Would more UK gas actually bring down prices?
By Paul Homewood
A slightly more objective Reality Check than we’re used to seeing!
The government has confirmed it is ending the ban in the UK on fracking, a controversial technique that involves drilling and using liquids at high pressure to release shale gas.
In her first speech as prime minister, Liz Truss said: "We will get spades in the ground to make sure people are not facing unaffordable energy bills."
She has pledged to increase domestic energy production with more oil and gas from the North Sea as well as fracking.
And the new Business and Energy Secretary Jacob Rees-Mogg told MPs on 22 September: "We also need more secure and cheaper supplies of gas, which is why we are going to issue more licences and why we are looking at shale gas."
He has said the government expects to award "more than 100 new licences" for oil and gas exploration in the North Sea.
But there have been warnings that these measures will not reduce people’s energy bills in the short-term.
"Greater domestic production of fossil fuels may improve energy security," the heads of the Climate Change Committee and the National Infrastructure Commission warned in a letter to the prime minister. "But our gas reserves – offshore or from shale – are too small to impact meaningfully the prices faced by UK consumers."
Labour leader Sir Keir Starmer also referred in Parliament to some "myth-busting" tweets from Greg Hands in February when Mr Hands was energy minister.
The tweet said it was a myth that extracting more North Sea gas lowers prices on the grounds that "UK production isn’t large enough to materially impact the global price of gas".
Kwasi Kwarteng, who is now chancellor, also tweeted in February saying: "additional North Sea production won’t materially affect the wholesale price (certainly not anytime soon)".
Fundamentally, UK energy companies buy gas – including from the North Sea – on the international market where prices are set by global supply and demand.
The amount extra that could be extracted from the North Sea – or from fracking – is unlikely to be enough to bring down bills significantly unless the government agrees a price with the companies that extract it.
The government has said it will look at new long-term energy contracts with domestic and international gas suppliers, although they create a danger of being tied into prices that are above market levels in the future.
There are also questions about how long it would take for any extra gas to be available.
Prof Jonathan Stern from the Oxford Institute for Energy Studies says: "The main issue is that if you started drilling tomorrow, had success the day after and everything else went to plan, it would still be two to four years before you could produce enough gas to make a difference to UK output."
While government estimates suggest there is still a significant amount of oil and gas under the North Sea, Prof Stern says that most of that is now in deep water, far from shore, which means it takes even longer to bring it online.
The new prime minister was quick to back fracking
Fracking
Reversing the ban on fracking does not present an easy, quick answer to high energy bills either.
Prof Stern said research 10 years ago had concluded that fracking wasn’t viable in Europe and that was still the case.
"The problem is you don’t know if you have a worthwhile resource until you’ve dug 50 to 100 wells, and that’s a huge problem in Europe."
That is because Europe is generally more crowded and land is more expensive than in the US, where fracking has extracted considerable quantities of gas and kept down domestic energy prices.
"The US infrastructure for export is relatively limited, so they can only export a small proportion of what they’re producing," said Kathryn Porter, an energy consultant at Watt-Logic.
That makes it harder for US companies to sell their gas outside the country, which keeps the domestic price much lower.
But the boss of the fracking company Cuadrilla welcomed the lifting of the moratorium, saying: "This is an entirely sensible decision and recognises that maximizing the UK’s domestic energy supply is vital if we are going to overcome the ongoing energy crisis and reduce the risk of it recurring in the future."
What could lower bills in the UK?
New onshore wind energy could come online faster than gas. The European Wind Energy Association says that a small wind farm can be built in as little as two months, once planning permission has been granted.
But a bigger farm that needed infrastructure such as new roads could take closer to two years. And the planning permission process can take two or three years.
During the leadership campaign Liz Truss indicated that she favours other forms of generation over onshore wind, but Chancellor Kwasi Kwarteng has just announced the planning process to install turbines will be made easier.
The CCC and NIC recommend a range of policies such as greater energy efficiency in buildings and better energy advice for consumers.
Some analysts have suggested that the solution is to separate electricity prices from gas prices by allowing households to have long-term contracts with renewable electricity generators.
https://www.bbc.co.uk/news/62878120
There are two things I wanted to highlight:
- The amount extra that could be extracted from the North Sea – or from fracking – is unlikely to be enough to bring down bills significantly unless the government agrees a price with the companies that extract it.
