Category: Solution City

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The Delta, The Ramp, The Stretch and The Duck #1

I gave a guest lecture at Birkbeck College, of the University of London on the evening of 22nd February 2017 in the evening, as part of the Energy and Climate Change module. I titled it, “Renewable Gas for Energy Storage : Scaling up the ‘Gas Battery’ to balance Wind and Solar Power and provide Low Carbon Heat and Transport”.

The basic concept is that since wind and solar power are variable in output, there has to be some support from other energy technologies. Some talk of batteries to store electrical energy as a chemical potential, and when they talk of batteries they think of large Lithium ion piles, or flow batteries, or other forms of liquid electrolyte with cathodes and anodes. When I talk about batteries, I think of electrical energy stored in the form of a gas. This gas battery doesn’t need expensive metal cathodes or anodes, and it doesn’t need an acid liquid electrolyte to operate. Gas that is synthesised from excess solar or wind power can be a fuel that can be used in chemical reactions, such as combustion, or burning, to generate electricity and heat when desired at some point in the future. It could be burned in a gas turbine, a gas boiler or a fuel cell, or in a vehicle engine. Or instead, a chemically inert gas can be stored under pressure, and this compressed gas can also be used to generate power on demand at a later date by harnessing energy from decompression. Another option would be holding a chemically reactive gas under pressure, allowing two stages of energy recovery.

As expected, the Birkbeck audience was very diverse, and had different social and educational backgrounds, and so there was little that could be assumed as common knowledge, especially since the topic was energy, which is normally only an interest for engineers, or at a stretch, economists.

I decided when preparing that I would attempt to use symbolism as a tool to build a narrative in the presentation. A bold move, perhaps, but I found it created an emblematic thread that ran through the slides quite nicely, and helped me tell the story. I used Mathematical and Physical notation, but I didn’t do any Mathematics or Physics.

I introduced the first concept : the Delta, or change. I explained this delta was not the same as a river delta, which gave me the excuse to show a fabulous night sky image of the Nile Delta taken from the International Space Station. I demonstrated the triangle shape that emerges from charting data that changes over time, and calculating its gradient, such as the temperature of the Earth’s surface.

I explained that the change in temperature of the Earth’s surface over the recent decades is an important metric to consider, not just in terms of scale, but in terms of speed. I showed that this rate of change appears in all the independent data sets.

I then went on to explain that the overall trend in the change in the temperature of the Earth’s surface is not the only phenomenon. Within regions, and within years and seasons, even between months and days, there are smaller scale changes that may not look like the overall delta. A lot of these changes give the appearance of cyclic phenomena, and they can have a periodicity of up to several decades, for example, “oscillations” in the oceans.

These discrete deltas and cycles could, to a casual observer, mask underlying trends, especially as the deltas can be larger than the trends; so climatologists look at a large set of measurements of all kinds, and have shown that some deltas are one way only, and are not cycling.

Teasing out the trends in all of the observations is a major enterprise that has been accomplished by thousands of scientists who have reported to the IPCC, the Intergovernmental Panel on Climate Change, part of the UNFCCC, the United Nations Framework Convention on Climate Change. The Fifth Assessment Report is the most comprehensive yet, and shows that global warming is almost certainly ramping up – in other words, global warming is getting faster, or accelerating.

Many projections for the future of temperature changes at the Earth’s surface have been done, with the overall view that temperatures are likely to carry on rising for hundreds of years without an aggressive approach to curtail net greenhouse gas emissions to the atmosphere – principally carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O).

From observations, it is clear that global warming causes climate change, and that the rate of temperature change is linked to the rate of climate change. In symbols, this reads : delta T for temperature over t for time leads to, or implies, a delta C for climate over t for time. The fact that global warming and its consequential climate change are able to continue worsening under the current emissions profile means that climate change is going to affect humanity for a long stretch. It also means that efforts to rein in emissions will also need to extend over time.

I finished this first section of my presentation by showing a list of what I call “Solution Principles” :-

1. Delays embed and extend the problem, making it harder to solve. So don’t delay.

2. Solve the problem at least as fast as creating it.

3. For maximum efficiency, minimum cost, and maximum speed, re-deploy agents of the problem in its solution.

In other words, make use of the existing energy, transport, agriculture, construction and chemical industries in approaching answers to the imperative to address global warming and climate change.

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New Hands on DECC

So, the Department of Energy and Climate Change (DECC) have a new top dog – Alex Chisholm – formerly the attack beast in charge of putting pressure on the electricity utility companies over their pricing rip-offs when at the Competition and Markets Authority (CMA).

There’s a huge and dirty intray awaiting this poor fellow, including the demonstrable failings of the Energy Act that’s just been signed into law. I’d recommend that he call for the immediate separation of the department into two distinct and individually funded business units : Nuclear and The Rest. Why ? Because nuclear power in the UK has nothing to do with answering the risk of climate change, despite some public relations type people trying to assert its “low carbon” status. Plus, the financial liabilities of the nuclear section of DECC mean it’s just going to bring the rest of the department down unless there’s a divorce.

The UK Government have been pursuing new fission nuclear power with reams of policy manoeuvres. The call for new nuclear power is basically a tautological argument centring on a proposal to transition to meet all energy demand by power generation resources, and the presumption of vastly increasing energy independence. If you want to convert all heating and cooling and transport to electricity, and you want to have few energy imports, then you will need to have a high level of new nuclear power. If new nuclear power can be built, it will generate on a consistent basis, and so, to gain the benefit of self-sufficiency, you will want to transfer all energy demand to electricity. Because you assume that you will have lots of new nuclear power, you need to have new nuclear power. It’s a tautology. It doesn’t necessarily mean it’s a sensible or even practical way to proceed.

DECC evolved mostly from the need to have a government department exclusively involved in the decommissioning of old nuclear power plants and the disposal of radioactive nuclear power plant waste and waste nuclear fuel. The still existing fleet of nuclear power plants is set to diminish as leaking, creaking, cracking and barely secure reactors and their unreliable steam generation equipment need to be shut down. At which point, this department will lose its cachet of being an energy provider and start to be merely an energy user and cash consumer – since there’s not enough money in the pot for essential decommissioning and disposal and DECC will need to go cap in hand to the UK Treasury for the next few decades to complete its core mission of nuclear decommissioning. It doesn’t take too much of a stretch of the imagination to figure out why this department will remain committed to the concept of new nuclear power. It would certainly justify the continuing existence of the department.

The flagship DECC-driven nuclear power project for Hinkley Point C has run aground on a number of sharp issues – including the apparent financial suicide of the companies set to build it, the probably illegal restructuring loans and subsidy arrangements that various governments have made, what appears to be the outright engineering incompetency of the main construction firm, and the sheer waste of money involved. It would be cheaper by around 50% to 70% to construct lots of new wind power and some backup gas-fired power generation plant – and could potentially be lower carbon in total – especially if the gas is manufactured low carbon gas.

In order to stand a chance of making any new low carbon energy investment in the UK, the Department of Energy and Climate Change needs to split – much like the banks have. The risky, nuclear stuff in one team, and the securely certainly advantageous renewable energy stuff in the other team. We will have more wind power, more solar power and more of lots of other renewables in the next 10 years. We are unlikely to see an increase in nuclear power generation in the UK for the next 15. It’s time to split these business units to protect our chances of successful energy investment.

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Fields of Diesel Generators

Recently, I had a very helpful telephone conversation with somebody I shall call Ben – because that’s his name, obviously, so there’s no point in trying to camoflage that fact. It was a very positive conversation, with lots of personal energy from both parties – just the sort of constructive engagement I like.

Amongst a range of other things, we were batting about ideas for what could constitute a business model or economic case for the development of Renewable Gas production – whether Renewable Hydrogen or Renewable Methane. Our wander through the highways and byways of energy markets and energy policy led us to this sore point – that the National Grid is likely to resort to “fields of diesel generators” for some of its emergency backup for the power grid in the next few years – if new gas-fired power plants don’t get built. Various acronyms you might find in this space include STOR and BM.

Now, diesel is a very dirty fuel – so dirty that it appears to be impossible to build catalytic exhaust filters for diesel road vehicles that meet any of the air pollution standards and keep up fuel consumption performance. It’s not just VW that have had trouble meeting intention with faction – all vehicle manufacturers have difficulties balancing all the requirements demanded of them. Perhaps it’s time to admit that we need to ditch the diesel fuel itself, rather than vainly try to square the circle.

The last thing we really need is diesel being used as the fuel to prop up the thin margins in the power generation network – burned in essentially open cycle plant – incurring dirty emissions and a massive waste of heat energy. Maybe this is where the petrorefiners of Great Britain could provide a Renewable Gas alternative. Building new plant or reconfiguring existing plant for Renewable Gas production would obviously entail capital investment, which would create a premium price on initial operations. However, in the event of the National Grid requiring emergency electricity generation backup, the traded prices for that power would be high – which means that slightly more expensive Renewable Gas could find a niche use which didn’t undermine the normal economics of the market.

If there could be a policy mandate – a requirement that Renewable Gas is used in open cycle grid-balancing generation – for example when the wind dies down and the sun sets – then we could have fields of Renewable Gas generators and keep the overall grid carbon emissions lower than they would otherwise have been.

Both Ben and I enjoyed this concept and shared a cackle or two – a simple narrative that could be adopted very easily if the right people got it.

Renewable Gas – that’s the craic.

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The Lies That You Choose

I have had the great fortune to meet another student of the Non-Science of Economics who believes most strongly that Energy is only a sub-sector of the Holy Economy, instead of one of its foundations, and doesn’t understand why issues with the flow of commodities (which include energy resources) into the system is critical to the survival of the global economy, and that the growth in the Services Industries and Knowledge Economy cannot compensate for the depletion of freshwater, fossil fuels and other raw resources.

This person believes in Technology, as if it can fly by itself, without seeming to understand how Technological Innovation is really advanced by state investment – a democracy of focus. This otherwise intelligent learner has also failed to grasp, apparently, that the only way that the Economy can grow in future is through investment in things with real value, such as Energy, especially where this investment is essential owing to decades of under-investment precipitated by privatisation – such as in Energy – investment in both networks of grids or pipes, and raw resources. And this from somebody who understands that developing countries are being held back by land grab and natural resource privatisation – for example ground water; and that there is no more money to be made from property investment, as the market has boomed and blown.

How to burst these over-expanded false value bubbles in the mind ? When I try to talk about the depletion of natural resources, and planetary boundaries, people often break eye contact and stare vacantly out of the nearest window, or accept the facts, but don’t see the significance of them. Now this may be because I’m not the best of communicators, or it may be due to the heavy weight of propaganda leading to belief in the Magical Unrealism always taught in Economics and at Business Schools.

Whatever. This is where I’m stuck in trying to design a way to talk about the necessity of energy transition – the move from digging up minerals to catching the wind, sunlight and recycling gases. If I say, “Look, ladies and laddies, fossil fuels are depleting”, the audience will respond with “where there’s a drill, there’s a way”. As if somehow the free market (not that a free market actually exists), will somehow step up and provide new production and new resources, conjuring them from somewhere.

What are arguments that connect the dots for people ? How to demonstrate the potential for a real peak in oil, gas, coal and uranium production ? I think I need to start with a basic flow analysis. On the one side of the commodity delivery pipeline, major discoveries have decreased, and the costs of discovery have increased. The hidden underbelly of this is that tapping into reservoirs and seams has a timeline to depletion – the point at which the richness of the seam is degraded significantly, and the initial pressure in the well or reservoir is reduced to unexploitable levels – regardless of the technology deployed. On the other end of the commodities pipeline is the measure of consumption – and most authorities agree that the demand for energy will remain strong. All these factors add up to a time-limited game.

Oh, you can choose to believe that everything will continue as it always seems to have. But the Golden Age of Plenty is drawing to a close, my friend.

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DECCimation

Into the valley of career death rode the junior 200… As Adam Vaughan reported on 10th November 2015, the UK Government Department of Energy and Climate Change (DECC) is to shed 200 of its 1,600 staff as a result of the Spending Review, ordered by George Osborne, Chancellor of the Exchequer, Second Lord of the Treasury. I wonder just where the jobs will be disappearing from.

Obviously, the work on nuclear power plant decommissioning and the disposal of radioactive nuclear waste and radioactive nuclear fuel needs to continue, and it needs to be government-led, as the experiment in privatisation of these functions went spectactularly over-budget, so it had to be brought back into public hands. But would all this work be best handled by a government agency, rather than DECC ? We already have the Nuclear Decommissioning Authority – should all work on decommissioning and waste disposal be delegated to them ? Shouldn’t DECC be concentrating on energy technologies of the future, instead of trying to fix problems from our nuclear past ? Should not the “policy reset” that many are hinting at address the advancement of renewable energies ? That, surely, should be DECC’s core activity.

There are many items of work that DECC could undertake, that don’t cost a penny in subsidy, that would advance the deployment of renewable energy technologies. Developing a model of energy transition that people believe in would be a good first move. Instead of depending heavily on new nuclear power, with its huge price tag, complex support arrangements, heavy public subsidy and long and ill-determined lead times for construction, DECC modelling could show the present reality, and the gradual dropping off of coal-fired power generation and nuclear power plants – revealing an integrated balance of variable renewable energy and flexible Natural Gas for both heating and backup/stopgap/topup electricity generation. New DECC modelling could show what a progressive transition from Natural Gas to Renewable Gas would look like, and how it would meet the climate change carbon emissions reductions budgets. DECC models of the future of UK energy could include the appearance of integrated gas systems – recycling carbon dioxide emissions into new gas fuels. When the wind is blowing and the sun is shining and not all renewable power is consumed, the UK could then be making gas to store for when the sun sets and the sky is becalmed.

