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.

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!

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?

Scenario Sandy

Do you ever find that audiences react to long-term scenarios with either disbelief or total resignation that they can do nothing about it? Maybe super-storm Sandy will at least act as a case-study and show people how disruption to things we take for granted can have far-reaching consequences.

New Yorkers have found that once the power goes off they can only stay in touch with the world for only as long as their mobile batteries work. That if they live on the 29^th floor there’s no water because the pumps won’t work. That unless they have a gas hob there’s no hot water and no hot food. No way of washing and no way of escape except down multiple flights of stairs. Once at ground level there’s no petrol, either because the tankers can’t get through or because there’s no electricity to pump it. At the moment all seems to be calm, but if frustration spills over into civil unrest in the next 24 hours that’s cooked Obama’s presidential goose!

Isn’t it tempting to say “NOW do you believe me?” Unfortunately until people experience this sort of thing first hand many remain in denial. Even when we persuade them that unexpected things happen it’s difficult to make them realise that while they can’t stop these events they can usually take sensible precautions to mitigate the effects. Of course there doesn’t seem to be much of a lead from the top. I know we now have record stocks of salt around the country - (just as well – it was snowing the south yesterday) -  but if the power goes off there doesn’t seem to be any plan to cope with darkened traffic lights, closed supermarkets or silent petrol stations. Or maybe the plans are there but the government’s keeping them secret. If so, I hope they are better than the ones they had at the time of the 2000 fuel strike! If not – well, it doesn’t bear thinking about.

Last time I made a presentation one of my delegates said, “You know, whenever I hear you talk I just want to go away and slit my wrists.”  It shouldn’t be like that. How do we get people to take a positive and pragmatic view of the future?

The Other Side of Peak Oil

Electricity could be the transport fuel of the future – but will we develop the infrastructure in time?

In the 1950s, much to everyone’s disbelief, M King Hubbert came up with his theory of Peak Oil, and claimed that all the world’s oil was going to run out. Production would reach a maximum and then start to decline. In fact US oil production reached a peak in 1971, but nobody has determined exactly when we will reach the global limit, although it’s generally expected in the next couple of decades. Now an article in New Scientist (19th May) suggests that we’ll reach the peak not because of a failure in supply, but because of a failure of demand.

Some 50% of the 85m barrels of oil that the world consumes each day is used for transport. It’s a fossil fuel and a major contributor to global CO2. The author’s belief is that technology will dramatically cut transport fuel consumption, largely because the electric car will capture a major – even dominant – share of the market within only one or two decades.

The efficiency of the petrol car has improved dramatically over the last 20 years or so. New technology with turbochargers and direct fuel injection will improve it even more. In terms of emissions, however, the pure electric car is far cleaner; the emissions at the power station per mile are far lower than those of the traditional internal combustion vehicle. The cost of electricity is dramatically lower at around one fifth of the cost of petrol per kilometre, at European prices. The problem with the electric car is its notoriously limited range and its very high initial cost. Batteries, a major element of cost, are expected to fall in price as demand increases, but that still leaves the problem of range. Rapid recharge still takes at least 30 minutes, and recharging two or three times on a long journey is not acceptable. Battery exchange looks a more viable option. The vehicle arrives at the exchange station and robots remove the battery and replace it with a fully-charged unit in about the same time as it takes to fill a petrol tank. The technology exists, but so far there are few exchange stations.

The hybrid car is a halfway-house. Economy is improved by using the energy from regenerative braking – otherwise wasted – to charge a battery to drive an electric motor to support the petrol engine. In July Toyota launches its plug-in hybrid. In addition to the hybrid technology the car may be charged from a domestic socket to run on battery power for 15 miles. If your journey is longer than that then the petrol engine cuts in seamlessly for the rest of the trip. The savings will only be worthwhile for high mileage users, as the car will cost around £27,000, even after the UK government’s £5,000 subsidy. Other hybrids like the Vauxhall Ampera come in at £38,000.

If electricity is the future, the key question is where is it all going to come from? In the UK we are facing problems with meeting the existing demand for electricity. The government has finally announced its commitment to a new generation of nuclear power stations, but because it will take at least 10 years to get new stations in commission, existing stations are being authorised to run beyond their originally expected lifetimes. There are technical issues with the proposed design of new stations – similar stations are years behind their construction targets. There are political issues. EDF, 85% owned by the French government, is the only serious bidder for the UK nuclear construction programme. The new French president is not a supporter of nuclear power. And then there’s the infrastructure – new pylon routes and a network of exchange or recharging stations.