The government has said it will look at new long-term energy contracts with domestic and international gas suppliers, although they create a danger of being tied into prices that are above market levels in the future
As I have been arguing for a long time, there is no reason why the government cannot insist on this, when new licences are issued. As the BBC now admit, this destroys anti fossil fuel narrative, which says that we governed by global prices.
The second sentence is also worth exploring. Nobody really has an idea of how long current prices will last, or what they might come down to afterwards. What we do know though is that the more supply of gas and oil is constrained, the higher prices will be.
But if prices do soon fall back to historic levels, it would undermine the switch to renewables and nuclear, as promoted by the BBC.
- New onshore wind energy could come online faster than gas. The European Wind Energy Association says that a small wind farm can be built in as little as two months, once planning permission has been granted.
But a bigger farm that needed infrastructure such as new roads could take closer to two years. And the planning permission process can take two or three years.
The BBC is keen to promote onshore wind as a way to lower bills. But the BBC misses one crucial matter; that onshore wind is actually much more expensive than natural gas.
Here are the facts:
- The lowest prices for onshore wind currently available on CfDs is £97/MWh; these are for Round One auctions, and the wind farms concerned were commissioned between 2016 and 2019. There is no evidence that the capital cost for onshore wind farms has decreased since then, nor that technology has improved efficiency. The only way that unit costs could be lowered would be to use much bigger turbines, which would environmentally unacceptable.
- The wholesale price of natural gas has fluctuated between 76 and 470 pence/therm this year, equivalent to £25 and £160/MWh:
https://www.catalyst-commercial.co.uk/works/september-2022-energy-market-brief/
https://www.ofgem.gov.uk/energy-data-and-research/data-portal/wholesale-market-indicators
At current prices, natural gas works out dearer, but for most of this year it has been well below 250 p/therm, which works out at £85/MWh. Certainly if prices remain at 400 p/therm or more, it becomes even more imperative that the UK makes full use of its resources of natural gas.
But the BBC analysis misses one absolutely crucial factor – onshore wind cannot simply replace natural gas.
In total the UK consumed 861 TWh of natural gas in 2021, but only 254 TWH went to make electricity. The rest is used for heating and other purposes across the economy. In total energy terms gas consumption is more than double electricity generation.
https://www.gov.uk/government/statistics/digest-of-uk-energy-statistics-dukes-2022
You can build as many windmills as you want, but they cannot directly replace natural gas in all of these other applications.
And switching your domestic heating from gas to electric will cost you a lot more. The new price cap is 54 p’KWh for electricity, against 14.7p/KWh for gas.
While ever we continue to consume such large amounts of gas, it is imperative that we maximise our own resources.
Comments are closed.
NOT A LOT OF PEOPLE KNOW THAT 
There’s a Green rearguard action within Cabinet:
Tories’ craven surrender to the green lobby
By Andrew Montford
https://www.conservativewoman.co.uk/tories-craven-surrender-to-the-green-lobby
Hang on, the new domestic price cap for electric is about 33p/kWh and for gas about 10.3p/kWh.
Let’s be clear: Lord Stern is a voice of impartiality here and we must take everything he says as gospel.
Ooops….my keyboard seems to be playing up…the word Not seems to be missing from many of the statements above. Doh.
He has recently advocated giving up internal combustion engines completely, the poor silly old man.
Start with the long list of invented regulations and taxes. Also look at what the taxes on transport fuels, particularly diesel, are doing to the price of everything.
>>What could lower bills ?
Why are companies allowed to build wind farms without having 100% back up power from e.g. gas, or even coal ?
Now that, alone, would be the best thing the Gov could do to level the playing field. I’m sick of having to subsidise carpetbaggers!
Wheewizz: Absolurtly. Wind energy, besides all its other shortcomings, is intermittent and has to be backed up by fossil fueled generation of electricity. And, most importantly, that generation must be financially viable i.e. it cannot willy-nilly be trumped by renewables just when the wind blows – there must be balance. The last thing we need is more wind capacity.
wheewiz. According to the Thatcher dogma of the privatisation of the power market, individual power producers are not responsible for security of supply. Security of supply is supposed to magically appear from the invisible hand of the market.
To put it another way, if individual power producers were to be held responsible for the costs of supply interruptions, the potential liabilities of power generation would probably be too unattractive to be investable. So a market could never really get underway.
