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Carbon, Low Carbon, And No Cash

Politics / Climate Change May 14, 2012 - 02:15 AM GMT

By: Andrew_McKillop


Best Financial Markets Analysis ArticleSTIRRING TIMES FOR SOME

Opening the IEA's high level conference by-lined "Clean Energy Progress" in London, late April, the IEA's deputy director Ambassador Richard H. Jones didn't beat around the bush: he said that global average temperatures were set to rise by "at least 6 degrees centigrade by 2050", and we should all be very unhappy to leave that behind us, as our legacy to future generations. To be sure, getting that surge in global temperatures in an eyeblink of planetary time would need something rather special and strange, in fact catastrophic. This could include the most intense and quickest acting explosion of volcanic activity the planet has ever known - but Ambassador Jones told the respectful audience, including serried ranks of the world's media and Britain's PM David Campbell, it was all due to tailpipe emissions from four-wheel-drives and fossil fuelled power stations. So low carbon was right back high on the menu ! Like the loudest shills in the global warming business, such as Britain's James 'Lysenko' Lovelock had always shilled for, through an incredibly long decade in which global warming junk science ruled and it was absolutely OK - despite Lovelock himself recanting and admitting, also in late April that basically speaking he had been lying. Lysenko had also been contrite, at the end.

Never mind ! The energy party has to go on. Ambassador Jones had a mission to leave a squeaky clean ship behind him and us all, for our descendants, so firstly he told the audience that his experts estimate the world must spend $5 trillion on developing energy over the next seven-and-a-half years, by 2020. Never mind again that's at least as impossible as global temperatures rising by 6 degrees by 2050, and 2020 is going to come an awful lot sooner.


Due to the terrible urgency of the global warming crisis, Jones said, the 32 developed OECD member countries of the IEA must literally develop every known conceivable form and type of energy, now defined as clean. Even imaginary forms, everything. The list was so massive that some members of the audience dozed off, shaked themselves awake, and shook their heads at hearing the list was still being read out. The litany went on and on. It seemed endless, but it did end - only to be followed by the Second Option, also read out by Jones. This is using no energy at all, economizing it, conserving it, negawatts instead of megawatts, car sharing, taking a shower (not even a bath) with a friend or two friends, which footballers do, taking buses and trains, which footballers and prime ministers don't, insulating homes, installing smart meters, turning lights and heating off in offices at nights and weekends despite this being a challenge to civilization, building smart grids and super grids, changing the regular flashlight for a Donald Duck LED flashlight Made in China, doing without flashlights, buying a bicycle, not buying a third iPhone. And lots more: Jones surpassed himself on that score, he said that his experts had told him that energy saving was vastly easier and cheaper than developing any kind of new energy, clean or otherwise.

The IEA doesnt have time for stuff like Peak Oil anymore: the global warming crisis is so serious we will have to give up oil an awful lot sooner than it runs out all on its own - which was one good bit of news. In the meantime however, Jones urged the energy corporations of the IEA countries to increase and accelerate and intensify the production of shale oil, deep offshore oil, heavy oil, Arctic oil, gas-to-oil conversion, coal-to-oil conversion, biomass-to-oil conversion, algae-based oil, biofuels, and what have you, all of them clean of course. Breakthroughs could be coming, the IEA says, on top of those which already came in the shape of shale gas and tarsand oil, the shale gas being possible to convert to oil, and the tarsand oil being possible to use as-is. Cars will of course become much more fuel efficient, due to the global warming crisis, and it goes without saying that electric cars are coming, and nuclear power to charge them up is fine as long as its nicely managed. As Jones added, China and India were aware of the oil problem and had told him they were doing serious things to cut the growth of their oil habit. It was sure.

Showing that oil and oil crisis are really old hat, the IEA gave triumphal data on the breathtaking growth in windpower and solar electricity production, about 20% a year growth for the first and 42% a year growth for the second. Jones gave a few killer numbers on this: on April 16th, he said, Spain had obtained 61% of its national electricity supply from windpower, and a big extra chunk from solar PV also. But this was well beaten by Germany, which since 2011 is in the situation of simply having too much of the wind and solar stuff on Bad Days when power demand is low, but its windy and sunny. On those kind of days, Germany's wind and solar capacity of about 55 000 MW easily beats Germany's total power demand of about 35 000 MW. Jones didnt add that Germany on Bad Days tries to give away the stuff to neighboring countries like Poland, but the power transport and transformer capacity isn't there: so the surplus is dumped. Too bad, and anyway the fuel is free and its Low Carbon.


Jones made it plain there simply isn't enough present spending on carbon capture and sequestration, a grave shortfall in political commitment to Low Carbon because without it, we can't use more coal, to run power plants we don't need because there is too much wind and solar power, as well as Jones hopes, much more renewable power generation and more clean and safe nuclear power. Speaking at the same conference, Britain's PM Campbell said he was inventing a new Brtish law to make nuclear power profitable, instead of passing a law to ban rain on Bank Holidays, so the nuclear option was still intact and in place, despite what Japanese and Germans, Italians and Swiss might be thinking.

