No more Business as Usual!

Hear the podcast at http://www.anthony-day.com/sustainable-futures-show/

This is Anthony Day, speaker, writer, conference chair and author of this, the Sustainable Futures Show.  If you like the show please tell your friends. If you don't like it please tell me at mail@Anthony-Day.com. Oh, and you can tell me if you do like it too.

This week, two reports. One from the Royal Institute for International Affairs, one from the Carbon Trust. Also, the latest update of Jeremy Leggett's The Winning of the Carbon War is out. You can download that free of charge from his website which is jeremyleggett.net. You really ought to read it. I did offer to record it as a podcast for him but he says it's in hand and he's talking to some people at the BBC. So, er, watch this space. That solar-powered plane, Solar Impulse 2, has landed safely in Hawaii after the longest solo flight ever. The next stages cross the United States and the Atlantic Ocean, and then back to the start point in Abu Dhabi.

Making the headlines this week has been the Greek economic situation. We won't say anything at all about that. And the UK chancellor’s budget. There's a few things there we’ll comment on - so let's start with that.

The Chancellor has maintained his freeze on fuel duty. Some would say this is a missed opportunity, because while oil prices are relatively low he could surely have slipped in an odd penny or two. The main difference for motorists is the change to vehicle excise duty, or car tax as some call it. These changes are for new cars registered from 1st April 2017 and the assumption is that cars registered before that date will be taxed at their current rate for the rest of their lives. Under the new rules only zero-emissions cars will avoid tax. All others will pay an amount on first registration depending on emissions levels and then pay a standard rate of £140 per year. This means that there’s now no real incentive to buy a low emissions car, as after the first year the annual tax is the same. There is a surcharge if the car costs over £40,000, bringing it up to £450 a year, but that’s less than the current top rate band of £505! Not very green!

The government will remove the Climate Change Levy exemption for renewably sourced electricity from 1 August 2015. Another short-notice policy change affecting the renewables industry. The purpose of the Climate Change Levy is to make it more expensive to generate electricity from unsustainable and polluting fuels. It is logical that renewable energy which avoids such fuels should not bear the levy. The Chancellor doesn’t think so. The change will have significant implications for the renewables industry but a negligible effect on tax revenues. But then, the Chancellor favours fracking above all else. He reiterated that he would establish a sovereign wealth fund from the proceeds of fracking. I remain convinced that you’ll find it next to the crock of gold at the end of the rainbow.

And so to these reports I mentioned.

“Titans or Titanics? Understanding the business response to climate change and resource scarcity.” That’s the title of a recent report from the Carbon Trust.

The report seeks to understand and explain how large businesses are responding to climate change and resource scarcity and makes a number of key findings. The most concerning is that the action of businesses on environmental sustainability today is significantly short of what is required to address the serious challenges of climate change and resource scarcity. The Trust goes on to say that there is common consensus around what will be required by businesses to address climate change and resource scarcity. They report that 70% of global business leaders surveyed are confident that action taken by consumers, governments, and investors will force the change to an environmentally sustainable future. (This sounds a bit like complacency to me - “We’re just waiting for the market to send us a signal. In the meantime, business as usual!”)  According to the report businesses recognise that climate change and resource scarcity will require them to make changes. Most executives see risks, even more see opportunities. Half of them expect to make fundamental changes and most of those are confident that they will be able to make the changes when the time comes. 99% believe they are at least average on environmental sustainability and half of them see themselves as leaders. 

The report warns that despite this, businesses are living in two realities: although they recognise and accept there will be risks and opportunities that will impact company value, they continue to focus on the short term. Despite a recognition of the likely need to change, businesses lack a clear vision of how this transition will be achieved beyond the business planning horizon.

They also say that there is a failure of governance from corporate boards, who need to better address uncertainty around the future risks and opportunities from environmental sustainability. There is also a lack of available frameworks or tools to help boards and senior executives to effectively assess and quantify value at stake. The report includes a useful checklist. We’ll look at that in more detail in a future episode.