The market arrangements put the operator of a nuclear plant in the same position as the operator of a gas fired plant, a coal fired plant, hydro plant, and so on. The operator of a wind farm is no different.
It would take new regulations to change this. We could have a reliability standard for individual generators, and it would be set by some authority and reference to the standards of performance associated with “good industry practice”. To incentivise performance, there would be some level of reward for exceeding the standard, and some level of punishment for falling below it. There would need to be a bunch of new rules about monitoring the standard on an even-handed footing for many different circumstances.
This puts the matter into a very familiar debate on these boards about whether more Government (regulation) is better than less. Requiring wind farm operators to achieve some reliability standard in an even-handed manner would mean a large new swathe of rules and regulations to comply with in order to be part of “the market”.
Jordan
Many thanks
I don’t agree your argument. We have no market in security of supply other than the failed government run Capacity Market. If we had a proper market open to consumers I think you would soon find that consumers were prepared to pay a premium for a secure supply, rather than finding their power cut any time winds are slight. I think that energy retailers would seek to tie up packages of supply that were cost efficient if they were actually permitted to do so, too. As it is, by law they must buy almost half their sales from renewables or pay for not doing so.
Indeed, what happened in the aftermath of privatisation was a large investment in cost competitive dispatchable CCGT plant. Coal was increasingly disadvantaged by regulation, and nuclear was subject to political roadblocks. Things got a whole lot worse once renewables were subsidised and granted grid priority with no penalties.
Under the pool price system there was also a capacity market. It did not operate as an energy only market à la ERCOT.
Jonathan Stern and (Lord) Nicholas Stern are different people. Jonathan Stern is broadly correct in downplaying expectations of a rapid pickup in UK gas production but he neglects to point out that production has been falling quite fast so even stabilisation would be a good outcome.
What are we willing to pay for energy security? I suspect quite a lot. As has often been pointed out, even if prices don’t fall there is a lot of income and tax revenue to be generated by increasing production. Should we turn that away even if the effect on market prices is modest?
We should be offering dispatchable power contracts to wind farms – i.e. you deliver power at the agreed price whenever the system requires it. Your problem to work out how to do that.
Much appreciated, Gordon.
There is no global price for gas.
From the article: ” … two to four years before you could produce enough gas to make a difference to UK output.”
The Chinese can build coal-fired power stations in about 30 months, which is what we should be doing in the UK to resolve the energy emergency.
It appears much of the attack against fracking for gas is based on estimated future cost, surely energy security has was value which should be included in any calculation.
The attack on gas is based on the fact that an ample local supply of gas would be far cheaper than renewables just as it has been all along until the point where prices were set by shortage, not cost of supply. Green investment would be knocked for six faced with real direct competition from gas and no subsidy support.
Now the Labour Party want to get to Net Zero by 2030 that would prevent any further investment in oil and gas unless there are contracts in place for the gas and oil prices for the life of the fields.
Which company is going to invest in anything if they think there is a reasonable chance that within 2 years they will be stopped from proceeding?
Starmer has just stopped new oil/gas/coal investment stone dead.
He is just following Biden’s lead in US.
A clued up Tory party – I know…a long shot – has just been given an open goal at the next election by Starmer. All they have to do is put out the honest costs of Nut Job Zero along with a list of the missing technology. The Aussie nutters have just promised the same thing but have admitted it will only be achieved with technology that doesn’t exist and some that nobody has thought of.
Gerry, if the Tory Party reveals the true costs of Numpty Zero, they will also be admitting they have squandered £billions. Plus, they will probably let slip that their own policies have been largely responsible for today’s energy shortage.
It might be an open goal, but it might also be their own. A meeting of the bullet and the big toe.
With the departure of Deben from the CCC there is a great opportunity to disown his bad advice.
Starmer says that Labour intends to end all fossil fuel use by 2030 and replace it wholly by wind, sun and nuclear. What could possible go wrong?
No need to point out the flaws here.
‘but Chancellor Kwasi Kwarteng has just announced the planning process to install turbines will be made easier’
Where is the pledge to get gas drilling expedited ?!?!?
“You should choose wind because . . . we will approve it.”
Perhaps the idea is to force this choice
I really tire of hearing that there is a ‘global market’ for gas.It’s simply untrue.For years the price of gas in the US has been far below what we pay here and in the EU.
