Going Underground

Published as a podcast at www.susbiz.biz on Friday 27th November 2015

Although recent episodes of the sustainable futures show might lead you to think that it's all about energy, that's certainly not the case. This week I do talk about energy, potential energy under our feet, and also about water, groundwater. Desalination, solar energy, failing monsoons, Moroccan salt and Californian almonds are also on the agenda. And the UK has abandoned plans for carbon capture and storage.

Hello. This is Anthony Day, and this is the Sustainable Futures Show for Friday, 27 November 2015. And from next month it's going to be called the Sustainable Futures Report.

Running Out

According to a report in Nature Geoscience we are running out of groundwater. Groundwater is the one third of the world’s freshwater which is below the surface of the earth. We are using it up more rapidly that it is being replaced. And less than 6% of the water in the top 2 km of the earth’s surface  is renewed in a human lifetime. Some groundwater is rapidly renewed by rainfall and is only a few months old. Other reserves of groundwater can be millions of years old.

In California groundwater from boreholes is used for agriculture. A farmer interviewed by Capital Public Radio reported that the water level in his well was falling by 800 mm each year. Not surprising when you consider that California is in its fourth year of drought. This farmer had decided to do what he could to replenish the groundwater by flooding his crops whenever there was heavy rainfall and surplus water. He was prepared to invest millions of dollars to divert floodwaters to irrigate his crops with far more than they needed so that the water would percolate away through the sandy soil and down into the aquifers. 80% of the world’s almonds are produced in California and the Almond Board is looking at flooding the plantations in order to restore the groundwater there. The problem is that not all agricultural soils are permeable and it is not clear whether all crops will accept excess water. There will also need to be canals and pipes installed to divert the floodwaters. The original farmer was growing grapevines and the excess water did not damage the crop and might even have slightly improved it. Elsewhere in California there is growing tension between farmers as they drill deeper wells in order to secure their own supplies.

The University of the United Arab Emirates reports that Abu Dhabi is likely to exhaust its groundwater completely within 15 years. At the moment 98% of drinking water in the emirates comes from desalination plants. The problem with this is that the process uses substantial amounts of energy, usually natural gas, and the hot liquid which is pumped back into the sea as a byproduct damages the marine ecosystem. Citizens of the emirates use on average 500 L per day each, which is one of the highest rates of consumption in the world. The government admits that the price of water is too low which leads people to have no concern about wasting it and they don’t bother about leaks. Raising prices could go part way to solving this problem and the Emirates are also introducing solar powered desalination plants which will not use gas and presumably will not produce CO2 emissions either.

According to the Times of India, Pune, south-east of Mumbai, is also suffering from falling groundwater levels. The 2015 monsoon was weaker than usual and some areas received as little as 50% of normal rainfall. In 2014 some 6,000 villages saw water in their wells fall by a metre or more. In 2015 this had more than doubled to 13,500 villages. Of these, nearly 3,000 saw the level fall between 2m and 3m and over 4,000 saw the level fall by more than 3m. These villages are on the brink of severe drinking water shortages. The authorities have banned deep wells in 80 locations and say they will have to recharge the aquifers, although it is not clear how they will actually do it.

All these places may be far from home, but that doesn't mean that we won't suffer water shortages in Europe. All too often our problem is too much water, rather than drought but how far do you and your business rely on water? Do you actually know where your water supply comes from? Probably yes, if you’re a farmer. Otherwise it might be worth finding out. In a future episode I plan to review the book “Let there be water” by Seth M Siegel. You can find it at sethmsiegel.com .

Unconventional Energy

Paul Younger is Rankine Chair of Engineering and Professor of Energy Engineering at School of Engineering, at the University of Glasgow. He was interviewed by Jim Al Khalili at the recent freethinking festival. He said his main concerns were keeping the lights on and keeping carbon emissions down. We urgently need to find new sources of energy. We need to find the lowest carbon alternatives and it is urgent because of continuing and increasing fuel poverty and the risk of winter blackouts. He was scathing about an energy policy which has left us with a very narrow safety margin in the event of a severe winter. Have I mentioned that before? What alternative energy sources do we have? As a geologist, Professor Younger has investigated geothermal energy and drilled boreholes deep into the earth. Anyone who has been down a coal mine knows that the deeper you go the warmer it gets. Deeper still and the rocks get extremely hot. It is possible to harness this heat to raise steam and generate electricity, but in many cases it is more efficient to use the heat as heat. Looking at the U.K.'s energy consumption, only one fifth of energy is used as electricity, 2/5 are used as heat and the remainder is used for transport. While it might be possible to use geothermal energy for combined heat and power, the main potential is for running district heating systems. This means that alongside the gas pipes, the water pipes and the electricity cables we would have a hot water main feeding the central heating of each property. It's a system which works well in other countries and if we have a source of free, zero carbon heat it's an opportunity to be seriously considered. Although test drillings have proved that the heat is there, the projects have run out of money.

In Africa, however, notably in Ethiopia, geothermal energy is providing clean, cheap electricity to communities that had little or none before.

Another potential source of energy is underground coal gasification (UCG). This involves drilling into very deep coal seams, way beyond the reach of conventional mining, oxidising the coal and extracting the gas. In fact, this gas would be more important as a source of chemical feedstocks than as a fuel. Many fertilisers, pharmaceuticals and fabrics that we all take for granted are manufactured from hydrocarbons: oil or gas. If we do use gas from this source for energy, the carbon dioxide could be re-injected into the exhausted coal seams. If everything could be done on-site then this would remove the need for long pipelines which seem to be part of the current carbon capture and storage initiatives. Current CCS plans involve piping the CO2 across the country and injecting it into caverns under the North Sea.

