February 24, 2012 / 12:03 AM / 8 years ago

UK could overpay for energy if shale ignored - report

LONDON (Reuters) - British households are in danger of overpaying for their energy bills as government policy has ignored the potential emergence of cheap shale gas, a report by the Policy Exchange think-tank said on Friday.

Given recent developments in the shale gas sector, which have sharply reduced household energy bills in the United States, the report said gas prices could also fall in Britain.

“No one can predict future gas prices, but shale gas developments suggest prices may be lower than previously assumed.”

Citing figures published by Department of Energy and Climate Change, Policy Exchange said Britain could end up overpaying for electricity by 22 billion pounds ($34.4 billion) if future gas prices fell.

The government suspended shale drilling activity by Cuadrilla Resources last year after exploration work triggered small earthquakes near Blackpool in northwest England, and it is reviewing the incident.

In general, applicants for a fracking licence in Britain need to obtain environmental, local authority, government and safety authority approvals and have to disclose the contents of fracking fluids used to the Health and Safety Executive.

In the United States, large-scale shale gas exploration has resulted in a shake up of the energy market, with the price of gas falling by 25 percent between 2008 and 2012.

“The uncertain direction of future gas prices is something that has to be reflected in government policy design,” Policy Exchange said.

Despite its benefits, the report said exploiting shale gas posed “risks in relation to water quality, seismic activity and water scarcity (which) need to be taken seriously.”

But these risks did not justify imposing a moratorium on shale gas production on the basis of current evidence, it added.

Policy Exchange is an independent educational charity and its reports are seen as influential. British media often say the think tank is one of Prime Minister David Cameron’s favourites.

Editing by Henning Gloystein and James Jukwey

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