Yes, that is what I was going to write – Ed Milband seems not to know that, plus a lot more…Why our gas must be at world prices but not the US.
Both actual gas and gasoline (petrol). And not only the USA. The problem is European politicians hate their own populations and what they don’t ban, they hammer with extortionate taxes and regulations both of which increase prices to end users.
>>For years the price of gas in the US has been far below what we pay here and in the EU
There is a tax of 18.4¢ per gallon at the federal level (paid at the factory) and then the states set the rate within their boundary. This tax provides for roads and bridges, but some goes to mass transit, but not into general funds.
A few examples of total tax: cents per gallon
Alabama: . . . 29.2
California: . . 65.1
Nebraska: . . 25.7
Washington: 52.38
Washington State, where I live, raised taxes over a two-year period beginning about 4 years ago. The State’s roads and bridges were in sorry shape. Construction projects are visible all over and the transportation network is improving.
The increases were based on increasing materials cost and wages.
If you have some time, learn about “critter crossings” –
https://conservationnw.org/our-work/habitat/i-90/
Even with the excessive tax in California, remember those USA taxes are per GALLON. We mere mortals in Europe are paying more than that per LITRE.
The other issue of course is that the European taxes don’t get used for actually maintaining the roads or even building the still missing ones. They just disappear into the black hole of public spending
You are correct, all natural gas is local For example US natural gas sells for approximately $7.00 Us/ 1000 cu ft while Alberta gas sells for Can $ 2.00/ 1000 cu ft.
You don’t even have to cross the pond. In July, when our own demand was low, we were self-sufficient in pipeline gas. Norway was taking advantage of lower than winter demand to use the UK as a transit route for extra gas sales to the Continent and the balance of our limited export capacity was filled by LNG purchases. The price at TTF in the Netherlands at the far end of the BBL pipeline was twice the UK price.
If we increase our own production it means more months when we are self sufficient and thus insulated from other prices. It reduces our import demand, so we no longer would find ourselves paying expensive freight to ship LNG from Peru and even Australia, reducing the cost of our imports. Since our imports price to equate our marginal supply cost the cheaper cost applies to all our imports, not just the imports backed out.
How can the US sell their fracked gas cheaper than the world price but we can’t/
Does the answer lie in logistics?
If the UK is well connected to other markets and the local gas demand exceeds local gas demand, the marginal cost of supply will be set by imports (those other markets and prices). If there is strong competition for the same supplies (e.g. from the EU or Far East), the going rate for gas will be whatever it takes to wrest the supplies out of the hands of the competition.
If the US is not well connected to other markets, local gas supply might exceed local gas demand, and local prices should struggle to increase above the marginal cost of production. Without the connectivity, there will be no tussle with other willing purchasers (e.g. in the EU or the Far East).
Big price differences should result in an incentive to increase US gas import/export capacity. If this is not happening, we’d need to understand the barriers to investment. For example, there could be structural issues in the US (such as lots of small players who find it difficult organise themselves to build the connection infrastructure needed to improve their prices). Or it might be the sheer cost of infrastructure to transport gas over long distance to connect seaborne ports (especially for inland producers in the US). Or it could be the difficulty in getting land rights and permits to build the infrastructure, involving many landowners in different US States.
Typical Magic Money Tree economics from the BBC, the long forgotten words Wealth Creation are the reason that the UK should be fracking, the gas will either be exported or will displace imports. Fack the price of gas, a country needs wealth creation to pay for its essential imports.
Especially when we hear what Labour are planning: nothing more than make-work – the equivalent of paying someone to dig a hole and someone else to fill it in. No wealth-creation jobs. Of course, it makes for full-employment – and the poor-house.
At some point in the future, Russia will turn the gas back on to Europe. No one is talking about this or including it in calculations.
Rightly or wrongly, Russia has Europe specifically and the west generally over a barrel. The conflict is likely to conclude by early to mid 2023 and the west will be forced to negotiate with Russia whether they like it or not.
Russia is calling up 300,000 reservist’s. These are experienced soldiers many of whom have seen battle so will only take a few weeks of training.
Ukraine’s casualties are immense and they have nowhere to turn for reinforcements.
The conclusion of this conflict is merely a matter of time now.
When Boris Johnson as PM last visited Zelensky he persuaded him (probably at Biden’s behest) not to negotiate with Russia. That was a monumental blunder which has cost many lives and induced misery across Europe.
