Which maniac agreed to this?

From the BBC:

The government plans to move nuclear and renewable electricity generators to lower price contracts to cut bills, Prime Minister Liz Truss has said.

"Renewable and nuclear generators will move on to contracts for difference, to end the situation where electricity prices are set by the marginal price of gas," Truss told Parliament.

The price paid to these companies is often set by the most costly generator. That is currently hugely expensive gas...

I thought the govt sold off the National Grid in 1995, so why they are now getting involved escapes me.

And why anybody - government or private - would sign up to such terms is a mystery to me. What's wrong with just setting a price of Xp per MWh (which will of course vary by time of day and seasons of the year) and buying from anybody willing to sell at that price? If that means paying France for their spare nuclear, so what?

Somebody who does these calculations for the National Grid once tried to explain it to me and had my head spinning. I am aware that we - as a society - want to have some slack or over-capacity in the system (electricity being as fundamental as it is; we could go a few days without mains gas, rubbish collection or the NHS, but not without leccy), so we have to pay generators simply for having things on stand-by. And we need a mix for security - renewables vs fossil vs nuclear; and domestic vs imported equipment and fuel, so better to err on the side of renewable/domestic, even if that means slightly higher prices (quite how much higher is a judgement call).

At least it explains why domestic prices for electricity went up so much. I thought - wrongly as it turns out - that the National Grid would simply buy much less electricity from the high-cost generators (using gas) until they have sorted themselves out and more from other sources.

Nobody move or the puppy gets it!

From ITV.com:

It's a grim time in the fun business. In Southend-on-Sea, the owner of Sealife says he may have to euthanise animals in his "zooquarium" because the annual cost of electricity has tripled from £240,000 to three quarters of a million pounds.

Philip Miller says keeping animals including monkeys, meerkats and tropical fish through the winter would be too costly, if the attraction was closed to save money.

"All these animals have to keep warm - or cold - or a combination of both*, and it's on 24/7, seven days a week. And they have to be fed, so it's a massive bill to maintain. They'll all have to euthanised or we find other homes but all the other zoos are going to be in the same boat, I'd imagine," Mr Miller said.

* I'm not sure what a "combination of being kept warm and cold" is in practice, but I hope he can sort something out.

EU - doing the sort of thing it should have been doing all along.

From the BBC:

But the focus now is on finding a European solution. And not a few EU figures, French President Emmanuel Macron included, have said they'd love the UK to be part of a plan. More on that later.

The drive for the common EU approach is manifold. In part, it comes from the same post-Covid crisis realisation that as part of a single market, when the economies of some member states suffer, it pulls everyone down.

There's also an appreciation that there's strength in numbers. Countries such as Italy and Germany have been busy trying to find alternative energy suppliers - in Algeria and the UAE, for example. But if the EU as a whole, with its economic clout, makes the energy deal, the conditions are likely to be more favourable.

"We have to achieve that we only pay the world market price, rather than a higher price," said Mr Scholz on Wednesday. His Belgian counterpart, Alexander De Croo, pointed out that gas prices in Europe are currently double those in Asia and 10 times as much as in the US.

EU purchasing power would also avoid one member state trying to outbid another in their scramble for energy. Not a good look when it comes to EU unity.

I said years ago that European countries (all of them, not just EU Member States) should use their bulk-buying or oligopsony power to drive down the 'world' price we pay for oil and gas, preferably to extraction cost plus profit margin. This is not an exact science and there is no right answer. Maybe they could buy it up centrally and then auction off oil and gas between themselves, with centralised profits (or losses) being shared per capita or something?

It can't possibly be much worse that the current set-up with wild price fluctuations and windfall profits (and occasional 'windfall losses') arising to exporting countries). If that subsidises European countries who are struggling economically, it sure as heck is better than subsidising Saudis, Putin etc. Again, if we stopped kow-towing to the Yanks where Venezuela or Iran are concerned, so much the better, it's about diversity of supply, playing off Iran against Saudis and so on.