Within the report they go on to talk about how adaptation - dealing with the consequences of climate change - will be so much more expensive than mitigation: taking action to prevent climate change getting worse. By 2050 business as usual and adaptation could cost from 5 - 20% of global GDP per annum, whereas mitigation could cost as little as 1%. Reminds me of Lord Stern’s 2006 report where he said much the same, except that the longer we delayed mitigation the more costly it would become. The report quotes Lord Stern and many other experts. It talks about the growth in population and about the pressures not from the absolute growth but from the growth in the middle classes. It talks about a shortage of fresh water and about resource scarcity. These are not new insights, but it’s depressing that the report paints a picture of a business community that is unprepared, if not unconcerned. Who are these businesses, when almost every major corporate from Unilever and Marks & Spencer to IKEA and HBOS is bragging about its green credentials? Are they islands in a sea of indifference? I asked the Carbon Trust about their research. They said: “Insights are based on six months of in-depth interviews with a range of experts from business, finance, government, academia, and civil society. The Carbon Trust also commissioned independent market research interviews with 229 board-level executive decision-makers across five regions: the UK, South Africa, Southeast Asia, Latin America, and the USA.” Looks like a pretty impressive sample. Looks like we still have a lot to do to get the message out!

This week the Royal Institute of International Affairs published Oil and Gas Mismatches: Finance, Investment and Climate Policy. The emphasis is on investment prospects for oil and gas. That might not sound very interesting to climate change watchers, but the odds are that some of your pension is invested in oil and gas, so listen up!

According to the report, oil and gas investment is affected by price volatility, the changing financial environment and climate change policy. The outlook for the oil price is uncertain and has been since Saudi Arabia abandoned the role of price stabiliser last year and the price collapsed. It remains around $65/barrel, just over half of where it was this time last year. Best estimates are that it will be much the same in 12 months, but the underlying feeling seems to be that it’s anybody’s guess. There is therefore a mismatch between the oil companies’ development plans and viability, as they were mostly drawn up on the assumption of the higher oil price. This has implications not only for oil companies like BP and their shareholders who rely on dividends, but also for the national oil companies who rely on earnings to balance their national budgets.

In a time of quantitative easing yields are low, but as this ends yields will rise and the yields expected from oil companies will also rise, putting them further under pressure.

The report looks in detail at Climate Change policies, which it sees more or less as a wild card. The issue will be the outcome of COP 21, the international climate change conference in Paris in December. Will the 195 countries decide to take strong action or weak? If the decision is weak, to do not very much or at least to delay taking any serious decisions for the time being, then oil production and demand can remain much as business as usual. (With all the consequences highlighted by the Carbon Trust). If the decision is strong, then there are all sorts of implications. First, it is likely that governments will take action by taxing the use of fossil fuels one way or another. This will drive a wedge between the price paid by the consumer and the price obtained by the producer. Where regulation is strong, investment that could have been made in an environment with weak regulation will not be viable. Indeed, strong regulation implies stranded assets, oil and gas reserves which cannot be used and therefore have no value, as regulation cuts demand. In the interim, until the outcome of COP 21 is known, significant oil and gas reserves remain in limbo. Their value is uncertain and investing in them would be highly risky. If the outcome turns out to be high regulation there will be consequences for other industries as well: power stations, manufacturers of gas-guzzling vehicles and buildings that do not effectively conserve energy, for example. 

Undoubtedly there are interest groups, albeit with a short term view, that will be lobbying hard for business as usual. We have to hope that the legislators who meet in December will be fully informed.

The report closes with the warning that the age of cheap oil production may not yet be over, but the age of cheap oil use almost certainly is.

I always like to end on a cheerful note. I’ll try and think of one for next time. This is Anthony Day, the Sustainability Coach, and that was the latest episode of the Sustainable Futures Show. Now I’m sure it’s in your diary, but don’t forget that the Sustainable Best Practice Exchange takes place in Harrogate on 5th November. We’re inviting a minister to brave the journey from London and join us in the Northern Powerhouse. I hope you can come too. Details soon!

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!

Sanctions on Russia - the best argument for renewable energy!

When the idea of a gas pipeline from Russia to Europe came up in the 1980s US president Ronald Reagan was strongly against it. At the time I couldn't see why, but the reason has become blindingly obvious in the last few weeks. Europe now gets up to a third of its natural gas from Russia and cannot afford to do anything that would cause Russia to turn it off. Of course loss of exports would hurt the Russian economy, but turning out the lights in Europe would have a devastating effect in only a few days. That's why Angela Merkel's response to Russia's involvement in Ukraine has been so low-key. David Cameron, on the other hand, has made much more fuss. He can afford to: the UK gets its gas elsewhere - from the British North Sea, from the Norwegian North Sea and from the Middle East. For the moment! Resources in the North Sea are running out, while Russian reserves are enormous. 

