Alex Massie: Shale is the energy future

Scotland may the Saudi Arabia of renewables, but Saudi oil is worth a lot more than Scottish wind. Picture: AP

Energy was supposed to be a cannot-lose battleground for the SNP. The Nationalists might be defensive about currency issues, Europe and pensions in the aftermath of a successful independence campaign but at least an independent Scotland would be well-placed to be a kind of pocket-battleship in the international energy arena. We would punch above our weight. Not only that, our commitment to renewable energy would set an example to our peers.

It hasn’t quite worked out like that. The problem, as so often, is that the SNP have over-stated its case.

Scotland’s oil resources are a vital national asset. Everyone, I think, knows this. If there were no remaining oil reserves waiting to be exploited in the North Sea, the economic case for independence would be severely weakened. Oil is a cushion and a comfort blanket.

But the Nationalist’s determination to make it seem as though Scotland’s oil is just a useful garnish – the cherry on an economic ice cream sundae – paradoxically weakens their case for independence and, more damagingly still, makes them seem detached from reality. “Oil is the bonus” says Alex Salmond, implying that without oil there’d still be an economic case for independence robust enough to persuade a sceptical electorate. Even if this is true, it is an argument that the public simply does not believe.

The revelation that the Scottish government’s own economic advisors warned ministers that establishing a significant oil-based sovereign wealth fund would most probably be at the cost of reduced public spending, increased taxation or greater public sector borrowing can only strengthen the suspicion that too many of the SNP’s calculations and forecasts are based on wishful thinking. Oil, it turns out, might be more than just a nice little bonus.

Then again, the government’s energy preferences are often mystifying. The SNP’s enthusiasm for costly renewable energy contrasts with the government’s reluctance to embrace the opportunities for cheaper domestically-produced fuel in the form of shale gas. Wind and wave and tidal energy have a place in a balanced portfolio of energy production but it is quite evident that renewables alone are not enough. SNP ministers boast about Scotland being the “Saudi Arabia of renewable energy” but this is a comparison that, though typically self-aggrandising, scarcely compares like with like.

To put it simply, Saudi Arabia has a lot more oil than Scotland has wind. Moreover, the oil is worth much more than wind too. The SNP’s boast is like saying Rangers are the Real Madrid of lower-division Scottish football. It might be true but it doesn’t tell you very much that is actually useful.

Even if the costs of wind power continue to decline in both relative and absolute terms, renewable energy is still an expensive business that contributes to sky-high domestic energy bills. Scottish and Southern Energy’s decision to increase Scottish domestic bills by 7 per cent reflects both higher wholesale energy prices and, rather importantly, increases in (UK-levied) taxation. Government levies have increased by 13 per cent this year and 11 per cent of the average domestic fuel bill is diverted to government energy-saving and climate change programmes.

Those may be noble programmes but they are not cost-free and it is consumers who pay for them. Yesterday, a spokesman for SSE told some necessary home truths: “Over many years, policymakers themselves have failed to highlight adequately the cost to consumers of the policies they have pursued in government. They can’t expect to have power stations replaced with new technologies, the network to be upgraded and nationwide energy efficiency schemes all to be funded for free.”

Britain’s energy portfolio will get worse before it gets better. Coal-fired power stations are coming to the end of their natural life. Replacing ageing nuclear reactors remains a costly, controversial and agonisingly slow process. Hoping that renewables can compensate for this is delusional. They have a part to play; they cannot do everything.

In a report published last month Audit Scotland concluded that if the Scottish government is to meet its ambitious renewable energy targets “average annual increases in installed capacity need to double”. Scotland might be moving relatively quickly in pursuit of renewable energy but, if targets for the production of renewable electricity alone are to be met, it is moving only half as quickly as it needs to.

Moreover, government claims that the dash for green energy will attract £30 billion of investment and create 40,000 jobs are “the most optimistic scenario”. A more pessimistic analysis “suggests that potential employment opportunities could be a third of this”. Wind-mills and seabed turbines will not lift, far less power, all boats.

Which is where shale gas offers an opportunity, even a lifeline. Estimates of British shale gas deposits continue to be revised upwards. If even 10 per cent of those reserves can be extracted on a commercial basis Britain could meet its likely gas needs for the next century. Cheaper energy prices are not just a boon to consumers; they are a catalyst to wider economic growth. Fracking revenues could even contribute to an energy-based sovereign wealth fund.

So it is perplexing that the Scottish government is so hesitant about shale. We might expect the Green Party to take the same attitude towards shale as it does to oil – namely that reserves should be left unexploited – but it is surprising that the SNP seems equally reluctant to pursue the opportunities afforded by shale. Perhaps it fears embarrassment if shale marginalises the importance of renewables.

Joan McAlpine, a list MSP for the South of Scotland, this week complained that drilling for “unconventional” gas near Canonbie in Dumfriesshire was nothing less than “environmental vandalism”. As if this were not chilling enough, drilling for gas also apparently threatens the local tourism industry.

Since the SNP has an unquenchable enthusiasm for putting wind turbines on, it sometimes seems, every hill in southern Scotland, this is a statement freighted with chutzpah.

Anti-windfarm campaigners are prone to overstating the negative visual impact of turbines and exaggerate their likely impact on tourism; that’s no excuse for anti-fracking campaigners to make exactly the same mistake. In any case, most fracking installations are little more intrusive than small-scale hydro-electric projects. Once installed, all that is left is a well-head and a number of storage tanks no larger than a typical outhouse.

In any case, it seems likely that a hefty proportion of Scotland’s shale reserves – potentially worth billions of pounds - will be located within a band stretching 20 miles north and south of the Glasgow to Edinburgh motorway. That is to say, much of any Scottish fracking industry will be concentrated in Scotland’s least spectacular countryside. The visual impact of widespread fracking in Scotland is likely to be limited.

Nor is there any convincing evidence fracking is an unusually environmentally-dangerous pursuit of energy. In the United States, local regulators from Alaska to Louisiana have been unable to discover any verifiable case of groundwater being contaminated by hydraulic fracking. Like any method of energy extraction, safety procedures need to be followed but, providing they are adhered to, there is little to no evidence that fracking is any more hazardous than other kinds of energy mining. Fracking will not set the water in your pipes ablaze.

According to Ms McAlpine, however, “In Scotland, with our renewable potential, we don’t need the hassle”. Actually, we do. If, that is, we are serious about exploiting Scotland’s natural resources, reducing CO2 emissions, making business more competitive and reducing household energy bills. Asking if shale gas is worth the hassle is precisely the wrong question. The proper question is whether we can afford to ignore a supply of abundant and cheap energy? And if so, why?