At least that was the plan. 

At the same time as the Chancellor, George Osborne, was delivering his Autumn Statement to Parliament this week, the Department of Energy and Climate Change was making an announcement to the London Stock Exchange. It said that the £1bn prize fund for the first company to develop commercial-scale carbon capture and storage was withdrawn with immediate effect. The pilot projects at Drax and Peterhead will not now go ahead, putting an end to four years of research and preparation. The schemes would have generated 2,000 construction jobs at Drax and 100 permanent positions, and a further 600 jobs at Peterhead. You could argue that with last week’s re-announcement of the closure of coal-fired power stations, carbon capture and storage is no longer needed. However the 25 gas fired power stations which they are planning to build will all emit greenhouse gases. Clearly they will now be emitted into the atmosphere without any form of abatement.

Going back to UCG.

Underground Coal Gasification is not the same as fracking, says Prof Younger although he believes that fracking is not as dangerous as some would claim. In his view, fracking in the United States has been carried out by unqualified cowboys, so no wonder there have been spills, escapes and pollution. If underground gasification is carried out by people with mining skills or people skilled in exploiting the oil and gas in the North Sea it can be carried out safely. After all, coal mines stretched miles out underneath the North Sea with never a leak. UGC and geothermal developments need to be done while these skills are still around, before these experts retire. Does he think it will happen? Sadly not. There will be no incentive until the population at large realises that energy and food and medicines and plastics are getting more expensive and demands that engineers find a solution. By then the only alternative will probably be to buy the technology and skills - technology invented in the UK – from the Chinese.

 The problem with unconventional energy, as with all other forms of renewable energy, is that oil is currently so cheap that it is difficult to be cost competitive, although on-shore wind is pretty close. For the moment. 

A Ray of Sunshine (lots, actually)

Meanwhile, the BBC, Daily Mail and many others report on the new solar plant about to open in Morocco. When it is complete it will provide enough power for a million people, 20 hours a day. Yes, even at night. The difference is that this is not a solar PV array. There are no panels which produce electricity when the sun shines on them. Instead there are banks of computer-controlled mirrors which track the sun and focus its rays on a heat exchanger. This transfers heat to molten salt, which in turn is hot enough to produce steam to drive a conventional steam-turbine generating set. The salt holds its heat well after dark. 

It is part of Morocco's pledge to get 42% of its electricity from renewables by 2020. The UN has praised Morocco for the level of its ambition. The UK on the other hand, a much richer country, is aiming for 30% by the same date. Of course the Moroccans don’t have George Osborne.

The Guardian explains how the whole of Europe could run on renewables, given the right distribution infrastructure. We could share geothermal power from Iceland, hydropower from Sweden, wind power from the UK and solar power from Spain. Where there’s a will there’s a way! No will, not enough vision, at the moment, unfortunately.

More Oil

If you were listening to the sustainable futures show in January you may remember that I asked you to predict the price of oil in January 2016. The oil price fell dramatically from over $100 a barrel in mid 2014 to only $47 by the start of this year. My prediction for January 2016 was $65. Today, 25th November, it’s $42, which doesn’t look good for me, or for renewables. OPEC warned this week that the price could spike. They said that they were not prepared to limit production raise prices unless other producers did the same. Their object was to maintain their market share. However the Saudi Oil minister warned that reduced investment as a result of the low price could lead to a supply shortfall which could drive up prices very quickly. According to the International Energy Agency the world currently holds stocks of oil equivalent to nearly 300 days’ net imports. This will be a buffer, but how effective it is depends on how quickly the industry can bring new supplies on stream, or - and this is surely preferable - how quickly we can we can find substitutes.

COP21

I’ve not mentioned COP21. It starts next week. Ban Ki Moon says that in the nine years that he has been Secretary-General of the United Nations he has seen first hand the consequences of climate change. He has seen the effects on the developing world and the likely effects on his grandchildren and future generations. 

“As the head of the United Nations,” he says, “I have prioritised climate change because no country can meet this challenge alone. Climate change carries no passport; emissions released anywhere contribute to the problem everywhere. Economic stability and the security of nations are under threat. Only through the UN can we respond collectively to this global issue.”

Mass demonstrations urging world leaders to come up with binding and effective solutions have been planned for months. Unsurprisingly, the French authorities have said that they cannot guarantee the safety of marchers after this month’s attacks. Indoor meetings can go ahead, but the march in Paris planned for this Sunday 29th November cannot. There will be marches in other capitals and major cities all round the world. A march is planned in Paris on 12 December to mark the end of the conference. We'll have to see whether that goes ahead or not. Apart from the marches, the world is on the threshold of something very big.

This is Anthony Day and that was another episode of the sustainable futures show. Thanks for listening. There is so much going on that again I have had to hold things over. Next time of course we will be in the middle of COP 21 the Paris climate conference and I shall certainly be monitoring that as it unfolds. That will dominate future episodes. It's all about sustainability. It’s about climate change, and energy and food and population and as you have seen in this episode, it’s about water and other scarce resources as well. The world is changing and change is affecting business as never before. It means you need to plan. You need to plan more than ever. If you're not sure how these things will affect your business, if you'd like to have a general chat on what's happening and how it may change your world, your market, your supply chain, give me a call. I’m Anthony Day and my number is 07803 616877 in the UK. Give me a call and let's talk. In any case I hope you'll be listening to next week’s Sustainable Futures Report.

