This document discusses the impact of shale gas on the environment and renewable energy industry. It finds that shale gas could help the UK achieve its carbon targets if it substitutes for coal in electricity generation, but could hamper targets if it replaces renewable energy due to lower energy prices. The effect depends on what sources shale gas substitutes for, any price impacts on demand, and renewable energy policies. More research is still needed to understand the environmental impacts of shale gas extraction and how it might affect carbon targets and renewable industry development. Proper regulation and transparency are important to manage the environmental concerns of developing shale gas.
5. It is not all about CO2
Matrix Corporate Finance
6. Matrix Corporate Finance
Premature deaths a year from air pollution:
2 million global
World Health Organisation
700,000 China
World Bank
300,000 EU
European Commission
50,000 UK
House of Commons Environmental Audit Committee
10. Matrix Corporate Finance
the uk targets
80% reduction in carbon emissions by 2050 set in law June 2011
Period Reduction Mt CO2
cf. 1990
2008-12 23% 3,018
2013-17 29% 2,782
2018-22 35% 2,544
2018-27 50% 1,954
Current debate over 2030 carbon intensity target for generation
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Impact on uk carbon targets - 1
Tyndall Centre
“even if there were to be a rapid transition from coal to shale gas
electricity, this could still not be reconciled with the UK’s 2°C
commitments under either the international Copenhagen Accord or
its own national Low Carbon Transition Plan.”
“there is a paucity of information on which to base an analysis of
how shale gas could impact GHG emissions and what environmental
and health impacts its extraction may have.”
“whilst the UK may be able to reduce its national emissions through
indigenous shale gas consumption, this risks triggering a net
increase in global emissions.”
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Impact on uk carbon targets - 2
Poyry
“You can develop shale and you can still achieve your carbon
targets. The one caveat to that is that if the government chose to
change its renewables support mechanisms that would mean the
targets are not achievable.”
Higher cut of emissions in 2020s as shale gas substitutes for more
coal in power generation.
Higher production of shale gas leads to lower imports of LNG (higher
emissions).
13. Matrix Corporate Finance
Climate change committee
“Extensive use of unabated gas-fired capacity (i.e. without carbon
capture and storage technology (CCS)) in 2030 and beyond would
be incompatible with meeting legislated carbon budgets.”
Climate Change Committee to Ed Davey
13 September 2012
NB This is a position on the “dash for gas” and not a comment on
the source of the gas
14. Matrix Corporate Finance
More research needed?
Tyndall Centre
“even if there were to be a rapid transition from coal to shale gas
electricity, this could still not be reconciled with the UK’s 2°C
commitments under either the international Copenhagen Accord or
its own national Low Carbon Transition Plan.”
“there is a paucity of information on which to base an analysis of
how shale gas could impact GHG emissions and what environmental
and health impacts its extraction may have.”
“whilst the UK may be able to reduce its national emissions through
indigenous shale gas consumption, this risks triggering a net
increase in global emissions.”
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Three driving factors
The effect depends on 3 factors:
- What shale gas substitutes for:
- Gas for coal is net positive
- Gas for imported gas is roughly neutral
- Any price effect on overall demand and efficiency legislation:
- Low price, unconstrained demand
- Effect of energy efficiency legislation and programmes
- Renewables legislation and cost curves:
- Removal of subsidies
- Can renewables reach cost competiveness?
