Amongst the many ramifications of this week’s ministerial reshuffle, there could be a subtle change of stance towards green issues.
Matthew Hancock is the new energy minister. He has previously called for onshore wind farm subsidies to be slashed, saying that though he supported renewable energy, “we need to do it in a way that gives most value for money and that does not destroy our natural environment”.
Gas storage
Mr Hancock replaces Michael Fallon. Last year Centrica (LSE: CNA) abandoned plans to increase the UK’s undersea gas storage capacity after Mr Fallon ruled out any subsidy. That looked short-sighted at the time, with the UK having barely half the storage capacity of most European nations. The country had come within six hours of running out of gas in the previous winter. But it looks downright irresponsible after the Ukraine crisis, which underlined the UK’s lack of energy security. Half of our gas is imported from Europe, which relies on Russia for a quarter of its needs.
Mr Hancock might appreciate the unobtrusive and environmentally friendly undersea storage technology. If I were a Centrica executive, I’d be working up a proposal to revisit the subsidy.
In any case, Mr Hancock could be something of a friendly face in the Department for Energy and Climate Change, where his Liberal Democrat boss Ed Davey has called for Centrica’s break-up, complaining that the Big Six energy firms “still see their role as selling gas and electricity”.
New environment minister Liz Truss might also be more sympathetic to the energy companies’ view of the world. A former Shell employee, she attacked the levy on energy bills and other green subsidies when she was deputy director of the think tank Reform, complaining that “vast amounts of taxpayers’ money are being spent subsidising uneconomic activity.”
Fracking
Ms Truss has also been a vocal supporter of fracking. With the planned Infrastructure Bill set to permit drilling under properties without the owner’s explicit permission, and Ms Truss’s pivotal role in environmental issues, the industry has a fair following wind from Government.
The best play on the UK’s shale gas resources is AIM-listed Igas Energy (LSE: IGAS). The £250m company exploits unconventional resources in the UK including coal bed methane, which doesn’t require fracking, and shale gas. It turned in a maiden profit last year and, together with farm-out partner Total, has the largest shale gas acreage in the UK.