It may take a few years before DECC finally realises that there is no future for coal and nuclear power. Massive projects will fail, or go slow. Financing will be uncertain and backers will run away screaming. Coal-fired power plants are already being left aside in National Grid planning for electricity markets. It will not be long before coal goes the way of the dinosaurs. What we will be left with, if we are clever, is a massive improved network of solar and wind power assets, and Natural Gas-fired power generation to back them up – even if these need to be renationalised because they are required to run flexibly – so shareholders cannot be sure of their dividends. The loan guarantees that DECC tried to throw at new nuclear power will be diverted to Natural Gas power plant investment, possibly; but even then, building and operating a gas-fired power plant could not make an economic case.

It is time to recognise that “baseload” always-on power generation is dead, just as the departing chief of National Grid, Steve Holliday, has indicated. Hopefully, he’s not departing National Grid because he doesn’t believe in the future of coal or nuclear. The plain facts, as the data shows, existing coal and nuclear power plants are unreliable and insecure. Investment into new coal and nuclear plants is at best, uncertain, and for many, dubious. It is possible that gas assets will need to be renationalised. We must resort to a gas-and-power future, for transport as well as heating and power generation. And within 20 years, we must transition to low carbon gas. If only DECC could admit this.

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What To Do Next

Status-checking questions. I’m sure we all have them. I certainly do. Several times a week, or even day, I ask myself two little questions of portent : “What am I doing ?” and “Why am I here ?”. I ask myself these questions usually because my mind’s wandered off again, just out of reach, and I need to call myself to attention, and focus. I ask these little questions of myself when I do that thing we all do – I’ve set off with great purpose into another room, and then completely forgotten why I went there, or what I came to find or get. I also use these forms of enquiry when I’m at The Crossroads of Purpose – to determine what exactly it is I’m deciding to aim for. What are my goals this day, week, month, age ? Can I espy my aims, somewhere on the horizon ? Can I paddle labouriously towards them – against the tide – dodge/defeat the sharks ? Can I muster the will to carry this out – “longhauling it” ?

I’ve spent a long time writing a book, which I’m sure to bore everybody about for the next aeon. My intention in writing the book was to stimulate debate about what I consider to be the best direction for balanced energy systems – a combination of renewable electricity and Renewable Gas. I wanted to foster debate amongst the academics and engineers who may be my peers, certainly, hopefully providing a little seed for further research. Hopefully also having a small influence on energy policy, perhaps, or at least, getting myself and my ideas asked to various policy meetings for a little airing. But, if I could in some way, I also wanted to offer a bit of fizz to the internal conversations of companies in the energy sector. You see, it may be obvious, or it may not be, but action on climate change, which principally involves the reduction in the mining, drilling and burning of fossil fuels, principally also involves the co-operation of the fossil fuel extraction companies. Their products are nearly history, and so it must be that inside the headquarters of every transnational energy giant, corporate heads are churning through their options with a very large what-if spoon.

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Nobel Chutzpah Prize 2015

The problem with climate change “deniers” and low carbon energy “sceptics” is that they cannot read.

Here’s Jo Nova, claiming that the United Nations and the World Bank are demanding $89 trillion “to fix climate”.

She writes, “The ambit claims know no bounds. Who else would ask for $89,000,000,000,000? If the evil “more developed” nations pay for their carbon sins, the bill for those 1.3 billion people works out at $70,000 per person by 2030 (babies included).”

A simple little diagram from the actual report and a little text, shows she is entirely wrong :-

From Section 2.1 “Infrastructure investment and global growth” :-

“The global economy will require substantial investments in infrastructure as the population and the middle class grow. An estimated US$89 trillion of infrastructure investment will be required through 2030, based on data from the International Energy Agency (IEA), the Organisation for Economic Co-operation and Development (OECD), and analysis for the Commission (see Figure 1). This is chiefly investment in energy and cities. This estimate for the required investment is before accounting for actions to combat climate change.”

That’s before accounting for actions to combat climate change, Ms Nova. Before. I know it’s probably clanging against your internal cognitive fences, but the fact is, the world needs to spend a heap of capital in the next 20 to 30 years reviving, replacing and renewing energy systems infrastructure. That spending has to happen regardless of whether it’s low carbon spending.

And let’s read the note on Figure 1 more carefully :-

“INCLUDING OPERATING EXPENDITURES WOULD MAKE A LOW-CARBON TRANSITION EVEN MORE FAVOURABLE LEADING TO A FURTHER REDUCTION OF US$5 TRILLION, FOR OVERALL POTENTIAL SAVINGS OF US$1 TRILLION”

So, Jo Nova, the world will actually be better off if it decides to make all new energy expenditure low carbon.

Jo Nova, when will you be updating your web post ?

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A Partial Meeting of Engineering Minds

So I met somebody last week, at their invitation, to talk a little bit about my research into Renewable Gas.

I can’t say who it was, as I didn’t get their permission to do so. I can probably (caveat emptor) safely say that they are a fairly significant player in the energy engineering sector.

I think they were trying to assess whether my work was a bankable asset yet, but I think they quickly realised that I am nowhere near a full proposal for a Renewable Gas system.

Although there were some technologies and options over which we had a meeting of minds, I was quite disappointed by their opinions in connection with a number of energy projects in the United Kingdom.

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DECC Dungeons and Dragnets

Out of the blue, I got an invitation to a meeting in Whitehall.

I was to join industrial developers and academic researchers at the Department of Energy and Climate Change (DECC) in a meeting of the “Green Hydrogen Standard Working Group”.

The date was 12th June 2015. The weather was sunny and hot and merited a fine Italian lemonade, fizzing with carbon dioxide. The venue was an air-conditioned grey bunker, but it wasn’t an unfriendly dungeon, particularly as I already knew about half the people in the room.

The subject of the get-together was Green Hydrogen, and the work of the group is to formulate a policy for a Green Hydrogen standard, navigating a number of issues, including the intersection with other policy, and drawing in a very wide range of chemical engineers in the private sector.

My reputation for not putting up with any piffle clearly preceded me, as somebody at the meeting said he expected I would be quite critical. I said that I would not be saying anything, but that I would be listening carefully. Having said I wouldn’t speak, I must admit I laughed at all the right places in the discussion, and wrote copious notes, and participated frequently in the way of non-verbal communication, so as usual, I was very present. At the end I was asked for my opinion about the group’s work and I was politely congratulational on progress.

So, good. I behaved myself. And I got invited back for the next meeting. But what was it all about ?

Most of what it is necessary to communicate is that at the current time, most hydrogen production is either accidental output from the chemical industry, or made from fossil fuels – the main two being coal and Natural Gas.

Hydrogen is used extensively in the petroleum refinery industry, but there are bold plans to bring hydrogen to transport mobility through a variety of applications, for example, hydrogen for fuel cell vehicles.

Clearly, the Green Hydrogen standard has to be such that it lowers the bar on carbon dioxide (CO2) emissions – and it could turn out that the consensus converges on any technologies that have a net CO2 emissions profile lower than steam methane reforming (SMR), or the steam reforming of methane (SRM), of Natural Gas.

[ It’s at this very moment that I need to point out the “acronym conflict” in the use of “SMR” – which is confusingly being also used for “Small Modular Reactors” of the nuclear fission kind. In the context of what I am writing here, though, it is used in the context of turning methane into syngas – a product high in hydrogen content. ]

Some numbers about Carbon Capture and Storage (CCS) used in the manufacture of hydrogen were presented in the meeting, including the impact this would have on CO2 emissions, and these were very intriguing.

I had some good and useful conversations with people before and after the meeting, and left thinking that this process is going to be very useful to engage with – a kind of dragnet pulling key players into low carbon gas production.

Here follow my notes from the meeting. They are, of course, not to be taken verbatim. I have permission to recount aspects of the discussion, in gist, as it was an industrial liaison group, not an internal DECC meeting. However, I should not say who said what, or which companies or organisations they are working with or for.

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Nuclear Power Is Not An Energy Policy

The British Government do not have an energy policy. They may think they have one, and they may regularly tell us that they have one, but in reality, they don’t. There are a number of elements of regulatory work and market intervention that they are engaged with, but none of these by itself is significant enough to count as a policy for energy. Moreover, all of these elements taken together do not add up to energy security, energy efficiency, decarbonisation and affordable energy.

What it takes to have an energy policy is a clear understanding of what is a realistic strategy for reinvestment in energy after the dry years of privatisation, and a focus on energy efficiency, and getting sufficient low carbon energy built to meet the Carbon Budget on time. Current British Government ambitions on energy are not realistic, will not attract sufficient investment, will not promote increased energy efficiency and will not achieve the right scale and speed of decarbonisation.

I’m going to break down my critique into a series of small chunks. The first one is a quick look at the numbers and outcomes arising from the British Government’s obsessive promotion of nuclear power, a fantasy science fiction that is out of reach, not least because the industry is dog-tired and motheaten.

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Greg Barker : Mr Sunshine

I went to a fascinating meeting on Monday 8th June 2015, hosted by PricewaterhouseCooper (PwC) in London, and organised by the Solar Trade Association, and starring Mr Sunshine himself, Greg Barker, who was on top form, and exceptionally good value, as always.

We had very interesting presentations from a number of key actors in solar photovoltaic energy, including the newly rebranded Solar Power Europe. James Watson, Solar Power Europe‘s CEO, expressed a view to the effect that it could seem like a waste of time, effort and money for Europe to be spending half its Energy Union budget on reforming the EU Emissions Trading Scheme, when so much could be achieved instead through a recasting of the Renewable Energy Directive. Amendments are due in a new Renewable Energy package in 2017, as confirmed by Commissioner Arias Cañete in March 2015. These amendments would usefully tackle the risk of the European Capacity Mechanism being used to support coal-fired power in Germany – as the parallel policy has been in the UK.

The Energy Union is taking forward the open and free market principles of “harmonisation” of the electricity and gas trade in the geographical envelope of the Eurozone, which includes countries that have not taken the Euro currency, such as the UK, and countries that are in the European Economic Area but are not full members of the European Union, principally Norway. A key part of the Energy Union is a physical enactment of guarantees for market access – focusing on standards in gas and power products, and the interconnectors that make cross-border trade possible. It is in the interests of all the private energy companies, public energy companies, invididual producers and network operators in the region to take part in this project, as the outcomes will include not only free, open and fair trade, they will also increase energy security in the region, particularly as the level of renewable energy production increases. Renewable electricity is intermittent and variable at all time slices, and strongly seasonal and weather-related, and so international trade within the European region is essential.

Most commentators on the Energy Union narrow in on the electricity grids, but union also includes the gas grids. The legal framework for gas market harmonisation includes work on gas quality standards and also what kinds of gas can be transmitted through the pipelines, issues covered in the 2009 Energy Package, which permitted unconstrained access for alternative gases as long as they meet the gas protocols. This would permit gas grid injection of biomethane, and potentially other biogases or Renewable Gas varieties.

One of the main contributors to new power production in the Eurozone is renewable electricity, with growth that has continued throughout the recession in the economy. Although barriers to increased renewable power in the electricity grids have been by and large vaulted, through a combination of regulatory progress and subsidies, as the landscape has changed, so has the need for re-assessment of policy. For example, in the UK, the solar Feed-in Tariff has been strongly criticised as costing too much (although it is a minnow in terms of the total socialised energy budget), and has had to be “degressed” – or stepped down in stages. In Germany, all electricity consumers have been taxed in order to pay for the renewable energy budget – and there has even been a tax on “self-consumption” for solar power producers – and this has been strongly contested. Plans to manufacture low carbon gas from excess solar and wind power would be badly affected by this. It does seem strange that producer-consumers of virtually cost-less and zero carbon power should be taxed, especially when centralised producers are forced to sell power for virtually nothing when there is oversupply – for example on a sunny day.

What is more likely to hold back European solar expansion, according to Solar Power Europe, is the Minimum Import Price, or MIP. Solar Power Europe will are lobbying for an end to both the MIP and German solar tax. The MIP, according to their analysis, is making solar power in Europe too costly, compared to other regions. Roughly 60% to 70% of the MIP subsidy is going to support Chinese manufacturers, yet China’s solar power industry is becoming very successful in its own right, and doesn’t need this support. Solar Power Europe are concerned that there is gaming of the market going on to decrease the costs of solar panels in Europe – for example, panels made in China are being routed through countries where exports don’t come under the MIP rules. In effect, Solar Power Europe wants policy to change to stop subsidising China and iron out counter-productive internal policies.

Solar Power Europe have published their “Global Market Outlook : 2015 – 2019” this week, and clearly, there are sunny times ahead, especially since Greg Barker has a key role in delivering solar power in London.

Greg Barker came to the podium to give his summary of solar power in the UK. He reminded the solar power industry, that although they were becoming a serious sector, that they would continue to remain dependent on subsidies. He said that the major reduction in unit costs was probably over; and barring some improvements in underlying technology, such as revolutions in semiconductor devices, I think I’d probably agree with him. Greg Barker said that to promote the market, there was still a need to sweep away unintended obstacles – he said he didn’t understand why solar power was still cheaper in Germany. He said that the development in solar power was incredible – he said that when he had first taken office in the previous Coalition Government, when he had talked about his ambition for solar power, officials had “fallen off their chairs, laughing”, at his parrotting as Minister, but that now there was a risk of over-development under the Levy Control Framework – the policy that caps subsidy spending on energy. Greg Barker said that he regretted that the EMR bids from solar power (bidding into the Contracts for Difference auction instituted as part of the Electricity Market Reform) may now not get built. He said that the solar industry would be “gutted that Eric Pickles has gone”, and that with the new majority Conservative Government rooftop solar would get support from the Department for Communities and Local Government from their new Minister Greg Clark. Greg Barker said that Camilla Cavendish, appointed in David Cameron’s Policy Unit, is a real ally of renewable energy. Greg Barker warned the room that there would be no additions to the levy budget for solar power, and told the solar industry not to go asking for increases as the regulatory environment would be harsh. He said the solar power developers should aim to drive down their costs and dive into a far more centralised market. He said that he expected that there would be “insurgent companies” making significant progress on solar power – something that the Big Six electricity providers would be unable to do. He warned the solar industry to he “hardheaded and realistic” and urged them to work with the Government.