High oil and gas prices - probably just a short term thing.

Sure, gas prices are stupid high at the moment; oil is high but coming down (and the government should do some short-term patching up for those on lowest incomes to help them through), but I have faith that 'capitalism' and 'free markets' will sort this out within a year and we'll wonder what the fuss was all about.

For a start, the Yanks could stop being so prissy about Venezuela and Iran, for some long-held grudges that date back decades and have no real substance (see also: Cuba). Or the rest of the world could tell the Yanks to go stuff themselves and recommence buying oil from Venezuela and Iran (who are no worse than the Saudis, I'm not picking sides here).

There was, until a few months ago, global demand/consumption for oil and gas of X and a global supply/production of X, give or take, with clearing price $Y. We could live with that. Both supply and demand are inelastic, the slightest change in supply or demand leads to large short term fluctuations in price, but it always reverts to some sort of equilibrium (extraction cost for higher cost producers + profit margin).

In the short term, Russia will be selling less to European countries and more to other countries; but in turn those other countries will be buying less oil and gas from 'wherever they used to buy it'; so European countries can start buying from 'wherever those other countries used to buy it'* and we'll get back to $Y, plus or minus a bit.

Of course, there are short term practicalities to sort out with pipelines and shipping, and on average, supply routes will be longer (hence more expensive) than before, but that's small change in the grander scheme of things.

As far as electricity goes, the UK can - short term - start using coal and oil again (in the power stations that haven't been completely wrecked yet), and longer term, continue/press ahead with nuclear power stations (these options not available to the Germans, who are the idiots who got us into this mess). There seem to be plenty of new wind farms sprouting up, maybe they'll work out something clever with wave or tidal power... The more diverse your sources are, the better.

One swallow doth not make a summer, but it's still nice to see a swallow once in a while. Or, on a similar note, here.

* India is currently buying more from Russia and correspongly less from the Saudis, Russian oil being cheaper for them.

Get back to the office, you plebs!

From The Telegraph:

Home workers are likely to be driven back to the office en masse this winter, experts have suggested, because of the added cost. Ofgem, the energy regulator, confirmed on Friday its energy price cap would jump by 80 per cent to £3,549 per year in October.

As a result, average monthly energy bills will hit £789 in January for home workers compared with £580 for those going into work, according to price comparison site Uswitch. This equates to £209 a month and £2,508 a year. Remote working will still add £131 to energy bills each month from October, Uswitch found.

Sure, for a single person in an average home, which they could leave empty and unheated during the daytime, and whose extra commute costs would be materially less than £2,500 a year, this might tip the balance towards going to the office.

That is a small subset of all workers. What if there is another adult who would be at home most of the time (working from home or raising kids)? Or kids who come home early from school every day or are an school holiday? Or whose extra commute costs would be materially more than the vaunted £2,500 utility saving (if you include cash cost plus time wasted each day)? That's a lot of people.

Putin - the CEO of an oil and gas company with its own armed forces

Most of the reasons bandied about as to why Putin invaded Ukraine are clearly nonsense, unless he is insane. Denazification? Reclaiming lost Russian territory? A buffer zone between evil NATO and Mother Russia proper? Winning a popular war to burnish his tough guy image and distract his 'voters' from the failing economy/massive corruption (of which he is the main beneficiary)? They all seem implausible to me.

I watched a 40 minute video by Real Life Lore on YouTube which does seem very plausible, and does not presume insanity on Putin's part.

The post title is a quote from the video; he wants to be CEO of a state-owned/controlled monopoly, but a qualification for that is being President. Anything he does to remain in power is to be able to permanentaly re-appoint himself as CEO. He also has to run oil and gas half way competently to be able to pay off his selected oligarchs, with a bit left over to bribe the electorate.

Basically, all his invasions and interventions - Georgia, Chechnya, even Syria, annexing The Crimea, arming Donbas separatists, and now Ukraine proper - are about securing oil and gas reserves and/or controlling pipelines and ports (Black Sea, Aral Sea). Russia either takes the territory directly or bullies neighbouring countries into compliance (Kazakhstan, Byelorussia, Azerbaijan). There are also apparently lots of gas reserves in the Sea of Azov, which Russia now has surrounded.

