Why drilling at the Jackdaw gas field site won't bring your energy bills down

The Government has given the green light to the Jackdaw gas field site in the North Sea. 

The long-awaited decision has been warmly welcomed by locals, trade unions and energy experts as a sign the Government is moving away from relying on foreign energy imports. 

Energy experts have long warned that Britain is more vulnerable to energy supply shocks, such as that caused by the Middle East conflict, because it imports most of its energy. 

As millions of households and businesses across Britain battle sky-high energy bills and higher inflation, could this development relieve pressure on people's pockets? 

What has happened?

Labour granted approval for gas to be produced from the Jackdaw gas field site in the North Sea today. 

A major reason why Labour gave the venture the green light is that Britain needs to be less reliant on gas imports. 

Jackdaw will start to supply gas to British homes and businesses from the end of this month. 

It is expected to increase domestic gas production by about 6 per cent at its peak.  

Chancellor John Healey will also announce today the launch of an 'energy wealth fund' which will 'use tax revenues from North Sea oil and gas to invest in renewable and low carbon energy projects'. 

A decision on the Rosebank oil field site off Shetland is yet to be made. 

The issue of whether to approve the two sites has become politically significant and has been delayed for several months. 

Andy Mayer, an energy fellow at the Institute of Economic Affairs, said: 'The Jackdaw approval is welcome but absurdly late and will not restore investor confidence in the UK or energy security. The field was discovered 21 years ago, and first approved in 2022.'

What does Jackdaw mean for energy bills?

Energy Secretary Miatta Fahnbulleh has already conceded that today's decision will not bring household energy bills down. 

She told LBC: 'It's really that important we're honest about this. That was not a consideration in the decision because it won't mean cheaper bills.

'This was about energy security and having homegrown energy. And it was also because we thought it was compatible with our climate commitments.'

Fahnbulleh said she recognised people's concerns about high energy bills and flagged Labour's decision to axe VAT from electricity bills.

Fahnbulleh said the majority of the gas that will come from Jackdaw will be used domestically.

She said: 'Ultimately where we're trying to get to is a world where a lot of our energy is produced here at home.'

Energy experts believe there will be little impact, too. Ed Reed, editorial director at Cornwall Insight, told This is Money: 'Approving Jackdaw will have little impact on household energy bills. 

'Gas produced in the North Sea is sold at the same price as gas on the international market, and those prices have risen because of the conflict in the Middle East.'

He added: 'Jackdaw will add a small amount to UK supply, but the volumes are too limited to offset the forecast decline in indigenous production or move international prices, so the wholesale part of bills will remain largely unaffected. Suppliers will also have already purchased much of the energy needed to serve customers this winter.

'Jackdaw will bring the government some tax revenue, which is being earmarked for an "Energy Wealth Fund" to invest in low carbon and renewable projects.'

Gareth Kloet, energy spokesperson at Go.Compare, added: 'While it might seem that producing more gas here in the UK should bring prices down, gas is sold at international market rates, so increasing domestic supply doesn’t automatically mean lower bills.'

Jackdaw's lifespan is 11 years, so it will not provide any reprieve from higher bills in the long run, either. 

Greg Jackson, boss of Octopus Energy, told This Is Money that while Jackdaw was 'good energy policy', Britain would need to speed up its adoption of heat pumps to help bring bills down.  

Proponents of heat pumps - which take in heat from the air or ground to warm your home - claim they are more efficient and have lower running costs. 

The decision comes as the Government eyes energy bill support for low-income households, as forecasts suggest the energy price cap will increase by 25 per cent in January.  

Tessa Khan, executive director of Uplift, said: 'Shell will be cheering this decision but it won’t knock a penny off our energy bills, which is what’s keeping people up at night, or make a meaningful difference to our gas supply.

'Jackdaw will provide around just 2 per cent of our gas demand for roughly ten years. It has been oversold and won’t stop the decline in North Sea jobs, as it will be largely unmanned and operated remotely.

'This benefits oil giants and their shareholders and doesn’t make life more affordable as Burnham promised.'