Unless something happens during this winter, springtime will likely see Europe overrun with demonstrations and riots.
Johnson needs to answer for this. We should have learned from having a self serving, incompetent Prime Minister take us to war in Iraq, but we didn’t. This is unacceptable.
Looking at the current map of occupied Ukraine, with contiguous land to Crimea, it looks to me like what Russia was widely expected to go for, so the choice is between accepting this or perpetual fighting along the new border.
I agree. The need to stop more loss of life far outweighs the egotistical posturing of the west.
When the foregone conclusion of the referendum is reached Russia will be defending it’s new border directly and the gloves will come off.
They have largely avoided targeting Ukrainian infrastructure but that ends when the 300,000 reservist’s finish their training. The reservist’s are ex military many with combat experience. They will largely be used to relieve regular soldiers elsewhere in Russia who will join the battle in Ukraine, and they will simply overrun the remaining Ukrainian forces.
The country will be destroyed, all of which could have been avoided long ago by negotiation, a peaceful internationally monitored referendum, and an orderly transition.
But that wasn’t good enough for our irresponsible, wholly childish western leaders. Their ego’s and NetZero ideology blinded them to the realities of war.
@ HotScot: from the evidence available within the public domain, Russian military technology is no match for Western military technology, see the destruction of Russian tanks by hand-held anti-tank weapons as one example.
Another 300,000 Russian soldiers without modern weapons, without competent command structures and without efficient logistical support will be marching into a meat grinder, if that is what the West chooses.
@Micky R
The west has largely exhausted reserves of military equipment it can send to Ukraine. Remember, Biden abandoned $80Bn worth of equipment in Afghanistan. This stuff doesn’t grow on trees.
If you imagine Russia is sending troops into battle without “modern” equipment, welcome to your delusion.
It is expending around 50,000 artillery rounds per day. The US Marine core expended that much over the entire Iraq war. Russia has been planning this for a very long time.
Ukraine has lost roughly 250,000 military personnel (killed or wounded) from a population of around 40M. The UK has 80,000 military personnel in total – we would have been wiped out almost three times by now. Of the 160,000 original force sent to Ukraine, Russia is believed to have lost about 80,000.
Zelensky is demanding modern American and German battle tanks but they are about one third heavier than Russian tanks and will get bogged down in a winter terrain they were never designed for. They also take months of training because of their sophistication and a huge logistical operation to keep them running.
Predictably, America and Germany have said no.
Ukraine has nowhere to turn for extra troops other than untrained civilians. It has nowhere to turn for equipment.
If this conflict continues over the winter, Ukrainian troops will be freezing to death on the battlefield.
The whole thing could have ended in a negotiated settlement but Boris Johnson got involved. Unless a settlement is reached very soon Ukraine will be gutted by the Russians.
Russia has incurred some defeats, but that’s the nature of war. And as one informed observer pointed out, Ukraine had the most competent army in the world, with the possible exception of the eastern Ukrainians who have been opposing them since 2014, yet they have incurred staggering losses from a force of only 160,000, on their home soil.
This conflict has already been won but for criminally reckless politicians who consider the lives of others cheap.
” The west has largely exhausted reserves of military equipment it can send to Ukraine. ”
The facts undermine your words e.g. HIMARS, approx 400 units in service with the US Army / Marines. The US has supplied approx 16 units to the Ukr.
An unknown is how much resource is the US prepared to supply to the Ukr.
Nobody in the West is setup to manufacture replacement arms and munitions in the required quantities. Daily firings have used more Stingers for example than can be made in a month or more, partially because a new design is due in the next year or so leading to a reduction in production.
What the likes of Micky R have overlooked is that the war is now an attritional artillery war where Russia has the best long range guns and are able to fire beyond the range of the obsolete stuff the likes of the UK and USA have sent, or promised to send.
@ Gerry: US manufacturing capacity is substantial.
The obsolete Stinger isn’t the only anti-aircraft weapon the West has supplied to Ukraine.
I doubt if any Russian artillery can substantially exceed the range of HIMARS. Historically, the West never planned to slug it out artillery vs artillery with the USSR; the same applies in 2022 in Ukraine.
Western resource isn’t an issue, although continuing Western commitment might be; the continued failure to bankrupt Russia is a major issue.
Other posters will have different views.
More BBC exaggeration.
