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A Global Perspective from GL Garrad Hassan - A muted effect of shale gas on European wind

As shale gas rapidly increases its market share in the US, there is talk of a global energy revolution. Having grown more than 45% per year between 2005 and 2010 in the US, shale-gas production has been heralded by the chief economist of the International Energy Agency as "a complete game changer". This has prompted the organisation to draw up the report Golden Rules for a Golden Age of Gas.

Shale gas is a controversial fuel source. A form of "unconventional" natural gas trapped in nonporous shale rock, it is accessed by hydraulic fracturing - "fracking" - and horizontal drilling. These techniques have been associated with risks of seismic activity, water contamination and fugitive CO2 emissions - as highlighted in the 2010 US documentary Gasland.

Yet, despite these environmental concerns shale gas has a certain allure for policymakers. By increasing gas supply, shale could act as a brake on future gas price increases and ensure the cost-effectiveness of combined cycle gas turbines (CCGT) - where fuel costs typically account for around 60% of total levelised cost. Moreover, in countries with domestic resource, shale gas has the potential to provide energy supplies independent of fickle gas markets and unpredictable geopolitics.

Advocates claim that shale gas can play a role in reducing carbon emissions: gas-fired power generation emits roughly half the carbon dioxide of its coal-fired counterpart.

Given the scale and pace of developments in the US, shale-gas developments have been reported in the renewables press as a threat. The wind industry has expressed nervousness at the emergence of a potentially competing energy source which, like wind, is affordable, indigenous and (allegedly) "green". Concerns have escalated following reports of competition for sites between shale-gas exploitation and offshore wind development in the Polish Baltic Sea.

But will fracking's well-publicised seismic effects really shake the European wind industry? It is reasonable to expect that some shale gas development will occur in the EU, with Poland a likely hotspot. But this must be put in perspective. There are two reasons why its impact of shale gas on wind power in Europe will likely be more muted than the press attention suggests.

First, it seems unlikely that the American fervour for shale gas will spread rapidly across the Atlantic. The geological and regulatory conditions in Europe are different to those that drove the American shale boom.

The extent and recoverability of the European shale-gas resource is subject to greater uncertainty than in the US. Initial indications suggest that reserves are located deeper in the ground - and drilling deeper will inevitably increase production costs. EU land tenure and mineral rights legislation is also less amenable to shale-gas development: it is not landowners, like in the US, but the governments in Europe who own the rights to shale gas.

Local resistance to shale-gas development seems more likely in the EU - due both to higher population density and increased environmental awareness. Indeed, the EU's relatively strong decarbonisation commitment means that the carbon lock-in effects of shale gas are likely to be politically salient, especially while carbon capture and storage technology remains unproven on a commercial scale.

A second reason for a more muted impact of gas on wind power in Europe is in recognising that power stations fired with shale gas need not be a straightforward competitor to wind. On the contrary, in the grid's complex energy mix, a certain capacity of CCGT could play a vital role in accommodating wind's variability by virtue of its flexibility. In the meantime, longer-term, more sustainable means of balancing the grid, such as interconnection, storage and demand-side management, could be developed.

Common enemy

Although shale gas may not pose an imminent threat to the EU wind sector, its development may still create losers. Arguably, other industries such as nuclear, oil and coal have more reasons to be fearful than wind does.

In particular, due to the very long payback times on nuclear investments, the pervasive uncertainty in future gas (and therefore electricity) prices threatens to cause a hiatus in nuclear investment unless governments step in and underwrite this market risk. Also, while renewables have targets for 2020, the nuclear industry has no such policy commitments; this means that the competition between gas and nuclear is more direct than that with wind.

The shale gas hype should be re-evaluated. A golden age of gas - operating in partnership with wind - might just outshine the radioactive glow of a potential nuclear renaissance.

Felicity Jones is a policy analyst at renewables consultancy GL Garrad Hassan

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