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To frack or not to frack that is the question being asked at the Labour Party Conference in Liverpool this week

Issues affecting electricity generators and the energy market as a whole.

29th September 2016

Fracking was back on everyone’s minds in the white heat of party conference season this week. It all started when Labour’s shadow energy and trade secretary Barry Gardiner declaring to a packed hall of the party faithful in Liverpool on Monday that the next Labour Government will ban fracking. He used the speech to reaffirm Labour’s green credentials as follows:

"Fracking locks us into an energy infrastructure that is based on fossil fuels long after our country needs to have moved to renewables. The next Labour government will back the clean technologies of the future."

This was immediately rebutted by the GMB union, Labour’s third largest donor. Stuart Fegan, the GMB’s national officer, declared: "It is a nonsense that any political party serious (about) forming a government after the next general election in 2020 could promote a ban on shale gas extraction outright. With our national dependency on gas consumption set to increase in the immediate future, ruling out the possible use of a natural fuel that exists beneath our feet in parts of the UK is ridiculous."

Caroline Flint, the former shadow energy secretary, also criticised the proposed ban without there being a policy to replace it. She told a fringe event: "We can't just be against things. Nobody is going to vote for a policy if they think that [energy] security is going to be at risk. "Ms Flint’s comment goes to the heart of the problem. In the area of UK gas reserves and stored capacity we are currently at our most vulnerable in the UK right now.

Despite the former minister of DECC, Amber Rudd, trying to trigger a ‘dash for gas’ through the last two rounds of Capacity Auctions, no new gas generation capacity is assured in the next few years here. In fact, recent analysis of Capacity Auction-awarded capacity by CMU type, published in the latest Utility Week, reveals that over 91% of power being promised by auction winners is coming from pre-existing generating CMUs.

The only new gas generation project that made it through the auction process was the Trafford Combined Cycle Gas Turbine (CCGT) plant set to be built in Manchester. However, the would-be owner of Trafford, Carlton Power, still needs to raise £800m before it can go ahead (originally its power was supposed to be powering up to 2m homes by October 2018). It has recently been given a 3-month extension to December 2016 to find the extra money or the project will be canned.

So we are clearly not going to be building any new gas plants in the UK anytime soon despite the best efforts of our Government it seems. Even more alarming is the fact that UK gas storage capacity is currently running at all-time low of 3-4 days ‘winter capacity’ compared with 14 days the UK had for a number of years before 2015 and a long way back from Germany’s 100 days for example! Our gas reserve paucity is set to continue throughout the upcoming winter months due to Centrica contemplating closing a large percentage of its Rough gas storage unit due to safety concerns at the vast ageing storage site.

So as the head of GMB indicated this week, it seems likely that unless we embrace fracking; along with greener gas options such as biomethane, synthetic natural gas, and even hydrogen down the road; we will find ourselves with one of the most sophisticated gas distribution networks in the world, but with no gas travelling down it, accept that which we import via interconnectors or ship in.

On that note, it seemed appropriate that just one day after Labour declared against fracking in the UK, we took delivery of our first shipment of fracked gas to Grangemouth. Yes, some 27,500 cubic metres of ethane extracted from beneath western Pennsylvania, has just arrived here after its 3,500-mile journey via a ‘virtual pipeline’ of eight tankers, where shale gas and chemical giant Ineos has built an import terminal as part of an overhaul costing GBP450m. The ethane will be fed into crackers that convert the gas into ethylene for use in manufacturing plastics initially. The imports are due to replace dwindling supplies from the UK’s North Sea reserves.

Apparently, the potential for fracked gas in the UK is massive: Bowland Basin Shale (underneath central Britain) alone could provide somewhere between 822 and 2,281 Trillion Cubic Feet (TCF) of shale gas according to the British Geological Survey. Estimates of the amount of this that will provide recoverable gas and gas resources are conservatively placed at around 10%. Just to give you an idea 130 TCF could supply Britain’s gas needs for at least 50 years!

To write off upwards of 100 years of energy reserves at one stroke, leaving us open to the vagaries of gas imports, particularly at the very moment where we are negotiating a soft or hard exit from the EU and staring down the barrel of dwindling domestic gas storage capacity and generation seems, at the very least, fool-hardy and at worst madness, as the GMB claimed up in Liverpool this week.

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