And Putin got away with all the previous incursions, the West did little to stop him apart from a few token sanctions, so he thought we would turn a blind eye to this one, which we didn't. Sleepy Joe as good as declared war on him personally.

Which is also why Putin couldn't care less if he carpet bombs the Donbas and Mariupol back to the Stone Age, he needs to control the geographic territory, not the people. They are superfluous to requirements (and he'd rather they all fled, today's civilian is tomorrow's partisan).

Also, Putin fights like a girl, belying his tough guy image.
------------------------------------
Anybody who starts bleating "But what about the Americans invading Iraq? They are just as bad!" can shut up. For sure, that was largely about oil (David Frost goaded Donald Rumsfeld into blurting that out) and not about WMDs (surely nobody believed that crap) or because Hussein was harbouring Al Qaeda (clearly bollocks).

But the Yanks did not routinely carpet bomb all the large cities, they didn't want the domestic backlash and dreamed they could win over the local population (yeah, right).

Furthermore, it was not too difficult to dislodge Hussein as a dictator, there was hardly a groundswell of popular support for him, the various factions were looking forward to fighting with each other again. Not that any of this is particularly relevant to what Putin's motives are.

Russian gas: Monopsony vs monopoly*

From The Daily Mail:

Energy prices in Britain will rise unless urgent action is taken to prevent Russia holding countries to ransom by cutting off gas supplies, a minister has warned.

Energy Secretary Ed Davey warned aggression from Russian President Vladimir Putin could quickly force up costs for families in the UK. Energy security will be high on the agenda of a meeting of the G7 meeting in Rome early next month.

A quarter of Europe's gas comes from Russia, half of which passes through Ukraine which has been the focus of mounting tensions after the Crimea region was annexed by Moscow.

Last week President Putin insisted it was 'impossible' for Europe to stop buying gas from Russia...

According to Wiki, European Union countries use 460 bn m3 a year, so they import about 115 bn m3 from Russia. Russian exports are 173 bn m3 a year, so two-thirds of that goes to Europe.

So we are dependent on them - but they are equally dependent on us.

If the EU, or European countries acting in concert, really wanted to do something they would draw the lessons from the way Thatcher dealt with the miners or the way supermarkets squeeze their suppliers, and simply set a cap on the price which they are all willing to pay for imports of gas. This price can be any figure they like, as long as it exceeds the extraction and transport costs.

I can't see Russia's other customers buying all the spare capacity, indeed they could join the buying cartel, hence the exporters will just have to accept it.

(The only reason why the EU/European governments wouldn't do this is if a lot of the senior people are in the pocket of Russian oligarchs, which they probably are, it is certainly true for German politicians.)

Sorted.

* OK, technically that is probably oligopsony vs oligopoly.

That OFGEM Consultation in Full

From OFGEM:

There is evidence that customer switching has been falling over recent years despite increasing prices and significant savings available for consumers that change supplier. There was a significant spike in switching in late 2013 but it is not clear whether this trend will be sustained, and we note that the switching rate has materially decreased in January 2014. Crucially, consumer trust has fallen significantly in recent years with the last survey showing that 43 per cent of consumers did not trust energy suppliers, an increase of 4 percentage points from the previous year. 

I've been on various price comparison sites for electricity and while there are savings for switching, the amounts barely warrant my time and trouble calling someone, changing my direct debit and so forth.

Previous analysis suggested that incumbent energy suppliers in both electricity and gas all have a relatively high proportion of customers who never or rarely engage in the market. These suppliers are able to charge higher prices to these "sticky" customers whilst making cheaper deals available to more active customers. 

So, some customers can be bothered to switch on a regular basis and others can't. If some customers can switch, how is this not a functioning market?