 I'm Anthony Day and that's it for another week.

Revolution - a film by Rob Stewart

Watch the trailer here: http://ykr.be/hn62dkp6v 
This review also available on The Sustainable Futures Show (podcast)

What’s it all about?

This film will appeal to anyone who is concerned about the environment, sustainability or climate change. Anyone else could well tune out and switch off in the first few minutes.

What’s it all about? It’s a film about our relationship with sharks. No, wait, here’s Rob Stewart mugging to the camera home-movie style. It's a documentary about making a documentary about sharks. No, wrong again, we’re now talking about coral reefs, the acidification of the oceans and the threat to fish stocks. Now we’re looking at global forests, at the destruction of some 75% of the world’s forests and its effects on the production of oxygen. And finally - it’s about CO2 emissions, it’s about man-made climate change, it’s about mega-corporations, coal and particularly about Canadian tar sands.

There is so much information in this film. There’s some amazing photography, especially the underwater scenes. There are some pretty disturbing scenes. There are things everyone should know. I had no prior knowledge or expectations of this film and we could have done with some signposting. It would have helped if I’d seen the trailer beforehand. Why watch this film? What’s it going to tell us? Why is it important? How does it affect me? Without answers to some of these questions I’m afraid the general viewer will just switch off. There is no clear thread at the start. 

The later part of the film shows how concerned citizens took their message to COP15, the 2009 United Nations Climate Change Conference in Copenhagen, and how the conference closed with no real result. We saw anti-coal protesters outside the White House in Washington. There was detailed coverage of the protests at COP16, the 2010 conference in Cancun, Mexico. Again, little was achieved and this time the protesters were expelled.

My main criticism of this film is that it lacks a strategy for action. The filmmakers suggest that if you don’t like what the government is doing on climate change you should elect another one. (We tried that in the UK last week and it didn’t work. Climate change and the environment were never discussed in the election campaign. Public awareness is the first challenge. People don’t know so people don’t care.)

This film reminded me of Al Gore’s “An Inconvenient Truth”. They both give an account of the threats and risks to our planet and to our life on earth, but they don’t say what we should do about it. “The Age of Stupid” was a similar film. “How could we have been so stupid as to get into this mess,?” it asked, but it didn't suggest any solutions. If you wait to the end of Al Gore’s film, as the credits roll you see little hints like, ”Drive a smaller car” or “Turn the heating down 1 degree”.

If you wait to the very, very end of Revolution, after all the credits - which are extensive - after the Canadian tax status statement, the very last line before fade to black  reads: “Open your eyes. Be brave. Fight for something.”

What? Fight for something? Is that it? If we don’t know what we’re fighting for we’re certainly not going to achieve anything.

The most memorable statement in the film for me came from Dr Patrick Moore (no, not the astronomer) A former Greenpeace activist and now an advocate of exploiting the Canadian Tar Sands. He said: “Tomorrow morning 300m vehicles in America need to start up to keep civilisation running. If they don’t get their oil from here, they’ll get it from somewhere else.” You can’t argue with that. At least, not in the short term.

The film criticises the negotiators at the Climate Conferences for all talk and no action. But we could criticise the activists and the filmmakers for all protest and no solutions. Ban coal, ban oil, but what then? And the Cancun conference was in 2010. Why nothing about the conferences which have taken place since? Why nothing about COP21, the next major UN Climate Change Conference coming up in Paris in December?

If you’re interested in the environment, in sustainability and climate change, you should see this film. It will remind you of the issues and probably add to your knowledge. If you’ve never taken an interest in these issues, you too should watch Revolution. It’s hard work to start with, but it provides a wealth of information. Make up your own mind as to what the action points should be. It’s not time for panic, but it’s no time complacency either.

Of course, you might turn round to me and say, “Right, if you’re so clever what course of action do you recommend?” And I could respond that I’m just the reviewer of the film; it’s not up to me. 

That’s  tempting, but it’s too easy, so here’s what I suggest.

We need to lobby governments to commit to clear targets for agreement in Paris in December. 

• A global fixed price for carbon, increasing year by year would be a start. 
• All those 300m vehicles, and all the others in the rest of the world, need to start up every day until we can create alternatives. Tax incentives must encourage rapid innovation in transport.
• We need to decarbonise electricity production by 2050, maybe earlier. This means that no-where in the world will we use fossil fuels to generate electricity. It’s a big ask, but many experts believe it’s possible. Make no mistake, to do this we will have to manage demand as well and eliminate waste so that demand can match supply.
• Governments must implement a public information programme so that people understand the reason for changes. This is probably the biggest challenge of all, because many politicians themselves do not understand the issues and quite a lot of them don’t want to believe the facts, for whatever reason.
• The international community must recognise that in the short term at least, poor countries and poorer people in developed countries will be hardest hit by the change from fossil fuels. Steps must be taken to protect them, for two reasons. One is that we have a moral duty to help those worse off than ourselves, and if you don’t buy that then if we neglect the poor there’s good chance that they will all rise up and destroy what we’re trying to do.
• Finally, it’s all very well to demonise mega-corporations, but given the vast proportion of the world’s assets that they control, it’s unlikely that we will achieve a low carbon world without their involvement. Governments must give them incentives to reinvent themselves, and penalise business as usual.

