‘one of the cleaner fuels’ in DECC Questions today, (Thursday).

I was hoping to ask the Energy Secretary at these questions whether he agreed with the Prime Minister’s assessment of Shale as ‘green energy’ and if so would production qualify for ‘contracts for difference’ when they come in, but the session unfortunately ran out of time.

So is shale clean, green and so on? Of course not. Had the Energy minister answered an admirably succinct question from my colleague, Ian Lavery, at Energy Questions on the emissions level of shale gas instead of just saying that the Chief Scientist has undertaken a report on its emission levels, he would be under no doubt by now. For the report itself quite clearly states that shale has ‘comparable emissions to gas extracted from conventional sources’ and falls in the range, for generating purposes of 423 – 535 grams per kilowatt hour. In other words, a bit cleaner than coal but not very ‘clean’ and certainly not ‘green’.

So just a series of co-incidental  mistakes then? I wonder.  The point of it all, I think is to start to position shale somehow as a vital, low carbon component of Britain’s energy mix in the future. Because after all, as the same ministers tell us, (non-specifically), ‘gas will continue to play a major role in our energy mix over future years’ even with a continuing commitment to substantial decarbonisation of our energy supply.

True, but what does that role actually look like when you get a little more specific? Or even, dare I suggest, read DECCs own projections, which they have handily set forward in the ‘Gas strategy’ last year? Well, in DECC’s central 2030s scenario of an energy mix averaging 100g per kwh in emissions, it is projected that gas will produce 88 terra watt hours of electricity, or about 22% of all electricity generated. Substantial then, but how substantial? For comparison purposes, we might turn to current output – last year gas produced 28% of electricity, or just over 100 twh of the stuff.

So a considerable downturn on current levels of production, and incidentally, as National Grid points out, easily suppliable at that point by whatever comes from remaining UK gas fields and from gas interconnectors from Norway.

And the conclusion then is…we don’t actually need shale as any sort of replacement gas supply, and nor on DECCs own projections will there be any sort of additional demand for gas that might need to call on shale to fill. The project will therefore not as the Prime Minister mistily declares ‘supply our gas needs for over 30 years’. If we force 7% of the gas out of the rocks using thousands of wells, it will provide some gas for us to sell to others because we won’t need it for UK purposes. Or at best replace some friendly and not exactly insecure Norwegian gas coming our way.  Unless of course one dispenses with all this ‘green crap’ and plugs the UK into the high gas, high emissions scenario beloved (as I have previously reported) of the Chancellor, but requiring the UK to tear up all its climate change legislation and adherence to the carbon budgets it produces.

So it may have a role…to make a lot of money for the Chancellor in sales tax, but clean and green it isn’t and never will be, even if the Prime Minister says it is.

On fat ladies and Kenneth Wolstenhome

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I don’t want to rain on anyone’s parade but I am less than impressed by the seemingly premature crowing about how the Energy Bill is ‘now in the statute books’, and that ‘the way is now open for new market arrangements.’ It’s true that the Bill now has royal assent but a quick look at what is in the statute books will underline just how far off we really are from the entrance of the eponymous singing fat lady.

A good way to describe what is now down on paper is to imagine the Bill (sorry, Act) as a wardrobe; it looks OK from the outside but if there are no coathangers on the rails once you open the door. And so you can hardly say that it performs the essential functions of a wardrobe. And as far as the Energy Act is concerned there are precious few hangers currently in evidence. This is because of the extraordinarily high count of consequent pieces of secondary legislation written into it – clauses that require the practicalities of what has been outlined (often in very rudimentary terms) to be set out in Orders. And these Orders will either have to be laid down on the Parliamentary order paper and (hopefully) not objected to, or, more seriously, will be subject to finding an afternoon in a committee room to debate and agree a raft of secondary measures.

The to do list now numbers no less than seventeen affirmative resolutions (the afternoon’s debate) and twenty-three negative resolutions, some of which may need to be fully debated depending on other parts of the Act. Subjects in the queue for debate include: how the Secretary of State is going to decide on a decarbonisation target; the carbon intensity of electricity generation; how to make electricity capacity regulations; the capacity agreements themselves; how auctions are carried out; the settlement body that will oversee them; a huge raft of regulations relating to CfD investment contracts and payments; how to make renewable obligation transitional arrangements; what emission performance standards will consist of; arrangements for altering licences… In short, most of the meaty content of the Act.

Some of this to do list is, of course, bound by time constraints, so one might imagine that some of the entries will need to be on the statute books by the end of the year at the latest. This means that there remain fewer full weeks in the Parliamentary calendar than resolutions that need to be laid down. And this is certainly true as far as affirmative resolutions are concerned; there is roughly one committee session for every eight sitting days up to the end of the year.