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Poyry scenarios
BOOM
- Unconventional gas price falls below North Sea production costs
c.2020
BALANCED
- GB annual average cost of gas moves from cost level of Middle East
LNG to oil indexed oil prices by c.2030
RESTRAINED
- Cost of unconventional gas is very high
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EFFECT ON RENEWABLES INDUSTRY
Scenario Gas Policy response Effect on renewables
price
Boom Down Relax on renewables & efficiency Strongly negative
Keep up pressure on renewables Moderate
& efficiency
Balanced Up Relax Negative to neutral
Keep up pressure Positive
Restrained Up Relax Neutral
Keep up pressure Strongly positive
Wild card will be cost curves of renewable technologies
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Gas and renewables
Integrated Renewables Combined Cycle (IRCC)
07 June 2011
MetCap Energy Selects GE’s New FlexEfficiency Technology for
World’s First Integrated Renewables Combined Cycle Power Plant
(in Turkey)
GE FlexEfficiency 50
510MW high efficency CCGT
22MW wind
50MW solar thermal
69% efficiency at site conditions
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Environmental concerns
- Water
- Ground water contamination
- Surface water contamination
- Water demand – pressure on water resources
- Air
- Fugitive methane release
- Radon gas release
- Other
- Seismic
- Noise
- Road congestion
- Site restoration
24. Matrix Corporate Finance
Mindset and two stages
Mindset has to be to positively manage
Stage 1:
Manage with integrity and transparency
Apply the highest standards of quality, H&S and environmental
management
Failure to do so will relegate the industry to the level of bankers
Stage 2:
Research and development on lower impact technologies
Good evening. I am very pleased to be here tonight. I am Steven Fawkes. I am a partner in Corporate Finance at Matrix, a boutique advisory firm in London, and Chairman of Day 1 Energy Solutions, a company that has been established to develop and finance energy retrofits. I have been involved in energy efficiency since 1980 and wrote a PhD about the potential for energy efficiency in UK industry and then went on spend many years implementing large energy management programme s for corporates, the public sector and governments. I also co-founded two energy services companies, one in the UK that became part of RWE and one in Romania.
I like to set the context first and talk about energy problems. I won ’ t spend much time on these because I know this audience will be very aware of them.
As we know energy is in the news a lot and everywhere you look there are energy problems. The first of these is oil peaking, the idea that oil production will peak while demand for the fuels and products that come from oil is still increasing. This is a controversial idea but there is some evidence that oil production has already peaked, certainly in some of the major oil producing regions of the world.
The next big problem is energy security. These two guys are guarding oil tankers in the Straits of Hormuz, which has been under threat from Iran. 20% of the world ’s oil goes through the very narrow straits, if it was disrupted we would have major energy supply problems. There are a number of other critical choke points in the global energy supply network.
We also hear a lot about the environmental effects of energy use. Over the last decade the focus has been on carbon dioxide and global warming but there are a number of other big environmental problems arising from energy use – this shows a small part of the oil slick from the BP disaster in the Gulf of Mexico.
This slide shows a beautiful satellite photo that illustrates the level of atmospheric pollution over China. The numbers from the WHO and the World Bank illustrate that air pollution is a big cause of premature death in many parts of the world including China, 2 million premature deaths a yea globally, 300,000 across the EU. That is a high price to pay for cheap energy.
Another big energy issue is nuclear power. The terrible events in Fukushima illustrated here show some of the dangers of nuclear power. I know France is dependent on nuclear, and I am not anti-nuclear. The issues of safety and proliferation, however, are very real.
A really big issue with energy is that despite all the concerns over energy supplies, we really are not using enough of it. Over 1.3 billion people are estimated to be without electricity at all – an almost unimaginable scenario for most of us who are becoming more and more electrified.
Let ’ s now look at the size of the energy resource, and we really have to start to think about it as a resource, just like other energy resources. As with conventional energy resources there is an economic level of reserves and it is those reserves I am interested in exploiting.
Let ’ s now look at the size of the energy resource, and we really have to start to think about it as a resource, just like other energy resources. As with conventional energy resources there is an economic level of reserves and it is those reserves I am interested in exploiting.
Let ’ s now look at the size of the energy resource, and we really have to start to think about it as a resource, just like other energy resources. As with conventional energy resources there is an economic level of reserves and it is those reserves I am interested in exploiting.
The potential to become more efficient , and become more efficient profitably, is everywhere – you just need to put on the right pair of glasses to see it.
We are going to concentrate on finance but I do want to quickly talk about demand and supply. Creating demand for energy efficiency is difficult, especially in the residential sector. Nobody wakes up in the morning and says I want to buy some energy efficiency today. Even when energy efficiency is offered with no capital cost and net savings people still don’t buy it. Hassle factor, lack of visibility, lack of engagement. Energy efficiency is not sexy or cool We need to understand the drivers of energy efficiency demand in each sector much better than we do at the moment.