DECC to set up new £1bn Shale Wealth Fund for local communities (NB Does NOT apply in Scotland)

DECC graphic on shale well depth

EXCLUSIVE report by Scottish-UK-Energy-News

The Department for Energy (DECC) has published details of its policies and priorities over the next five years to 2020 – including a new commitment to set up a Shale Wealth Fund.

The plan also makes clear that shale oil and gas will be an integral part of the UK energy mix, along with large-scale and, possibly, small-scale, new nuclear build.

DECC aims to achieve its objectives by cutting subsidies, increasing competition and nurturing innovation. The following is a summary of the key highlights in its five year plan.

Conventional oil and gas

We will continue to support development of North Sea oil and gas and to maximise the production of domestic energy sources, fully implementing the recommendations of Sir Ian Wood’s independent review of UK offshore oil and gas recovery.

Measures in the Energy Bill, currently before Parliament, are a key stage of this implementation, formally establishing the sector regulator, the Oil and Gas Authority (OGA), as a Government Company, with a focus on maximising the economic recovery of the UK’s remaining reserves.

The OGA will have powers to maximise the economic recovery of the UK’s oil and gas, including the ability to access data, resolve disputes and impose fines up to £1 million

We have recently concluded a consultation on a strategy to Maximise the Economic Recovery of the North Sea and published our response to it on 5 February.

Once in place, this strategy will set the boundaries of people’s obligations and provide a framework for the OGA as it carries out its role. We are also taking action to help the industry remain strong during this period of low international oil prices, retain vital skills and experience, and remain capable of making the right investment decisions.

The whole of UK’s oil and gas industry is under intense pressure in the current business environment of sustained low oil prices. The industry is working closely with both the Scottish and UK Governments and its regulator, the Oil & Gas Authority, to adapt.
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Unconventional oil and gas (shale)

To supplement production from the North Sea, we will also continue to support the safe development of shale gas which will strengthen UK energy security.

We will ensure that communities that host shale exploration benefit directly.

The government has therefore established a Shale Wealth Fund from up to 10% of shale tax revenues, which will invest up to £1 billion in the North and other shale producing areas over the next 25 years.

This will also contribute to the government’s commitment to build the Northern Powerhouse (in England).

We will continue to ensure that shale exploration is developed safely, cleanly and responsibly, including, where appropriate, through support for independent environmental monitoring, and that the protections in place are properly explained to local communities.

We will continue to work with industry and other key stakeholders to identify remaining barriers to exploration and how these might be resolved, and to ensure that developers communicate fully and effectively with local communities.

Controlling subsidies

It is only right that when the costs of renewables fall, subsidies should also fall. We have therefore announced changes to the Renewables Obligation and Feed-in-Tariff programmes (subsidy schemes for demand-led low carbon electricity generation) to bring those costs under control, and published our response to consultations on these changes in December 2015.

All of the proposed actions have the potential to save consumers in the region of £500m a year from 2020 to 2021.

More Competition

More generally, ensuring effective competition in the energy market is at the heart of our approach to keeping bills as low as possible.

As well as implementing the recommendations of the Competition and Markets Authority’s energy market investigation, due to be published in 2016, we will continue to support consumers by making switching quicker, easier and more reliable, with the aim of allowing switching in one day by 2018.

We will continue to enable consumers to take greater control of their energy bills. By the end of 2020 every household and small business will have been offered smart electricity and gas meters giving them accurate bills, up to date information on their energy use and the ability to switch energy suppliers more easily.

To make the most of the opportunities provided by smart meters, by early 2017 Ofgem will enable “half hourly settlement”. This will enable energy suppliers to offer new time of use tariffs so households can reduce their bills by adjusting their energy use depending on the price of electricity.

Support for business

The government has therefore consulted, through the Business Energy Tax Review, on how to reduce administrative burdens while improving the effectiveness of policy in driving cost-effective energy and carbon savings. A government response to that consultation is expected at the 2016 Budget.


Renewables & Innovation

Innovation has a key role to play in driving the development of cheaper clean technologies, which is why we will more than double DECC’s innovation programme to £500m over this Parliament, providing start-up funding for promising new low-carbon technologies and research but only giving significant support to those that clearly represent value for money.

We will take a more targeted approach to innovation spend, ensuring that we target those technologies that can make the greatest contribution to our carbon and security of supply objectives and where the UK has a natural competitive advantage.

Nuclear power

We are also investing £250m in an ambitious nuclear research and development programme, enabling the UK to be a global leader in innovative nuclear technologies.

This will include a competition to identify the best value small modular reactor (a small scale nuclear generator) design for the UK, paving the way towards building one of the world’s first small modular reactors in the UK in the 2020s.

DECC is developing a small modular reactors policy position and plans for the competition will be brought forward in early 2016.

DECC logoThe full five year plan can be viewed here:



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