“Hurricane Fiona: Canada hit by ‘historic, extreme event'”
https://www.bbc.com/news/world-us-canada-63011195
Several days ago the MSM decided it would be a rare hurricane strike on Canada and they used terms ‘historic’ and most powerful ‘ever’.
Yes it is an extremely damaging storm, but it wasn’t a hurricane at landfall as far as most reports seem to say, and it is far from unprecedented.
Now the bbc are claiming an “explosive super typhoon” nears Philippines.
Hit the Philippines and is unprecedented…
Hurricanes aren’t so very unusual in Canada after all:
https://en.wikipedia.org/wiki/List_of_Canada_hurricanes
It passed over Bermuda where my sister lives. No big deal.
using the argument that gas production in the uk would have no effect on international prices if transferred to green measures would destroy them.
Kwartengs solution is MORE windmills.How stupid can you get?
Politicians sicken me to the core.
Well, they do reduce imports of expensive gas.
The first effect of wind is to back out baseload generation from coal and nuclear. That results in an increased reliance on gas to provide baseload when the wind doesn’t blow as well as topping up any time wind is inadequate for higher loads. The net result is we now use more gas than we did in 1997, and that will increase as we can’t rely on imports to provide some of the missing power.
If something doesn’t work, double down on it.
It appears clear to me that our economic prosperity will be determined specifically by our ability to produce copious quantities of reliable cheap energy. A resource so necessary that it almost rates as a basic human right. The availability of which would drive an economic boom. There was a good article in the Sunday Times by Mathew Syed today illuminating this idea. https://www.thetimes.co.uk/article/fiddling-with-tax-wont-cut-it-our-focus-must-be-energy-energy-energy-0tsqpnjwq
We need to look at all of the available resources and fast track them while clearing out timewasting hurdles. Apparently the French built 45 nuclear power stations in 15 years in the past. We could do the same if we ditch the endless public inquiries. https://www.ted.com/talks/isabelle_boemeke_nuclear_power_is_our_best_hope_to_ditch_fossil_fuels
We also shouldn’t forget geothermal. As a by product of fracking we could convert wells which become unproductive into geothermal district heating systems providing limitless heating for buildings eg houses, hospitals, greenhouses etc https://www.ted.com/talks/jamie_c_beard_the_untapped_energy_source_that_could_power_the_planet
Lets get on it.
Lies, lies and more lies. Today’s Telegraph (Business) announces that Ms Truss plans to hypothocate the taxes from shale gas to a national reserve like Norway did. What planet is she from? We haven’t even got ANY shale gas yet! Another lady reporter in the same publication accuses the US fracking industry of being secretive – she couldn’t find any references. Perhaps she doesn’t have a computer but if she googled “us shale gas” she woulf find hundreds of open and informative technical papers and if she added the word “seismic” the number would be reduced but still dozens. Still the nonsense goes on.,
GREAT article and Comments. Kwart is obsessed with gaining power. Americans could call him a grifter. Nobody has dared to force him to obey Parl’y Rule and declare all his assets and interests….. wonder why not? Knows where bodies are buried! Nigerian extraction, say no more. Nowt boding well. Overall, the article agrees with Rosstradamus…. US and EU will abandon Ukronazis and fix a carve up with Russia . No brainer. xxx
‘Would more UK gas actually bring down prices?’
IT’S A TRICK !!!
They imply a motivation, then declare it won’t work. BUT there are other reasons to do it. A clever little BBC strawman.
A couple of relevant thoughts: why does no-one talk about “balance of payments” anymore? Saving imports used to be a major factor in deciding industrial output. Now it is never mentioned.
Starmer wants 100% renewable electricity by 2030. Good luck, but what about the other 85% of energy that has to be provided without fossil fuels by 2050? Not easy to see how that can be achieved. But, of course, he was not asked…
Also, how well does the windfall tax work if 1. gas prices fall by 40% as they just have, and 2. you want all those firms which have just paid the windfall tax to invest millions to boost renewable production? They might just be a bit reluctant!
You can see how the Chancellor, Ministers and economists all think as Globalists first and foremost.
PH: “The amount extra that could be extracted from the North Sea – or from fracking – is unlikely to be enough to bring down bills significantly unless the government agrees a price with the companies that extract it.”
