Low-carbon cuts

The UK’s Department of Energy and Climate Change has announced details of cuts it will be making as part of broader cost-cutting, with low-carbon projects bearing the brunt of reductions.

With few areas being spared from the UK government’s “age of austerity”, the country’s Department of Energy and Climate Change (DECC) announced back in May that it would contribute £85m to departmental cuts in government. DECC has now revealed that a sizeable chunk of those savings – £35m, or 40% of the total – will come from cuts in expenditure on low-carbon technology.

In May, the department unveiled plans to save £3m through the early closure of the Low Carbon Buildings Fund, which gave grants to help the installation of small-scale renewables in homes, replacing it with a scheme where homeowners and businesses can receive money for renewable electricity which they generate. The latest announcement indicates that several other green funding schemes will be shut down or curtailed.

The Carbon Trust, which promotes the transition to a low-carbon economy, will lose £12.6m from its budget for promoting green technology and business. The offshore wind capital grant scheme is set to have its scope reduced, with an expected saving of £3m. And the government will cancel £4.7m worth of final funding rounds of schemes which support bio-energy.

DECC was keen to stress that the department would still spend over £150 million on low carbon technology this year, including the recently announced formation of a Green Investment Bank (GIB) – although there has been reported tension (FT, subscription required) between Chancellor George Osborne and Business Secretary Vince Cable over the scale of the institution.

Perhaps inevitably, the announcement got a poor reception on the opposition benches, with former climate change secretary and Labour leadership prospect Ed Miliband denouncing the plans, saying “On the one hand they call for tougher carbon emissions targets but with the other they take away the means to achieve these targets.”

On his well-subscribed Twitter account, Miliband later added “so much for greenest govt ever”, a reference to Prime Minister David Cameron’s pledge to the 10:10 campaign in May. The sentiment was echoed by John Sauven, executive director of Greenpeace, who said that Cameron’s green promises were “beginning to crumble”.

Given that almost half of cuts affected low-carbon schemes, it is inevitable that the government’s green promises would be called into question. The coalition has not abandoned its commitments as much as Labour would like to suggest. But it will need to ensure that its remaining commitments, including the GIB, are run effectively, or Cameron’s pledge may become a point of attack for Labour, and of tension between the coalition partners.

Blow me down

Wanted: a chief executive to promote the building of a European Super Grid

In a recent story (see North Sea monster – subscription required), we assessed the prospects of a North Sea super grid. The idea is to link nine countries in northern Europe through a renewable energy grid harnessing offshore wind. A second grid linking southern Europe is also being considered. It is, to say the least, an ambitious project.

So good luck to the man or woman appointed chief executive of the projects holding company “Friends of the Super-grid” (FOSG). If you are interested see here. What awaits the chief executive? Put simply, an enormous task. The new head of the FOSC will be based in Brussels, and will get to work on the various financial, regulatory, and technical hurdles the project faces.

The announcement follows through on the pledge made by FOSG in early March and adds to the feeling that, despite the hurdles, the project is building momentum. It will be down to the CEO to grease regulatory cogs in Brussels so expect the appointment of an adept political operator.

Just to recap the progress so far: FOSG estimates that the initial linkage of northern Germany, Norway and the UK will cost €20-34bn. The establishment of the FOSG, which includes German construction firm Hochtief, German conglomerate Siemens and French energy infrastructure specialist Areva, suggest serious corporate interest. The March announcement of the creation of the holding company followed a December announcement from ministers in nine countries—the UK, Germany, France, Belgium, the Netherlands, Luxembourg, Denmark, Sweden and Ireland—on the signing of an agreement to develop an offshore grid in the North and Irish Seas.

Hydrogen vs EV, Round 5

At the very least, Suzuki’s Burgman Fuel Cell Scooter prototype (pictured) passes the embarrassment test: you wouldn’t feel like a fool tooling around the city on it, as you probably would in some electric vehicles like the Smart Car or a Toyota iQ, or certainly the old Sinclair C5 tricycle (remember them?).

Indeed, the bike is intended to look just like a conventional Suzuki Burgman and was developed with Intelligent Energy, a UK-based fuel cell developer, to address some other issues that have held back commercial deployment of fuel-cell vehicles — its makers claim a range of 350km, a re-fueling time of just a few minutes, as well as engine power comparable to its conventional stablemate.

It’s expected to be rolled out commercially sometime around 2015 as a realistic alternative to a standard combustion bike, and is designed to have mass appeal, specifically targeted for use in the urban environment by London’s commuters. The London prototype unveiling, with the backing of city authorities, also comes amid talk of a European Union move to crack down on motorbike emissions.

However, there are plenty of questions still to be answered and the impetus both in the EU and the USA heavily favours electric vehicles (EV) over hydrogen.

The initial price of the Suzuki Burgman fuel cell scooter will be relatively high — perhaps twice the current price tag of US$6,000 for a conventional bike — though that would fall if the bike found a large enough market. Bigger issues include the fragility of the engines, which can be highly susceptible to bumps and vibrations. Also, hydrogen is enormously expensive to store, and refuelling pumps are scarce.

