Sabien Technology has warned that the race for shale gas will be a long and difficult journey, noting that reducing energy demand alongside broadening supply will be crucial to reducing the cost of energy and securing supplies.
Talking to The Independent, Sabien CEO Alan O’Brien also suggested that a robust and effective shale gas production programme could conflict with the Government’s current renewable energy target.
While it is all very well being bullish about the creation of thousands of new jobs and adding billions of pounds to the UK economy, in our view David Cameron runs the risk of ‘biting off his nose to spite his face’.
“If shale gas production takes off and recoverable yields fill the declining gap in domestic production while delivering a substantial surplus, we feel this will present a very real threat to renewables. In the past gas was seen as a bridge to renewables. Now, with the UK’s commitment to shale exploration, gas is being described as a ‘destination’ fuel. When given the right market dynamics and conditions, this would leave the 2020 Renewables target completely stranded.
“The major stumbling block at the moment is the international wholesale ‘spot prices’ for gas. Whichever way you look at it, the UK cannot ring-fence itself from wider international market conditions. And in our view other countries with large shale reserves – like France and Poland – will also need to drill if supplies are to significantly swell and influence international wholesale spot prices,” he continued.
Alan O’ Brien also cited the views of Fatih Birol, Chief Economist and Director of global energy economics at the International Energy Agency. “The UK has significant shale gas resources but people shouldn’t expect a US scale energy revolution in the UK – the conditions are not as favourable as in the US,” said Mr Birol in an interview with The Daily Telegraph (30 January 2014).
Alan O’Brien added: “If shale gas plays out the way experts are predicting perhaps an artificial floor price for gas to head off the potential threat to renewables could be on the cards. But, frankly, we cannot see how the Government will meet its long established commitment to reduced carbon emissions and lower gas prices if the UK is to forge ahead on its own with a shale programme.
“In our view, the Government is missing a trick here; what has been and still is the most overlooked and underrated sector in the energy diversification debate is energy efficiency,” he concluded.