UK fracking won't stop fuel poverty, expert says

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FRACKING will not radically cut energy prices, an energy expert has argued.

In a public speech last week, Professor Jim Watson, the research director of the UK Energy Research Centre, said he was "tired of advocates saying [fracking is] going to transform our economy tomorrow".

Those rushing to tap newly discovered shale gas reserves in the UK have sold the policy on the basis that it will dramatically reduce household energy bills.

"If we don't back this technology, we will miss a massive opportunity to help families with their bills and make our country more competitive," David Cameron said in August.

Misleading comparisons

Cameron added that he was "determined to win" the national debate on fracking.

But promises of lower prices might not be the right way to do it.

Predictions that energy bills will fall are based on misleading comparisons with US fracking, Watson argued in his speech at the University of Sussex, where he is an professor of energy policy.

"There is, of course, a chance that fracking in the UK would reduce bills and therefore help to tackle fuel poverty," Watson clarified to me in an email.

"But my main point is that we don't have any evidence to be able to say how likely this is to happen.

"We don't know yet how much UK shale will cost to extract, but most experts think that it will be more expensive than US shale due to different geology, population density, planning systems and public opposition. Environmental regulations may be tighter here too."

Professor Watson's lecture at the University of Sussex

Last week, representatives of companies hoping to extract shale gas were similarly cautious about expecting the same price reductions as the US.

Speaking to the Lords Economic Affairs Committee, full transcript here (pdf), Francis Egan, chief executive of fracking company Cuadrilla, said it was more or less impossible to predict energy prices at this stage.

"All you can do in oil and gas is control your costs," he said.

"What controls the price of a commodity is supply and demand [and] ...over time it gets more efficient and it drives down costs."

However, during a hearing dominated by strategies to improve the public image of gas extraction, the energy bosses also pointed out that limited extraction would have a negligible effect on wholesale prices.

If extraction can only be carried out at one or two sites, perhaps for "public acceptance-related" reasons gas prices stand no chance of going down, Andrew Austin, the head of IGas Energy, told the Lords.

Watson also criticised "poor rhetoric" on the part of fracking opposition groups and noted that vital test drilling would likely be hampered by the strength of public opposition.

No solution for fuel poverty

In all, there is clearly little expert support for, for example, Chris Grayling's argument that "the rapid acceleration of shale gas... could make a huge difference" to household energy prices.

The justice secretary had his 'drill baby drill' moment at the opening of the Conservative party conference in September.

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"The single biggest difference to the cost of living in this country would be a sustained reduction in the cost of energy," he added.

Few in Westminster today would disagree.

Energy UK, the trade body for the energy industry, said this week that household bills are likely to rise by 50% over the next six years.

A National Audit Office report into the impact of infrastructure costs on household bills also concluded that bills will rise in the future, and added that low income groups would be hardest hit.

"Funding of infrastructure via bills is more regressive than taxation: it requires proportionately greater expenditure from those on low incomes" the report said.

Currently, around 6.7 million British homes are in fuel poverty and that number is expected to climb in the next few years.