Ofgem issues a heated warning

Energy regulator, Ofgem, is expected to issue its most severe warning on the UK’s energy management over the next few weeks.

According to the Telegraph, the regulator’s supply and demand forecasts are likely to show that spare capacity in the UK has slumped as more gas-fired plants have been mothballed. It may also reissue warnings that energy prices will rise steeply, even if blackouts are avoided.

According to Peter Atherton, an analyst at Liberum Capital, the UK’s spare energy capacity will be so narrow by the winters of 2014-15 and 2015-16 that events, such as plant closures or cold snaps, could send electricity bills soaring by as much as 20%.

These concerns follow warnings made by Rob Hastings, energy and infrastructure director at the Crown Estate, that the gas crisis in the UK may be closer than originally thought.

Shale gas could be a new North Sea for Britain

In an interview with the Financial Times, he said that at one point in March, the UK only had six hour¹s worth of gas left in storage. “The bottom line is that in the UK we are in a place where the gas supply is dangerously low,” he said.

The March supply issue was caused by difficulties at a processing plant in Norway that supplies gas to Britain through the Langeled pipeline. Added to this were disrupted supplies with Belgium and the fact that gas storage levels were already low after a cold winter.

With the process industries accounting for 73% oif the UK’s industrial energy consumption, companies in the sector will need to step up efforts in both energy production and consumption.

In its recent ‘Getting shale gas working report’, the Institute of Directors (IoD) highlighted the shale gas industry as one possible solution to the UK’s energy crisis.

The report claims that shale gas development could create tens of thousands of jobs, reduce imports, generate significant tax revenue and support British manufacturing.

The scenarios presented by the study suggest that shale gas investment could peak at £3.7 billion a year, supporting 74,000 jobs.

Corin Taylor, an IoD adviser, said: “Shale gas could be a new North Sea for Britain, creating tens of thousands of jobs, supporting our manufacturers and reducing gas imports.”

“Further exploration will be needed to assess the size of technically and commercially recoverable resources. At the same time, partnerships need to be established between industry, government and communities to ensure that development of this vital national resource benefits local people.”

The IoD believes shale gas could reduce the country’s reliance on imported fuel. It is expected that 76% of the UK’s gas is likely to be imported by 2030, costing £15.6 billion.

The IoD report claims that shale gas production could reduce gas imports to 37% in 2030, and the cost of imports could fall to £7.5 billion.

But some industry experts argue that in their “dash for gas”, policymakers could be at risk of overlooking the potential of green alternatives.

“Investing in renewable fuels will reduce the UK’s reliance on potentially expensive and unproven shale gas exploration,” said Rolf Stein of Advanced Plasma Power in a recent ClickGreen report.

“The expansion of green gas would allow for gas expansion without the UK becoming wholly dependent on controversial shale gas exploration or on foreign gas for our energy security,” he added.