Not necessarily. Enlarging supplies in a contracting market must impact gas prices and affect, in turn, electricity prices. In addition, it will produce profits for UK PLC which produce taxes for Government expenditure
Imagine if Germany had had the foresight to accept the long-term (25 years IIRC) gas supply contracts Putin offered for Nord Stream supplies when the pipelines were first being negotiated?
There’d now be fun & games with the Take-or-Pay clause!
Let’s see the force majeur clauses in any contracts being offered for the supply of gas for 25 years. You can guess what circumstances would void the contracts.
IIUC gas prices in Europe are 7 TIMES those in US. So seems their fracking is keeping prices down.
Here in UK we could choose to allow fracking subject to the gas being made available to the nation for power generation at controlled prices. So long as they were high enough to keep interest that could work.
We could compel joint ventures with the state.
As I have alluded to in a different comment – energy markets are not vegetable stalls in a barrow marketplace. Companies and countries need as much certainty as they can get long term. If they cannot see certainty they will then start to stockpile from the existing production which will constrict supply and thus increase prices. It is a fairly basic concept that the Unicorn/Rainbow alliance never seems to grasp.
But a solid commitment to exploration and extraction with proven reserves provides stability and reduces pressure on the market. It does not take some overwhelming amount of supply, it just requires the longer term plan based on real science and engineering.
There was enormous skepticism in the USA that the Bakken Play (one of the biggest of the fracking areas would never be “viable” which was blown out of the water as a) fracking paid off in terms of being able to be extracted and b) the tech of fracking started expanding by leaps and bounds.
Contrast the scenario I just laid out to the one proposed for onshore wind. A) intermittent production of electricity does not help the market as much as steady production b) No-one has laid out how much onshore wind turbine building weould be needed to match the projected production from fracking and NSO.
” Companies and countries need as much certainty as they can get long term. If they cannot see certainty they will then start to stockpile from the existing production which will constrict supply and thus increase prices. ”
Certainty of supply hasn’t applied to the UK for years:
“Next day” prices for electricity.
Five days gas stockpile.
Minimal ability to stockpile coal at the power station (mainly because we have very few coal-fired power stations).
A reducing ability to stockpile nuclear fuel at the power station (mainly because we have a reducing number of nuclear power stations).
“But a solid commitment to exploration and extraction with proven reserves provides stability and reduces pressure on the market.”
Some years back here in the USA, perhaps early in Trump’s presidency, the government granted an explosion of oil drilling leases. The pundits said – as above – “this isn’t going to help with price, as it will be two years before any of this hits the market.”
As Rush Limbaugh pointed out at the time, it DID reduce prices, BEFORE production hit the market. For the reason you say, Mick. The perception that supply would soon increase reduced pressure on pricing.
There is no evidence that the capital cost for onshore wind farms has decreased since then, nor that technology has improved efficiency.
There’s a maximum energy in wind that depends on the cube of the wind speed.
e = 1/2mV^2 where m is the mass of the wind and V is its velocity
But m= 2πR.V.ρ where R is the rotor length, V is wind Velocity and ρ is density of the air.
So
e=πRρV^3 where πR are constants, ρ does vary with temperature, humidity and altitude
So any improvements in efficiency are insignificant when compared to the cube of wind speed.
7m/s a decent breezy day velocity is 343πRρ
14m/s above optimum is 2744πRρ
So double/half the wind speed is an 8x change (as you’d expect with a basic knowledge of maths) in energy upto the maximum output of the turbine usually 12-14m/s and down to zero output at 3m/s.
Improving low wind speed cut in down to 1.5 m/s gives 3.4πRρ as oppossed to 27πRρ for 3m/s
1.5m/s is 0.1% of 14m/s energy
3m/s is 1% of 14m/s energy
For a 5GW turbine getting down to 1.5m/s gets an extra 50MW.
Getting maximum output windspeed down from 12m/s to 10m/s is more difficult to assess but it’s 27mph (classed as Very Windy) down to 22mph (Windy). For most of the year not really relevant.
I’d be interested in other opinions and number checking on this aspect?
Ben V.
I suggest some caution talking about “changing wind speeds” for you might well see your politicians passing a Minimum Speed For Wind Bill. Worse they will think it is workable as they seem to rely on wishful thinking.
As for the usable wind range I think the Turbine builders will have already worked out the stresses etc. so trying to increase output by running at higher wind speeds might give a big increase in output but increase the stresses in the blades beyond their limit.