What do you think?

Energy - the Story of 2015

Predict the oil price this time next year! Email your forecast to me at mail@anthony-day.com before the end of January 2015 and we'll see who's right!

I make no apology for talking once again about energy. Yes, this is the Sustainable Futures blog but everything we do and everything sustainable depends on energy. How we generate it determines our impact on the environment. Fossil fuels and CO2 emissions affect climate change. How we generate our energy determines the cost of energy and its impact on economic activity. As always, your question is “So what - what’s in it for me?” Monitor your energy use and seek out opportunities for saving. Protect yourself, because some commentators expect energy to get vastly more expensive by this time next year, and it might be more difficult to get as well. Here’s why.

In the last couple of weeks several significant events have occurred which make me believe that energy will make the news throughout this year. You remember stranded assets? That was the title of one of my podcasts last month. I was talking about a report issued by the Carbon Tracker Initiative three years ago which stated that we could not exploit all the remaining fossil fuel reserves without making the planet uninhabitable because CO2 emissions would raise global temperatures to unsustainable levels. At the time of my podcast I was concerned that nothing seems to have been done since then. Suddenly we have two more reports on this very topic. The first is an announcement from Mark Carney, governor of the Bank of England, that the Bank will monitor the financial risk of unburnable carbon. What he means is that if companies include coal or gas or oil as assets on their balance sheets as things of value which they own, there is a risk that they later find that these assets cannot be used and their value collapses. If these assets have been used to secure loans then the lenders suddenly find they have no security. Investors in fossil-fuel industries may not get a return and may not even get their money back. Did somebody say “Sub-prime”? We could be looking at another global financial crisis. 

The problem with the short-termism of markets is that traders are not interested in the jobs and industries and assets behind their stocks and shares and bonds. Their aim is to play pass the parcel until everything goes wrong and ensure they’re not holding the toxic assets when the music stops. There’s the dilemma of governments. They can either put sanctions on fossil fuel use, effectively devaluing the assets and torpedoing the economy, or let things go on as they are until global warming is out of control.

The second report which caught my attention was published by Christopher McGlade and Paul Ekins of the Institute for Sustainable Resources at University College London. They looked at how restricting fossil fuel use would affect different parts of the world. For example, if we are to keep global warming below a 2℃ temperature rise then 99% of the coal, 61% of the gas and 38% of the oil in the Middle East must be left in the ground. Canada must stop exploiting oil from tar sands and Russia must limit its Arctic oil production. China, India, Brazil, Mexico and the US must all abandon significant fossil fuel reserves. Even the UK must decide between fracking and continuing North Sea oil production. The political pressures at the next IPCC meeting, scheduled for Paris in December, will be immense. Up till now such pressures have always proved insurmountable.

The big energy news which is going to resonate throughout 2015 is of course the collapse in the oil price. It has fallen from over $100 to just over $40 in less than six months. Although this a dramatic and unprecedented fall there has been little comment about it, except to celebrate falling petrol prices at the pump and to complain that they are not falling even faster. For the motor industry in the US it has been a year of record sales, and the best sales were of gas-guzzling sports cars and 4x4s. The fall in oil prices is a significant part of the fall in UK inflation - down to 0.5%. But what is the reason for the fall? What are the true consequences? And is $40 the new norm?

The basic reason for the fall is on oversupply of oil. Fracking has led to vasty increased production in the United States and Saudi Arabia and the Middle East producers have decided not to reduce their production levels. In the past OPEC, the confederation of mainly Middle Eastern oil producers, was big enough to control the oil price. If OPEC caused a shortage the price went up. They managed the price to give themselves an adequate return without bankrupting their customers. Now there are many more producers around the world and OPEC’s power is limited. Clearly they may not be able to raise prices but they can certainly drive them down by expanding supply. Why would they do this? 

According to the French newspaper Le Figaro the Saudi minister of oil has said that he is ready to drive the price as low as $20. Some say that OPEC is working with the US to “punish” the Russians and Iran, both of whom rely heavily on oil revenues. More probably this is about market share, because the Americans too are suffering from the low price. Saudi and the OPEC producers want to force the Americans to reduce production by making much of their shale gas and oil uneconomic. Congress and the president are currently wrangling over the Keystone XL pipeline. This is an extension to a pipeline which will transport oil from Canada across the US to refineries in Texas. The oil comes from Canada’s extensive tar sands, but at a price any less than $100 it’s not economical to extract. And in that case the pipeline is irrelevant. There have been crisis meetings in Aberdeen because at current prices much North Sea oil is uneconomic as well. Today BP has announced that it is cutting 200 jobs and 100 contractors from its North Sea operations. Shell has abandoned a $6.5bn petrochemical venture with Qatar Petroleum. Most renewables are difficult to justify economically if they are to compete with oil costing less than $100/barrel.

OPEC actions have already bankrupted small fracking operators in the US. They want to push down US supply so that they can regain market share. History suggests that if a business is successful in eliminating its competitors its next action is to push up prices. However, if OPEC did this it would make competing investments viable again. Maybe a sensible strategy would be to set a price around $50: too low to make a lot of shale oil viable but high enough to give the OPEC countries a reasonable income from a restored market share. BP predicts that oil will stick at $50 for the next three years.