That is if they have been written, of course, and the first week back has gone by without anything appearing. So I wish the put-upon scribes and drafters below DECC bon voyage. The only saving thought is that there seems to be very little primary legislation now going through the House because members of the coalition are increasingly vetoing each other’s pieces of pet legislation. And because of this no secondary legislation will appear to compete with the needs of the Energy Act.

Latest News: green levies not to be in green levy review!

More I-made-it-up-on-the-way-in energy policy from David Cameron: this time, the commitment in last week’s PMQs to review green levies. This policy seems to have been made following a pincer movement from Tory backbenchers, who blame green levies for all those annoying windmills in their constituencies; the opposition, who are demanding action on energy prices; and some of the energy companies themselves, who claim that an exaggerated share of price rises are due to Renewable Obligation (RO), Contracts for Difference (CfDs) and all the other schemes that can be put under the green levies banner.

Of course what comes under that green-levies heading – the contents of the £112 on bills specified by the PM – is an assortment of different levies with differing effects. CfDs, RO and Feed in Tariffs (FiTs) are true green levies; they levy a payment obligation on energy companies to underwrite support for low carbon technologies. The Energy Company Obligation, meanwhile, covers several schemes supporting greater energy efficiency in homes: retrofitting of insulation in hard-to-treat properties and the reduction of bills for those in fuel poverty through insulation and efficiency measures. Warm Home discount knocks some money off fuel bills for elderly people. And the smart meter levy is slowly starting to put the roll out costs of smart meters onto customers’ bills. The Carbon Floor Price looks like a green levy but doesn’t actually save any carbon in its own right and all the revenue from it goes straight to the Treasury anyway. The EU-ETS does save carbon but is a variable amount based on trading allowances across Europe.

So the above melange is what makes up the £112 and logically therefore, now that a review has been declared, it’s what will be reviewed. And it’s fair to say that there’s not much point in having a review, unless there is a result. To swear solemnly to review all this and then declare that there is nothing to see after all so please move along now, won’t wash.  So something will presumably be reviewed out.

But what, exactly?  The process of running up a short list started, as far as I can see, almost as soon as the PM had left the chamber.  Lib Dems started rumbling about saving green levies (presumably the actual green levies) and Nick Clegg weighed in with a push in the direction these levies should be placed into general taxation (a policy suggested by some of the Big 6).

So within a week, the review has begun to look a little different.  I think DECC, recovering its composure after the surprise announcement, put out some ‘press guidance’ (not a press release, mind) to the effect that Renewable Obligation, CfDs and Feed in Tariffs would not be in the review.  I say I think, because Energy Ministers in the Commons and the Lords said opposite things on the same day, and Ed Davey refused to confirm whether the green levies would be in the review when I directly challenged him about it during the Annual Energy Statement on Thursday.

But I suppose they would be out, not least because it is difficult to see how they can easily be reviewed. Renewable Obligation and FITs are pretty much fully allocated and there might be a number of protracted legal actions if this support was suddenly taken away. In any event, RO will end in 2017 anyway and FiTs are due to be reviewed further and have already just been reviewed.  CfDs don’t exist yet, but some are in the process of being allocated for the future, most notably to that energy company building our new nuclear power station.  That might be difficult to untangle.

So that leaves non-green levies in the green levy review.  The big one, of course is the Carbon Floor Price. Not really a levy, it’s actually more a tax and as such one that goes straight from the power plants to the Treasury. Treasury in fact gets about half a billion pounds a year from it, with the trajectory of the income rising rapidly as the floor price increases. Oh and don’t forget that the Treasury has set out and planned to receive this revenue in the ‘Red Book’.  So I doubt that George would be desperately happy about the loss of several billion pounds of actual and imminent Treasury revenue if the Carbon Floor Price was reviewed out. I also doubt that he’d impressed by the prospect of the further loss of spending power that would occur if green levies were transferred into general taxation.  Of course there is also the marginal issue that EDF (yes the same company that has graciously agreed to scoop up the subsidies to build a new power station) is getting almost a billion pounds a year by selling the output from the existing, ageing nuclear fleet (which is CFP exempt) at the same price as (non CFP exempt) gas. And the loss of this money could further tip the still delicate nuclear ‘deal’ over the edge.

And then there’s the business of underwriting the smart meter roll out, which will, in the fullness of time, be levied through energy companies and charged to the bill payer. This will be about £12 billion. I’m not sure the Chancellor would willingly transfer that liability into general taxation either.

So we’re left with poor, old, non-performing, benighted ECO. It was the scheme that was going to replace warm front and other energy efficiency measures at no cost to the taxpayer and is still, we hope, going to insulate and retrofit all those energy inefficient and draughty homes across the country. And this urgently needs doing if we are to get to any sort of grips with energy efficiency and produce lower carbon emission homes in the future.

That’ll be the one then. Review sorted.  Look out for the demise or downgrading of ECO shortly, as the only prisoner that it’s actually possible to round up and make walk the plank.  And meanwhile the individual responsible for this utter shambles lives to make up another policy on the hoof as soon as he’s cornered again.