One of the main problems - who and how is this all going to be paid for ? - was directly addressed by Jones. His experts estimate the IEA countries spend $409 billion-a-year on energy subsidies to fossil fuels, so that can go right away. They also already pay $66 billion in subsidies to renewable energy, and that could triple or pentuple, with spare change left over.

The spare change would however be direly needed, not only for carbon capture and other great things like nuclear fusion research and development, but also for floating offshore windfarms, a massive expansion of geothermal energy, and of course the development of giant offshore gas fields and deep oil resources. Pipeline development will have to receive at least as much new spending, the IEA experts estimated, as global power grids because shale gas development will move into really high gear. Jones showed he has serious and major concern for the social impacts of whipping away those dangerous subsidies to fossil fuels, because Fuel Poverty will certainly increase, he said, unless careful attention goes to ignoring this little problem.

The answer is level playing field energy prices, which a huge expansion in energy trading can produce almost overnight, Jones said. Huddled over their playstation trading screens, a new race of energy traders will be working to ensure Clean Energy Progress, but to do this we first have to spend a trillion or two on pipelines, grids, smart meters and what have you. The problem is so serious we should not get too worried with the boring details of how we solve it - we have to start spending now.

Without the spending on energy transport infrastructures, how can the trader community place itself between producers and consumers ? The IEA, heavily committed to energy trading like all liberal bourgeois political parties, and a few governments, remains intimately convinced that energy trading is an unlimited good thing: creating ways for traders to get their hands on energy supplies, at critical transport points between producers and consumers is therefore vital - with the programmed result that energy prices will become as volatile as possible while generating fat profits and spectacular losses for traders, brokers and their parasitic friends in the finance industry, as power blackouts and energy supply cutoffs become the norm.


The IEA's fantasy vision of world energy in 2020 is above all that: fantasy. Facing up to this will only come through repeated failures, losses and scandals followed by quietly dumping the failed policy and programmes. Its long-term obsession with cheap oil, dating from the IEA's founding mission set in 1974 by Nixon and Kissinger, is now mutated. Now mixed and mingled with global warming hysteria and other newer elite themes like wall-to-wall development of windfarms and solar power plants, as well as saving nuclear power from oblivion, the so-called new vision can only be out of focus. This results in the IEA's entirely impossible "outline plans and recommendations". Calling for the spending of $5 trillion by 2020 fits well with this fantasy vision.

One immediate problem is this kind of spending on energy has never been achieved or needed ever before. It was not needed so it was not possible - somewhat like a 6 degree celsius temperature surge in 37 years. Since it never happened before, perverse logic seems to allow, it can happen now: where is the problem ? The IEA's call to governments is print more money and spend more.

Staying with the IEA's core obsession of trying to keep a lid on oil prices, Ambassador Jones told the Clean Energy Progress conference that several European countries and not only the debt crisis PIIGS had cut their national oil consumption by 20% or more since 2006. To be sure massive unemployment, business failures, deindustrialization, and recession in other OECD countries helped accelerate this retreat from oil, but the process is under way. The OECD, with one-seventh of the world's population still takes a little more than on-half of all global oil supply, meaning that a big cut on oil consumption in all OECD countries will surely space the peak oil crisis further out and far ahead.

Working out who pays and how much it costs was surely made difficult by the IEA moving the goalposts so far they disappeared off the playing field, itself so un-level it looks like it was triple-plowed by drunken bulldozers. Right today, we have US natural gas prices struggling to hold $2 a million BTU, but in Europe and Asia gas prices are often $16 to $18 for the same amount of gas.

Electricity prices in European countries are probably set to rise 30% to 50% by 2015 simply to pay for the grand folly of renewable energy being ramped up to the sky. Oil prices remain close to $100 a barrel even if they currently are under attack by traders in a ritual bout of speculation, before being talked back up again. More important, only oil prices at that level can justify huge spending on "new clean oil", like shale oil and tarsand oil, that only the blind or dumb can call clean - BP, Anadarko, Halliburton, Shell, ENI, Petrobras, Total and others make a point of underlining how dirty deep offshore oil really is. Their capital spending to get this "clean oil" also shows it can never be cheap. Oil prices so high they make new clean oil feasible also drive the move away from oil, that recession and deindustrialization accelerate. The bottom line is that saying what happenes to oil prices in any future time framework is nigh to impossible.

All we know is that energy will cost more except when it costs less, if its available, which isn't sure, like the question that the IEA also sets, of if we need it all. The IEA, faithfully reflecting the total disarray and confusion of political and economic deciders in its member countries, has produced a blueprint for going nowhere - but in fantastic style !

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2012 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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