EUA Policy Position Date: September 2012 EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH 01926 513777 www.eua.org.uk The Impact of Shale Gas on Energy Markets

.The Impact of Shale Gas on Energy Markets

Executive Summary

 Shale and unconventional UK gas reserves can diversify supply, improving security

and providing downward pressure on prices

 Gas provides the flexibility for power generation working alongside renewables to

“keep the lights on”.

 Gas is cleaner than coal and oil producing less carbon emissions.

 Domestic heating requirements in the UK require gas as a back-up fuel, even on best

use of renewable scenarios.

 Shale gas can generate substantial tax revenues and employment opportunities for

the UK.

 Shale can quickly supply the grid and comparatively secure compared to LNG

shipping

Energy and Utilities Alliance is a not-for-profit trade association that provides a leading

industry voice to help shape the future policy direction within the sector. Using our wealth of

expertise and over 100 years of experience, we act to further the best interests of our

members and the wider community in working towards a sustainable, energy secure and

efficient future. We are grateful for the opportunity to comment on this inquiry.

1. We believe that shale and other “unconventional gas reserves” in the UK have the

potential to diversify gas supply to strengthen security of UK supply but also to

impact upon market prices. We do not believe, in the Committee’s words “it is a

game-changer” as in the US, but its potential impact should not be ignored and can

only provide downward pressure on gas prices.

2. To meet its climate change obligations, the UK must continue to support the drive for

increased renewable and low carbon energy production, in terms of power

generation and domestic heating. However, many of these technologies provide

intermittent energy supplies without the necessary flexibility needed to meet UK

energy demand. Therefore fossil fuel back-up is required, and to achieve lower

carbon emissions gas is the fuel of choice.

3. Gas is also cleaner than both coal (power generation by 50 per cent) and oil

(transportation by 25 per cent) so its use will enhance the ability of the UK to achieve

its climate change obligations.

EUA Policy Position

Date: September 2012

EUA, Camden House, Warwick Road, Kenilworth, Warwickshire CV8 1TH

01926 513777 www.eua.org.uk

 

4. Natural gas has a key role to play in the future, alongside renewables, in the

domestic heating market. The UK does not have, or plan to have, sufficient electricity

generation capacity to meet peak heating demand. In fact, to do so would be

economically prohibitive and create huge problems surrounding the location of power

generation. Therefore it will rely on an energy distribution network that consumers

know and trust to heat their homes. Gas will be the fuel of choice, albeit working

alongside renewable technologies that in theory can provide the heating

requirements for base levels. We do not believe that shale gas production would

damage the demand for renewable technologies in the domestic heating sector.

5. UK produced shale gas has the benefit of being liable for taxation levied to support

the Exchequer and therefore wider UK priorities. Potentially, revenue could be used

to support investment in renewables; reduce fuel poverty levels through energy

efficiency programmes or further develop new clean technologies. UK production

would also be a boost to employment prospects, especially in Lancashire. In turn this

also provides a boost to the Exchequer with higher tax revenues and lower welfare

costs.

6. Shale gas could be brought into production reasonably quickly due to its proximity to

the National Transmission System. It would provide greater security of supplier

compared to reliance on LNG tankers navigating the insecure waters around the

Straits of Hormuz, close to Iran.

Mike Foster – Chief Executive,