Hamish McRae: Gas, In All Forms, Is Our Best Fuel Option

  • Date: 13/12/12
  • Hamish McRae, The Independent

It is going to be a “dash for gas” in Britain. There is one quick way of closing the potential electricity generating gap that the UK faces and that is to build more gas power stations.

Given the financial and political uncertainties about new nuclear plants and the physical uncertainties about wind power, it is pretty clear that the only way through is to build more thermal power stations and, of the three possible fuels, gas is the only sensible one – oil is too expensive and coal too dirty.

So that is what is going to happen. But what we do is a tiny element of the global energy market, for we account for less than 3 per cent of the world’s primary energy use. The interesting question for the world is how much time the changed outlook for gas production buys for its economy. What we will do will be pretty much the same as everyone else.

Some perspective: there have been many studies of energy demand and supply in recent months but they all tend towards the same broad conclusions. These are that energy demand will continue to climb in pretty much a straight line for the next couple of decades, notwithstanding improved conservation; that virtually all the additional demand will come from the emerging world; and that most of the additional supply will come from fossil fuels.

You can see one set of estimates in the graph on the right, taken from BP. As you can see the three bottom segments, coal, oil and gas will still be providing about 80 per cent of global primary energy in 2030. Renewables (including biofuels), nuclear and hydro are projected to gain share but they start from such a small base that they cannot hope to make more than a marginal impact on the total supply.

Actually, we have become increasingly aware of the limits of nuclear and biofuels recently and even these projections may be an overestimate. Both Japan and Germany have turned their back on nuclear power, while the mood on biofuels has shifted rapidly as it has become clear that increasing the supply has had a damaging impact on the price of food.

I have been cross-checking the BP estimates with those of the International Energy Agency, which earlier this year did a special report on the impact of unconventional gas. The broad conclusions, which run forward to 2035, are pretty much the same. Oil will remain the largest single source of primary energy but output will rise modestly. Coal will grow too, but will be displaced as the second biggest source by gas, which will grow by more than one-third. Renewables will double, but because of the lower base they will still be much smaller than any of the fossil fuels. And nuclear will grow, but again from a low base.

The particular focus of the IEA paper was the extent to which we will be able to rely on unconventional gas. There are three main sources of this. Shale gas, which has received most publicity, is the largest, and is gas trapped in shale rocks. But there is also what is called tight gas, which is a sub-form of shale gas. And there is coal-bed methane, which coal mines had to get rid of as it was extremely dangerous, but which is now seen as fuel in its own right.

Unconventional gas is controversial. Some feel that the environmental risks are so great as either to preclude its extraction or at least to require higher safety standards than are being applied. Others feel these risks can be managed and the advantages of access to gas that does not have to be imported justifies the development. The environmental concerns will not go away, but the IEA has set out some “golden rules” for higher standards that increase the cost of the gas but cut the risks. Its projections for growth of output assume these rules are applied.

Shale gas certainly changes the US energy outlook. As you can see from the right-hand chart from the Institute for Energy Research, it is transforming the US gas market. Instead of facing declining supplies the US is increasing them and has the prospect of further rises for the next 20 years and beyond. Indeed there are projections that it will become a net exporter of gas rather than an importer.

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