Friday, 21 August 2015

Fracking and declining profitability

Where exactly are we with fracking in the UK?

There is the view that we're nearing 'peak fossil fuels':
Futures Forum: Peak coal > peak shale oil > peak gas >>> peak fossil fuels

There is the contrary view that we're approaching a new age in fracking - and that government needs to make sure it happens:
Futures Forum: Fracking: kick-starting the shale gas revolution when local planners prove obstructive

Meanwhile, it's all about supply and demand:
Futures Forum: The end of peak oil: "supply just keeps expanding while demand fails to take off"

Much of this is covered in the latest from the New Economics Foundation:

New Economics Foundation

Fracking has finally arrived in the UK, eight years on from Cuadrilla’s approved licence for shale gas exploration in Lancashire.

Last week the government released details of new areas for drilling applications (including 53 Sites of Special Scientific Interest, backtracking on an earlier promise) and made a surprising announcement to “call-in” local decisions that were taking too long.

But a lot has changed over the past eight years and opponents should still feel hopeful.

The most dramatic change for the energy sector has been a fall in natural gas prices. From a peak of 73p per therm (a unit of heat from gas) in December 2013, the price halved last summer, and now sits at 41p.

At such a price, it is entirely possible that few, if any, fracking sites in the UK will be profitable (see this week’s graph). In the US, shale projects are operating at a loss and capital markets are abandoning the technology they had recently been so aggressively funding.

The supposed environmental case for fracking has also taken a hit.

Estimates of greenhouse gas emissions from fracking continue to be revised upward with another study published this week on methane leakage, while a recent study on US greenhouse gas emissions found fracking’s suspected impact on carbon cuts non-existent: it was economic recession, rather than a switch to fracking, that lowered emissions.

The development of fracking has displaced investment in renewables, too. Instead of bridging the gap between coal and a low-carbon future, gas may lock-in the US’ existing fossil fuel infrastructure and higher emissions pathway (p11).

The current line from the UK government is that fracking would reduce energy dependence, which may be true to a degree. But it doesn't square with recent decisions to scrap other programmes that do the same thing, such as support for renewables and home energy efficiency.

Nor does it seem to be making such headway outside of Westminster. Awareness of fracking might have increased, but public support is at an all-time low. Repeated surveys from the Department of Energy and Climate Change have shown a strong preference for renewables like wind and solar.

By now, fracking’s cheerleaders expected the dash for gas to be crossing the finish line. But a substantive, reasonable and hugely successful protest movement continues to block the home straight.

The case against fracking is stronger than ever. Now is the time to make it.

Don't miss these:

Estimated costs of fracking outstrips current gas prices 
  • “Clean energy is inherently more local, more distributed, more accountable.” Bloomberg New Energy Finance CEO, Michael Liebrich, pens a letter about significant changes in the world of clean energy and calls for greater diversity in the energy sector workforce – especially more women.
  • The exceptional has become the unexceptional. What was an extraordinarily hot year for the global climate in 1998 now looks rather cool as recent years have continued to break temperature records. 2015 is currently on track to do it again.

In other news…

Bills, bills, bills
One in three Britons don't read their energy bill, reports EnergyLiveNews. Young adults were the most likely to simply read how much they owe, rather than understand the bill.

A real carbon price emerges on the EU ETS
After years of extraordinarily low prices for carbon permits through the EU Emission Trading Scheme, due to a weak economy and an oversupply of permits, the price has finally begun to rise and has now reached a 33 month high of €8.38. Carbon pricing is also partially credited with the decision by ScottishPower, formally announced this week, to close Scotland’s most polluting power station in March 2016. Though the price has increased, it remains far below the level deemed necessary to aid a transition to low-carbon economies.

Electric shock: all London taxis to be electric by 2018?
There have been a series of reports and announcements concerning electric vehicles (EV) in recent weeks. Perhaps the most interesting of these is Morgan Stanley’s Addressing Climate Change and the Investment Implications – A Primer on Climate Change, which contains a series of predictions about the market. Among these predictions is that Apple will get into EV manufacturing and that all new London Black Cabs will be electric by 2018. There has also been a lot of reaction to bold moves in California to move the state towards electric vehicle adoption.

From British butterflies to global fish stocks
Climate researchers continue to explore the adverse impacts of climate change on animal populations. British butterflies have been singled out for their susceptibility to recurrent droughts, while researchers at the University of British Columbia have been conducting research into how shifting fish stocks as a result of climate change will impact the global seafood sector, echoing earlier research this year on the Northeast Atlantic.

And finally…
Google’s latest tool, Project Sunroof, tells you how much solar power your home could be generating and, as a result, how much money you could be saving. While the tool is only available for San Francisco, Boston and Fresno, the company hopes to roll it out to many more cities in the coming months.

Griffin Carpenter and the Energy Crunch team

New Economics Foundation

Whilst fracking looks to be losing money, the government is banking on it bringing in a fair amount:


AUGUST 13 2015
Are onshore wind turbines – often in ones or twos on farming land – being thrown out so that the mega-business of fracking can reign supreme and provide the Treasury with vastly more tax income?
Some intriguing possibilities:
“If fracking yields ample supplies of gas (which is still an unknown), the Treasury will be relieved. The tax take from North Sea oil and gas tax has dropped by more than £6bn over three years and the Office of Budget Responsibility recently slashed its long-term North Sea revenue forecast by 94%. …

… Daisy Sands from Greenpeace said: “The contrast between [the government’s] view that local councils should be ‘masters of their own destiny’ and the new provisions announced today is staggering.
“Local residents could end up with virtually no say over whether their homes, communities and national parks are fracked or not.

“There is a clear double standard at play – the same government that is intent on driving through fracking at whatever cost has just given more powers to local councils to oppose wind farms, the cheapest source of clean energy. The government is riding rough-shod over democracy to industrialise our most beautiful landscapes and damage the climate. …”
So, wind farms not supplying enough tax to the Treasury but fracking looking much more lucrative.
Fracking being encouraged over wind power because it may bringbigger tax revenues? | East Devon Watch
Fracking bids to be fast-tracked - BBC News

Meanwhile, there are, perhaps more sinister, suggestions of a connection between opposition to wind farms and support for fracking:
Green Party quizzes Dorset MP on financial links to fracking on World Heritage Jurassic Coast | East Devon Watch
What does MP Burns do for £333 an hour? The Story behind the Private Eye Piece - Politics and Local Elections - Dorset East

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