Archive for January, 2016

Adieu fossil fuels?

What is the real world?

Obviously this is a question that can (and should) be posed for many more areas than energy supply.

In the case of energy, post the Paris climate change summit, the point is becoming more pressing because one can easily see new conventional wisdom taking hold.

This can be illustrated by a national newspaper journalist writing (on the last weekend of 2015) of “the powerful mood for change following the historic Paris climate accord” — not apparently understanding that the Paris agreement is not a draft treaty, not a protocol, not a legally-binding step. (It does commit the signatories to work to “peak emissions as soon as possible” — which was a rejection of proposals for emissions to be stopped by 2060 — and sets 2023 for a “global stocktake” to assess abatement progress.)

In support of his perception, the journalist quoted a green investment booster to the effect that “you really don’t want to be exposed to the old economy in this low carbon world (to which) Paris has committed” and echoed a zealots’ placard outside the UN’s Le Bourget meeting place: “Adieu fossil fuels,” a motto picked up by “National Geographic” magazine and others, including Germany’s environment minister, who has declared “the world will have to say goodbye to coal, oil and gas.”

(Germany in 2014 consumed 111 mtoe of oil, 64 mtoe of gas and 77 mtoe of coal. Its non-hydro renewables use was equivalent to 32 mtoe. Not so much energiewende as scheinheiligkeit, minister.)

How far all this adieu stuff is removed from the real world can be readily illustrated via reading a review of resources and energy trade by the federal Department of Industry, Innovation & Science, issued as the newspaper commentary was being published.

Among other things, the review sees (1) global trade in metallurgical coal rising slightly in the new year (compared with 2015) to 302 million tonnes, (2) international trade in thermal coal also increasing marginally to 1,059 Mt, (3) China in the throes of building, or finishing planning, of 117,000 megawatts of higher-efficiency, lower-emissions coal plant and (4) India constructing 138,000 MW of coal generation as well as 49,000 MW of hydro-electric plant against 21,000 MW of renewables such as solar and wind power.

This real world also has oil production reaching its highest level since 2004 of 96.2 million barrels a day.

As well, the department expects global LNG supply capacity to be 12 per cent higher this year than in 2015, reaching 289 million tonnes, and demand to be eight per cent higher.

And the International Energy Agency, warning that the commitments global governments took to (and from) Paris are inadequate to curb carbon emissions for a two-degree target, has proposed a tougher approach where coal’s share of electricity supply in 2030 will be some 7,500 terawatt hours and fossil fuels’ overall contribution to the mix some 15,000 TWh – compared with almost 3,000 TWh for wind power and about 1,500 TWh for solar systems.

After a herculean, multi-trillion dollar outlay of capital to meet the IEA’s proposed path (significantly better in abatement terms than the one adopted by the Parisian summiteers), coal in 2030 in this scenario would hold 22 per cent of total primary energy demand (measured in millions of tonnes of oil equivalent), oil 28 per cent and gas 23 per cent – against a share of five per cent for non-hydro renewables and 12 per cent for bio-energy.

(The balance, says the IEA, would be nuclear power seven per cent and hydro-power three per cent.)

The IEA model, mark you, is not for a world in which “deniers” have sat on their hands — but it is manifestly not one, despite huge expenditure, where adieu has been said to fossil fuels or even auf wiedersehn (which is “see you later.”) Even in the agency’s world of stronger efforts than embraced in Paris, the “old economy” in which fossil fuels play a critical role is anything but kaput.

A rather more measured perception of what the UN summit has wrought was published just before Christmas in some newspapers (but was invisible to most Australians), quoting professor Warwick McKibbin to the effect that “Paris means the Australian coal industry will not expand as much as it otherwise would have; the coal industry does not shrink from today’s scale.”

And Harvard University’s Robert Stavins, an environmentalist of repute, offers the assessment that “the new approach brought about by the Paris agreement can be a key step towards reducing the threat of climate change” because all countries will be involved now in taking actions to reduce emissions” — but nowhere does he proclaim “the end of fossil fuels.”

In this context, it has been interesting in the holidays to read a lengthy (108 pages) commentary published in December by bankers Citi (“Energy 2030: Financing a Greener Future”).

The Citi researchers set out to review “the micro-economics of the changing energy environment” and one of the questions they posed themselves is “can renewables remain competitive in a lower-for-longer fuel (cost) environment?”

