Shale gas a turning point?

London – Forget the improved deals around national insurance, R&D tax credits, and even the surprising 1p reduction in beer duty, for me the most important aspect of the Budget was the Government’s support for shale gas development.

If properly developed, shale gas could contribute significantly to UK energy security by reducing our reliance on imported gas, and provide a valuable, low-cost source of feedstock for UK-based chemicals manufacturers.

More significantly, the acceptance of the case for shale, signals an awareness across the Coalition of the urgent need for new measures to ‘keep the lights on’ in the UK.

Market watchers report that gas supplies have been stretched almost to the limit during the continuing cold weather, and point to a mounting list of danger signs concerning UK energy security.

This list includes the imminent loss of coal power, which is currently providing 45% of our electricity, dwindling North Sea supplies, uncertainty over the cost of new nuclear and the fact that the Government’s commitment to unreliable wind power is discouraging investment in gas power plants.

While shale could go some way to plugging the gaps, the best-case estimates indicate that the benefits would not kick in before 2020 at the earliest.

The Budget measures, so, might just be a starting point for a major shift in the Government’s energy strategy.