The problem with using higher wind speeds is that they become less frequent. I would guess that there is some kind of poisson distrinution of windspeeds in various areas of the UK, with 0 m/s having some non-zero value and 80m/s having zero.
Maximum output is from 12m/s to cutout, so moving the cutout speed from 25m/s (I think that is the current value) up to 30m/s is changing from Force 11 Violent Storm to 12 Hurricane not that frequent in the UK. What’s more likely is that if we ever get the the nirvana of 100% renewables the low windspeed problem will be insurmountable. Wind speeds aren’t likely to change much in the future
The Met Office says
UKCP18 projected an increase in near surface wind speeds over the UK for the second half of the 21st century for the winter season when more significant impacts of wind are experienced. However, the increase in wind speeds is modest compared to natural variability from month to month and season to season, so confidence is low.
The main benefit in providing a less draconian cutout is that you don’t suddenly get several GW of wind deloading at the same time, which would cause a massive frequency hit and lead to blackouts. The same applies to restarting as wind drops back to an “acceptable” speed. You could end up with huge swings in output as the wind gusts. Cliff edge cutout is now not acceptable.
Also worth pointing out that higher wind speeds likely imply a lot of surplus wind generation across a wide area. That implies curtailment, or at the least, very low (perhaps negative) prices. So the loss from not being able to produce at a theoretical maximum may be rather less than you might at first suppose, at least for those not on a CFD.
On the “Govt lifts fracking ban” thread, It doesn’t add up posted:
“Perhaps Miliband can explain why UK NBP gas prices in July were half those the other end of the BBL interconnector at TTF in the Netherlands.
Gas prices are local, and when we are self sufficient (normal demand is very low in July) we are not influenced by global prices.”
There was also a graphic but, being a technonumpty, I can’t copy it across.
Reprised above.
I am somewhat puzzled at the suggestion that onshore fracking production would take a long time to ramp up. Certainly, here in North America, multi well fracking can be drill from a single platform , most platforms are fully automated, with production commencing in only a few months. I understand that onshore gas formations in the UK and Europe have much thicker formations than in North America, which would suggest longer reserve lives. Get fracking !!!!
At least one fracking organisations, of the hundred or so applying for permits, has promised they could have gas flowing by January.
“a small wind farm can be built in as little as two months”
When the wind don’t blow, the wind don’t blow…
Kwarteng is from Ghanaian origins. A rather different society.
But I think Kwarteng is more British upper classes than disadvantaged immigrant!
Wind farms need grid connections. The windier parts of the UK are in Scotland. Already, the grid connections are inadequate to ship out Scottish wind power when it’s windy, so it ends up being curtailed. Noone is going to build endless transmission capacity on the basis that it might get used 5% of the time. The more wind we build the more the number of hours when wind is in surplus and has to be curtailed anyway. That means that wind earns revenue on fewer and fewer hours of output, pushing up the cost for useful output.
Supply more gas, and it can move through the pipeline network to wherever it is needed to heat homes and to fuel local power stations around the country. No need for more grid connections. They are already in place. A bunch of cost saved.
National Grid is looking for £50bn to fund changes to the grid – I won’t say ‘improvements’ as without windmills and sun temples is would not be required – to connect the far flung generation and to deliver an increase in the use of electricity. Where is the money coming from that is a question for Starmer.
I see in the Mail, the Octopus boss is whining about rising standing charges. Obviously too stupid to see that apart from covering the cost of failed suppliers, the £1.2bn grid management costs due to unreliables has to come from somewhere.
The price of gas is set by current supply and anticipation of future supply. If the anticipation is that future supply will be abundant then current prices will drop and vice versa. Particularly true of long term contracts.
If or when we have UK gas from on shore fracking then we – the UK will have more control over our energy supply, be less reliant on imports and prices will be lower than if we did not have local gas supply. The case study is Texas. The fracking boys there have transformed the US from an Energy importer to an Energy exporter. We have the opportunity to put the UK on the same path as an energy exporter. Our need for gas is huge and will take decades to reduce by any significant amount. The more local gas the better and the lower the price.
If the government locks us into higher gas prices, the energy companies will make large profits and multiple governments have shown a willingness to tax any excess.
Surely, any gas produced in UK at UK prices even if sold at World prices benefits balance of payments and means jobs in UK and taxes to pay here. Surely a benefit and also energy security. Looks like a no brainier to me.