BY JEREMY LEGGETT, author of The Energy of Nations
The Energy of Nations
Neuroscientists are no longer surprised by dangerous risk-taking in human society. The recent explosion of knowledge in their field shows them how easily we tend to blind ourselves to risk, individually and collectively. But I wonder how many of them are watching detail in four of the great risk games in energy markets today. Any neuroscientist with the time to do that as well as probe the human brain would find a lifetime of fascinating research potential.
First, risk from oil depletion. Plenty of oil left, the incumbency says. Peak oil is dead. Saudi America here we come. Oil is actually infinite, so former BP boss Tony Hayward told a recent City conference.
No, says a minority. Oil supply can only meet demand if you can deliver the flow rates needed, no matter how big the resource may be. An oil crunch is coming. In just a few years. It will be worse than the credit crunch.
Second, risk from climate change driven by carbon fuel burning. Little risk here, says much of the oil and coal industry and its many friends in the conservative right in multiple countries. Groundless liberal scaremongering, more like.
No, says a huge counter constituency, not least in government climate research agencies worldwide, and multiple ministries across the European Union. Plenty of economic crash potential in overheating Earth’s thin atmosphere, never mind the environmental horrors also involved.
Third, relatedly, risk of a carbon bubble in capital markets. No need to regulate the clocking of carbon-fuel resources transferred to reserves, says the energy incumbency. Clock them all as assets. There is no risk. We know what we are doing.
Wrong, says a small but increasingly vocal minority stirred up the CarbonTracker Initiative, a dissident City think tank that I chair. By allowing carbon assets to be accounted as though they are at zero risk of stranding, a vast bubble of unburnable carbon is being inflated on stock exchanges around the world. It holds major crash potential should it suddenly be deflated bygovernments panicing at the remorseless march of terrifying climate science and emerging impacts of an enhanced greenhouse effect.
Fourth, risk of a shale gas surprise. The US shale gas boom is a gamechanger, says the incumbency. Cheap gas is on the way for multiple countries, once mass fracking begins overseas. Emulating this US experience is the new route to recovery, says the UK Treasury.
Hold on, says another minority. Look at the balance sheets of US gas companies. All that debt to service. And such low cash flows from over-cheap gas. This has the whiff of Ponzi about it. Could it be yet another of those bubbles we seem so good at creating? And even if it isn’t, can the phenomenon be exported en masse? Is Surrey really the same as Texas?
And so the debates roll on, polarized, tribalised. Stop scaremongering, you dangerous extremists. Pass the blinkers, you reckless fools.
Meanwhile, elsewhere in the energy markets, the great family of technologies that could deconstruct all these risk games, or soften the penalty clauses, barrels on. Over a quarter of a trillion dollars now flows into renewable energy globaly each year, notwithstanding all our problems. New renewable generation coming onstream almost equals conventional carbon and nuclear energy combined. Germany leads the race but the US and China sit in a pursuing pack. Accelerate that race and you can soften the blow from an oil crunch. You offer hope to schoolkids who know that greenhouse gases trap heat. You have a chance to deflate the carbon bubble sustainably by default. You make gas a bridge to a low carbon future.
But in financial centres and in governments today, the energy incumbency is actively fighting for the suppression of renewable energy. It seems to me, operating on the front lines as I do, that their pushback increases in intensity the more ground renewables gain. It reminds me of those histories of war that tell you the bitterest, dirtiest, fighting comes towards the end. The incumbency wants the oil price to be high enough to make a killing, but not too high to torpedo the global economy. They want coal IPOs to line their pockets in perpetuity. They want gas to be a bridge not to a low carbon future but a gas future.
They want to play Russian roulette on multiple fronts with our national economies, our global economy, the ecosystems on which all economies ultimately rest. They want to be allowed to do all this, as they are today, essentially with minimal or no risk of meaningful regulatory intervention.
They must be stopped.
I do not believe there is an organized conspiracy by the energy incumbency. This is a problem of human cultures and belief systems. Neuroscientists understand this, increasingly.
All this I recount in a detailed narrative, mixing the march of history from 2004 – 2013 (May) with diary extracts showing my experiences of it, in my book The Energy of Nations. In my column on www.rechargenews.com I will be following the four great global energy-risk debates as the drama unfolds each month from June. I will also follow the evolution of the renewables industries in and around the risk narrative.
I expect to be telling a real-time story, building on the history in The Energy of Nations, on the outcomes of which, over the next few years, the future of human civilization will depend.