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Fuelling the future

Most politicians are being advised that emissions of carbon dioxide must be cut drastically if the risk of ‘dangerous’ (even ‘catastrophic’) global warming is to be averted. Despite a singular failure to stop the annual rise in global emissions, let alone reverse it, the EU has heeded this advice and set national targets to be met whatever happens elsewhere in the world. Failure to achieve these would, in theory, be penalised via heavy fines levied by the Commission.

Just to make the task more difficult, there is not a single target, but multiple ones. Member States are committed to reducing emissions by 20% from a 1990 baseline, but also to making 20% savings in energy use and having 20% of total energy derived from renewables (15% in the UK). The renewables target is particularly demanding: it is generally understood that many politicians believed at the time they were signing up for a renewable electricity target rather than for a contribution towards overall energy use, a much larger figure.

Individual countries have devised their own schemes of varying complexity to push large energy users down the desired path but the bloc as a whole has compounded the problem by introducing a system of tradable permits – the Emissions Trading System – which is a case study in ineffectiveness. Too many permits are on the market, making the carbon price too low to overcome the economic advantage of fossil fuels, and a number of major instances of fraudulent trading have been uncovered.

The UK government, in its wisdom, has taken the process seriously enough not only to have introduced legally binding emissions targets (via the ill-advised Climate Change Act 2008) but more recently to have set a national carbon price floor. Now we also learn that, for the UK, wind farm subsidies are in top band. According to the article “Britain pays £95 per megawatt hour for electricity from on-shore wind farms, including subsidy and the wholesale price. The international average is £77, according to the study commissioned by the Department of Energy and Climate Change. Wind farms in Sweden and Denmark receive less than £60 per megawatt hour and those in the US states of Texas and Iowa receive less than £40.”

We know that the renewable energy industry is entirely reliant on government policy and a range of taxpayer- and consumer-paid subsidies. Nowhere is the effect of this being felt more strongly than in Germany.  As quoted in an article from the Daily Caller (EU retreats on global warming while US pushes ahead) “German consumers already pay the highest power prices in Europe, according to Der Spiegel, and generous renewable energy subsidies cost them about $26 billion in taxes last year. ‘The promotion of green electricity costs will cost our citizens ($32.5 billion) next year, which is a lot of money that could otherwise be spent on buying new cars, furniture or on restaurant visits,’ said Michael Fuchs, deputy leader of the Christian Democratic Union.”

The reason for the headline word ‘retreat’ is that the Commission is currently not proposing renewable energy targets beyond the existing ones for 2020, despite pressure from the Parliament and the energy and environment Commissioners. This seems to be a sign that European politicians are aware both that many citizens will tolerate only so much in the way of unnecessary energy price rises and that more and more jobs in energy-intensive industries will inevitably move overseas. Already, most countries protect their domestic industries to a large extent, loading even more costs onto consumers.

Against this backdrop, BP has this week published its latest view of the future development of the energy market (BP Energy Outlook 2035). Among the headlines is that energy demand will continue to grow, rising by 41% between 2012 and 2035, albeit at a lower rate than previously, and driven almost entirely by developing countries (particularly China and India).

Another key fact is that, over this period, fossil fuels are expected to remain dominant. Gas is likely to increase its overall share at the expense of coal and oil, with all three converging towards a share of 26-27% each. Nuclear, hydro and renewables meanwhile are projected to have a share of 5-7% each. Renewables are expected to see the highest rates of growth (from a low baseline) and to contribute 14% of total electricity by 2035.

This growth is, of course, entirely dependent on government policies. The fact that the EU seems unlikely to set a binding target for renewables for 2030 at this stage is a straw in the wind which suggests BP is painting too rosy a future for the sector. Maybe peak wind will come before peak oil. And, like any such study, this outlook suffers from the inevitable fault of projecting from the current state of technology. The development of disruptive energy generation and storage technologies in the interim (maybe even fusion?) would change the picture entirely.

The other key figure from the report is an expected rise in carbon dioxide emissions of 29% by 2035, even though declines are likely in the EU and other developed economies. This seems like a realistic view, and has certainly not been seriously questioned in the media. However, it sits uneasily with messages from the IPCC and activists that emissions growth must be halted and reversed soon if catastrophe is to be avoided.

One of the latest official contributions to this point of view comes from Christina Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), as reported by the BBC: Get your cash out of fossil fuel backed funds says UN climate chief. She argues that most of the known reserves of coal, oil and gas should be left in the ground if global warming is to be limited to 2°C (according to climate modellers), so making much investment in fossil fuel industries essentially worthless. Because of this, investors have a duty to disinvest if they are managing their funds responsibly.

The fact that there is no stampede out of conventional energy companies suggests that the business world tends more to the BP than the UNFCCC view. Only time will tell who is right, but all we can be sure of is that actual energy sources and use in 2035 will be different from current predictions. Governments should, in the meantime, also be taking on board the fact that global emissions will continue to rise and that adaptation rather than mitigation should be their policy focus. 

Current Issues

To see UK electricity demand
and the contribution from
wind, see www.gridwatch.templar.co.uk

 

What's New

7 October 2015; Letter in The Times on the safety of low doses of radiation, as Chernobyl becomes a wildlife haven.