Britain, as much as the rest of Europe, needs to look at energy security, at energy that we can control within our own borders. That's why fracking is so attractive. It's exploiting British gas and oil. As commented elsewhere, fracking is no silver bullet. It's likely to be costly, there's no guarantee that the reserves can actually be recovered, there are pollution risks, there's strong public opposition and it produces fossil fuels which emit co2 when used. 

We need to explore all the options. Nuclear - under our control, but apart from all the arguments about pollution and waste disposal the plain fact is that it's no short-term solution. It will take a decade to bring a new nuclear station into production. Renewables. There's nowhere near enough capacity at present and it will take years of research and development to increase it significantly. Time to start now. Many people will complain that it can never be as cheap as coal, oil or gas. Probably true, but the age of cheap energy is over. Which would you rather have, expensive energy or none at all? 

The third step to securing our energy supplies is to minimise waste. Are you sitting in an office enjoying the sunshine with all the lights on as well? How many public buildings have the lights on 24/7? Lighting is only part of it. In a few weeks we'll have the heating on again. How hot is your home? What mpg do you get from your car? We need a government lead to encourage energy savings, otherwise we’re never going to do enough. Unfortunately the Green Deal didn't work so we need something else. Pushing energy prices up would do it, but it would make any government that did that unelectable. We need more public education, more investment in renewables, and a subsidised Green Deal ( the one that didn't work failed largely because it was too expensive, too inflexible and in many cases unlikely to yield the promised savings). Governments need to take action, because if they don't they'll be thrown out when the lights go out - and that will be the least of our troubles!

And when our energy supplies are truly secure we’ll never be held to ransom by foreign powers.

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?

Keeping the Lights On

Back in October I predicted major power cuts on 18th January 2013. In the event, some 5,000 people in Wales lost their electricity as the result of bad weather, but nothing catastrophic happened. This weekend's weather caused power cuts for 10,000 people in Scotland and up to 200,000 in Northern Ireland. 

There are two issues here. One is the ability of the network to stand up to bad weather. The other is whether the system can cope with increased demand. 

Running out of Gas?

Saturday's papers were full of government denials that we're going to run out of gas. Apparently we have some of the smallest reserves of any country in Europe, and they are down to 10% of capacity. That's not a problem as long as gas flows into the system at least as fast as it's used up. The key issue is where we get the gas from. Yes, we still get about half of what we use from the North Sea. About 20% comes from Norway and about the same from the Middle East in ships. All our gas, whether it comes from the North Sea or elsewhere, is governed by world prices. Middle East gas - mainly from Qatar - is also governed by Middle East politics. The US is rapidly increasing its domestic production by exploiting shale gas and by 2030 could no longer need the Middle East. Who will attempt to keep the peace there then? Norway is a friendly, stable nation but its government already recognises that its gas may last little more than another 10 years. The biggest reserves in Europe are in Russia, at the end of a very long pipeline from the UK. In recent years Russia has been in dispute with Ukraine and others about gas prices and has simply cut the gas off - affecting innocent countries down the pipeline as well.

Powering the Future

In view of all this it's a bit of a worry that George Osborne has announced a policy of building a fleet of gas power stations. They are cheap and quick to build, they can react rapidly to fluctuating demand, but although they are much cleaner than coal they still burn fossil fuels and still create CO2 emissions. And where is the gas going to come from, George? Why not shale gas like they've discovered in the US? George announced special deals for "fracking" in the budget, and fracking installations which extract the gas from shale are likely to be fast-tracked for planning. (Locals will not be involved in the planning decision.) Why not? I'll tell you why not.

1. Although there has been test drilling, shale gas reserves have not been proved in the UK.
2. There are suspicions that the test drilling caused an earth tremor near Blackpool. 
3. There are fears - yet to be proved or disproved - that the fracking process can contaminate the water table. Certainly it generates a lot of dirty water which has to be dealt with somehow.
4. Shale gas, like any natural gas, is a fossil fuel and releases CO2 when burnt.

In the short term the question is whether existing systems and existing supplies will keep the lights on in the face of this terrible weather and increased demand. (Did anyone ever predict the consequences of rising emissions and resulting climate change? Wasn't there something about unseasonable weather? Did you read that Sir John Beddington, retiring chief government scientist, says that climate change is more serious than ever?) 