Greg Barker told us about his new appointment to the London Sustainable Development Commission. He said that when Boris Johnson had called him about this, he hadn’t heard of it. Greg Barker said that the population of London is growing by 100,000 a year, and that London has growing technology companies – so much so that clean tech in London is better than California. He said that he accepted the appointment to the London SDC on the basis that he would get carte blanche to reform it, to “shift the dial”. He said that “much as I love city farms, and bees“, that he wanted to create more focus. He said that he wanted to get the London SDC working to three criteria on solar power, firstly scalability. He wants to see solar power initiatives that are scalable – which I took to mean not just large unrepeatable projects, or small bespoke projects. Greg Barker said that solar power policy should have genuine additionality – not just producing more reports. The third criteria he wants to apply is that of replicability – as until now, the record of solar power in London was not very good. He said we should remember the aesthetics of solar power, and that big blue panels sitting proud of a red clay roof was not particularly appealing. He mentioned Amber Rudd, who has been given the post of Secretary of State for the Department of Energy and Climate Change, and how she has been talking about the aesthetics of nuclear power. He said this issue was not ephemeral and that it was important to have good design for the London “semi” – semi-detached house. He said that local policy changes could help – such as eliminating the Congestion Charge for solar power companies having to drive and park in London for installations. Greg Barker said that Ed Davey, the Secretary of State for Energy and Climate Change in the previous Government, was too narrow in his views on organisations that should be enabled to do solar projects. Greg Barker said that we needed not only co-operatives, but also charities, and local authority level alliances, to be enabled to do solar projects. He said that policy needed to be revisited as regards the mid-sector rooftop solar band. He said that if the solar industry and builders get together and propose a change in regulation, Greg Clark would listen. Greg Barker said that Government should be regulating for outcome and not process in order to make progress. Greg Barker said that he wanted solar power to be a key policy issue in the upcoming mayoral election (for the Mayor of London). He said that when he had sat down with Boris Johnson the issues that had surfaced were a need for policy to deal with the circular economy, and how to develop London’s clean tech cluster, and the need for a solar group.

Greg Barker finished with some good advice. He told the solar power industry to be “persuasive rather than loud”. He said that the solar industry need to understand that a good deal of subsidy has to be focused on the offshore wind power priority, and that this cannot be changed. He said that the solar power industry could “pick up the slack from onshore wind”. He reminded the solar industry to focus on aesthetics and to sell this along with the idea of energy efficiency and return on investment. He said that the Green Deal has shown that we are still a long way from a market in energy efficiency. He asked if the Feed-in Tariff would survive, as solar power continues in its march towards grid parity.

Later on in the day, over snacks and a couple of beers, I was shown worrying-looking maps of the state of the National Grid by somebody looking at the “constraints” being imposed by Western Power Distribution (WPD), for example, in the South West of England. A summary that could be drawn from the maps was that there are difficulties with adding new power generators into large parts of the grid network. For the proposed Hinkley Point C nuclear power plant and the new Seabank 3 gas-fired power plant, an entirely new piece of grid will be needed – which will increase the lead time to these projects being able to contribute power to the network. If modifications for major projects are going to take up all the attention of National Grid, they won’t be able to advance the upgrades to the grid needed for small, decentralised projects – perhaps for years – and this is worrying as it imposes limitations on the amount of new renewable electricity that can be added in the near future. Some will see this as excellent news, as it will cap the rollout of windfarms and solar parks. However, this will create a drag on low carbon transition. It seems that large amounts of new renewables will only be possible in localised grids – so emphasis on developing solar power in London is useful.

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Solar Independence for an Electric Britain

Later on this morning, I shall attend the shiniest, brightest, sunniest event of the whole year so far : by the invitation of the Solar Trade Association, I shall attend a day of presentations named “Does the new government mean business for solar ?”. If I were a journalist, I would probably assume that the answer to that question is the default “no”, but I’m hoping some of the attendees will claim otherwise. And here below is a related press release about a publication released today : “Solar Independence Plan for Britain”, outlining exciting opportunities for solar photovoltaic farms in the UK. I shall be smiling all day, I can tell. The UK solar future’s so bright, I’ll need to wear PV shades.

‘Solar Independence’ is opportunity for Britain

Media Release : Embargoed to: 00:01 Monday 8 June 2015

Commenting on the publication of the ‘Solar Independence Plan for Britain’ by the Solar Trade Association [1], Guy Smith, Vice President of the National Farmers Union, highlighted the opportunity that solar power presents to British farmers.

Guy Smith said: “We’re pleased to see the fast-maturing solar industry calling for a responsible tapering-off in the level of public support it requires. Solar farmers are proud to be contributing renewable electricity into the British grid and the NFU is firmly in favour of using subsidies as efficiently as possible.”

“Our advice to government would be that as many farmers are finding, solar farms can easily be managed to support additional biodiversity such as bees and birds. The government is asking farmers to meet targets on biodiversity, and so we’d urge ministers to support solar farms as part of the solution.”

“Farm economists seem agreed that in the future farm-gate prices will become more volatile. Increased weather volatility is a key factor in this. To help manage this volatility farmers need to spread risk across a number of diverse income streams, and solar power and the other land-based renewables are an excellent way of doing this thus helping secure a robust rural economy.”

Catherine Mitchell, Professor of Energy Policy at the University of Exeter [2], said that smart policies could support the development of the solar industry in the UK.

Catherine Mitchell said: “We are seeing a profound global transformation in how we think about and build energy systems, and solar is the technology that is leading it.”

“Where governments enact good policy, healthy industries emerge and costs fall. Citizens become entrepreneurs.”

“As the Solar Independence Plan shows, Britain is potentially just five years away from a tipping point in this transformation, and I’d certainly urge ministers to encourage the inevitable rather than fighting it.”

ENDS

Notes to editors:

1. The ‘Solar Independence Plan for Britain’ by the Solar Trade Association is published on Monday 8 June.

2. Guy Smith and Catherine Mitchell sit on the Advisory Board of the Energy and Climate Intelligence Unit: https://eciu.net/about/advisory-board

3. The Solar Trade Association is holding an event on 8th June 2015 titled “Does the new government mean business for solar ?”

For more information:

Richard Black, director, ECIU, Tel: 07912 583 328, email: richard . black @ eciu . net

George Smeeton, head of communications, ECIU, Tel: 07894 571 153, email: george . smeeton @ eciu . net

About

The Energy and Climate Intelligence Unit is a non-profit organisation supporting informed debate on energy and climate change issues in the UK. Britain faces important choices on energy and on responding to climate change, and we believe it is vital that debates on these issues are underpinned by evidence and set in their proper context.

We support journalists and other communicators with accurate and accessible briefings on key issues, and help connect individuals and organisations in the field with the national conversation.

Our Advisory Board reflects the breadth of society’s interest in energy and climate issues. It includes climate scientists, energy policy experts and economists, as well as a range of other stakeholders including MPs and Peers.

All of our funding comes from philanthropic foundations. We gratefully acknowledge the support of the European Climate Foundation the Grantham Foundation for the Protection of the Environment, and the Tellus Mater Foundation.

For more information or to receive our daily newsletter, please visit our website: https://eciu.net/

Cuttings

https://www.solar-uk.net/article/97207-New-Government-could-nearly-double-previous-Government-solar-New-Government-could-nearly-double-previous-Government-solar-ambition.php

https://publicpowersolutions.co.uk/press/2015-06-sta-event-does-new-government-mean-business-solar

https://positivenews.org.uk/2015/environment/renewable_energy/17115/uk-solar-capacity-doubled-2014/

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Shell and BP : from “Delay and Deny” to “Delay and Distract”

Shell, BP and some of their confederates in the European oil and gas industry have inched, or perhaps “centimetred”, forward in their narrative on climate change. Previously, the major oil and gas companies were regularly outed as deniers of climate change science; either because of their own public statements, or because of secretive support of organisations active in denying climate change science. It does seem, finally, that Shell in particular has decided to drop this counter-productive “playing of both sides”. Not that there are any “sides” to climate change science. The science on climate change is unequivocal : changes are taking place across the world, and recent global warming is unprecedented, and has almost definitely been attributed to the burning of fossil fuels and land use change.

So Shell and BP have finally realised that they need to shed the mantle of subtle or not-so-subtle denial, although they cling to the shreds of dispute when they utter doubts about the actual numbers or impacts of global warming (for example : https://www.joabbess.com/2015/06/01/shells-public-relations-offensive/). However, we have to grant them a little leeway on that, because although petrogeologists need to understand the science of global warming in order to know where to prospect for oil and gas, their corporate superiors in the organisation may not be scientists at all, and have no understanding of the global carbon cycle and why it’s so disruptive to dig up all that oil and gas hydrocarbon and burn it into the sky. So we should cut the CEOs of Shell and BP a little slack on where they plump for in the spectrum of climate change narrative – from “utter outright doom” to “trifling perturbation”. The central point is that they have stopped denying climate change. In fact, they’re being open that climate change is happening. It’s a miracle ! They have seen the light !

But not that much light, though. Shell and BP’s former position of “scepticism” of the gravity and actuality of global warming and climate change was deployed to great effect in delaying any major change in their business strategies. Obviously, it would have been unseemly to attempt to transmogrify into renewable energy businesses, which is why anybody in the executive branches who showed signs of becoming pro-green has been shunted. There are a number of fairly decent scalps on the fortress pikes, much to their shame. Shell and BP have a continuing duty to their shareholders – to make a profit from selling dirt – and this has shelved any intention to transition to lower carbon energy producers. Granted, both Shell and BP have attempted to reform their internal businesses by applying an actual or virtual price on carbon dioxide emissions, and in some aspects have cleaned up and tidied up their mining and chemical processing. The worsening chemistry of the cheaper fossil fuel resources they have started to use has had implications on their own internal emissions control, but you have to give them credit for trying to do better than they used to do. However, despite their internal adjustments, their external-facing position of denial of the seriousness of climate change has supported them in delaying major change.

With these recent public admissions of accepting climate change as a fact (although CEOs without appropriate science degrees irritatingly disagree with some of the numbers on global warming), it seems possible that Shell and BP have moved from an outright “delay and deny” position, which is to be applauded.

However, they might have moved from “delay and deny” to “delay and distract”. Since the commencement of the global climate talks, from about the 1980s, Shell and BP have said the equivalent of “if the world is serious about acting on global warming (if global warming exists, and global warming is caused by fossil fuels), then the world should agree policy for a framework, and then we will work within that framework.” This is in effect nothing more than the United Nations Framework Convention on Climate Change (UNFCCC) has put forward, so nobody has noticed that Shell and BP are avoiding taking any action themselves here, by making action somebody else’s responsibility.

Shell and BP have known that it would take some considerable time to get unanimity between governments on the reality and severity of climate change. Shell and BP knew that it would take even longer to set up a market in carbon, or a system of carbon dioxide emissions taxation. Shell and BP knew right from the outset that if they kept pushing the ball back to the United Nations, nothing would transpire. The proof of the success of this strategy was the Copenhagen conference in 2009. The next proof of the durability of this delaying tactic will be the outcomes of the Paris 2015 conference. The most that can come out of Paris is another set of slightly improved targets from governments, but no mechanism for translating these into real change.

Shell and BP and the other oil and gas companies have pushed the argument towards a price on carbon, and a market in carbon, and expensive Carbon Capture and Storage technologies. Not that a price on carbon is likely to be anywhere near high enough to pay for Carbon Capture and Storage. But anyway, the point is that these are all distractions. What really needs to happen is that Shell and BP and the rest need to change their products from high carbon to low carbon. They’ve delayed long enough. Now is the time for the United Nations to demand that the fossil fuel companies change their products.

This demand is not just about protecting the survival of the human race, or indeed, the whole biome. Everybody is basically on the same page on this : the Earth should remain liveable-inable. This demand for change is about the survival of Shell and BP as energy companies. They have already started to talk about moving their businesses away from oil to gas. There are high profile companies developing gas-powered cars, trains, ships and possibly even planes. But this will only be a first step. Natural Gas needs to be a bridge to a fully zero carbon world. The oil and gas companies need to transition from oil to gas, and then they need to transition to low carbon gas.

Renewable Gas is not merely “vapourware” – the techniques and technologies for making low carbon gas are available, and have been for decades, or in some cases, centuries. Shell and BP know they can manufacture gas instead of digging it up. They know they can do the chemistry because they already have to do much of the same chemistry in processing fossil hydrocarbons now to meet environmental and performance criteria. BP has known since the 1970s or before that it can recycle carbon in energy systems. Shell is currently producing hydrogen from biomass, and they could do more. A price on carbon is not going to make this transition to low carbon gas. While Shell and BP are delaying the low carbon transition by placing focus on the price of carbon, they could lose a lot of shareholders who shy away from the “carbon bubble” risk of hydrocarbon investment. Shell and BP need to decide for themselves that they want to survive as energy companies, and go public with their plans to transition to low carbon gas, instead of continuing to distract attention away from themselves.

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Why Shell is Wrong

So, some people do not understand why I am opposed to the proposal for a price on carbon put forward by Royal Dutch Shell and their oil and gas company confederates.

Those who have been following developments in climate change policy and the energy sector know that the oil and gas companies have been proposing a price on carbon for decades; and yet little has been achieved in cutting carbon dioxide emissions, even though carbon markets and taxes have been instituted in several regions.

