Over 150 years ago Scotland led the way in developing a cheap source of energy and that option is still available, writes George Kerevan
HERE is a fact of life: economic growth is driven by cheap energy. Sustained growth comes from productivity increases. And most productivity stems from the input of cheaper power.
Unfortunately, the world faces a dilemma. The form of energy that has driven growth over the past 250 years is burning carbon in the form of coal, gas and petroleum. But the CO² given off by this process is creating global warming through a greenhouse effect. Replacing carbon with nuclear or renewables is feasible but only at a much greater cost. The result is a trade-off between growth and safety.
Europe has chosen the path of expensive renewables, which will inevitably reduce its growth and global competitiveness. That is not an argument against de-carbonisation, which I favour. But unless we take off our ‘politically correct’, rose-tinted spectacles we will not understand the options before us.
Consider: last month the Coalition government announced it was going to double the share of renewables in Britain’s energy mix (to 30 per cent) by 2020. Great – except this can only be achieved by subsidising renewable electricity generation, otherwise no-one would buy because it is more expensive than power generated from gas. This move will force up the average household domestic energy bill by around 20 per cent. That cash will not be spent in the shops, cutting growth. That money will come from the purses of the less well off, making them poorer and colder.
Here is an even sadder matter to contemplate. Despite Europe’s creditable attempt to cut carbon emissions (thereby increase its cost base), the amount of CO² entering the atmosphere is not going down. Last year global emissions reached an all-time high of 34 billion metric tons. Annual CO² emissions have now hit the “worst case” range predicted by the UN International Panel on Climate Change (IPCC). Just in case you thought wind power was changing anything.
In fact we now face climate disaster much earlier than the IPCC forecast in its last report, in 2007. Five years ago, the IPCC hoped that concerted international action could limit the global temperature rise to 2 percentage points over the pre-industrial baseline (15 degrees Celsius). The unforeseen rate at which the Artic ice sheets are melting has blown that prediction out of the water. We are now facing a 4-point rise by 2070, destabilising weather patterns and sending global food prices into orbit.
We need a Plan B. They may have found it in the United States, almost by accident: hydraulic fracking of shale gas. This involves the use of high-pressure water and chemicals, injected horizontally at great depth, to break open shale deposits and release trapped natural gas.
Remember what I said about cheap energy being the motor of economic growth? Fracking has unlocked huge deposits of cheap hydrocarbons in the United States. As a result, gas prices have dropped . The shale gas boom has created 33,000 jobs in America this year – ensuring the re-election of President Obama.
The US shale gas revolution has had another unexpected benefit – it has cut America’s CO² emissions from fossil fuel. Cheaper natural gas has meant a switch away from dirty coal-fired power generation – coal produces roughly twice the emissions of natural gas. America’s emissions from fossil fuel use in the first quarter of 2012 were the lowest for two decades.
Here’s my point: we have zero time to start cutting global CO² emissions. We need an instant fix. Why not replace coal with cheap, clean natural shale gas on a global basis? Coal still provides 40 per cent of the world’s electricity needs. In fact, global coal consumption jumped by 60 per cent between 2000 and 2010. Coal is the enemy.
Face it: the developing world can’t afford expensive renewables. But it can replace coal with gas, putting CO² emissions on a downward curve, yet maintaining growth. Of course, that plan only buys time till we can fully de-carbonise the world economy – but we are now in the business of buying time.
So far Europe has avoided fracking, supposedly on environmental grounds. In reality, politicians and big energy firms – some state owned – are too committed to subsidised renewables and subsidised nuclear power (read: guaranteed profits) to want competition from shale gas. The tide could be changing with yesterday’s announcement that the UK government is lifting a ban on fracking, though personally, I think the government’s change of mind is to cover its complicity in the coming hike in electricity bills.
The environmental lobby opposes fracking but this opposition is based on a utopian vision rather than a problem-solving one. Ironically, while America is dumping coal, Europe is burning even more. In a bid to offset the impact of expensive renewables, coal imports into the EU are sky-rocketing, contributing to a reduction of around 23 billion cubic meters of gas being burned in European power stations this year.
Germany, having decided to close its nuclear power plants, is actually moving back to coal – it’s cheaper and less politically complicated than building the new transmission lines needed to link up with wind turbines on the North Sea.
Don’t get me wrong. I want to de-carbonise. But the way to do this is to impose a stiff carbon tax on all fuel types and let the market decide on the appropriate technology. Instead we have a cabal of politicians forcing dearer (taxpayer subsidised) renewables on us while conspiring to eliminate cheap shale gas. And cutting growth to boot.
The world’s first commercial oil refinery was built near Bathgate in 1851, by James “Paraffin” Young. He built a global export industry extracting petroleum from shale found beneath West Lothian. Today, he wouldn’t get planning permission. Yet there remain huge potential shale formations under the Central Belt. Let’s start solving global warming, not just talk about it. And that means fracking.