The Nuclear Option

Of course planning permission was awarded last week for a new nuclear power station at Hinckley Point, but that will take at least 10 years to build. All but one of our existing nuclear plants are scheduled to close by 2020. 

And if we run out?

What will happen if the nation does run out of gas? Probably, the lights will go out. That's because it's very much easier to turn off a major gas user like a power station than thousands of individual users. Let's hope it doesn't happen, because the consequences would be horrific. Last time we had nationwide power cuts - which, incidentally, brought down the government- was in the 1970s. At that time we had no ATMs, no computers, no barcode scanners, no electronic tills, no mobile phones. Which of those would you be happy to go without? And remember, your gas central heating has electronic controls and an electric pump. You won't just be sitting in the dark, you'll be sitting in the cold as well!

Cheer up, it's Spring!  

The Age of Stupid

Do we need another misery movie?

Review: The Age of Stupid - premiere at Leicester Square and 65 cinemas across the country.

In The Age of Stupid Pete Postlethwaite addresses us from the wrecked planet of 2055 and asks how we could be so stupid as to let climate change destroy humanity. He flicks through endless archives showing us the obvious clues to catastrophe from 2009 and before. It seemed a long film, partly because technical problems meant that about 30 minutes of footage was played twice. Partly, too, because it replayed the breast-beating and lamentations already seen in Al Gore’s An Inconvenient Truth, Leonardo di Caprio’s The Eleventh Hour, The Day After Tomorrow and all the rest.

What these films lack, and that includes the live debate following The Age of Stupid, is a credible call to action. Watching this film you might conclude that the best thing to do is to run your car on chip fat, live self-sufficiently on a small holding and protest against the nasty nimbies who oppose wind farms. It goes without saying that there’s not enough chip fat and not enough smallholdings. The effectiveness of wind farms is also very much in doubt. After the film Pete Postlethwaite pledged to give back his OBE if the government approved the proposed new Kingsnorth coal-fired power station. Ed Milliband was there to respond, but they let him off extremely lightly by not once mentioning government support for Heathrow’s third runway. Surely that’s a much more powerful national political issue than some power station down in Kent.

Sustainable economic growth is still possible in a low carbon economy, but if we are going to solve this problem we must all drive less, heat less and consume less. Life will be very different - potentially much more pleasant - if we take the low-carbon route. The Age of Stupid has missed the opportunity to show what ordinary people can do to safeguard our future, and to show what sort of future we can all enjoy if we act now. Certainly the showing raised enthusiasm both in Leicester Square and in the cinema where I was, but I fear that people will be rushing off to protest, rather than rushing off to change their lives.

They think it's all over

Latest reports from the IPCC, the United Nations’ Intergovernmental Panel on Climate Change, indicate that a 2 degree rise in world temperatures is inevitable – within 10 years. There is now so much excess carbon dioxide in the global system that it is too late to stop this happening; there’s nothing we can do. It’s time to face up to the consequences and prepare to adapt to them.

Ironically the prosperous West may benefit form the temperature rise in the short term. Higher temperatures will mean substantially increased crop yields in North America, Northern Europe and Russia. Elsewhere the opposite is true. In some parts of the Third World flash floods will wash the crops from the fields and destroy buildings, bridges and roads. Rising sea levels will make other places uninhabitable – already parts of the Maldives have had to be abandoned.

Too much water in some places; too little elsewhere as the Himalayan glaciers melt and the rivers they fill run dry. Up to a billion people will lose their water supply. Many species will become extinct and diseases will appear in places where they have never been seen before.

All this sounds apocalyptic. Too dreadful to be true. Turn the page – let’s not think about it. And what can we do about it anyway? And there on the next page is an advertisement from the energy company Total. “Total is pursuing the development of gas fields across the globe…” And burning more gas releases more CO2. Three degrees? Four degrees? Six degrees?

It needs government action. It needs big business to take action. What we can do is be aware of what is going to happen and be aware of how it will change our lifestyles. We need to do as much as we can to cut our individual carbon footprints. We can change public opinion. Enough public opinion influences government and changes business behaviour.

Within 10 years. That means it won’t just affect our children or our grandchildren. It’s going to affect us.

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.

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