In the second half of the year we learnt that the Rockefeller Foundation had decided to divest its holdings in fossil fuels. A bit of a surprise as the foundation’s wealth all came from Standard Oil. In hindsight it looks like a remarkably sensible strategy, given the way that oil company share prices have followed the oil price down. Rockefeller is not alone. California’s Stanford University is avoiding fossil-fuel investments, echoing actions taken by universities and others against South Africa before the end of apartheid. They hope that a boycott will change behaviour. Others argue that selling out will have little effect. They believe that investors can only influence the fossil fuel companies by staying invested, acting as shareholders and demanding that companies change their ways. But Bill McKibben, a prominent US environmental activist, rejects this. If you’re not happy with the way Apple treats its workers or Amazon’s position on tax avoidance you can put pressure on them to change their ways and build a better business. On the other hand fossil fuels are like tobacco. They are all noxious substances and there is no clean, green or socially responsible way of running such industries. We don’t want them to change, we want them to close down.

Of course it would be naive to suggest we could eliminate fossil fuels in anything less than a generation. Nevertheless, the debate has clearly started. If the market does not bring energy prices back up governments may raise them by taxing carbon. Such a tax is probably electorally suicidal, but unless we take carbon seriously there is little hope for our future.

What’s my conclusion? Consider energy as though it’s going to be incredibly scarce and outrageously expensive. Look at every way you use it and every way you can cut that use. If prices don’t rise you’ll still save money. If prices do rise you’ll save a lot of money!

A final thought. What’s your estimate of the oil price this time next year? Today, 15th January 2015, Brent Crude is around $47. My prediction for next January is $65. What’s yours? Send your prediction to me at mail@anthony-day.com by the end of January 2015 and this time next year we’ll see who’s right. There will be a valuable prize!

Will we all freeze in the dark this winter?

We’ve had a number of people warning us about blackouts this winter. Strange. I read a report 10 years ago called “Mind the Gap” which predicted that the lights would go out in 2015. Now we’ve heard from the heads of npower and edf, and the National Grid has just published its annual Winter Outlook Report. Ed Davey, Environment Secretary, has told us that there’s absolutely no cause for alarm, so now we know it’s really serious! Or do we?

Our problem is that electricity demand grows year by year and our power stations get older and older. As they get older they get less reliable, and this year we’ve had two major fires and four stations taken off-line for urgent boiler repairs. If there’s another breakdown, will we be plunged into darkness? And is darkness all we have to worry about?

National Grid is responsible for the distribution of gas and electricity across the United Kingdom. It doesn’t generate power and it doesn’t sell gas or electricity to consumers. It just provides the energy super-highway, and the generators and the energy companies pay to use it. National Grid must balance supply with demand and ensure that power is available wherever and whenever it’s needed. December and January are the months of greatest demand; hence the Grid publishes a Winter Outlook Report. The press have made much of the suggestion that the safety margin, the amount by which supply exceeds maximum demand, has fallen from 17% three years ago to only 4.1% now. 

These statistics, as always, have to be looked at in context. The 4.1% margin is against Average Cold Spell (ACS) demand, the coldest part of winter. Winter weather is unpredictable, so we could have a cold spell which lasts longer and is even colder than predicted. National Grid admits that it cannot predict the weather, but then, even the Met Office struggles at times. Apart from bad weather, the other risk factor is power station breakdowns. Although some are much bigger, the average power station accounts for around 1% of supply. So theoretically we could lose four of them, in the coldest weather, and still struggle by. Of course, this is a very unlikely scenario, and National Grid has in any case taken steps to increase the safety margin. Three power stations that were mothballed have been recommissioned and placed on standby. Two of them are gas turbine plants and can come up to full power very rapidly. 

On the demand side, National Grid has agreements with major industrial users to accept power cuts if usage exceeds available supply. Taken together, these measures bring the safety margin, in the worst weather, up to 6.1%.

So is everything all right then? Probably a lot better than the tabloid press might make you think, but there are surely underlying problems. As economic growth continues, energy demand increases. Many of our power stations are due for replacement, but energy policy from all governments has been fragmented and vague. It’s difficult to plan a power station with a 30 or 40 year life if the politicians’ horizon goes no further than the next election. My prediction is that things can only get worse, because there is no quick fix to a shortage of generating capacity. Even with a 6.1% safety margin National Grid can’t rule out localised blackouts, although they do expect to hold them to no more than 36 minutes. 

The popular reaction to blackouts is to rush out and buy candles, and that is certainly what we did when we had regular power cuts in the 1970s. The world has changed dramatically since then. We didn’t have mobile phones and we didn't have cash machines. We certainly didn’t have computers. Many families still kept warm in front of open fires. Remember, you may have gas central heating, but it goes off when the electricity goes off because all the controls are electric. Quite a lot of infrastructure has back-up generation. For example, you’ll usually find a diesel generator tucked away at the back of your supermarket. Generators support mobile phone masts - the remoter ones, anyway, - but a blackout is likely to close ATMs. If the weather turns really cold, make sure you stock up on cash. And it might be worth buying a camping gas stove so you can have a hot drink. And a wind-up lantern is so much safer than candles! In business, data is your most precious resource. You do always back up, don't you? Keep your laptop and your phone charged up. And a UPS - uninterruptible power supply - should be in place to let your larger computers power down smoothly if the power goes off.