The EV versus Fuel Cell debate hasn’t been in fuel cell’s favour recently, especially in the US, where Nobel Prize-winning Energy Secretary, Steven Chu, has come out forcefully against a viable future for the technology.

Intelligent Energy chief executive,  Henri Winaund, argues that it will be cheaper in the long run to develop a hydrogen fuel grid compared to electricity, as pumps can be built into existing petrol stations. EVs also face questions about infrastructure, such as the fact that many countries still produce most electricity from coal, the dirtiest fuel source, and grids would require huge upgrades to be able to cope with large-scale EV deployment.

For motorcycles, the lighter-weight fuel cell also has a distinct advantage over heavier EV battery alternatives. Several vehicle manufacturers, including GM, Honda and Toyota, have cited 2015 as the year that affordable hydrogen vehicles will start to come onto the market, and investment in infrastructure is picking up pace accordingly. Already, California has a nascent hydrogen network, with over 25 refueling stations; Germany has 30 and Sweden and Denmark are working to keep up with Norway, aiming to link up to create a Scandinavian highway. Japan is also investing heavily in infrastructure, hoping to have built up to 60 stations by 2015.

Now, encouraged by the Suzuki launch, London is scheduled to have at least six refueling points built in the run up to 2012, as well a fleet of fuel-cell taxis, buses and police cars planned for roll-out. By focusing on London’s commuters, the hope is that the practical case for developing a power grid for hydrogen is supported. Further backing in the UK came from energy minister Philip Hunt, who has laid out a £7m investment plan to fund a hydrogen highway along a stretch of motorway into Wales.

EVs are still favoured among policy-makers (See Cleaning up cars) and roll-out in the US and elsewhere is well-advanced. But Suzuki’s new scooter is a stylish ambassador for the hydrogen case.

Last weeks energy highlights

The EIU’s latest global coal outlook shows that Asia, mainly China, is pulling the industry out of 2009’s demand slump. Meanwhile in Europe, a proposed coal burning power plant in Mannheim, Germany has come under fire from environmental group WWF. Its legal challenge could have wider implications for other planned coal burning power plants in the EU.

 In Venezuela, drought has created an electricity shortage in the hydro-electric dependant country. This has compounded a lack of investment in the sector, leading to blackouts. It’s a situation that could potentially cause problems for Hugo Chavez as disquiet grows among the country’s poor. Pakistan too is struggling to manage its energy crisis, and has brought in a new Petroleum policy to tackle the situation.

Elsewhere, the EU has told the UN that it won’t be upping its CO2 reduction target from 20% to 30% following the recommendations of the Copenhagen summit, to the disappointment of green technology advocates. While in big oil, fourth-quarter results reporting season is underway. ConocoPhillips was first-up and its results reflected a company still paying the price for an ill timed investment in US refining and natural gas.

Summit fallout

The Guardian (UK) carried a fascinating insight into the failed Copenhagen summit from Mark Lynas, an Oxford-based climate change consultant and activist who was in attendance at the inter-governmental sessions there. The piece was titled How do I know China wrecked the Copenhagen deal? I was in the room, which really requires little further explanation.

Whether or not one shares Mr Lynas’ position on anthropogenic climate change, CO2 policies, etc., his account of the talks has a very convincing ring to it in terms of the process involved in one of these events. One doesn’t even have to agree with his conclusion that China is “to blame” for the failure to get the kind of deal that he, his fellow climate activists and indeed most governments appear to have wanted out of Copenhagen, to understand what went wrong. For the truth is that all of these processes, whatever the “One World” pronouncements from politicians involved, are ultimately a complex set of countervailing negotiations around national interests. The bigger the number of countries involved — 193 for Copenhagen, for goodness sake — and the more divergent those national interests, the less likely is the prospect of a meaningful outcome. In the case of Copenhagen, it was clear long before it commenced that there was little prospect that it would achieve anything conclusive. But the completeness of its failure exceeded even the pessemistic expectations. 

In a way, however, that failure — and the nature of the failure, as spelled out in Mr Lynas’ account –can be seen as a good thing. It is likely to focus governments more on what can — and should — be done at national levels, even if only rationalised on the grounds of pollution-control, energy security, promotion of economic and technological development, etc. There will be, of course, much debate at the natoional and the inter-governmental levels about costs, monitoring, effective delivery systems, etc. But it may well be more rational if done in more manageable, less amorphous groups than was seen to fail at the Copenhagen shambles. Already there is talk of a much smaller group of the most powerful — and most polluting — countries negotiating outside of a UN process, perhaps at a G30 level.

The UN’s top climate man, Yvo de Boer, generally a voice of reason in the process, could have had Mr Lynas in mind (as well as Ed Miliband, the UK environment minister and others from the west, and those responding for China) when he called for the blame game to finish and to move onto constructive talks. But sometimes a big, noisey row is needed so that everyone can see what really is what before moving onto the business at hand. And maybe the UN forum for debating and managing the climate change process has run its course.

Disruptive behaviour

Never before has there been so much uncertainty about the future supply and demand of hydrocarbons.