Previous analysis showed evidence of weak competition in the market due to aligned pricing strategies of the six larger suppliers. Ofgem would stress that it found no evidence of explicit collusion between these suppliers. But tacit coordination can have the effect of reducing competition between suppliers and worsening outcomes for consumers.

The Assessment has found further evidence of possible tacit coordination and indeed that this pattern of behaviour may have become more entrenched over recent years. It has found evidence of strong alignment of pricing announcements, in both timing and extent, as well as a pattern of suppliers raising prices more rapidly and to a greater extent in response to an increase in costs than they reduce prices in response to a fall in costs. This is a sign of a lack of competition. 

Well, as the energy companies are all buying from a commodity market the prices are going to stay pretty much the same. Gas isn't like cars where you can buy Suzuki gas or Rolls-Royce gas with each special properties. It's just gas. If someone's flogging it for 10 dollars a cubic litre, you can't flog yours for 11 dollars a cubic litre.

And it's a sign of real competition. You see it when Tesco and ASDA decide to have a price war over petrol or oranges. One announces a price fall followed by someone else doing the same. In the cloud hosting market you see the same thing. Amazon drop the price of EC2 servers and Microsoft announce something a week later.

Many stakeholders highlighted barriers to entry and, particularly, expansion in energy markets. These include low wholesale market liquidity, credit and collateral requirements, suppliers’ pricing strategies, regulatory barriers and reputational risks. While there has been recent growth in new entrants who now have a 5 per cent market share, there is no evidence of sustained expansion at a scale which would provide a disruptive competitive threat. 

I've checked these companies on the price comparison sites and again, they aren't much cheaper than my current supplier. Certainly not to the point where I can be bothered switching.

There has been evidence of increasing average profitability in the six larger suppliers over the last four years. The Assessment has not come to a conclusion as to whether excess profits are being made but notes the recent increases and questions the suppliers’ contentions that five per cent is a fair margin. It also notes that there is variation in profitability amongst the large suppliers, and that there has been no clear evidence of efficiency improvements that might be expected in a strongly competitive environment.

While the evidence of profitability is not conclusive, the rise over the last few years allied to no clear evidence of increasing efficiency is indicative of a possible lack of effective competition. 

Really? 5%? I'm pretty sure you can tuck money away in bonds at about 3.5%, so 5% hardly seems like that much of an excessive return on investment.

But OK, let's strip out that 5% profit margin. Let's imagine no profits at all. That still doesn't account for the 37% rise in the past 3 years, does it? So, why have bills risen in that time?

And that's what this exercise is really about - it's not about a serious investigation into these companies because the report contains nothing but suggestion about their activities. It's a political exercise to keep the blame on the electricity companies to distract attention from the government having an utterly failed energy policy.

Land, oil, gas, rents, price caps etc

1. The knee-jerk industry response to Red Ed's musings about price caps for energy prices was that "We can't help it if world market prices for oil and gas go up, if you impose price caps that's tantamount to forcing us to sell at a loss and we'll have to shut down".

Well, maybe they would, maybe they wouldn't, but that is only if the UK were to do this in isolation. Because while the world market price (WMP) for oil or gas (O&G) is whatever it is, that price is far in excess of the actual cost of getting it out of the ground (AC); so any price cap which Labour dream up would be lower than WMP but higher than AC.

But what if most governments formed an oligopsony and agreed a universal price cap: nobody is allowed to pay more than $x for a unit of imported O&G? As long as $x is in excess of AC, then we can assume that exporters will continue exporting as they can still make real profits.

2. This leads me to my next topic, which is the truism that when the economy does better, demand for O&G increases disproportionately, and because supply is relatively price insensitive in the short or medium term, O&G prices increase super-proportionately.

Which is a vicious circle for importing countries. Let's say that at current GDP levels, 5% of our GDP output (call it £1,500 billion a year) is spent on importing O&G (call it £75 billion a year).