They take the view that the “battle between coal and gas” is as important to emissions abatement as the rise of renewable energy.

One of their observations is that “while new plant economics seem to favor the rise of natural gas, regional variations in costs and power demand growth could dampen its ascent to the benefit of coal.”

This leads them to argue that there is a need for governments to assess policies to support the use of gas as well as renewables (demonstrating yet again that, when you scratch moneylenders, the urge for government intervention, so long as it doesn’t impact on their own practices, is never far beneath the surface.)

Meanwhile, the IEA’s analysis of pledges embedded in the Paris accord comes down to this: even when investment in (all) renewable generation has reached $US260 billion annually in 2030, outlays on fossil-fuelled power supply will still stand at $US100 billion a year – and spending on new coal-fired plant will account for half of this.

In this world promised by policymakers, by the way, China will hold half the coal-fired power generation in 2030, having added 345,000 MW over 15 years. This fleet will emit almost five billion tonnes a year of greenhouse gases.

(It is worth interpolating here that the agency points out the Paris pledges also require $US8 trillion to be spent between now and 2030 on energy efficiency: one-third by motorists on better cars, another third on improving buildings and the rest split between the manufacturing sector and the road freight industry. Why the commentators, and especially those in financial media, think this can be effectively ignored is a mystery – at least to me.)

To repeat: what is the real energy world?

There are many ways of addressing the answer but one it certainly is not: the Pollyanna perception the media (in Australia and many other places) are intent on forcing on us where fossil fuels are “the old economy” with all the dismissive intent of the adjective.

Of course, how you perceive what the Paris agreement portends depends on your own interests or wishes — and, for our politicians, on the urge to play the public mood, as divined from opinion polls, to electoral advantage.

At one end of this spectrum is the view that Paris represents, to quote actor/activist (and Parisian flagwaver) Robert Redford, “an epic movement away from fossil fuels” – and, to quote Greenpeace, that “time is up for fossil fuels.”

There is also advice to activists from an American professor of their persuasion that they should “savor the moment, but not pause to rest.” Ensuring the accord amounts to more than a hollow proclamation, he avers, requires “overcoming resistance to the adaptations we have to make.”

From the other end of the spectrum, Australian journalist and academic Tom Switzer declares the accord is “a triumph of wishes over facts.” Never discount the selfishness of nations, he asserts. And Christopher Booker, controversial commentator of “The Daily Telegraph” in London, derides the summit as “the moment political panic over climate change collided with the reality of a fossil-fuel-based global civilisation.”

Scots marine eco-scientist Robert Wilson sums it all up like this on his blog: “Fossil fuels continue to dominate new energy infrastructure. Maersk is not unveiling solar powered container ships. Boeing and Airbus appear content with the age of kerosene. Steel makers are sticking with coal. Twenty million new cars are added to China’s roads each year. Electric cars remain marginal everywhere: in Germany, where they wanted a million of them on the roads by 2020 and in America where Obama spoke of a million being on the roads by 2015. Despite what you may read, China is still opening roughly one new coal power plant each week. India plans to double its coal production by 2020. Green Germany just opened a new coal power plant last month. Britain announced a phase-out of coal power plants, but plans to build a new fleet of gas power plants. Despite what most EU policy-makers believed we now appear to be entering an era of cheap oil and natural gas.”

 

And, for leading London economics commentator Martin Wolf (of the Financial Times), a big post-Paris imperative is to avoid sacrificing the growth of the world economy. While the rate of decline in emissions per unit of output must “accelerate hugely,”  he says, it is far too early to feel confident that the curve of emissions will now bend decisively downwards because of what governments wrought at Le Bourget.

Obviously, this whole shebang is not esoteric so far as Australia is concerned, not just because this country is heavily dependent on fossil fuels for its lifestyle and very dependent on exporting them for essential trade income, but because we are now embarked on a federal election year where the Paris agreement is a tool for the political gamblers – and we will all have to live with the consequences of the policy cards the poll delivers, having suffered a decade where political intervention in energy markets has notoriously failed us.

This is why an understanding among Australians of the real world of energy supply is very important – and why it is a worry that our leaders across the political spectrum, many journalists and the community at large (depending on the media for information that influences their voting) still apparently lack such understanding.