That somewhat Churchillian premise of a new study about “disruptive” energy technologies, authored by Melissa Stark, a partner at consultant group Accenture, (see pdf link below*), is also one of the main underlying themes of the big climate change debate about how to curb carbon emissions without devastating the world economy.

While the statement is unarguable, it also underlines how much harder it has become to predict a whole array of key elements of the energy future, such as how oil demand will change, how the energy mix might evolve, what will be the effect on lifestyle options such as transport, etc.? And the changes are likely to come much more quickly than many might think, the study argues.

That forecasting difficulty was demonstrated by last week’s unveiling by the International Energy Agency of its annual World Energy Outlook, which was met with an unusual degree of excitement in some quarters amid the pre-Copenhagen hype. George Monbiot of the Guardian, in particular, doesn’t want to let go of his outrage that the IEA has adjusted quite substantially its predictions for some oil forecasts. [NB, it seems from the link title to Mr Monbiot’s blog entry that some Guardian wag thinks the pique might be out of control].

Given the heightened uncertainty, the Accenture study, in another Churchillian flourish, concludes, “Never before have we demanded so much from our regulators and governments”. It goes on to prescribe what governments must do to help the 12 identified technologies reach commercial viability, which varies considerably from country to country, including controversial moves such as supporting genetic engineering of biofuel crops.

The bottom line: “In five years, we will be looking at a different landscape of fuel supply, fuel demand and options to reduce [greenhouse gases] than is currently forecast today given the pipeline of disruptive technologies. It is important that these technologies be considered when forecasting supply and demand.” We’ll try to bear that in mind.

*Accenture_Betting_on_Science_Study_Overview

Game theory of climate change

Bruce Bueno de Mesquita, professor of politics, New York University

In the US, it has become clear throughout the debate in both the House of Representatives and in the Senate, the divisions over energy and climate policy are not primarily along traditional party lines, as interests take many colours on both sides of argument: Democratic coal-producing districts; Republican states benefiting from federal carbon-reducing largesse; oil- and wind-heavy states that are winners and losers at the same time, etc.

The Economist Intelligence Unit’s sister publication, Roll Call, has put together an energy policy briefing (subscription required), comprised of articles and statements from a diverse array of members of Congress.

In its lead article, Roll Call concludes: “Regardless of their party and political orientation, Members seem to agree conceptually on what’s needed: Less pollution, greener energy and better economic opportunities for all those industries associated with cleaning up the planet. But they differ on how to achieve these goals, and that’s where the debate — and the fun — begins.”

The same is true of business at large, as the New York Times highlights in a story about divisions among energy companies over the bill. As the story reminds us, the divisions are mirrored in the wider business community, as the fractures at the Chamber of Commerce in recent months has underlined. With its hard-line stance on climate change policy, the national Chamber of Commerce has lost not only members it might have expected to play the “green” card – Apple, Nike, Microsoft, etc. – but a host of energy companies, including Duke, Exelon and PG&E (of Erin Brokovitch fame, no less), which have hard-nosed business interests in seeing the subsidy-laden energy bill pass into law.

With this kind of fractiousness among interested parties within the US, one can only imagine the unbridgeable fissures between parties haggling over a deal (any deal) for the Copenhagen Climate Change summit in December, a mere 50 days away. What chance of a meaningful outcome there?

Bruce Bueno de Mesquita, a New York University professor who is best known for using game theory and related techniques as a predictor of international political developments, is pretty clear. In an essay in the latest issue of Foreign Policy, he puts his view unequivocally: “Despite the hoopla, the U.N. climate change conference in Copenhagen is destined to fail.”

The first two pages of the article online – Recipe for Failure – are largely taken up with the professor defending past results of his theories, even in the face of his own – and certainly others’ – scepticism. But he goes on to explain in detail how he arrives at the conclusion that it will be impossible to get all the parties – not only the developed world and the key developing countries, but also non-governmental organisations and multinational companies – to agree to a climate deal that will have real teeth through 2050, the crucial period.

“To get people to sign a universal agreement and not cheat, the deal must not ask them to change their behavior much from whatever they are already doing. It is a race to the bottom, to the lowest common denominator. More demanding agreements weed out prospective members or encourage lies,” he writes, later pointing out, “The rich have an incentive to encourage the fast-growing poor to be greener, but the fast-growing poor have little incentive to listen as long as they are still poor.”

Thus, the Kyoto Protocol has been only a very limited success and the deal in 2007 at Bali (a precursor to Copenhagen, when the US caved in and agreed terms the last) ultimately fell apart because US lawmakers found it unacceptable. Whatever deal is reached in Copenhagen, it will fall well short of what is targeted by those who fear a two-degree worldwide temperature rise will be disastrous.

How, in the meantime, to address the climate issue in the absence of a comprehensive international treaty? Technology, in a nutshell, the professor says.

There are many areas of technological progress, of course, but that path is no smoother than the policy one, as this story on hydrogen-power for the automobile sector attests.

As Copenhagen approaches, in order to avoid doomsday depression it may be best to remember the Y2K frenzy and the fact that disaster was ultimately averted then by a whole lot of practical, boring, backroom beavering by technicians.