“Dear Aunty, is it true that fracking will be too expensive to succeed in the U.K.?”
What a marvellous question this is, dear, and one that goes right to the heart of the role shale gas could one day play in the U.K.
Those that are opposed to fracking often say it will be more expensive to extract that the wholesale price of gas, and therefore will be unprofitable.
Attacking a technology you don’t like based on potential costs is nothing new though, poppets: anti-nuclear groups have been doing it for years and, more recently, we see others attacking renewables over the high costs of subsidies.
Renewables, however, provide us with an interesting analogue.
In the Guardian today, Chris Goodall makes much of the falling costs of solar photovoltaics (PV) as a direct consequence of increases in deployment around the world.
The same will happen with fracking in the UK, cherubs, and we know this because the Time/Experience effect is well documented – the more you do something over time, the better and quicker you become, which is partly why solar modules are now cheaper – and because it’s what’s happened in the US.
After the OPEC nations tried to choke-off America’s shale revolution by pumping more oil and gas, fracking companies there invested more time and effort in finding operational efficiencies that mean they are now able to drill and complete wells in a fraction of the time it used to take. Those efficiencies have helped the US continue to develop its own shale reserves even in the face of very low market prices.
So, sweeties, it’s very likely we’ll see the costs of shale gas extraction here fall precipitously as more wells are drilled and as the industry matures, with innovations being developed to continuously drive down costs – just like in renewables.
If they didn’t think it would be profitable, they wouldn’t be doing it and investors wouldn’t continue funding it.
Until next time xxx