Electricity is attractive, but how soon it can be practical is open to doubt. Peak Oil, with rocketing prices and unpredictable supply, may not have gone away quite yet!

Cutting Fuel Costs

Petrol duty rises today by 1p/litre.

Have you had that email forwarded and re-forwarded from a friend of a friend of a friend? The one that urges you to boycott Esso and BP when buying petrol, to force the wicked oil companies to bring prices down to £0.90/litre?

I class it as a "quasi-virus". It urges you to send it to all your contacts and if everyone does that it truly means millions of messages. Why a virus? Because it's just setting out to clog up and slow down the internet with all these messages.

What about the boycott of Esso and BP?

First, it's not true when they claim that the oil price is "as low as it has been for a while." It hit $147/barrel in July 2008 and then fell back, but it's been climbing since the beginning of last year and today is at $83. In sterling that's £73 in July 08 and £55 now - the gap is closing because sterling has fallen against the dollar. The long term average for oil is around $30, but as it runs out and we have to get it from increasingly remote and unstable regions the cost of production goes up and up. Industry experts predict the $200 barrel within 5 years!

So what happens if we stop buying from Esso and BP? The truth is that Morrisons, Sainsbury's, Tesco and all the rest don't own oil wells or refineries. They buy petrol from the oil companies - like BP and Esso. Even if we managed a 100% boycott there would be no change to the price - though there might be queues at the supermarket forecourts! As with electricity and gas, we cannot do anything to drive down the price of what is becoming a scarce resource in the face of growing world demand and population increase. The only solution is to get the very maximum out of every gallon: drive carefully, drive only when you have to, choose an economical car. Very boring, but I'm afraid it's the truth.

FUEL DUTY RISE DEFERRED

No 3p petrol duty increase on 1st April - instead it will be 1p, with the rest phased in after the election. Undoubtedly rising petrol prices will increase inflation, but we cannot soften the blow of rising oil prices through the tax system. Oil is running out - or hadn’t you heard? Yes, we may be able to get it from tar sands, from corn or from beneath distant oceans, but it is still running out and as we attempt to mop up the last resources it will get more and more expensive.

Should we encourage people to use less oil by pushing the price up? In the long term that may work, but in the short term it will make life difficult for many “hard-working families” and most other people as well. Few can afford a £20,000 electric car; fewer still can find anywhere to charge it. Will there really be a significant number of buyers prepared to put up with a range of only 100 miles?

Taxation is always a blunt instrument, and never a substitute for policy. Instead of arguing about petrol we should be debating the whole transport and mobility issue. Instead of reserving £30bn for new high-speed rail links across the country shouldn’t we be looking at the millions of shorter journeys that millions of people make every day? Considering how video links and high-speed broadband can reduce the need for travel? Planning to increase home working? Questioning why our lifestyle and working patterns demand more and more travel?

[Written on a train]

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.

Too late to save the planet

The BBC can be criticised for the way it justified abandoning Planet Relief, but the truth is that a television spectacular would have achieved nothing. Yes, many people would have made pledges and yes, some may have sent money, but most of us have excellent reasons for making long-haul flights, driving large cars and constantly consuming. In any case we cannot stop climate change. Even if all nations fulfilled their Kyoto targets the best we could hope for would be slowing it down, but with the US refusing to sign and the UK and the rest falling short even this will not be achieved.

British government action on climate is largely lip-service and superficial. They continue to build roads, support airport expansion and subsidise wind farms – the most ineffective form of renewable energy. The implication of their policies is that fossil fuels are limitless; they ignore the carbon consequences of burning all these fuels. They dare not tax energy, cut petrol use though road pricing or restrict air travel. There lies electoral suicide. That leaves action up to us.

Concern for climate change must not blind us to the threats of pollution, resource depletion and particularly energy shortages. It makes sense to address all of these by reducing, re-using and recycling as environmentalists recommend. This won’t save the planet but it may help us cope with the dire conditions we can expect as the oil and everything else starts to run out.

Let’s face up to the consequences of climate change rather than pretending that a TV show or anything else we do will stop it happening.

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.