If GDP goes up 10% to £1,650 billion, then O&G prices go up by a lot more, say 20%, so we are now importing 10% more OG at a 20% higher price, £75 billion x 1.1 x 1.2 = £99 billion, which is 6% of our GDP; or £24 billion of that extra £165 billion GDP (15%) disappears abroad, to be recycled when exporting countries buy up assets in the UK.

3. Economists tend to see land/location rents and O&G prices as two separate topics (apart from those insane economists on far left and far right who deny that land rents even exist), although they both come under the same general heading of "land" or "natural resources". Land Value Taxers agree that both are suitable subjects for taxation, but also tend to see them under separate headings, or suggest taxing them for subtly different reasons.

But remember that land/location rents are merely a function of average net wages minus the costs of a basic minimum living standard; so a small percentage increase in GDP or wages leads to a much larger percentage increase in land/location rents - even though the landowner's actual costs (AC) have not changed and what he is providing has not changed (he is sub-licensing the same government-granted exclusive right to access to land).

Similarly, O&G prices are a function of how well the global economy is doing, and the costs of extraction are fairly fixed, so a small % improvement in global GDP leads to a larger % increase in O&G selling prices and, mathematically, an even larger % increase in the pure profit/rental element (WMP minus AC).

So ultimately it is the same thing - if the economy grows, landowners get a larger and disproportionately larger share; and O&G exporters get a larger and disproportionately larger share. If your landlord is a Russian or Saudi Arabian, it's all the same as far as he is concerned.

4. Finally, price caps.

Let's apply the logic from Part 1 above to land/location rents. Although most housing market commentary talks about changes in selling prices, it is rental values which drive the markets, they are the Maypole around which house prices dance.

We know that while rent caps work in the short term, in the medium and long term they lead to all sorts of unwanted side effects.

But what if the boot were on the other foot? What if we look at the demand side, not the supply side?

In other words, instead of the government preventing individual landlords from charging "market rents" (being average local net wages minus basic living costs), the government made it illegal for any tenant household to spend more than 10% of its gross income on rents, or for first time buyers to spend more than 10% of their gross income on monthly mortgage repayments?

It wouldn't actually need government action if tenants/first time buyers themselves would wake up and organise themselves, i.e. form an oligopsony and agree among themselves that "nobody pays more than ten per cent on rent"?

5. For the sake of this discussion, let's assume that the average tenant household in the UK pays £9,700 in rent and the average tenant earns £28,000. On average, a tenant household has one-and-a-half earners, so has gross income of £42,000.

If only a small number of tenant households did it, then they would have to downsize, but what if every tenant household did it? They can't all be forced to downsize. Every landlord would want to attract the highest-earning tenant household (as at present) but the highest-earning tenant household in turn would want to live in the nicest house.

So our high-earning tenant household with gross income of £100,000 now know that they only have to pay £10,000 a year in rent instead of £20,000 or £30,000. Their landlord will be a bit miffed, and when the tenancy comes up for renewal, he will try and find a tenant household earning £110,000; but that even higher earning household will only be paying £11,000 for something much nicer so won't want to down-size etc.

The upshot of all this is that gross rents will fall by half or so; our average tenant household will be paying £4,200 for an average sort of house which costs the landlord a lot less than £4,200 to maintain and insure, so he is still making some money; but pure land/location rents, the excess of gross rents over actual costs will fall disproportionately (to a few hundred pounds per home per year in most places).

But - and this is the important point - very, very few tenant households would end up moving. The highest earners remain in the nicest homes, the average earners in the average homes and the lowest earners in the cheapest homes. So the allocation would still be a free market allocation - if you want to live somewhere nicer, then try and get a better job or a promotion, or do more overtime etc.

6. Remember, this is a cultural thing.

There is no hard and fast rule on what a basic minimum standard of living is, we can only work out the annual cost thereof by observation, even though we do not know what this basket includes (and it is almost certainly different things for different households).

If it simply became tradition or custom that "nobody spends more than ten per cent on rent" then the amount spent on "everything else" would go up accordingly and over time, this would become the new basic minimum. We know that output would increase (less money disappearing into the LMBH) and with higher output, unit costs would decrease (same fixed costs divided by larger number of units of output).

