Investing in gas over renewables is a false economy, says UK pressure group

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U.K. Chancellor George Osborne confirmed environmentalists’ worst fears after he announced he would institute a ‘dash for gas’ in the country at the expense of renewables when he made his autumn statement on the U.K. economy.

And yesterday, the coalition government’s secretary of state for energy lifted the U.K. ban on the controversial fracking method of extracting gas deposits from subterranean rock.

Friends of the Earth has backed a report by independent statutory body the Committee on Climate Change (CCC), which predicts that investing in renewables development will be cheaper in the long run for U.K. households than betting on more plentiful gas, and said government predictions about a falling gas price were false.

"The figures used by the government are based on extrapolating what is happening with gas extraction in the U.S. and applying it here," Friends of the Earth’s head of campaigns Andrew Pendleton told pv magazine.

"That is a false premise because the geology is different in the U.K. and Europe and we are also much more densely populated, which will make extracting gas in this manner more expensive.

"The likelihood of a falling gas price in Europe is quite low, most analysts agree, but even if the price of gas falls, the EU Emissions Trading Scheme will ensure – when energy demand rises again – that the cost of gas-powered plants will be a lot more expensive."

The report produced by the CCC predicts that whilst the cost of investing in renewables could add 10 per cent, or GBP100 (US$161), to UK household energy bills annually until the end of the decade, after that point any further rises would be negligible.

By contrast, the CCC predicts the rising price of gas could see GBP600 added annually to household bills in ‘the decades ahead’.

That figure is based the International Energy Agency’s Golden Age of Gas report which predicts gas prices will continue to rise until levelling off at around GBP0.70p/therm, and possibly higher if new extraction methods are limited.

The CCC has also considered the UK government’s carbon price floor which will rise to GBP70/ton of CO2 in 2030 and is predicted to rise to GBP200/t CO2 by 2030 – a price that would rise considerably if efforts to meet the UN sub-2 degree climate change target were met.

"Shale gas could make a useful contribution to meeting heat demand," CCC CEO David Kennedy told pv magazine. "However, it is unlikely to significantly reduce prices, and is carbon intense. It is still therefore sensible to invest in low-carbon power generation as an insurance policy against potentially high electricity prices in future."

The CCC report states investment in renewables will entail a heavier burden – 20 to 25 per cent – for commercial and manufacturing businesses but adds these more electricity-dependent sectors can do more to be energy efficient and that the imapct on the consumer would be minor because energy bills make up a much smaller proportion of company income than that experienced by domestic households.