Analysis

UK energy security – are we sensing the winds of change?

Craig McMaster, business director for energy, industry & infrastructure, MWH Global

Craig McMaster sees the cancellation of subsides for onshore wind as the first step in a decisive new energy strategy that has to include shale gas.

The UK Government’s decision to remove subsidies for onshore wind development has sent ripples through the energy industry with consequences likely to be experienced for years to come. This bold decision has produced diverging reaction from different quarters, but perhaps gives a glimmer of insight into the government’s longer term energy security strategy and the shape of the UK’s future energy mix.

The longer term curtailment of onshore wind incentives perhaps suggests the government’s financial support will be re-directed and used to promote alternative energy sources; shale gas and marine based renewables must be prime targets.

"The UK’s shale gas reserve seems an opportunity too good to miss for a government moving its spotlight away from onshore wind."

Tidal energy and offshore wind have yet to be fully developed around the UK’s coastline with many GW of untapped potential, with less planning controversy and land constraints than onshore wind. The UK has recently seen a shift in thinking towards planning approvals for large scale tidal energy schemes with more and larger developments likely to come.

Shale Gas divides opinion but the potential exists for large scale extraction perhaps with a new fleet of CCGT schemes to follow.  Low cost and domestic gas may drive a resurgence in new build CCGT and re-commissioning of mothballed plants.

If we indeed have a thirty year supply of gas accessible from onshore locations it may provide the UK with security and investment certainty in a troubled world.

The UK’s shale gas reserve seems an opportunity too good to miss for a government moving its spotlight away from onshore wind.

This week’s planning rejections in Lancashire are a disappointing outcome for the oil & gas industry. If the UK government’s desire to promote large scale shale gas production is to be realised it must make a step change in public education and awareness. The environmental protection measures must be rigorous and visible and the longer term benefits to the economy, future prosperity and energy security must be better communicated.

A slow ramp up to full scale nuclear power adds further weight to the short-medium term need for further gas fired generation. A new fleet of new build nuclear power stations will play a fundamental part of the UK’s future energy mix, but not for many years to come.

In the background there is further instability in the middle-east and a fast growing oil/gas demand from China. If these factors are considered together, why would the UK government continue to incentivise onshore wind while we have a long term and reliable gas (energy) source beneath our feet.

The future of the UK’s energy mix is still not clear, but here are some scenarios to consider: short term we halt further onshore wind and increase shale gas abstraction coupled with several new CCGT plants. Large scale offshore wind and tidal schemes progress rapidly. Energy from waste, bio-power and other renewables (hydro, solar, wave) will play a part. Further energy storage is introduced to balance the variability of renewables supported in part by European interconnectors.

"Why would the UK government continue to incentivise onshore wind while we have a long term and reliable gas (energy) source beneath our feet."

The tax bonanza from a shale gas boom is invested in a protected national fund to enable future renewable energy development (say 30 years from now). The longer term scenario reduces our reliance on all forms of fossil fuels, increases our reliance on nuclear (including advanced reactor types e.g. Thorium) with a much greater contribution from marine based renewables (mostly tidal and wind).

In summary, the sudden change in policy behind onshore wind power hints at a decisive and strategic change in direction from a new UK government. The details of this strategy and the impact it will have on the UK energy mix remain unclear. Other planning decisions around shale gas and the next round of Contracts for Difference (CfD) will reveal the true future for UK energy security.

Craig McMaster is Energy, Industry and Infrastructure Director for MWH in the UK