"...and your speeches are all self-praise and--and--well, and gross exaggeration and-- and----" - "And gas," put in the Badger, in his common way.

One of my children is moving into a rented house on a bit of a deal. The landlord is a client of mine and the deal is she gets it rent free whilst she does it up. Anyway, she needs a new cooker. It has to be gas. Luckily an employee of mine’s husband is a plumber and he has a deal with a ‘CORGI’ registered blokey.

But CORGI seems to have disappeared and been replaced by the Gas Safe Register, run by (and I’ll give you one guess – yes you got it) - Capita.

This sent me to Wikipedia. The entry is a wonderful story of how the CORGI, the HSE and Capita seem to have colluded to destroy a working system each for their own profit.

There is also some wonderful nonsense about prohibiting competition to improve things, but the icing on the cake is this bit:-

“One of Capita's main challenges was to create a new 'Gas Safety' brand for the trade and public from April 2009. At that time, CORGI had over 93% public awareness across the UK. Despite having now been in place for over four years (2013), public awareness of the Gas Safe Register brand as the official registration agency for UK gas installers is still pitifully low, an issue which GSR seem to be doing little to address.”

There is a lesson in there somewhere, but quite what it is, I am not sure.

It's amazing what passes for logic nowadays.

From Channel 4 News:

 

A new shale gas allowance will more than halve the tax rate for onshore shale gas production, or fracking, from 62 per cent to 30 per cent.(1)

 

Mr Osborne said: "We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits. This new tax regime, which I want to make the most generous for shale in the world, will contribute to that. I want Britain to be a leader of the shale gas revolution."(2)

 

But opponents warn that the process for extracting shale gas, by hydraulic fracturing rock with high-pressure liquid to release the gas, or "fracking", can cause earthquakes, pollute water supplies, blight the countryside and affect house prices...(3)

 

Andrew Pendleton, Friends of the Earth's head of campaigns, said: "Promising tax hand-outs to polluting energy firms that threaten our communities and environment, when everyone else is being told to tighten their belts, is a disgrace. (4) Ministers should be encouraging investors to develop the nation's huge renewable energy potential."(5)

 

1) First and foremost, these companies don't need tax breaks for this, they need permission to do it in the first place.

 

And the best way of taxing extractive industries is for the government to declare itself the owner of the stuff underground and to sell it to the highest bidder. If the profits are tax free, then this pushes up the amount the government gets from the auction and vice versa, so the tax rate doesn't really matter.

 

In practice - given the fluctuations in prices - the neatest solution is for the government to just pay the experts to extract it. So instead of auctioning off licences to extract and then taxing the profits - whether they relate to the real hard work of getting it out of the ground or to the unearned commodity value - at the same rate, the government would do best to do a competitive tender, and whoever agrees to extract it for the lowest price and hand it over to the government (who then sells it straight on again for its full market price) wins the contract. Again, there is no need to tax those profits afterwards.

 

2) Obviously, the Yanks are years ahead of us, but never mind, the technology seems to work so we could catch up pretty quickly.

 

3) Right, that settles it then, they've played the trump card which defeats all trump cards.

 

4) How much money would the government get from fracking if Friends of The Earth had their way? None whatsoever. So however much or however little they get, it's always going to be more than under Friends of the Earth's plan, hence it means a little less belt-tightening for the rest of us plebs (and lower heating costs, hopefully).

 

5) To paraphrase, "Promising tax hand-outs to landowners who agree to stick up a few useless windmills that threaten our house prices and wildlife, when everyone else is being told to tighten their belts, is a disgrace. Ministers should be encouraging investors to develop the nation's huge shale gas potential."

We're doing our bit for global warming

Here's what the gas/electricity company sent us to cheer us up at Xmas time. I hope that once the 'planet' has warmed up a bit, it'll reduce our heating bills at least:

Юлія Тимошенко

Lazy Energy Secretary to blame for high energy bills, say domestic customers

From The Daily Mail:

Millions of hard-up householders have risked insulting Chris Huhne by saying that he is to blame for high energy bills.

