Fracking U-turn highlights risk of politicising energy 


Friday’s decision to halt fracking in the UK over earthquake risks should provide a warning to politicians in all countries that the energy market is complex and that the tendency to back one technology over another is dangerous.

Less than seven years ago, David Cameron, then the prime minister, proclaimed a “shale gas revolution”. Fracking shale rocks to produce gas was going to transform the UK’s energy prospects, reduce import dependence, bring untold wealth to disadvantaged parts of the country and create tens of thousands of jobs in the process.

Mr Cameron, as I am sure he would acknowledge, is not a geologist. He seems to have been unaware of the limited scale and complexity of the shale resources in the UK and of the fact that the growth of the US shale industry relied on vast open spaces in North Dakota and Texas where hundreds of wells can be drilled every year without disturbing established local communities. 

He is far from the only leader to make energy decisions without considering the consequences. In 2011, German chancellor Angela Merkel accelerated the closure of that country’s nuclear power stations which had provided safe and low cost sources of power. She took this step right after a tsunami caused major damage to a Japanese reactor at Fukushima, an event which had little or no relevance to the German situation. The German closures led to increased coal consumption and emissions.

In the UK George Osborne, then chancellor, made the opposite choice, deciding that new nuclear power was the solution to Britain’s energy needs. In 2013, he accepted a horrendously expensive deal in terms of construction, risk for investors and future cost for consumers, to build the Hinkley Point plant, which is not yet complete. The UK will pay 2012 prices of £92.50 per megawatt hour of electricity for 35 years once it starts producing electricity. The National Audit Office has estimated that could add up to £30bn above market prices.

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In each case the decision was taken without detailed knowledge of the energy market. 

Energy prices for oil, gas, wind and solar have all fallen over the past five years. If the UK fracking industry had not been halted by concerns over earthquakes, the economics of trying to produce small amounts of gas in the face of strong local opposition would have forced it out of business eventually.

Whatever gas the UK needs is readily available through imports from Norway and elsewhere. German nuclear power could have been replaced more gradually and at lower cost by renewables. Offshore wind, now available for less than £40 per MWhr without subsidies, could have allowed consumers to avoid the burden of Hinkley.

The next big policy issue in the UK and across Europe is how to meet the target of reaching zero net emissions of greenhouse gases by 2050. All of the main British parties are committed to it and some want to bring the date forward. The danger is that politicians will once again make technical choices which are all too likely to be overtaken by technological advances and falling costs. 

The role of politicians should be to set the objectives — in this case achieving steady reductions in emissions at the lowest possible cost — and then allow open competition to deliver the outcome. There is a role for research funding, for instance into technologies which offer a game-changing potential such as improving the storage of electricity within the grid. But our leaders should not be choosing or rejecting particular technologies on the basis of limited knowledge. 

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As we enter the election season in the UK and the US, energy is higher on the agenda than usual because of climate concerns. Beware of politicians who think their role is to make technical choices in areas which they do not understand.

The writer is an energy commentator for the FT and chair of The Policy Institute at King’s College London



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