Continuing as part of this month’s focus on energy policy, Derbyshire’s indomitable Mike Shipley has written this post:
Extreme Energy – Extreme Risk.
Even though Governments and the oil industry will not admit it, the world has passed peak oil production. This is important information that we should be informed about in order for us to be involved in the decisions necessary about our energy supply in the years to come. But with so much investment and share value tied to oil and fossil reserves, the industry, financial sector and the governments they control are keeping quiet, behaving as if it’s all ‘business as usual.’ The markets do not like change, confirmation of peak oil from ‘reliable sources’ would send jitters through the market and weaken investor confidence in the dominant fossil sector. Very rich people would find their investments and therefore their wealth, devalued.
So we don’t hear about ‘Peak Oil’ except from scientists and Greens, and they aren’t seen as ‘reliable sources’ by the market. But it’s what the industry is doing that gives the game away. The easy so called conventional oil and gas on land or in shallow water, is running out. Why else is this conservative ultra cost conscious industry investing so heavily in hard to win reserves known as ‘extreme energy’? They are investing in high cost, high risk exploration, trying to find fossil reserves that will reassure the markets that fossil carbon remains a good investment. These explorations include the very deep water drilling, up to 3 kilometres down, off the coast of Brazil and in the Gulf of Mexico, the mining of Canadian tar sands, mountain top removal for coal in the Appalachians, fracking and underground coal gasification [UCG] that is about to be launched in the UK.
These sources of energy, to which we can add nuclear, because of the uninsurable risk associated with nuclear accidents – come with a high price tag. The technology needed is either in an early stage of development or it is being stretched well beyond its design capacity, as happened with the Deep Water Horizon disaster in the gulf of Mexico. Because of this the risk associated with extreme energy is much greater than with either conventional energy sources or with renewables. However the industry will do everything it can to transfer this risk from its balance sheet to the customer and then the taxpayer as the insurer of last resort. One way or another we will pay a high pricer for extreme energy.
Even if risk costs are externalised, that is: passed on to the community and tax payer, the cost of bringing extreme energy to market remains high and will increase as reserves become more difficult to find. For this reason the price of energy from fossil fuels will continue to rise in to the future. The big six energy companies will use their dominant market position to protect their profits and therefore share and dividend value. The age of cheap fossil energy is over and the only way prices of fossil energy can be brought down is through Government subsidy. This is what the ConDem Government is doing when it gives tax breaks and cuts regulatory costs. But even with this support the costs of extraction and processing is high and will be reflected in market price.
Without doubt, we need a secure and sustainable source of energy that we can rely on well into the future. Fossil fuel is not this energy. By its very nature is is limited in supply and is getting more expensive to find and is damaging to the global environment. The energy future that can deliver reliability is renewables, it has to be, by their very nature, renewables are limitless. The wind will always blow, the sun will shine the tides rise and fall somewhere all the time. The technical challenge is to connect up these various technologies in to energy grids that cover large areas so that energy can flow from high generating areas to the becalmed areas. Developing this super-grid and building the appropriate generating plant will initially be expensive, but developing this system is an investment in the future and once mature, it will deliver reliable and affordable energy. This has happened in Germany where because of its investment in renewable energy generation, the wholesale cost of electricity is falling. True that the retail price remains high because of green tariffs that are designed to pay for the switch from fossil-nuclear to renewable. But as the technology matures and the grid is developed, tariffs will fall and so will prices to the consumer.
This will not happen in the UK thanks to the policies of successive governments. In the future we will be paying a premium global market price for gas, having been made reliant on gas power generation by Gideon Osbourn. The fracking venture will prove to be an expensive flop and underground coal gasification will rack up a huge price tag in environmental damage that we will all have to pay for. Nuclear will deliver profits to French and Chinese state owned companies at our expense, but again it will fail to live up to the hype leaving us instead with a very costly clean up bill that will be greater than the value of the energy generated, plus the ever present risk of a major nuclear accident.
Green Party Energy policy aims to move energy generation from this high risk strategy that is based on extreme energy to a secure and sustainable energy supply system based on renewable sources of energy. It can be done, Europe’s most successful economy is dong just this. Japan in taking a close interest in German energy policy and for obvious reasons is interested in following this lead. However, this strategy does not suit the big energy companies, and for that reason, the ConDem government is promoting a fossil-nuclear policy based on extreme energy and extreme risk.