Families said that the Energy Secretary 'does not allow energy companies to bother' to hunt for the cheapest sources of fuel, but would rather spend more time making them look for hugely overpriced windmills and wrecking what's left of the UK's heavy industry with a Carbon Tax.

They also said the Energy Secretary could save up to £3,000 in legal fees if he didn't get involved in speeding incidents and could use the spare money to go on a short weekend mini-break with the woman he dumped his wife for.

Domestic energy users said: "He frankly spends less time shopping around for an energy source that's on average more than £500 a year cheaper than what we are being forced to buy than he does shopping around for a £250 toaster from the John Lewis list. Or for something like £250 billion's worth of windmills and other green tomfoolery. If he got that in perspective and said, 'OK, we are going to save a huge amount of money shopping around' [we] could save very substantial amounts of money,' they said in an interview with the Times.

Households said Mr Huhne spends 85 per cent of his time dreaming up new ways of making gas and electricity eye-wateringly expensive, and challenged him not to 'just sit back and take all the bungs from the windmill and power lobbies and succumb to the myth that all sources of energy cost the same'. Their comments came after energy firm EDF announced a 15.4 per cent jump in gas tariffs as it became the last of the major suppliers to put up prices...

Vested Interest Fun

Nice to see a whole shed load of Vested Interest groups sticking their oars in at the BBC:

The UK government should put a moratorium on shale gas operations until the environmental implications are fully understood, a report says.

Inevitably, the article kicks off with a 'should'.

"We are aware that there have been reports from US of issues linked to some shale gas projects," a spokesman for the Department of Energy and Climate Change (Decc) told BBC News, "However, we understand that these are only in a few cases and that Cuadrilla (the firm testing for shale gas in Lancashire) has made it clear that there is no likelihood of environmental damage and that it is applying technical expertise and exercising the utmost care as it takes drilling and testing forward."

Regulator takes regulated's word for it. Nice.

The Tyndall report also expresses concern that the exploitation of shale gas is bringing new greenhouse gas sources into play. It says: "This will further reduce any slim possibility of maintaining global temperature changes at or below 2C (3.6F) and thereby increase the risk of entering a period of 'dangerous climate change'."

All things being equal, the amount of 'greenhouse gases' and other pollutants created per unit of energy consumed in a building is probably lower with domestic shale gas than e.g. importing gas from Russia or the Middle East.

... there have been reports of problems with the technology in the US, such as cattle dying after drinking water from the fracturing process that found its way to the surface.

Possibly true, that all depends on whether cattle drink water which has recently fallen as rain or which trickles out of rocks. But the overall safety record of European oil and gas producers is vastly better than in the USA, so I'm not sure that's relevant.

In Pennsylvania, some residents can now set fire to their drinking water after methane leaked into wells. They are blaming shale gas extraction.

Possibly true. Safety tip: if you turn on your water tap and smell gas*, then open a couple of windows and leave the tap running until the gas dissipates, and most importantly, don't hold a lighted match under a running tap.

The Tyndall report says that gas drilling in Lancashire will give rise to a range of local concerns including noise pollution, high levels of truck movements and land use demands.

Ah... the NIMBYs making a late guest appearance. As a rule of thumb, where there's a Greenie there's a NIMBY not far behind.

The Decc spokesman said: "We support industry's endeavours in pursuing energy sources (like shale gas), provided that tapping of such resources proves to be economically, commercially and environmentally viable...

If it weren't 'economically viable', then no private company would want to do it, short of there being massive subsidies. The reason why we can't rule out the government subsidising this is hinted at earlier in the article: "Experts say the technological breakthrough increases energy security worldwide and reduces the diplomatic power of gas-rich nations, such as Russia."

The article concludes:

"All onshore oil and gas projects, including shale gas exploration and development, are subject to a series of checks, including local planning permission before they are able to move ahead with drilling activities."

