The appointment of George Osborne acolyte Amber Rudd - a keen advocate of shale gas – as Energy and Climate Change Secretary is being seen a signal of intent.
With the UK now a net importer of gas, the Conservatives are determined to secure new supplies for power generation, heating and industry and to do this Ms Rudd, a former parliamentary private secretary to George Osborne, will encourage the development of a home-grown shale industry.
Some major decisions are expected on shale licences in Lancashire next month and Ms Rudd is expected to support further applications, aided by the North East duo in the Communities Department; Secretary of State, Middlesbrough-born Greg Clark and Northern Powerhouse chief James Wharton, MP for Stockton South.
One of the features of the energy policy landscape in the last few years has been the cross-party consensus which saw all parties back the Climate Change Act in 2008 (see panel).
Ms Rudd, the former climate change minister, will support a massive increase in solar deployments on the roofs of schools and homes, as well as more offshore wind, moves which have been welcomed across the political spectrum.
While both Labour and the Liberal Democrats had expressed support for a UK shale gas industry, both parties contain sceptical MPs who share the anti-fracking views of the environmental lobby.
These nuanced positions on shale gas have highlighted some fractures in the consensus, but the Conservative position on onshore wind has blown open this divide.
Ms Rudd has restated the Tory manifesto promise to ‘end any new public subsidy’ for land-based wind turbines, casting a shadow over the 6.9GW of projects in the advanced planning stage.
This has been criticised by the North East Chamber of Commerce (NECC) head of policy Jonathan Walker, who said: “In the past we have been concerned about the narrow view taken by the Government on onshore wind energy.
“Clearly it is not for every area but it has a vital role to play in helping us have a secure and sustainable form of energy, while providing many jobs into the bargain. The Government now has a chance to change the conversation in this area and we urge them to do so.”
Nevertheless Prof Simon Hogg, executive director and DONG Energy chair of renewable energy at the Durham Energy Institute, Durham University, believes with the exception of this ‘mistake’ the Government is heading in the right direction.
“While there is a lack of public support for onshore wind there is a lot of potential for expansion. The cost is now competitive and delivering ahead of schedule, so this is a mistake.”
“However we are in a good position going forward. The climate for energy investment could not be much better.”
He continued: “The Conservative manifesto is very encouraging for the continued support for offshore wind. It is still under-deployed and will play a major party in the energy mix.
“It is becoming a real success story, the costs have fallen rapidly, more quickly than anyone would have imagined. Some recent schemes have been priced at £120MW/h (megawatt hour) and the target of £100 per MW/h by 2020 should be exceeded.
He says the rapid cost falls are being helped by deployment of the new 8MW Vestas turbines, ahead of the industry’s former ‘workhorse’ the 3.6MW Siemens turbine.
He added: “We need a new nuclear fleet to provide baseload power. We have done it before and we should be able to do it again.”
Plans are in place for over 10GW of new nuclear power stations but hopes of speedy construction are being held back by technical and financial issues.
Prof Ian Fells, emeritus professor of energy conversion at the Newcastle University who formed Penultimate Power which aims to build home-grown Small Modular Reactors said he was ‘glad to see the back’ of former Energy Secretary Ed Davey. “I hope Amber Rudd will not be as single minded in pursuing Climate Change to the exclusion of all else and whatever the cost,” he said.
He continued: “Nuclear Power will become even more important as we try to decarbonise our electricity supply. Problems continue to dog the Hinkley Point C nuclear station as costs have escalated from £5bn to £24.6bn. It will be much better to build a series of Small Modular Reactors using the British nuclear supply chain.”
Even the Friends of the Earth have welcome Ms Rudd’s appointment. Simon Bowens, its North East and Yorkshire regional campaign coordinator says Ms Rudd has previously acknowledged that climate change will have “devastating impacts, nationally and internationally”.
“This is welcome when a significant contingent of Conservative backbenchers deny the links between human activity and climate change,” he said.
He continued: “The challenge to steer the UK towards a low carbon, affordable and secure energy system is considerable and has not been helped by the uncertainty for low carbon investment over the last five years.”
However he added: “The vast majority of the world’s coal, oil and gas reserves need to stay in the ground. The Government should acknowledge that the exploitation of coal and unconventional gas and oil would be incompatible with our national and international obligations on climate change.