Supporters of pricing carbon dioxide emissions urge the “give it time” approach, believing that continuing down the road of tweaking the price of energy in the global economy will cause a significant change in the types of resources being extracted.

My view is that economic policy and the strengthening of carbon markets and cross-border carbon taxes cannot provide a framework for timely and major shifts in the carbon intensity of energy resources, and here’s a brief analysis of why.

1.   A price on carbon shifts the locus of action on to the energy consumer and investor

A price on carbon could be expected to alter the profitability of certain fossil fuel mining, drilling and processing operations. For example, the carbon dioxide emissions of a “tank of gas” from a well-to-wheel or mine-to-wheel perspective, could be made to show up in the price on the fuel station forecourt pump. Leaving aside the question of how the carbon tax or unit price would be applied and redistributed for the moment, a price on carbon dioxide emissions could result in fuel A being more expensive than fuel B at the point of sale. Fuel A could expect to fall in popularity, and its sales could falter, and this could filter its effect back up the chain of production, and have implications on the capital expenditure on the production of Fuel A, and the confidence of the investors in investing in Fuel A, and so the oil and gas company would pull out of Fuel A.

However, the business decisions of the oil and gas company are assumed to be dependent on the consumer and the investor. By bowing to the might god of unit price, Shell and its confederates are essentially arguing that they will act only when the energy consumers and energy investors act. There are problems with this declaration of “we only do what we are told by the market” position. What if the unit price of Fuel A is only marginally affected by the price on carbon ? What if Fuel A is regarded as a superior product because of its premium price or other marketing factors ? This situation actually exists – the sales of petroleum oil-based gasoline and diesel are very healthy, despite the fact that running a car on Natural Gas, biogas or electricity could be far cheaper. Apart from the fact that so many motor cars in the global fleet have liquid fuel-oriented engines, what else is keeping people purchasing oil-based fuels when they are frequently more costly than the alternative options ?

And what about investment ? Fuel A might become more costly to produce with a price on carbon, but it will also be more expensive when it is sold, and this could create an extra margin of profit for the producers of Fuel A, and they could then return higher dividends to their shareholders. Why should investors stop holding stocks in Fuel A when their rates of return are higher ?

If neither consumers nor investors are going to change their practice because Fuel A becomes more costly than Fuel B because of a price on carbon, then the oil and gas company are not going to transition out of Fuel A resources.

For Shell to urge a price on carbon therefore, is a delegation of responsibility for change to other actors. This is irresponsible. Shell needs to lead on emissions reduction, not insist that other people change.

2.   A price on carbon will not change overall prices or purchasing decsions

In economic theory, choices about products, goods and services are based on key factors such as trust in the supplier, confidence in the product, availability and sustainability of the service, and, of course, the price. Price is a major determinant in most markets, and artificially altering the price of a vital commodity will certainly alter purchasing decisions – unless, that is, the price of the commodity in question increases across the board. If all the players in the field start offering a more expensive product, for example, because of supply chain issues felt across the market, then consumers will not change their choices.

Now consider the global markets in energy. Upwards of 80% of all energy consumed in the global economy is fossil fuel-based. Putting a price on carbon will raise the prices of energy pretty much universally. There will not be enough cleaner, greener product to purchase, so most purchasing decisions will remain the same. Price differentiation in the energy market will not be established by asserting a price on carbon.

A key part of Shell’s argument is that price differentiation will occur because of a price on carbon, and that this will drive behaviour change, and yet there is nothing to suggest it could do that effectively.

3.   A price on carbon will not enable Carbon Capture and Storage

Athough a key part of Shell’s argument about a price on carbon is the rationale that it would stimulate the growth in Carbon Capture and Storage (CCS), it seems unlikely that the world will ever agree to a price on carbon that would be sufficient to stimulate significant levels of CCS. A price on carbon will be deemed to be high enough when it creates a difference in the marginal extra production cost of a unit of one energy resource compared to another. A carbon price can only be argued for on the basis of this optimisation process – after all – a carbon price will be expected to be cost-efficient, and not punitive to markets. In other words, carbon prices will be tolerated if they tickle the final cost of energy, but not if they mangle with it. However, CCS could imply the use of 20% to 45% extra energy consumption at a facility or plant. In other words, CCS would create a parasitic load on energy resources that is not slim enough to be supported by a cost-optimal carbon price.

Some argue that the technology for CCS is improving, and that the parasitic load of CCS at installations could be reduced to around 10% to 15% extra energy consumption. However, it is hard to imagine a price on carbon that would pay even for this. And additionally, CCS will continue to require higher levels of energy consumption which is highly inefficient in the use of resources.

Shell’s argument that CCS is vital, and that a price on carbon can support CCS, is invalidated by this simple analysis.

4.   Shell needs to be fully engaged in energy transition

Calling for a price on carbon diverts attention from the fact that Shell itself needs to transition out of fossil fuels in order for the world to decarbonise its energy.

Shell rightly says that they should stick to their “core capabilities” – in other words geology and chemistry, instead of wind power and solar power. However, they need to demonstrate that they are willing to act within their central business activities.

Prior to the explosion in the exploitation of deep geological hydrocarbon resources for liquid and gas fuels, there was an energy economy that used coal and chemistry to manufacture gas and liquid fuels. Manufactured gas could still replace Natural Gas, if there are climate, economic or technological limits to how much Natural Gas can be resourced or safely deployed. Of course, to meet climate policy goals, coal chemistry would need to be replaced by biomass chemistry, and significant development of Renewable Hydrogen technologies.

Within its own production facilities, Shell has the answers to meet this challenge. Instead of telling the rest of the world to change its economy and its behaviour, Shell should take up the baton of transition, and perfect its production of low carbon manufactured gas.

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Shell’s Public Relations Offensive #2

And so it has begun – Shell’s public relations offensive ahead of the 2015 Paris climate talks. The substance of their “advocacy” – and for a heavyweight corporation, it’s less lobbying than badgering – is that the rest of the world should adapt. Policymakers should set a price on carbon, according to Shell. A price on carbon might make some dirty, polluting energy projects unprofitable, and there’s some value in that. A price on carbon might also stimulate a certain amount of Carbon Capture and Storage, or CCS, the capturing and permanent underground sequestration of carbon dioxide at large mines, industrial plant and power stations. But how much CCS could be incentivised by pricing carbon is still unclear. Egging on the rest of the world to price carbon would give Shell the room to carry on digging up carbon and burning it and then capturing it and burying it – because energy prices would inevitably rise to cover this cost. Shell continues with the line that they started in the 1990s – that they should continue to dig up carbon and burn it, or sell it to other people to burn, and that the rest of the world should continue to pay for the carbon to be captured and buried – but Shell has not answered a basic problem. As any physicist could tell you, CCS is incredibly energy-inefficient, which makes it cost-inefficient. A price on carbon wouldn’t solve that. It would be far more energy-efficient, and therefore cost-efficient, to either not dig up the carbon in the first place, or, failing that, recycle carbon dioxide into new energy. Shell have the chemical prowess to recycle carbon dioxide into Renewable Gas, but they are still not planning to do it. They are continuing to offer us the worst of all possible worlds. They are absolutely right to stick to their “core capabilities” – other corporations can ramp up renewable electricity such as wind and solar farms – but Shell does chemistry, so it is appropriate for them to manufacture Renewable Gas. They are already using most of the basic process steps in their production of synthetic crude in Canada, and their processing of coal and biomass in The Netherlands. They need to join the dots and aim for Renewable Gas. This will be far less expensive, and much more efficient, than Carbon Capture and Storage. The world does not need to shoulder the expense and effort of setting a price on carbon. Shell and its fellow fossil fuel companies need to transition out to Renewable Gas.

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Amber Rudd : First Skirmish

As if to provide proof for the sneaking suspicion that Great Britain is run by the wealthy, rather than by the people, and that energy policy is decided by a close-knit circle of privileged dynasties, up bubbles Amber Rudd MP’s first whirl of skirmish as Secretary of State for Energy and Climate Change : her brother Roland is chairperson of a lobbying firm, Finsbury, which is seeking to get state approval for a controversial gas storage scheme at Preesall, near Fleetwood, on behalf of the developers, Halite Energy of Preston, Lancashire.

Whilst some claim there is a starkly obvious conflict of interest for Rudd to take part in the decision-making process, the Department of Energy and Climate Change (DECC) could have denied it, but have instead confirmed that the potential reversal of a 2013 decision will be made, not by Rudd, but by Lord Bourne.

New gas storage in the United Kingdom is a crucial piece of the energy infrastructure provision, as recognised by successive governments. Developments have been ongoing, such as the opening of the Holford facility at Byley in Cheshire. Besides new gas storage, there are anticipated improvements for interconnectors with mainland Europe. These are needed for raising the volume of Natural Gas available to the British market, and for optimising Natural Gas flows and sales in the European regional context – a part of the EC’s “Energy Union”.

An underlying issue not much aired is that increased gas infrastructure is necessary not just to improve competition in the energy markets – it is also to compensate for Peak Natural Gas in the North Sea – something many commentators regularly strive to deny. The new Conservative Government policy on energy is not fit to meet this challenge. The new Secretary of State has gone public about the UK Government’s continued commitment to the exploitation of shale gas – a resource that even her own experts can tell her is unlikely to produce more than a footnote to annual gas supplies for several decades. In addition, should David Cameron be forced to usher in a Referendum on Europe, and the voters petulantly pull out of the Europe project, Britain’s control over Natural Gas imports is likely to suffer, either because of the failure of the “Energy Union” in markets and infrastructure, or because of cost perturbations.

Amber Rudd MP is sitting on a mountain of trouble, undergirded by energy policy vapourware : the promotion of shale gas is not going to solve Britain’s gas import surge; the devotion to new nuclear power is not going to bring new atomic electrons to the grid for decades, and the UK Continental Shelf is going to be expensive for the Treasury to incentivise to mine. What Amber needs is a proper energy policy, based on focused support for low carbon technologies, such as wind power, solar power and Renewable Gas to back up renewable electricity when the sun is not shining and wind is not blowing.

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The Great Transition to Gas

Hello, hello; what have we here then ? Royal Dutch Shell buying out BG Group (formerly known as British Gas). Is this the start of the great transition out of petroleum oil into gas fuels ?

Volatile crude petroleum oil commodity prices over the last decade have played some undoubted havoc with oil and gas company strategy. High crude prices have pushed the choice of refinery feedstocks towards cheap heavy and immature gunk; influenced decisions about the choices for new petrorefineries and caused ripples of panic amongst trade and transport chiefs : you can’t keep the engine of globalisation ticking over if the key fuel is getting considerably more expensive, and you can’t meet your carbon budgets without restricting supplies.

Low crude commodity prices have surely caused oil and gas corporation leaders to break out into the proverbial sweat. Heavy oil, deep oil, and complicated oil suddenly become unprofitable to mine, drill and pump. Because the economic balance of refinery shifts. Because low commodity prices must translate into low end user refined product prices.

There maybe isn’t an ideal commodity price for crude oil. All the while, as crude oil commodity prices jump around like a medieval flea, the price of Natural Gas, and the gassy “light ends” of slightly unconventional and deep crude oil, stay quite cheap to produce and cheap to use. It’s a shame that there are so many vehicles on the road/sea/rails that use liquid fuels…all this is very likely to change.

Shell appear to be consolidating their future gas business by buying out the competition. Hurrah for common sense ! The next stage of their evolution, after the transition of all oil applications to gas, will be to ramp up Renewable Gas production : low carbon gas supplies will decarbonise every part of the economy, from power generation, to transport, to heating, to industrial chemistry.

This is a viable low carbon solution – to accelerate the use of renewable electricity – wind power and solar principally – and at the same time, transition the oil and gas companies to become gas companies, and thence to Renewable Gas companies.

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Zero Careers In Plainspeaking

There are many ways to make a living, but there appear to be zero careers in plainspeaking.

I mean, who could I justify working with, or for ? And would any of them be prepared to accept me speaking my mind ?

Much of what I’ve been saying over the last ten years has been along the lines of “that will never work”, but people generally don’t get consulted or hired for picking holes in an organisation’s pet projects or business models.

Could I imagine myself taking on a role in the British Government ? Short answer : no.

The slightly longer answer : The British Government Department of Energy and Climate Change (DECC) ? No, they’re still hooked on the failed technology of nuclear power, the stupendously expensive and out-of-reach Carbon Capture and Storage (CCS), and the mythical beast of shale gas. OK, so they have a regular “coffee club” about Green Hydrogen (whatever that turns out to be according to their collective ruminations), and they’ve commissioned reports on synthetic methane, but I just couldn’t imagine they’re ever going to work up a serious plan on Renewable Gas. The British Government Department for Transport ? No, they still haven’t adopted a clear vision of the transition of the transport sector to low carbon energy. They’re still chipping away at things instead of coming up with a strategy.

Could I imagine myself taking on a role with a British oil and gas multinational ? Short and very terse and emphatic answer : no.

The extended answer : The oil and gas companies have had generous support and understanding from the world’s governments, and are respected and acclaimed. Yet they are in denial about “unburnable carbon” assets, and have dismissed the need for Energy Change that is the outcome of Peak Oil (whether on the supply or the demand side). Sneakily, they have also played both sides on Climate Change. Several major oil and gas companies have funded or in other ways supported Climate Change science denial. Additionally, the policy recommendations coming from the oil and gas companies are what I call a “delayer’s game”. For example, BP continues to recommend the adoption of a strong price on carbon, yet they know this would be politically unpalatable and take decades (if ever) to bring into effect. Shell continues to argue for extensive public subsidy support for Carbon Capture and Storage (CCS), knowing this would involve such huge sums of money, so it’s never going to happen, at least not for several decades. How on Earth could I work on any project with these corporations unless they adopt, from the centre, a genuine plan for transition out of fossil fuels ? I’m willing to accept that transition necessitates the continued use of Natural Gas and some petroleum for some decades, but BP and Royal Dutch Shell do need to have an actual plan for a transition to Renewable Gas and renewable power, otherwise I would be compromising everything I know by working with them.