Not going to happen then, is it, short of energy companies merrily greasing a few palms. So it's in the interests of local politicians to stoke up Greenie and NIMBY opposition because that enhances the amount of bribes they can demand.

*The problem being that apparently you can't smell natural gas, but hey. More to the point, UK water companies are very much geared up to separating out methane from water pumped into the system, that's what sewage works are for.

It can't be rocket science to separate a heavy liquid (like water) from a light gas (like methane). From here: "Methane can also migrate from coal seams into sandstone aquifers. If methane is present in an aquifer, it will likely exist as a dissolved gas in the water. When the well is pumped, the water level is drawn down. The draw down will lower the pressure in the well and allow more gas to be released from the water. Methane will readily move from the water phase to the gas phase when water pressure is reduced to atmospheric pressure at the ground surface."

More tax and subsidy fun

From the BBC:

A government scheme that gives households in England £400 off the cost of a new boiler has been launched... Once you have found out if your boiler qualifies for replacement, the next step is to arrange a quote for a new one from a qualified installer. This could cost anything between £2,000 and £3,000...

Ho hum. So for all the hassle of battling with fakecharity Energy Savings Trust, you effectively get a refund of the VAT you've paid on your new boiler, taking a mid price of £2,500 x 7/47 = £372. Why not just scrap VAT on new boilers and cut out the middleman?

'Time for action' on fakecharities

The BBC have re-heated an article from a year and a half ago titled UK mulling fuel poverty voucher, only this time it's titled 'Time for action' on fuel poverty:

A charter aimed at ridding Wales of fuel poverty by 2018 is being launched by charities and consumer groups. Campaigners say one in four Welsh households - 320,000 - experience fuel proverty, meaning they have to spend 10% or more of their income on heating. The chair of the Wales Fuel Poverty Coalition said they have united to say "now is the time for action".

In case the words 'charities', 'campaigners' and 'coalition' don't set alarm bells ringing, a quick squizz at National Energy Action's 2008 accounts shows their main subsidiary Warm Zones Limited received £12,210,580 from the government or local councils in the year (note 5, page 11), as well as £2,797,939 in grants from various government departments/local councils, including £2,285,287 from the Department of the Environment, Food and Rural Affairs (note 6, page 12). It had also built up a nice pot of £6,340,233 by the year end (Cashflow statement, page 9 - the column for 2008 is incorrectly headed 2007, natch).

The whole thing is bizarre. The government has been paying these people for years to 'campaign' for an end to fuel poverty and to subsidise home insulation, while simultaneously ensuring that domestic fuel prices - for example all the 'extra investment in renewables'*, the 5% VAT and allowing the gas suppliers to run a cartel (actually, I'm not sure whether they do, I have asked the expert in the comments here).

There's no need to make it so complicated! If you increase taxes on gas (preferably at the import stage rather than at point of end-use, like VAT), then home insulation becomes more attractive anyway by comparison, and if they scrapped all this loony 'extra investment in renewables' as well, then there'd be plenty of extra money for cutting vehicle excise duty, increasing the tax-free personal allowance or old age pensions so that the average user is no worse off (on a static basis) but putting a downward pressure on usage/encouraging people to insulate their homes.

* One of the dozens of other quangos that competes in this area is the Energy Savings Trust, which cheerfully admitted that [Annual domestic] Energy bills could go over £4,000 by 2020

My 'Bloggers Cabinet 2; Tory wannabe 0

Energy Minister Nick Drew takes another look at those scare stories and comes to much the same conclusion.

Proper mining engineer 1; Tory wannabe 0

You may vaguely remember recent headlines based on the fact (to the extent that anything can be accepted as a fact any more) that "Germany has 99 days of gas storage capacity, France has 122 days, while Britain has just 15 days".

The Remittance Man* explains why this is complete and utter scaremongering tosh.

* Who has accepted the post of Defence Minister.

"Fuel help may end up on bills"

Tee hee, so they've finally noticed!