“It should put in place a moratorium on unconventional oil and gas until its full climate and health impacts have been assessed, phase out coal power by 2023 and ban opencast mining.”
Prof Hogg believes the quest for security is a big factor in the push for shale gas.
He said: “The US experience has shown that it is too good an opportunity for the UK to miss. I think it will happen research at Durham has shown that there is no significant risk of earthquakes or gas getting into water supplies.
“The biggest risk seems to be the sealing of the wells and the industry needs to commit to secure all wells on completion. The other drawback is the visual intrusion caused by the sheer number of wells that will be required to achieve the scale the industry needs.
“Moves to create a sovereign wealth fund for the communities in the North where most shale gas extraction will be conducted are to be welcomed.”
The shale gas industry will be delighted by the Conservative stance, although Ken Cronin, Chief Executive of UKOOG, played a straight bat when he released the following statement to Journal Energy.
It read: “The appointment of Amber Rudd provides continuity within DECC. We look forward to working with her and the new Conservative government which, during their last administration, showed a commitment to allowing businesses to explore for oil and gas and discover the extent of the resources underneath the UK.”
The Conservatives are also expected to introduce further tax breaks to support the high-cost North Sea offshore industry.
George Rafferty, chief executive of Durham-based NOF Energy, said: “We welcome the appointments of the new Secretary of State and Energy Minister and we hope that they continue to work with the industry and build on the strategies and achievements made in the last few months of the coalition government.
“The UK’s oil and gas industry is facing major challenges in the coming years and is at a pivotal moment in its future development. Therefore stability and continuity is essential to ensuring it continues to contribute significant revenues to the UK economy and maintains a technology-led and innovative supply chain.
“As with any change of government and the arrival of new ministers, there is always an air of uncertainty. However, across the energy sectors, and in particular offshore renewables and nuclear there has to be some quick announcements and commitment to these sectors that will help deliver clarity and confidence to the industry.”
Dermot Roddy, chief technology officer at Newcastle energy firm Five-Quarter, which aims to extract gas from the North East’s vast coal reserves, dismissed the reservations of the environmental lobby.
He says he is encouraged by the Government’s ambition to secure long-term, indigenous gas supplies.
“We are making good progress on our decarbonisation targets with the easy bit, the electricity bit, but this accounts for only 18% of the total energy mix.
“The remaining 82% is in heat and transport – and the renewable contribution in these is 2.5% and 3.5% respectively.
“The heat demand on a cold winter’s morning is equivalent to 130GW (gigawatt) which is more than double the size of the electricity grid.
“We cannot electrify everything and many in the anti-fossil fuel lobby fail to understand that there will continue to be a need for their use for some time to come.
“Whether that is Five-Quarter gas, North Sea gas or shale gas we need something to deliver the additional 82% and if we don’t have our own supplies then we will have to import it. Those opponents of fossil fuels haven’t really thought it through,” he said.
In an interview with The Sunday Times at the weekend Ms Rudd said she would be stepping up the pressure on the Big Six energy firms to keep prices down.
She said: “My ambition in my new role is quite simple: to keep the lights on and carbon emissions down, whilst saving consumers money on their energy bills.”
Follow Peter McCusker on Twitter @mccusker60
Emission reduction targets
The 2008 Climate Change Act commits the UK to reducing carbon emissions by at least 80% in 2050 from 1990 levels.
The UK is on track to hit the first milestone on this journey by producing 15% of its energy from renewable sources by 2020.
All political parties have supported the introduction of financial support mechanisms to support these goals such as Feed in Tariffs and Contracts for Difference.
The Climate Change Act also requires the Government to set legally binding ‘carbon budgets’ which establish a cap on the amount of greenhouse gases emitted in the UK over a five-year period.
But the Conservatives are now reconsidering the fourth Carbon Budget up to 2027 as it believes it may be more viable to focus more on gas than less expensive renewables. Gas has half the carbon dioxide emissions as coal. A decision on the fourth Carbon Budget was last year delayed until 2016.
At the European level David Cameron last year led moves to remove country-specific renewable energy targets. Subsequently a pan-European target has been agreed to increase the renewable contribution to 27% and cut carbon emissions by 40% by 2030.
This is seen as an attempt to support the UK’s moves to develop a shale gas industry and in contrast to the Labour party which says it wants to totally decarbonise the power sector by 2030.