Tuesday, July 23, 2013

Gas from shale can be part of our Energy future - but it needs to beseen in a broad context of Primary Energy supply

There is a fairly high level of ignorance about shale gas around - even in the serious media - for example here on the website Conservative Home. I'm not sure what the headline means. If it means that many countries have shale gas that is true and unremarkable. However the "global resource" is actually "Natural Gas" - the fact that some of it is held in shale deposits is not relevant once the gas has been harvested. It then becomes a commodity and where it came from is irrelevant .

To understand energy it is useful to look at the traditional and newer non-traditional sources. The modern (post industrial revolution) energy mix comes overwhelmingly from four sources: Oil, Gas, Coal and Primary Electricity. Lets deal with the last of these first. Electricity is of course the power for so much of modern living. Its uses do not need to be itemised here as they are so ubiquitous - except perhaps to remember that electric power is the power of choice for most modern railways. Primary electricity is that which comes from non-conversion sources (i.e. NOT from the conversion of hydrocarbons - Oil, Gas of Coal - in a Power plant.). This is usually Capital intensive but with reasonably low running costs. Hydro-Electric power is by far the main use. It can be controversial - the damming of rivers to provide the water power can be environmentally and socially problematic. But once the capital works have been done there is no better source of electricity environmentally and economically. Wind power is analogous with Hydro-electric up to a point. The economics are similar - high up-front costs in turbines and no fuel consumption costs. However the environmental costs of wind power can be large and we are too early in the use of wind turbines to know whether in many countries it can really be an economic choice - unsubsidised. Nuclear power is similar again except that it is a mature industry whose risks and benefits are well known. The capital costs are enormous and the spent fuel disposal and storage is a concern. But the French, among others, have shown the benefits of having an extensive network of Nuclear Power Stations and increasingly Nuclear will be part of the mix.

Coal should not be dismissed lightly. It is now little used as primary energy in transportation - there are no coal-burning locomotives any more except on heritage railways! But Coal as a source of electricity production has far from had its day. Modern coal-burning power stations can be highly efficient and be reasonably environmentally acceptable as well. Obviously any conversion of Hydrocarbons into electricity damages the environment and contributes to global warming. But the idea that the lower CO2 emission burning of Gas is always preferable to the higher CO2 emission burning of Coal is too simplistic. Coal has its place.

Any source of Primary Energy has its pluses and minuses. It is wrong to see its conversion into useful energy or power as just being clean or dirty at the point of conversion (e.g. When it is used as fuel in a power station). Along the chain from production to consumption there are environmental, safety and a host of other risks - and costs. There are also the practical realities of transportation and end use application to be considered. Crude Oil and Oil Products are the only truly global energy resource. They are easy to transport and the costs are totally explicit and unsubsidised. Oil is by far the most important of the Primary Energy resources partly because of this and also because so much energy consumption is oil specific - you can only use oil for aircraft for example and it is overwhelmingly the main choice for road transportation at present and for the foreseeable future.

Natural Gas is also an international resource but it is much less flexible than oil. Gas prices in the US are far lower than in the rest of the world but the problem of moving it from where it is to where it could be used outside the US is too problematic for this to happen. Britain is substantially a Gas economy for Power Generation and home (etc.) heating and cooking. But so is much of Western Europe. The Gas infrastructure is in place and Gas is moved through pipelines and extensively traded. Across Europe there are reserves of Shale gas and the economics will be broadly the same across the continent. Once the Gas has been harvested and processed it is simply pushed into the network and consumed.

For Britain the challenge is environmental and economic. Can gas from shale be produced in a safe and environmentally responsible way at a cost that is economic? It is unavoidable that these questions will be answered at a European level. The exploiters of the resource are multinational companies who will look for and get common rules across the EU. There is no reason why shale cannot be exploited if its production takes place responsibly and if the unsubsidised costs are acceptable (the idea of one European country subsidising shale gas production or if having lower environmental standards is unthinkable).

So there ought to be less heat and more light about shale gas. There ought to be better understanding that it is not a unique Energy source but simply a more complex production challenge than conventional gas production. It will undoubtedly have its place in the energy mix. But Britain cannot go it alone as the US (a closed economy in a single State) has done. 


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