Could I imagine myself taking on a role with a large engineering firm, such as Siemens, GE, or Alstom, taking part in a project on manufactured low carbon gas ? I suppose so. I mean, I’ve done an IT project with Siemens before. However, they would need to demonstrate that they are driving for a Renewable Gas transition before I could join a gas project with them. They might not want to be so bold and up-front about it, because they could risk the wrath of the oil and gas companies, whose business model would be destroyed by engineered gas and fuel solutions.

Could I imagine myself building fuel cells, or designing methanation catalysts, or improving hydrogen production, biocoke/biocoal manufacture or carbon dioxide capture from the oceans… with a university project ? Yes, but the research would need to be funded by companies (because all applied academic research is funded by companies) with a clear picture on Energy Change and their own published strategy on transition out of fossil fuels.

Could I imagine myself working on rolling out gas cars, buses and trucks ? Yes. The transition of the transport sector is the most difficult problem in Energy Change. However, apart from projects that are jumping straight to new vehicles running entirely on Hydrogen or Natural Gas, the good options for transition involve converting existing diesel engine vehicles to running mostly on Natural Gas, such as “dual fuel”, still needing roughly 20% of liquid diesel fuel for ignition purposes. So I would need to be involved with a project that aims to supply biodiesel, and have a plan to transition from Natural Gas to Renewable Gas.

Could I imagine myself working with a team that has extensive computing capabilities to model carbon dioxide recycling in power generation plant ? Yes.

Could I imagine myself modelling the use of hydrogen in petroleum refinery, and making technological recommendations for the oil and gas industry to manufacture Renewable Hydrogen ? Possibly. But I would need to be clear that I’m doing it to enable Energy Change, and not to prop up the fossil fuel paradigm – a game that is actually already bust and needs helping towards transition.

Could I imagine myself continuing to research the growth in Renewable Gas – both Renewable Hydrogen and Renewable Methane – in various countries and sectors ? Possibly. It’s my kind of fun, talking to engineers.

But whatever future work I consider myself doing, repeatedly I come up against this problem – whoever asked me to work with them would need to be aware that I do not tolerate non-solutions. I will continue to say what doesn’t work, and what cannot work.

If people want to pay me to tell them that what they’re doing isn’t working, and won’t work, then fine, I’ll take the role.

I’d much rather stay positive, though, and forge a role where I can promote the things that do work, can work and will work.

The project that I’m suitable for doesn’t exist yet, I feel. I’m probably going to continue in one way or another in research, and after that, since I cannot see a role that I could fit easily or ethically, I can see I’m going to have to write my own job description.

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Renewable Gas : A Presentation #1

Last week, on the invitation of Dr Paul Elsner at Birkbeck, University of London, I gave a brief address of my research so far into Renewable Gas to this year’s Energy and Climate Change class, and asked and answered lots of questions before demolishing the mythical expert/student hierarchy paradigm – another incarnation of the “information deficit model”, perhaps – and proposed everyone work in breakout groups on how a transition from fossil fuel gas to Renewable Gas could be done.

A presentation of information was important before discussing strategies, as we had to cover ground from very disparate disciplines such as chemical process engineering, the petroleum industry, energy statistics, and energy technologies, to make sure everybody had a foundational framework. I tried to condense the engineering into just a few slides, following the general concept of UML – Unified Modelling Language – keeping everything really simple – especially as processing, or work flow (workflow) concepts can be hard to describe in words, so diagrams can really help get round the inevitable terminology confusions.

But before I dropped the class right into chemical engineering, I thought a good place to start would be in numbers, and in particular the relative contributions to energy in the United Kingdom from gas and electricity. Hence the first slide.

The first key point to notice is that most heat demand in the UK in winter is still provided by Natural Gas, whether Natural Gas in home boilers, or electricity generated using Natural Gas.

The second is that heat demand in energy terms is much larger than power demand in the cold months, and much larger than both power and heat demand in the warm months.

The third is that power demand when viewed on annual basis seems pretty regular (despite the finer grain view having issues with twice-daily peaks and weekday demand being much higher than weekends).

The reflection I gave was that it would make no sense to attempt to provide all that deep winter heat demand with electricity, as the UK would need an enormous amount of extra power generation, and in addition, much of this capacity would do nothing for most of the rest of the year.

The point I didn’t make was that nuclear power currently provides – according to official figures – less than 20% of UK electricity, however, this works out as only 7.48% of total UK primary energy demand (DUKES, 2014, Table 1.1.1, Mtoe basis). The contribution to total national primary energy demand from Natural Gas by contrast is 35.31%. The generation from nuclear power plants has been falling unevenly, and the plan to replace nuclear reactors that have reached their end of life is not going smoothly. The UK Government Department of Energy and Climate Change have been pushing for new nuclear power, and project that all heating will convert to electricity, and that nuclear power will provide for much of this (75 GW by 2050). But if their plan relies on nuclear power, and nuclear power development is unreliable, it is hard to imagine that it will succeed.

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Only Just Getting Started

In the last couple of years I have researched and written a book about the technologies and systems of Renewable Gas – gas energy fuels that are low in net carbon dioxide emissions. From what I have learned so far, it seems that another energy world is possible, and that the transition is already happening. The forces that are shaping this change are not just climate or environmental policy, or concerns about energy security. Renewable Gas is inevitable because of a range of geological, economic and industrial reasons.

I didn’t train as a chemist or chemical process engineer, and I haven’t had a background in the fossil fuel energy industry, so I’ve had to look at a number of very basic areas of engineering, for example, the distillation and fractionation of crude petroleum oil, petroleum refinery, gas processing, and the thermodynamics of gas chemistry in industrial-scale reactors. Why did I need to look at the fossil fuel industry and the petrochemical industry when I was researching Renewable Gas ? Because that’s where a lot of the change can come from. Renewable Gas is partly about biogas, but it’s also about industrial gas processes, and a lot of them are used in the petrorefinery and chemicals sectors.

In addition, I researched energy system technologies. Whilst assessing the potential for efficiency gains in energy systems through the use of Renewable Electricity and Renewable Gas, I rekindled an interest in fuel cells. For the first time in a long time, I began to want to build something – a solid oxide fuel cell which switches mode to an electrolysis unit that produces hydrogen from water. Whether I ever get to do that is still a question, but it shows how involved I’m feeling that I want to roll up my sleeves and get my hands dirty.

Even though I have covered a lot of ground, I feel I’m only just getting started, as there is a lot more that I need to research and document. At the same time, I feel that I don’t have enough data, and that it will be hard to get the data I need, partly because of proprietary issues, where energy and engineering companies are protective of developments, particularly as regards actual numbers. Merely being a university researcher is probably not going to be sufficient. I would probably need to be an official within a government agency, or an industry institute, in order to be permitted to reach in to more detail about the potential for Renewable Gas. But there are problems with these possible avenues.

You see, having done the research I have conducted so far, I am even more scornful of government energy policy than I was previously, especially because of industrial tampering. In addition, I am even more scathing about the energy industry “playing both sides” on climate change. Even though there are some smart and competent people in them, the governments do not appear to be intelligent enough to see through expensive diversions in technology or unworkable proposals for economic tweaking. These non-solutions are embraced and promoted by the energy industry, and make progress difficult. No, carbon dioxide emissions taxation or pricing, or a market in carbon, are not going to make the kind of changes we need on climate change; and in addition they are going to be extremely difficult and slow to implement. No, Carbon Capture and Storage, or CCS, is never going to become relatively affordable in any economic scenario. No, nuclear power is too cumbersome, slow and dodgy – a technical term – to ever make a genuine impact on the total of carbon emissons. No, it’s not energy users who need to reduce their consumption of energy, it’s the energy companies who need to reduce the levels of fossil fuels they utilise in the energy they sell. No, unconventional fossil fuels, such as shale gas, are not the answer to high emissions from coal. No, biofuels added to petrofuels for vehicles won’t stem total vehicle emissions without reducing fuel consumption and limiting the number of vehicles in use.

I think that the fossil fuel companies know these proposals cannot bring about significant change, which is precisely why they lobby for them. They used to deny climate change outright, because it spelled the end of their industry. Now they promote scepticism about the risks of climate change, whilst at the same time putting their name to things that can’t work to suppress major amounts of emissions. This is a delayer’s game.

Because I find the UK Government energy and climate policy ridiculous on many counts, I doubt they will ever want me to lead with Renewable Gas on one of their projects. And because I think the energy industry needs to accept and admit that they need to undergo a major change, and yet they spend most of their public relations euros telling the world they don’t need to, and that other people need to make change instead, I doubt the energy industry will ever invite me to consult with them on how to make the Energy Transition.

I suppose there is an outside chance that the major engineering firms might work with me, after all, I have been an engineer, and many of these companies are already working in the Renewable Gas field, although they’re normally “third party” players for the most part – providing engineering solutions to energy companies.

Because I’ve had to drag myself through the equivalent of a “petro degree”, learning about the geology and chemistry of oil and gas, I can see more clearly than before that the fossil fuel industry contains within it the seeds of positive change, with its use of technologies appropriate for manufacturing low carbon “surface gas”. I have learned that Renewable Gas would be a logical progression for the oil and gas industry, and also essential to rein in their own carbon emissions from processing cheaper crude oils. If they weren’t so busy telling governments how to tamper with energy markets, pushing the blame for emissions on others, and begging for subsidies for CCS projects, they could instead be planning for a future where they get to stay in business.

The oil and gas companies, especially the vertically integrated tranche, could become producers and retailers of low carbon gas, and take part in a programme for decentralised and efficient energy provision, and maintain their valued contribution to society. At the moment, however, they’re still stuck in the 20th Century.

I’m a positive person, so I’m not going to dwell too much on how stuck-in-the-fossilised-mud the governments and petroindustry are. What I’m aiming to do is start the conversation on how the development of Renewable Gas could displace dirty fossil fuels, and eventually replace the cleaner-but-still-fossil Natural Gas as well.

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Renewable Energy : Google Blind

In an interesting article by two Google engineers, Ross Koningstein and David Fork, "What It Would Really Take to Reverse Climate Change : Today’s renewable energy technologies won’t save us. So what will?", the authors concluded from their modelling scenarios that :-

"While a large emissions cut sure sounded good, this scenario still showed substantial use of natural gas in the electricity sector. That’s because today’s renewable energy sources are limited by suitable geography and their own intermittent power production."

Erm. Yes. Renewable electricity is variable and sometimes not available, because, well, the wind doesn’t always blow and the sun doesn’t always shine, you know. This has been known for quite some time, actually. It’s not exactly news. Natural Gas is an excellent complement to renewable electricity, and that’s why major industrialised country grid networks rely on the pairing of gas and power, and will do so for some time to come. Thus far, no stunner.

What is astonishing is that these brain-the-size-of-a-planet guys do not appear to have asked the awkwardly obvious question of : "so, can we decarbonise the gas supply, then ?" Because the answer is "yes, very largely, yes."

And if you have Renewable Gas backing up Renewable Power, all of a sudden, shazam !, kabam ! and kapoom !, you have An Answer. You can use excess wind power and excess solar power to make gas, and you can store the gas to use when there’s a still, cold period on a wintry night. And at other times of low renewable power, too. And besides using spare green power to make green gas, you can make Renewable Gas in other ways, too.

The Google engineers write :-

"Now, [Research and Development] dollars must go to inventors who are tackling the daunting energy challenge so they can boldly try out their crazy ideas. We can’t yet imagine which of these technologies will ultimately work and usher in a new era of prosperity – but the people of this prosperous future won’t be able to imagine how we lived without them."

Actually, Renewable Gas is completely non-crazy. It’s already being done all over the world in a variety of locations – with a variety of raw resources. We just need to replace the fossil fuel resources with biomass – that’s all.

And there’s more – practically all the technology is over a century old – it just needs refining.

I wonder why the Google boys seem to have been so unaware of this. Maybe they didn’t study the thermodynamics of gas-to-gas reactions at kindergarten, or something.

Thanks to the deliberate misinterpretation of the Google "brothers" article, The Register, James Delingpole’s Breitbart News and Joanne Nova are not exactly helping move the Technological Debate forward, but that’s par for the course. They rubbished climate change science. Now they’ve been shown to be wrong, they’ve moved on, it seems, to rubbishing renewable energy systems. And they’re wrong there, too.

Onwards, my green engineering friends, and upwards.

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20 Letters


[ Video : George Marshall of the Climate Outreach Information Network launching his new book "Don’t Even Think About It" on the communication of climate change at the Harvard Book Store, whereto he had to fly, thereby causing significant personal carbon dioxide emissions. This YouTube does not feature Ian Christie, but is not entirely unrelated to his address, which is documented in the text below. ]

Ian Christie of the Sustainable Lifestyles Research Group (SLRG) at the University of Surrey came to speak to the Green Christian Annual Members Meeting today under the heading “Sustainable Living : Why we struggle and how we can change”, and presided over three facilitated workshops on Church, Community and Campaigning. He was introduced as working with the Centre for Environmental Strategy at the University of Surrey, and having helped to pull together “Church and Earth”, the Seven Year Plan for the Church of England, as a response to the Alliance of Religions and Conservation initiative which culminated in the “Many Heavens, One Earth” Windsor Conference in November 2009. Ian Christie has also done project work with the Foundation for Democracy and Sustainable Development and the think tank Theos. He has been environmental advisor to the Bishop of Kingston.

