The Idiocy of Dieter Helm and Bridge Fuels to Nowhere

In U.K. policy circles, it has become increasingly fashionable to believe that we can rely on natural gas as a bridge fuel to a non-carbon energy nirvana some time in the indeterminate future. In the meantime, let’s dump renewables: just too expensive.

Shale gas has also become a neoclassical wet dream. Here is Dieter Helm, the most vocal supporter of shale gas in the U.K., in The Spectator:

Shale oil and gas were not the result of any radical technological revolution, but rather of a combination of advances in seismic information technologies, horizontal drilling and the ability to split open rocks at depth. Why did it happen? Part of the answer is the incremental process of innovation, combined with rising prices of oil and gas innovation plus markets.

Innovation plus markets: truly the neoclassical saviour of all our ills (and don’t forget that fracking technology was born out of government financed R&D, tax credits and infant industry support; see here). My frustration with this line of argument is that it claims to be based on markets, but makes no reference to actual market prices and volumes. If ‘innovation plus markets’ is our salvation then gas volumes will rise and prices will fall (or at least go sideways). Simple really.

In short, we now have a testable hypothesis: the hypothesis being that the bridge fuel of natural gas  at the right price and volume will part the Red Sea and give us 20 or so years of R&D time to transcend fossil fuels altogether. So, Dieter, give us a price and volume number to test your hypothesis. I search within his book “The Carbon Crunch” in vain. Some solid numbers to buttress his assertions: not a chance!

Meanwhile, Helm also says it would be nice to have a carbon tax (it would be nice if we could have peace on earth too, and the lamb lie down with the lion and….well, you get my drift).

Overall, his argument goes like this: gas should get sort of cheaper and therefore get sort of more plentiful, and therefore we sort of use less coal, and so we sort of don’t need so many renewables (which are expensive anyway), and R&D should sort of possibly come up with non-carbon energy alternatives at some vague time in the future. And meanwhile we sort of manage to introduce a carbon tax.

This must be the most pathetic policy prescription in the history of academia.

So what is actually frigging happening. First, U.S. natural gas production is going sideways. I blog on this each month.

US Dry Gas Production January 2013 jpeg

Second, natural gas spot prices have bounced over 50% from their (much quoted by Dieter Helm) April 2012 sub $2 lows (click for larger image). And yes they are still down from their peaks in the 2000s. But those price peak years were the anomaly not the norm (which everyone conveniently forgets).

Natural Gas Spot Prices jpeg

Third, and this is the critical point, as we grind up toward $4 per million British thermal unit (Btu), the electricity generators are substituting out of natural gas and back into coal in the U.S.!

Power Generation jpeg

The Energy Information Administration (EIA) explains what is going on here. In short, shale gas is unconventional gas. And when you see the word ‘unconventional’ you should always substitute ‘expensive to produce’. So when the price goes down, companies don’t want to produce it any more until the price goes up again. But when the price goes up sufficiently, alternatives such as coal look attractive. So shale gas is a bridge fuel to nowhere.

But where Helm and his ilk are particularly mendacious is in the assertion that the bridge fuel of natural gas allows us to have it all: cheap fuel, subdued infrastructure investment, increased energy consumption and reduced CO2 emissions. It is absolute tosh—and dangerous tosh at that. To all these appeasers of the fossil fuel propaganda machine, I have one question: have you no children or grandchildren?

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