All this is about electricity, but National Grid is responsible for gas as well and we use a lot of that in a cold winter; for industry, for central heating and for generating electricity. We still get gas from the North Sea, but it’s declining and we now import a significant proportion of our gas. The predictions of the Grid’s Winter Outlook are that we have a substantial margin of reserves and production over maximum demand - around 24%. The key risk factor here is political. Russia is a major supplier of gas to Europe and much of it is routed via Ukraine. If Russia restricts supplies to Ukraine, as it has done in the past, then the rest of Europe suffers. The UK does not import gas directly from Russia, but if supplies to Europe were cut any imports to the UK from the Netherlands or Belgium would probably be cut as well. 

The Winter Outlook takes this into account and assumes that any shortages would be made up by increased imports of Liquefied Natural Gas (LNG). Last year just under 20% of our imported gas was LNG and most of that came from Qatar in the Persian Gulf - not the most stable region politically. National Grid makes the point that we could maintain supplies by increasing these imports, but only by paying world prices which are highly likely to escalate if there is a shortage. As far as gas supply is concerned, we’re in a secure position. Cost is something else, so turn down the thermostat a degree or two, fit that double glazing and roof insulation, upgrade the boiler and enjoy as much heat as you can from as little gas as possible.

The supply and distribution of energy to the UK is clearly a highly sophisticated operation. Now there’s another factor to add to the risks from breakdowns, bad weather and politics. This week the Intergovernmental Panel on Climate Change (IPCC) published its fifth assessment report (AR5), warning that we must cut co2 emissions by drastically reducing fossil fuel use. Launching the report, Ban Ki-moon, UN General Secretary, said, “Science has spoken. There is no ambiguity in their message. Leaders must act. Time is not on our side.” At the moment, well over half the electricity in the UK is generated from fossil fuels - coal and gas. The UN urges nations to divest from fossil fuels and invest in renewables to prevent global warming from exceeding a 2℃ rise. The report shows how this path can improve economic performance. 

This is a big issue for the UK, where the government is offering substantial tax incentives and subsidies for the development of fracking. Fracking produces oil and gas securely, free from interference by foreign governments, but oil and gas are fossil fuels. Should we be going this way, when even the Rockefeller Foundation, based on the fortunes made from Standard Oil, is selling off its fossil fuel investments and investing in renewables? Surely the tax breaks and subsidies should be going into continued development of renewables. 

Whatever happens, we need some hard and urgent decisions made by government. Unfortunately the present government seems inclined to ignore the evidence, pushing on with fracking, talking about “green crap” and the “green blob” and with a former environment minister calling for our Climate Change Act to be suspended. Despite all this we need decisions. 

Decisions which will determine whether or not we spend our future winters freezing in the dark!

Fracking - no silver bullet

The government today invites applications for licences to frack for gas and oil across the country. We need an energy security policy, but fracking is not the answer.

We used to be self-sufficient in energy with limitless reserves of coal. Then we found North Sea oil and gas and the party went on. Now these reserves are running out and we are importing significant amounts of energy.

Although most people believe that much of our gas now comes from Russia that’s not true. About 70% comes in equal proportions from the British and Norwegian sectors of the North Sea and some 20% by ship from Qatar in the Persian Gulf. North Sea reserves are declining and although Qatar is a stable state that is certainly not true of the rest of the Middle East. The ISIS fundamentalists have already taken over large parts of Iraq, including a major oil refinery, and their aim is total domination. Supplies from the Middle East are at risk. If we can extract oil and gas from shale beneath our feet in Britain it’s surely the obvious way to control the supply and the cost of essential energy. In the USA fracking has revolutionised the energy industry. Energy prices have fallen with significant benefits to US industry. The increased use of gas has pushed down the world price of coal (which is one of the reasons why we are using more coal for electricity generation in Britain at present.) 

There have been protests against fracking in the US and the same arguments are now being made here. “Fracking pollutes the groundwater - people’s drinking water is at risk.” “Fracking causes earthquakes.” “Fracking uses vast amounts of water, some of which is recovered and is polluted.” Some of the  pollution arguments are difficult to support. Yes, in the US some people have turned on the tap and been able to light a stream of gas bubbling out of the water. The question is whether this is due to fracking or is naturally occurring. Fracking, which involves driving high-pressure water, chemicals and sand into shale beds to split them apart and release gas, takes place 650m - 800m below the level where drinking water is extracted [British Geological Survey], so it’s unlikely to affect it. There are certainly concerns about water in general. Yes, fracking does use vast amounts of water in the initial stages and this is usually trucked in. Constant lorry movements will be a major impact on local communities. About half the water injected into the shale bed is recovered and has to be treated. Among other things, it’s mildly radioactive. It cannot be sent to the normal sewage treatment works. And what about the water that is not recovered? Where does it go?

Earthquakes? Earth tremors were recorded after exploratory drilling near Blackpool, but they were very minor and about the same magnitude as natural tremors which occur all the time. They are not house-shaking events: they can only be detected with special equipment.

Apart from lorries carrying water to the wellheads, how will the gas or oil be carried out? Either by building pipelines or connections to the national gas grid, or by sending in yet more lorries. It has been suggested that unlike conventional wells, fracking wells can dry up in as little as four years. The only solution is to up sticks, move on and drill somewhere else - not necessarily very far away.