Ian Christie joked that his colleague Tim Jackson, who has written a best-selling book “Prosperity Without Growth”, sometimes feels he is on a permanent global tour, given the huge impact his work has had worldwide. The “paradox” is that his carbon footprint is enormous. Yet clearly there is great benefit from travel to present the messages from Tim’s research. This illustrates the clash of goods and values that is always present in our attempts to reduce our impacts and change lifestyles. Ian said that we shouldn’t beat ourselves up too much about our carbon emissions-filled lifestyles – many of us are doing reasonably well in not very promising circumstances. It’s not surprising that we haven’t made much progress in sustainable living – this is perhaps the biggest challenge humanity has set itself.

Ian said, “Between 5% and 10% of the population (and this figure hasn’t changed over the last several years) are consistently trying to live as sustainably as they can in all areas of their lives. Meanwhile, another small segment – maybe 10% – 15% don’t care at all. The other two-thirds or more, including myself, are in the middle ground. We get confused. We sometimes give up on making particular changes. We might feel that taking the trouble on environmental issues is a bit of an effort – because other signals are not there, because other people are not doing it. Anyone who thinks we can bring about environmental “conversion”, person by person – it’s too difficult.”

He went on to say, “As advocates of change, we don’t tell positive stories very well. We environmentalists have been much better at telling the alarming or apocalyptic event, rather than explaining the diagnosis of unsustainability. There’s a lack of supporting infrastructure for doing the sustainable things in everyday life. People get locked-in to high-carbon behaviours. We might want to do the green, sustainable thing but we can’t. The idea that “joy in less” is possible can seem unbelievable.” He went on to explain that, “consumption can make us feel good. More can be more. I get a thrill going into John Lewis sometimes, all those bright and shiny things. It’s amazing they’re available for sale and that I can afford them. Consumerism can feel like it is bringing real benefits. It can be fun.”

Ian Christie remarked about the RESOLVE research at Surrey on the sense of “threatened identities”, a feeling that can arise when we’re asked to change our lifestyles – an important part of our identity can seem to be at stake. There is a lack of positive incentives and collective success stories. He gave an example – one where people cooking for their families want to recreate the cosy, nourishing food of their childhoods, or feel that they are giving a ‘proper meal’ to their loved ones, and they do that by using meat. These people find it hard to be told that they need to give up eating meat to save the planet. Another example, when people are told to cut down on car driving – there is a feeling of a loss of freedom, an assault on the idea that I can go where I like and do what I want to do. “Climate change is perhaps too big, distant or complicated for us. It is certainly too much for any one person to deal with”.

Ian Christie spoke about the clash of desires and values – and that St Paul got there first (Romans 7:15-17) (and St Augustine, but paraphrased). He joked that he has discovered that many people had a dirty secret, which he calls “Top Gear Syndrome” – “you’d be surprised how many environmentalists like watching Top Gear”. He also mentioned what he termed “Copenhagen Syndrome” – where environmentalists feel that they need to attend every meeting on climate change – and so they fly there. People like to go to exotic places – many Greens included.

Ian Christie emphasised that we can’t get to sustainable living one person at a time. He said that this amounted to a “Collective Action Problem” or (CAP). He showed us an image of what is commonly called a Mexican Stand-Off – where a group of three people have their weapons at each other’s throats and nobody will back down – each of the three major groups in society thinks that the other two should take the lead. So governments think that businesses and citizens should act. And citizens think that government and businesses should act. And businesses think that their consumers and governments should act.

Ian said that there is a clear finding from social research that people feel safety in numbers – we like to feel that we fit in with our peers and neighbours – for example, in some cultures like America, people would rather make everyone feel comfortable than break out of normative behaviour or views. Individual households have a low perception of “agency” – feeling that they can make any significant change – that they don’t have sufficient capacity to act – “no clout”, as one member of the audience commented.

Ian gave some examples of attitudes of people’s attitudes on environmental lifestyles : “I will even though you won’t – even though no one else steps forward”; “I will – but it’s never enough”; “I might if you will” or even, “I know you won’t, so don’t ask me”. He said that Collective Action Problems need to be addressed by all actors needing to be engaged. He said that there would be “no single ‘best buy’ policy” and that action will tend to be in the form of “clumsy solutions”. He said that people need “loud, long and legal” signals from government, consistent messages and incentives for change.

Ian Christie said there is a community level of action possible – “communities of practice”. He recommended that we look up the CLASL research done by Defra/WWF. He mentioned “moments of change” – times of transition in life – and whether these might be appropriate times to offer support for alternative choices. He said that action by individuals cannot be guaranteed by giving messages to people as if they are only consumers, rather than citizens. If we say that something will save people money, they won’t necessarily act in ways that support a shift to sustainable lifestyles. We need to address people’s intrinsic values as well as material self-interest.

Ian talked about some of the results of the research from the DEFRA-funded SLRG project, which is coming to an end. He spoke about the evidence of “Rebound Effects”, where people make savings on their carbon dioxide emissions by energy efficiency gains or other measures, and then spend the saved money in ways that can increase greenhouse gas emissions, like taking holidays by aeroplane – he mentioned the Tesco offer to “turn lights into flights”, where people were being encouraged to buy energy efficient light bulbs in exchange for Air Miles – “it’s going to make things much worse”. He said that research showed that re-spending (reinvestment) is what matters and that we need to go to the source of the emissions, through a carbon tax, for example.

Ian Christie said that it is very limited what we can do as individual households. Lots of policymakers have thought to get through to people at moments of change – although there used to be no evidence. People’s habits and networks can be restructured for example when they move home, have a child or retire – a “habit discontinuity”. Research has now shown that there is a small but significant effect with house-movers – who are much more likely to act on information if they are given well-timed and designed information packages on green living – but only a small minority are truly motivated. He asked “how do we magnify this effect ?” The sheer act of moving house makes people amenable to change. Research has also shown that there might be a willingness amongst new parents – who would express more pro-environmental values as a result of having a new child – but are less capable of acting on these wishes. The reverse was found in those entering retirement – they wanted to live more frugally – but didn’t necessarily express this desire in terms of sustainable living.

Ian said that the “window of opportunity” for introducing lifestyle change might be quite limited, perhaps a few months – and so people would not sustain their new habits without “lifestyle support systems”. People might not want to hear from a green group, but could be open to hearing from a church, or their Health Visitor, or Mumsnet. Maybe even a hairdresser ? One project that he recommended was PECT, the Peterborough Environment City Trust, which is acting as a facilitator for encouraging changes. He said people get demotivated if they feel businesses and governments are not doing the same thing. He mentioned avenues and approaches for increasing the sense of agency : framing environmental issues in : moments of change, local food growing, community energy groups, frugality, health and well-being…

Ian Christie said that Church of England work on “Shrinking the Footprint” was poised to make fresh progress, with leadership from the new lead bishop on the environment, Rt Revd Nicholas Holtam.

Ian Christie suggested that positive activities could inspire : why could a church not turn an emergency feeding centre – a food bank – into a food hub – a place where people could come for tools, seeds and food growing group support ? What about Cathedral Innovation Centres as catalysts for sustainable living schemes ? Why not partner with the National Trust or the National Health Service over environmental issues ? He said the NHS has a Sustainable Development Strategy – “one of the best I’ve seen”. How about calling for a New Green Deal for Communities ? One reason why the Green Deal has been so poorly supported has been it has been promoted to individuals and it’s much harder to get individuals to commit and act on projects.

Ian pointed towards good intervention concepts : “safety in numbers” approaches, moments of change, congregation spaces, trusted peers in the community, consistent messages. He recommended Staying Positive : “look how far we’ve come”; we have two decisive decades ahead; Business As Usual is failing – CEOs are breaking ranks; cities are going green – and the churches are waking up to ecological challenges.

In questions, I asked Ian Christie why he only had three social groups rather than four. I said that I see businesses broken down into two categories – those that produce energy and those that consume energy to provide goods and services. I said there were some excellent sustainable development strategies coming out of the private enterprises consuming energy, such as Marks and Spencer. He said that yes, amongst the fossil energy producing companies, there is a massive challenge in responding to climate change. He pointed to Unilever, who are beginning to see themselves as pioneers in a new model of sustainable business. There is a clear divergence of interest between fossil fuel producers and companies whose core business is being put at risk by climate disruption.

When asked about whether we should try to set the economy on a “war footing” as regards climate change, Ian Christie said “we aren’t in a war like that. We ourselves, with our high-carbon consumption, are ‘the enemy’, if we want to put it like that. We are not in a process where people can be mobilised as in a war.” He said that the churches need to bring climate change into every talk, every sermon “this is how we do Christian witness”.

In discussion after the breakout workshops, Ian Christie said that we need to try to get to local opinion-formers. He said that a critical mass of communication to a Member of Parliament on one subject could be as few as 20 letters. He said that mass letter writing to MPs is one way in which others seeking to influence policy “play the game” in politics, so we must do it too. For example, we could write to our churches, our leaders, our democratic representatives, and demand a New Green Deal for Communities, and in letters to political candidates for the General Election we could say it would be a critical factor in deciding who we vote for. In the General Election in 2015, Ian said that it could be a five-way split, and that the “green issue” could be decisive, and so we should say that our vote will go to the greenest of candidates.

Ian said we should try to audit our church expertise, and that we should aim for our churches to give one clear overall narrative – not an “environmental narrative”, but one that urges us to be truly Christian. He said that it was important that church leaders talk the talk as well as walk the talk – making it normal to talk about these things – not keeping them partitioned. The weekly sermon or talk in church must tell this story. He said that people disagree for really good reasons, but that the issue was one of trying to create a setting in which disagreement can get somewhere. He mentioned the work of George Marshall and the Climate Outreach Information Network as being relevant to building narratives that work on climate change out of a silence or absence of dialogue.

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Shell Shirks Carbon Responsibility

I was in a meeting today held at the Centre for European Reform in which Shell’s Chief Financial Officer, Simon Henry, made two arguments to absolve the oil and gas industry of responsibility for climate change. He painted coal as the real enemy, and reiterated the longest hand-washing argument in politics – that Shell believes that a Cap and Trade system is the best way to suppress carbon dioxide emissions. In other words, it’s not up to Shell to do anything about carbon. He argued that for transportation and trade the world is going to continue to need highly energy-dense liquid fuels for some time, essentially arguing for the continuation of his company’s current product slate. He did mention proudly in comments after the meeting that Shell are the world’s largest bioethanol producers, in Brazil, but didn’t open up the book on the transition of his whole company to providing the world with low carbon fuels. He said that Shell wants to be a part of the global climate change treaty process, but he gave no indication of what Shell could bring to the table to the negotiations, apart from pushing for carbon trading. Mark Campanale of the Carbon Tracker Initiative was sufficiently convinced by the “we’re not coal” argument to attempt to seek common cause with Simon Henry after the main meeting. It would be useful to have allies in the oil and gas companies on climate change, but it always seems to be that the rest of the world has to adopt Shell’s and BP’s view on everything from policy to energy resources before they’ll play ball.

During the meeting, Mark Campanale pointed out in questions that Deutsche Bank and Goldman Sachs are going to bring Indian coal to trade on the London Stock Exchange and that billions of dollars of coal stocks are to be traded in London, and that this undermines all climate change action. He said he wanted to understand Shell’s position, as the same shareholders that hold coal (shares), hold Shell. I think he was trying to get Simon Henry to call for a separation in investment focus – to show that investment in oil and gas is not the same as investing in Big Bad Coal. But Simon Henry did not bite. According to the Carbon Tracker Initiative’s report of 2013, Unburnable Carbon, coal listed on the London Stock Exchange is equivalent to 49 gigatonnes of Carbon Dioxide (gtCO2), but oil and gas combined trade shares for stocks equivalent to 64 gtCO2, so there’s currently more emissions represented by oil and gas on the LSX than there is for coal. In the future, the emissions held in the coal traded in London have the potential to amount to 165 gtCO2, and oil and gas combined at 125 gtCO2. Despite the fact that the United Kingdom is only responsible for about 1.6% of direct country carbon dioxide emissions (excluding emissions embedded in traded goods and services), the London Stock Exchange is set to be perhaps the world’s third largest exchange for emissions-causing fuels.

Here’s a rough transcript of what Simon Henry said. There are no guarantees that this is verbatim, as my handwriting is worse than a GP’s.

[Simon Henry] I’m going to break the habit of a lifetime and use notes. Building a long-term sustainable energy system – certain forces shaping that. 7 billion people will become 9 billion people – [many] moving from off-grid to on-grid. That will be driven by economic growth. Urbanisation [could offer the possibility of] reducing demand for energy. Most economic growth will be in developing economies. New ways fo consuming energy. Our scenarios – in none do we see energy not growing materially – even with efficiencies. The current ~200 billion barrels of oil equivalent per day today of energy demand will rise to ~400 boe/d by 2050 – 50% higher than today. This will be demand-driven – nothing to do with supply…

[At least one positive-sounding grunt from the meeting – so there are some Peak Oil deniers in the room, then.]

[Simon Henry] …What is paramount for governments – if a threat, then it gets to the top of the agenda. I don’t think anybody seriously disputes climate change…

[A few raised eyebrows and quizzical looks around the table, including mine]

[Simon Henry] …in the absence of ways we change the use of energy […] Any approach to climate change has got to embrace science, policy and technology. All three levers must be pulled. Need a long-term stable policy that enables technology development. We think this is best in a market mechanism. […] Energy must be affordable at the point of use. What we call Triple A – available, acceptable and affordable. No silver bullet. Develop in a responsible way. Too much of it is soundbite – that simplifies what’s not a simple problem. It’s not gas versus coal. [Although, that appeared to be one of his chief arguments – that it is gas versus coal – and this is why we should play nice with Shell.]

1. Economy : About $1.5 to $2 trillion of new money must be invested in the energy industry each year, and this must be sustained until 2035 and beyond. A [few percent] of the world economy. It’s going to take time to make [massive changes]. […] “Better Growth : Better Climate” a report on “The New Climate Economy” by the Global Commission on the Economy and Climate, the Calderon Report. [The world invested] $700 billion last year on oil and gas [or rather, $1 trillion] and $220 – $230 billion on wind power and solar power. The Calderon Report showed that 70% of energy is urban. $6 trillion is being spent on urban infrastructure [each year]. $90 trillion is available. [Urban settings are] more compact, more connected, there’s public transport, [can build in efficiencies] as well as reducing final energy need. Land Use is the other important area – huge impact on carbon emissions. Urbanisation enables efficiency in distributed generation [Combined Heat and Power (CHP)], [local grids]. Eye-popping costs, but the money will be spent anyway. If it’s done right it will [significantly] reduce [carbon emissions and energy demand]…

2. Technology Development : Governments are very bad at picking winners. Better to get the right incentives in and let the market players decide [optimisation]. They can intervene, for example by [supporting] Research and Development. But don’t specify the means to an end…The best solution is a strong predictable carbon price, at $40 a tonne or more or it won’t make any difference. We prefer Cap and Trade. Taxes don’t actually decrease carbon [emissions] but fundamentally add cost to the consumer. As oil prices rose [in 2008 – 2009] North Americans went to smaller cars…Drivers [set] their behaviour from [fuel] prices…

[An important point to note here : one of the reasons why Americans used less motor oil during the “Derivatives Bubble” recession between 2006 and 2010 was because the economy was shot, so people lost their employment, and/or their homes and there was mass migration, so of course there was less commuter driving, less salesman driving, less business driving. This wasn’t just a response to higher oil prices, because the peak in driving miles happened before the main spike in oil prices. In addition, not much of the American fleet of cars overturned in this period, so Americans didn’t go to smaller cars as an adaptation response to high oil prices. They probably turned to smaller cars when buying new cars because they were cheaper. I think Simon Henry is rather mistaken on this. ]

[Simon Henry] …As regards the Carbon Bubble : 65% of the Unburnable fossil fuels to meet the 2 degrees [Celsius] target is coal. People would stuggle to name the top five coal companies [although they find it easy to name the top five oil and gas companies]. Bearing in mind that you have to [continue to] transport stuff [you are going to need oil for some time to come.] Dealing with coal is the best way of moving forward. Coal is used for electricity – but there are better ways to make electricity – petcoke [petroleum coke – a residue from processing heavy and unconventional crude oil] for example…

[The climate change impact of burning (or gasifying) petroleum coke for power generation is possibly worse than burning (or gasifying) hard coal (anthracite), especially if the pet coke is sourced from tar sands, as emissions are made in the production of the pet coke before it even gets combusted.]

[Simon Henry] …It will take us 30 years to get away entirely from coal. Even if we used all the oil and gas, the 2 degrees [Celsius] target is still possible…

3. Policy : We tested this with the Dutch Government recently – need to create an honest dialogue for a long-term perspective. Demand for energy needs to change. It’s not about supply…

[Again, some “hear hears” from the room from the Peak Oil and Peak Natural Gas deniers]

[Simon Henry] …it’s about demand. Our personal wish for [private] transport. [Not good to be] pushing the cost onto the big bad energy companies and their shareholders. It’s taxes or prices. [Politicians] must start to think of their children and not the next election…

…On targets and subsidies : India, Indonesia, Brazil […] to move on fossil fuel subsidies – can’t break the Laws of Economics forever. If our American friends drove the same cars we do, they’d reduce their oil consumption equivalent to all of the shale [Shale Gas ? Or Shale Oil ?]… Targets are an emotive issue when trying to get agreement from 190 countries. Only a few players that really matter : USA, China, EU, India – close to 70% of current emissions and maybe more in future. The EPA [Environmental Protection Agency in the United States of America] [announcement] on power emissions. China responded in 24 hours. The EU target on 27% renewables is not [country-specific, uniform across-the-board]. Last week APEC US deal with China on emissions. They switched everything off [and banned traffic] and people saw blue sky. Coal with CCS [Carbon Capture and Storage] we see as a good idea. We would hope for a multi-party commitment [from the United Nations climate talks], but [shows doubt]… To close : a couple of words on Shell – have to do that. We have only 2% [of the energy market], but we [hope we] can punch above our weight [in policy discussions]. We’re now beginning to establish gas as a transport fuel. Brazil – low carbon [bio]fuels. Three large CCS projects in Canada, EU… We need to look at our own energy use – pretty trivial, but [also] look at helping our customers look at theirs. Working with the DRC [China]. Only by including companies such as ourselves in [climate and energy policy] debate can we get the [global deal] we aspire to…

[…]

[Question from the table, Ed Wells (?), HSBC] : Green Bonds : how can they provide some of the finance [for climate change mitigation and adaptation] ? The first Renminbi denominated Green Bond from [?]. China has committed to non-fossil fuels. The G20 has just agreed the structure on infrastructure – important – not just for jobs and growth – parallel needs on climate change. [Us at HSBC…] Are people as excited about Green Bonds as we are ?

[Stephen Tindale] Yes.

[Question from the table, Anthony Cary, Commonwealth Scholarship Commission] …The key seems to be pricing carbon into the economy. You said you preferred Cap and Trade. I used to but despite reform the EU Emissions Trading Scheme (EU ETS) – [failures and] gaming the system. Tax seems to be a much more solid basis.

[Simon Henry] [The problem with the ETS] too many credits and too many exemptions. Get rid of the exemptions. Bank reserve of credits to push the price up. Degress the number of credits [traded]. Tax : if people can afford it, they pay the tax, doesn’t stop emissions. In the US, no consumption tax, they are very sensitive to the oil price going up and down – 2 to 3 million barrels a day [swing] on 16 million barrels a day. All the political impact on the US from shale could be done in the same way on efficiency [fuel standards and smaller cars]. Green Bonds are not something on top of – investment should be financed by Green Bonds, but investment is already being done today – better to get policy right and then all investment directed.

[…]

[Question from the table, Kirsten Gogan, Energy for Humanity] The role of nuclear power. By 2050, China will have 500 gigawatts (GW) of nuclear power. Electricity is key. Particularly coal. Germany is building new coal as removing nuclear…

[My internal response] It’s at this point that my ability to swallow myths was lost. I felt like shouting, politely, across the table : ACTUALLY KIRSTEN, YOU, AND A LOT OF OTHER PEOPLE IN THE ROOM ARE JUST PLAIN WRONG ON GERMANY AND COAL.

“Germany coal power generation at 10-year low in August”, 9th September 2014

And the only new coal-fired plants being built are those that were planned up to five years ago. No new coal-fired capacity is now being agreed.

[Kirsten Gogan]…German minister saying in public that you can’t phase out nuclear and coal at the same time. Nuclear is not included in that conversation. Need to work on policy to scale up nuclear to replace coal. Would it be useful to have a clear sectoral target on decarbonising – 100% on electricity ?

[Stephen Tindale] Electricity is the least difficult of the energy sectors to decarbonise. Therefore the focus should be on electricity. If a target would help (I’m not a fan) nuclear certainly needs to be a part of the discussions. Angela Merkel post-Fukushima has been crazy, in my opinion. If want to boost renewable energy, nuclear power will take subsidies away from that. But targets for renewable energy is the wrong objective.. If the target is keeping the climate stable then it’s worth subsidising nuclear. Subsidising is the wrong word – “risk reduction”.

[Simon Henry] If carbon was properly priced, nuclear would become economic by definition…

[My internal response] NO IT WOULDN’T. A LOT OF NUCLEAR CONSTRUCTION AND DECOMMISSIONING AND SPENT FUEL PROCESSING REQUIRES CARBON-BASED ENERGY.

[Simon Henry] …Basically, all German coal is exempted (from the EU ETS). If you have a proper market-based system then the right things will happen. The EU – hypocrisy at country level. Only [a couple of percent] of global emissions. The EU would matter if it was less hypocritical. China are more rational – long-term thinking. We worked with the DRC. Six differing carbon Cap and Trade schemes in operation to find the one that works best. They are effectively supporting renewable energy – add 15 GW each of wind and solar last year. They don’t listen to NIMBYs [they also build in the desert]. NIMBYism [reserved for] coal – because coal was built close to cities. [Relationship to Russia] – gas replacing coal. Not an accident. Five year plan. They believe in all solutions. Preferably Made in China so we can export to the rest of the world. [Their plans are for a range of aims] not just climate.

[…]
[…]

[Simon Henry] [in answer to a question about the City of London] We don’t rely on them to support our activities [my job security depends on a good relationship with them]]. We have to be successful first and develop [technological opportunities] [versus being weakened by taxes]. They can support change in technology. Financing coal may well be new money. Why should the City fund new coal investments ?

[Question from the table, asking about the “coal is 70% of the problem” message from Simon Henry] When you talk to the City investors, do you take the same message to the City ?

[Simon Henry] How much of 2.7 trillion tonnes of “Unburnable Carbon” is coal, oil and gas ? Two thirds of carbon reserves is coal. [For economic growth and] transport you need high density liquid fuels. Could make from coal [but the emissions impact would be high]. We need civil society to have a more serious [understanding] of the challenges.

After the discussion, I asked Simon Henry to clarify his words about the City of London.

[Simon Henry] We don’t use the City as a source of capital. 90% is equity finance. We don’t go to the market to raise equity. For every dollar of profit, we invest 75 cents, and pay out 25 cents as dividend to our shareholders. Reduces [problems] if we can show we can reinvest. [ $12 billion a year is dividend. ]

I asked if E&P [Exploration and Production] is working – if there are good returns on investment securing new reserves of fossil fuels – I know that the company aims for a 10 or 11 year Reserves to Production ratio (R/P) to ensure shareholder confidence.

Simon Henry mentioned the price of oil. I asked if the oil price was the only determinant on the return on investment in new E&P ?

[Simon Henry] If the oil price is $90 a barrel, that’s good. At $100 a barrel or $120 a barrel [there’s a much larger profit]. Our aim is to ensure we can survive at $70 a barrel. [On exploration] we still have a lot of things in play – not known if they are working yet… Going into the Arctic [At which point I said I hope we are not going into the Arctic]… [We are getting returns] Upstream is fine [supply of gas and oil]. Deepwater is fine. Big LNG [Liquefied Natural Gas] is fine. Shale is a challenge. Heavy Oil returns could be better – profitable, but… [On new E&P] Iraq, X-stan, [work in progress]. Downstream [refinery] has challenges on return. Future focus – gas and deepwater. [On profitability of investment – ] “Gas is fine. Deepwater is fine.”

[My summary] So, in summary, I think all of this means that Shell believes that Cap and Trade is the way to control carbon, and that the Cap and Trade cost would be borne by their customers (in the form of higher bills for energy because of the costs of buying carbon credits), so their business will not be affected. Although a Cap and Trade market could possibly cap their own market and growth as the sales envelope for carbon would be fixed, since Shell are moving into lower carbon fuels – principally Natural Gas, their own business still has room for growth. They therefore support Cap and Trade because they believe it will not affect them. WHAT THEY DON’T APPEAR TO WANT PEOPLE TO ASK IS IF A CAP AND TRADE SYSTEM WILL ACTUALLY BE EFFECTIVE IN CURBING CARBON DIOXIDE EMISSIONS. They want to be at the negotiating table. They believe that they’re not the problem – coal is. They believe that the world will continue to need high energy-dense oil for transport for some time to come. It doesn’t matter if the oil market gets constrained by natural limits to expansion because they have gas to expand with. They don’t see a problem with E&P so they believe they can keep up their R/P and stay profitable and share prices can continue to rise. As long as the oil price stays above $70 a barrel, they’re OK.

However, there was a hint in what Simon Henry talked about that all is not completely well in Petro-land.

a. Downstream profit warning

Almost in passing, Simon Henry admitted that downstream is potentially a challenge for maintaining returns on investment and profits. Downstream is petrorefinery and sales of the products. He didn’t say which end of the downstream was the issue, but oil consumption has recovered from the recent Big Dip recession, so that can’t be his problem – it must be in petrorefinery. There are a number of new regulations about fuel standards that are going to be more expensive to meet in terms of petroleum refinery – and the chemistry profiles of crude oils are changing over time – so that could also impact refinery costs.

b. Carbon disposal problem

The changing profile of crude oils being used for petrorefinery is bound to cause an excess of carbon to appear in material flows – and Simon Henry’s brief mention of petcoke is more significant than it may first appear. In future there may be way too much carbon to dispose of (petcoke is mostly carbon rejected by thermal processes to make fuels), and if Shell’s plan is to burn petcoke to make power as a solution to dispose of this carbon, then the carbon dioxide emissions profile of refineries is going to rise significantly… where’s the carbon responsiblity in that ?

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UKERC : Gas by Design

Today I attended a meeting of minds.

It’s clear to me that the near-term and mid-term future for energy in the United Kingdom and the European Union will best be centred on Natural Gas and Renewable Electricity, and now the UK Energy Research Centre has modelled essentially the same scenario. This can become a common narrative amongst all parties – the policy people, the economists, the technologists, the non-governmental groups, as long as some key long-term de-carbonisation and energy security objectives are built into the plan.

The researchers wanted to emphasise from their report that the use of Natural Gas should not be a default option in the case that other strategies fail – they want to see a planned transition to a de-carbonised energy system using Natural Gas by design, as a bridge in that transition. Most of the people in the room found they could largely agree with this. Me, too. My only caveat was that when the researchers spoke about Gas-CCS – Natural Gas-fired power generation with Carbon Capture and Storage attached, my choice would be Gas-CCU – Natural Gas-fired power generation with Carbon Capture and Re-utilisation – carbon recycling – which will eventually lead to much lower emissions gas supply at source.