So is the inconvenience of fracking justified by the benefits of energy security, cost control and job creation for the nation? Maybe, if it works. The British Geological Survey has found that there is significant oil beneath the Weald in southeast England and significant gas in the north. It cannot say how much of this is commercially recoverable. It cannot at this stage say whether the geology is similar to the areas in the US where fracking is successfully established. It is possible that the shale beds are folded or uneven because of geological activity, making extraction difficult or impossible. 

Oil and gas from fracking will not be cheap. Extraction is an expensive process and the high level of popular opposition to fracking indicates that there will be policing and security costs as well. It won’t provide a new source of energy overnight. It won’t avoid the blackouts that have been predicted for Winter 2015 in reports since 2005. Oil and gas from fracking are still CO2-bearing fossil fuels, not helping our carbon-reduction targets.

Fracking is no silver bullet.

No surprises!

 No surprises in the Autumn statement after all the leaks. No surprise that Labour criticised the whole thing. Sadly, no surprise that energy policy, which is crucial to the long-term prosperity of the country, is being treated as a short-term political football. Obligations on energy companies have been relaxed so they are now able to save consumers about a pound a week on bills. Once again an increase in fuel duty has been scrapped. Subsidies for onshore wind power have been reduced and at the same time the duty on gas produced from fracking is cut in half.

In the short term, reductions in energy bills and the fuel duty freeze will help with the cost of living, (though Is £1 per week really important when the average energy bill is now some £1200 per year?) It’s suggested that the reduced support for onshore windfarms is designed to head off a threat from UKip, which is totally opposed to them. All these are good political points in advance or the 2015 election. Not sure why George Osborne is so desperately keen to promote fracking, when it’s clearly so unpopular!

Altogether, these measures are symptomatic of a chaotic energy policy. There are three issues that have to be taken into account when planning energy supplies - cost, security and pollution. 

Let’s look first at fracking. Driving high-pressure water down into shale deposits to drive out oil and gas looks like a good idea. It’s been very successful in the US. The Americans have reduced their carbon footprint by using shale gas, which is a much cleaner fuel than coal. They calculate that they are sitting on reserves of shale oil which are greater than all the oil left in Saudi Arabia. Certainly ticks the security box - as it would for the UK. We’re talking about resources firmly within our borders and under our control.

The trouble with fracking is that it doesn’t tick the other two boxes. Gas is still a fossil fuel which produces co2 when burnt. Globally, we cannot afford to burn all our fossil fuels because if we did the co2 would cause runaway global warming and extreme weather events which would damage food production and make some parts of the world uninhabitable. (Of course George Osborne doesn’t believe in this. He’s with the 5% of scientists who believe it won’t happen. The other 95% are sure it will.) Fracking uses vast amounts of water, it causes minor earthquakes and it releases methane, a highly potent greenhouse gas, into the atmosphere. Then there’s the cost. Nobody knows what gas from fracking will cost. Looks as though George expects it to be very expensive. That’s the second time he’s cut the duty! The sad thing is that fracking is no silver bullet. Nobody even yet knows whether it will work outside the US. In the UK the geology is different, the population density is different and the planning laws are different.

Relaxing the obligations on the energy companies means that they can slow down the process of offering free insulation for cold homes. Well-insulated homes mean less energy and lower bills. There are some (a very, very few) high-spec council homes that cost no more than £20 a year to heat. That’s the dilemma of the privatised energy companies. The less we spend, the less profit they make. In the long term more insulation, more efficient heating and lower bills are good for the consumer and good for the balance of payments. (Don’t forget, we import 20% of our gas from the Middle East, much of our coal from Russia, even electricity from France!) So who will win this one? The consumer or the energy companies? Don’t hold your breath.

Has the government really got an energy policy? Some of us have been warning for years that the lights could go out in winter 2014 or 2015, as power stations are retired before new ones are built. The government has announced a new nuclear power station that won’t be ready for 10 years, they’re offering subsidies to fracking but they don’t know if that works - and it will probably also take 10 years to commission. Meanwhile they are preserving demand by cutting back on insulation  and scrapping the fuel duty rise, and limiting supply by cutting wind power subsidies. Is that a credible policy?

A World Without Oil (and Gas and Coal)

Yesterday the Independent published a front-page article about the coming oil crisis. At last the media, or this part of it at least, have recognised that there’s an energy crisis ahead. The article was triggered by the publication of the latest edition of BP’s Statistical Review of World Energy. A number of industry experts have taken issue with the rosy view they claim the report is taking. Some of them believe that oil supplies will begin to run out in four years. Some believe that cheap oil has run out already.

Paradoxically, taxation is one of the factors that have cushioned the British public against the evidence of an increasing oil price. Petrol is taxed at a fixed sum per gallon; unlike VAT which is calculated as a percentage of the selling price. Because UK petrol duty is relatively high, the cost of the oil at the pump is only a small portion of the price paid. If the cost goes up, the petrol duty per litre does not. Thus in the UK the price of petrol has risen from 85p to 97p over the last few months; an increase of some 14%. Over the same period US prices have risen from $2 to $3 – a 50% increase caused by the same underlying rise in oil prices. Another factor is the dollar rate: as oil prices have gone up the dollar has declined, offsetting the increases for us in Europe. This cannot continue, however. The signs are that the oil producers are less willing to accept payment in dollars as the American economy weakens. This will push prices up for the rest of us.