What follows is a transcription of my poorly-written notes at the meeting, so you cannot accept them as verbatim.

Jim Watson, UKERC = [JW]
Christophe McGlade, University College London (UCL) = [CM]
Mike Bradshaw, Warwick Business School = [MB]

[JW] Thanks to Matt Aylott. Live Tweeting #FutureOfGas. Clearly gas is very very important. It’s never out of the news. The media all want to talk about fracking… If we want to meet the 2 degrees Celsius target of the United Nations Framework Convention on Climate Change, how much can gas be a part of this ? Is Natural Gas a bridge – how long a ride will that gas bridge be ?

[CM] Gas as a bridge ? There is healthy debate about the Natural Gas contribution to climate change [via the carbon dioxide emissions from burning Natural Gas, and also about how much less in emissions there is from burning Natural Gas compared to burning coal]. The IPCC said that “fuel switching” from coal to gas would offer emissions benefits, but some research, notably McJeon et al. (2014) made statements that switching to Natural Gas cannot confer emissions benefits. Until recently, there have not been many disaggregated assessments on gas as a bridge. We have used TIAM-UCL. The world is divided into 16 regions. The “climate module” seeks to constrain the global temperature rise to 2 degrees Celsius. One of the outcomes from our model was that export volumes [from all countries] would be severaly impacted by maintaining the price indexation between oil and gas. [Reading from chart on the screen : exports would peak in 2040s]. Another outcome was that gas consumption is not radically affected by different gas market structures. However, the over indexation to the oil price may destroy gas export markets. Total exports of natural gas are higher under the 2 degrees Celsius scenario compared to the 4 degrees Celsius scenario – particularly LNG [Liquefied Natural Gas]. A global climate deal will support gas exports. There will be a higher gas consumption under a 2 degrees Celsius deal compared to unconstrained scenario [leading to a 4 degrees Celsius global temperature rise]. The results of our modelling indicate that gas acts as a bridge fuel out to 2035 [?] in both absolute and relative terms. There is 15% greater gas consumption in the 2 degrees Celsius global warming scenario than in the 4 degrees Celsius global warming scenario. Part of the reason is that under the 4 degrees Celsius scenario, Compressed Natural Gas vehicles are popular, but a lot less useful under the 2 degrees Celsius scenario [where hydrogen and other fuels are brought into play].

There are multiple caveats on these outcomes. The bridging period is strictly time-limited. Some sectors need to sharply reduce consumption [such as building heating by Natural Gas boilers, which can be achieved by mass insulation projects]. Coal must be curtailed, but coal-for-gas substitution alone is not sufficient. Need a convincing narrative about how coal can be curtailed. In an absence of a global binding climate deal we will get consumption increases in both coal and gas. In the model, gas is offsetting 15% of coal by 2020, and 85% by 2030. With Carbon Capture and Storage (CCS), gas’s role is drastically reduced – after 2025 dropping by 2% a year [of permitted gas use]. Not all regions of the world can use gas as a bridge. [Reading from the chart : with CCS, gas is a strong bridging fuel in the China, EU, India, Japan and South Korea regions, but without CCS, gas is only strong in China. With CCS, gas’s bridging role is good in Australasia, ODA presumably “Offical Development Assistance” countries and USA. Without CCS, gas is good for Africa, Australasia, EU, India, Japan, South Korea, ODA and USA.]

In the UK, despite the current reliance on coal, there is little scope to use it as a transition fuel. Gas is unlikely to be removed from UK energy system by 2050.

[Question from the floor] The logic of gas price indexation with the oil price ?

[CM] If maintain oil indexation, exports will reduce as countries turn more towards indigenous at-home production of gas for their domestic demand. This would not be completely counter-balanced by higher oil and therefore gas prices, which should stimulate more exports.

[Point from the floor] This assumes logical behaviour…

[Question from the floor] [Question about Carbon Capture and Storage (CCS)]

[CM] The model does anticipate more CCS – which permits some extra coal consumption [at the end of the modelling period]. Gas-CCS [gas-fired power generation with CCS attached] is always going to generate less emissions than coal-CCS [coal-fired power generation with CCS attached] – so the model prefers gas-CCS.

[to be continued…]

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Contracts for Difference Risks

The UK Government’s Electricity Market Reform (EMR) is a moving feast, or “trough”, if you are of the opinion that any state subsidy is a subsidy too far. My, how people complained and complained about the Renewables Obligation (RO), perhaps one of the world’s best stimuli for pushing forward wind power development. Yes, some rich engineering firms and rich landowners got richer on the back of the RO. What do you expect ? The wealthy always leverage their capital. But at least the RO has produced some exceptional wind power generation numbers. In the period 2017 to 2018 however, the RO is set to be staged down and replaced by several elements in the EMR, most notably, the CfD or Contracts for Difference, otherwise affectionately and quite inaccurately described as the FiT CfD – Feed-in Tariff Contracts for Difference.

The basic plan for the CfD is to guarantee to new electricity generators, or old generators building new plant, a definite price on power sold, in order to ensure they can get debt and equity invested in their projects. However, this is a huge state intervention and potentially entirely scuppers the efforts to create a market in electricity. More dangerously, although the CfD is supposed to encourage the freeing up of capital to support new energy investment, it might fail in that, at least in the short-term, and it may even fail to make capital cheaper. This is due to the new kinds of risk associated with the CfD – particularly because of the long lead time from auction to allocation, and the cap on allocations. The CfD is designed to create project failures, it seems.

I recently attended an event hosted at the Queen Elizabeth II Conference Centre in Westminster in London, called Energy4PowerLive 2014 and managed by GMP. The first session I attended was in the RenewablesLive 2014 stream, and featured a panel discussion between Andrew Buglass from Royal Bank of Scotland (RBS), Philip Bazin of Triodos and Steve Hunter, Investment Director of Low Carbon.

What follows is not verbatim, and is based on my handwritten notes, and my handwriting is appalling, so that sometimes, even I cannot read it.

[ Andrew Buglass, Managing Director and Head of Energy, Royal Bank of Scotland (RBS) : “Financing CfD projects – initial impressions from a lender” ]

[You may have an interest in the actions of] RBS [heckle from the audience, “We own it !”]. We built our first renewable energy project in 1991 – an onshore wind turbine. Now we [have helped] finance 9 gigawatts of renewable energy. I have 15 minutes – only possible to scratch the surface of CfDs [Contracts for Difference – a subsidy under the UK Government Department of Energy and Climate Change (DECC) Electricity Market Reform (EMR))]. The EMR journey has been a very long one – four years. We have offered advice to the government – about the bankability of the policy. DECC have a different policy perspective – they are going over here [in this direction] whether or not… [Their aim was to] encourage new sources of investment debt and equity, [currently] not here in the UK. […] Matt Hancock, new [energy] minister […] £115 [billion ?] […]. Half of £100 billion needed by end of decade. The EMR framework is [intended] to bring in new sources of debt and equity – its ability to track that into the market. I’m not going to review whether the EMR will be successful. It’s a “Nought to Sixty” question [reference to how quickly it takes for cars to accelerate], how quickly is capital going to be delivered [getting up and running]. There will be a big step up in terms of work […] how are different counterparties [countersigning parties in the CfD contracts] responding ? Now is the time to deliver on the [practical economics] for those to decide whether to invest or not. Need to engage the ratings agencies – getting debt from bond markets – to convince Standard and Poor etc to convince […] The first projects are going to take a long time – cutting their teeth. Cost, availability, terms of debt. The risks that will [come into play] :

A. OFFTAKE RISK – BASIS RISK
[At the start of the EMR discussions] we highlighted that small generators found it hard to get PPAS [Power Purchase Agreements]. With the CfDs “lender of last resort” “offtaker of last resort” […] may support less strong balance sheets for PPAs. Great – because we need a lot more liquidity in PPAs. [However] the basis risks on the strike price compared to the reference price – if this is [changed, different] – a concern about whether they might be matching in the middle [and so conferring no benefit to having arranged the CfD]].

B. WHOLESALE PRICE RISK
In offshore wind – wild – the economics of generating. In onshore wind power, the wholesale price has less of a way to fall [because of many years of learning and maturing of supply chains etc].

C. INDEX INFLATION RISK
The CfDs are to be linked to CPI [Consumer Price Index] rather than the RPI [Retail Price Index]. This may seem like a not very important difference – but at the moment you cannot hedge against the CPI. […] we recommend RPI – linked to lock in. Can’t do that with CPI.

D. FORCE MAJEURE RISK
[Risk] especially during construction. The CfD does not pick up during construction – need to see [how this pans out].

E. CHANGE IN LAW (CIL) RISK
Twenty pages of the CIL clause – doesn’t seem to give you much protection – what is a “foreseeable change in law” ? Unless you’re a big utility you will not have been tracking [policy and legislation] for the last ten years. Big risk ? In the RO [Renewables Obligation], CIL risk was set to the offtaker. Law firms are going to really agonise [over this in the CfD].

F. LIFETIME MANAGEMENT RISK
Risk relating to managing CfD contract during its lifetime. There is a risk from the termination of a CfD – more than in the RO. May need to do more work to keep lender involved to manage termination risk.

Leads to a gloomy approach – in banking paying back on time is good – anything else is bad.

The EMR has cross-party support, but this is the most interventionist approach since the CEGB (Central Electricity Generating Board market). The politicians are saying “no, no, we’d never change anything” – from three parties. It would help if there were a public statement on that (I get calls about “too many turbines”). Initial projects will probably take longer to start than [under] RO. Collectively fund pragmatic solutions.

[ Philip Bazin, Head Project Finance Team, Triodos Bank : “Financing CfD projects – initial impressions from a different bank” ]

Triodos was established in 1980, and started in the UK in 1995 with the acquisition of Mercury […] Our portfolio in the UK is still relatively small. Over a third of the £500 million is in renewable energy. Our investment […] basis of positive social and environmental outcomes. […] Core lending of £1 to £15 million finance […] construction […] and up to 15 years [on loan repayment]. Smaller developers – best fit. The bank is almost becoming part of the supply chain in the bidding process. Give a forward fixed rate of interest. We’ve had to think about how we provide this derivative. Discussions with PPA providers. Feeling that most a lot of new players. The whole rush around CfD was quite unhelpful. We haven’t been engaging with any bidders for this round [of CfDs]. Our customers are small generators or community groups. Smaller projects are risk-averse and would [probably] use the RO instead of the CfD [for now]. These markets are going to find this new structure [offputting]. Not ideal if you’re a professional investor. [Andrew has explained the risks well] The biggest one for me is the risk of failing to achieve your LONGSTOP DATE [failure to start electricity generation by an agreed date], which would risk a termination [of the CfD subsidy agreement. This would destroy the economics of the whole project and therefore the investment]. What protections do you have as a sub-contractor ? Another point is about wayleaves. [If you can’t get your wayleaves in time…] Fundamentally, the [CfD] mechanism is bankable. [However] in trying to fix a problem it [may] have created a total mess. Don’t know if more capital will be going into projects.

[ Steve Hunter, Investment Director, Low Carbon : “CfDs from an equity perspective” ]

[Our business is in] Solar PV, Onshore wind, CSP in the Mediterranean area. We get there when project developer is doing land deals. We have a cradle-to-grave perspective. Land planning and grid access are major risks [and the guarantee of biomass feedstock for a biomass project]. The WHOLESALE POWER PRICE RISK – someone needs to take it. Your view depends on your equity horizon. For us, the two big changes [from the RO] are the introduction of the ALLOCATION RISK and the removal of the power price risk. Don’t know the budget for allocation. Only know one month before the [CfD] auction ! The government has not released [a budget] for “emerging technology”. Timing : doesn’t really work for solar. The idea of CfD versus RO for solar will not work. [It’s all down to the project lifecycle] – you could be waiting 14 or 15 months for a CfD allocation after making a bid, but grid connection deals are now closing in [at around 12 months – if you do not take up your grid connection permission, you will lose it]. At the moment there is no competition between technologies. Is there enough CfD set aside for offshore wind projects ? Yes. If CfDs are intended to deliver technology-neutral [energy mix] – it doesn’t yet. The REFERENCE PRICES for me are the significant risk. This is entirely new for CfDs. Because the CfD intended to bring lower cost of capital – there is an implication for return [on investment] to the investor. Government will set [the reference prices]. Government just released [for some technologies] – decreased [in a forward period]. The Government may have a very different view on forward power prices… These reference prices come out of the air [there seems to be no basis for them]. When is final not final ? When it comes from DECC. If consider 2018/2019 September, the tightest budget, you could afford 1,000 MW of offshore, [if there is a change in the reference price] you could only afford 700 MW. In the TEC Register from National Grid – download this – there is 1,000 to 1,200 MG in the pipeline onshore. If I was a wind developer with [grid] connection dates after the end of the RO, you can bet I’ve already bid [for a CfD allocation] already. The political risk of changing the RO. May be a small amount of solar – but anyway it’s too expensive. If the CfD is only to support onshore wind power – is it achieving its goals ? There will almost certainly be some modification [to the CfD or the reference prices ?]. Transparency ? Oversupply ? [Oversight ?] of setting reference prices. Increase in frequency of the CfD auction would be helpful. Would give developers more time to bid. Technologies like solar PV that could deliver large savings… If no large solar is built… They could put a minimum in [for the subsidy allocated to each technology] – more positive. CfD represents long-term support. If the industry drives down the cost of renewable energy, CfD gives us an infill fix on revenue. It will give that certainty to get debt [and equity] in. It may be the support mechanism we need in the long-term. It could be the support mechanism we need for renewable energy…