Going back to the BP review; there are some startling figures. The report calculates R/P - the reserves to production ratio. So if a country has 100 barrels and uses 10 barrels per year the R/P is 10: they have enough reserves for another 10 years.

Take a look at the UK figures:
Coal R/P = 12 years
Oil R/P = 6.5 years
Gas R/P = 6 years

Of course we will not be able to maintain our production rates as these resources get harder to find and more difficult to extract, so they will last longer than implied. They are still running out, though, and the UK is increasingly dependent on foreign supplies.

Managing the message on climate change

I’ve already commented in the past that the climate change debate is a dialogue of the deaf. Certainly there’s lots of dialogue – maybe it’s because it’s World Environment Day tomorrow and the G8 Summit starts later this week.

Looking again at George Bush’s announcements on climate change we see a worrying message. He wants to call a global summit in America to discuss the issues to an American agenda. We already have the G8. We already have the IPCC. The last thing we want is the world’s biggest polluter trying to take over the debate. The US has made it clear that its economy depends ultimately on coal, and certainly that country has massive reserves. We know that burning coal releases CO2 – and many other substances that are far more harmful. The US line is that technology will find a way and we don’t need to cut consumption while we’re looking for the solution. No carbon trading or limits, they say, - we must not prejudice economic growth. The US is gambling on undiscovered technologies – and some believe that science proves that gamble is already lost.

Today China has entered the debate. In advance of the G8 they have announced a climate change initiative, but they too emphasise that the protection of economic growth is crucial. They recognise that there is much to be done, because China’s rapid industrialisation has led to far worse pollution than anything in the West, quite apart from CO2 emissions. As I’ve mentioned before, China is a major polluter but the pollution per head is much lower than in America and in many other countries.
We need to support China’s efforts to clean up.

We need to get used to using less energy ourselves (-not a bad strategy as it’s going to get scarce and expensive) and we need to build on what has already been developed by the G8 and IPCC – not start a new debate. We need a clear and constructive dialogue – not a dialogue of the deaf.

It's the law

...or at least it soon will be. Today the British government publishes its Climate Change Bill which is expected to set 5-year targets for carbon dioxide emissions. This comes after a weekend when the Conservative opposition were making it clear how green they were. Bit of a balancing act - they want to restrict air travel, but they don't want to upset families who might vote for them so maybe they will target the frequent fliers. Gordon Brown has also set out his stall in a speech, making it clear that he's green and voter-friendly at the same time.

The bill has already attracted criticism. Why have 5-year targets and not annual targets? If things are as desperate as the press and politicians tell us surely we should be watching the situation week by week. It's easy to be cynical and assume that climate change is just another bandwagon and a convenient excuse for raising more tax.

My own view is that the whole thing is far too simplistic. The unspoken message is that if we cut carbon dioxide we will stop global warming, avoid climate change and everything will go on as normal. In fact, the only effect we may have is to make future climate change less bad than it might otherwise have been. If we cut carbon dioxide by cutting our fossil fuel consumption we will also cut production of the other nitrous and sulphurous pollutants than no-one ever mentions, so that might be a hidden bonus.

The real threat of course is Peak Oil. As production volumes decline we will be forced to use less, travel less and consume less, but we could never tell that to the voters. As conventional oil declines it's likely that we will start exploiting oil from coal, shale or tar sands. And when we do that you can forget carbon dioxide limits or pollution controls!

Underground Coal Gasification - (Press Release)

Last week, London hosted the most significant and extensive conference on Underground Coal Gasification ever held. Over 100 delegates from 19 countries heard speakers from around the globe updating on projects and Technology in China, India, Australia, USA and Europe.

The conference was held at the London headquarters of ABN AMRO and organised by the UCG Partnership, and included major industry players, government and academia.
Underground Coal Gasification is a method of converting un-worked coal into a combustible gas, which can be used for industrial heating, power generation or the manufacture of hydrogen, synthetic natural gas or diesel fuel. The gas can be processed to remove its CO2 content, thereby providing a source of clean energy with minimal greenhouse gas emissions.

World Energy Consumption in 2004* breaks down into 41% from oil, 23% from natural gas, 23% from coal,6% from nuclear, 4% from hydro and 3% from renewables.

However, world proven reserves 2005** has oil accounting for 19%, gas with 17% and coal with a massive 64%. Add total reserves to total resources and coal accounts for 95% of the fossil fuel energy content of the planet*** – hundreds of years of energy.

Delegates heard that UCG represents a real answer to the energy gap issue since UCG provides security of supply and a low cost clean energy with substantial volume. Russia, Australia, USA, India, China, South Africa and the UK all have projects developed or being developed with plans being made for further studies in Ukraine, Poland, Hungary, Ireland and Pakistan.

The technology of UCG is now ready for scale-up to large projects to produce syngas for power generation and coal to liquids. Security of supply, the potential for CO2 capture and storage, the lower costs of gas production and its rapid development to fill the energy gap are the principal motivators for the vast increase in activity in UCG.

The conference urged the UCG Partnership, which represents the industry and provides public information on UCG, to continue to urge Governments to provide a workable framework in which UCG projects can flourish and develop quickly. This includes an easier licensing, a simpler environmental and planning framework, risk management and the removal of unnecessary bureaucratic red tape. Encouragement from the very top of Government is needed urgently.

Sources:
*USEIA, 2005
**BP, 2006
***AAPG and BP