OIL at more than $50 a barrel concentrates the mind. What looked like a spike in prices is now taking on an air of permanence. Even when the price subsides, as it will, it will remain higher than seemed likely even a few months ago.
The future of oil, given geopolitical uncertainties and the tightness of supply and demand, looks more precarious than it did before. Having promised some weeks ago to look at the future of energy supplies, this is a good time to do it.
In July this year an internal Department of Trade and Industry document had the following to say about Britain’s energy situation: “Self-sufficiency in gas is coming to an end . . . self-sufficiency in oil will end in the foreseeable future . . . UK coal mines produce about half the nation’s needs . . . nuclear generating capacity is approaching the end of its life, coal-fired generation is ageing and will need to be replaced by lower-carbon technologies or refurbished . . . the energy workforce, across all sectors, is ageing.”
It paints a pretty bleak picture. The report, to set it in context, was intended to warn that Britain would need new power stations in the coming years and might not have the skills or industrial capacity to create them. But there is a wider issue here for Britain and the world, and $50-a-barrel oil, while unlikely to be sustained, is a wake-up call.
How do we reduce our reliance on oil? To avoid a huge mailbag, let me point out that supplies are not about to run out. Professor Peter Odell’s intelligent new book, Why Carbon Fuels will Dominate the 21st Century’s Global Energy Economy (Multi-Science Publishing), states that there are a conservatively estimated 5,000 billion barrels of oil left, and he does not see oil production peaking until about 2050, by which time it will have been overtaken in importance by natural gas.
Gas production, he predicts, will not peak until about 2090.
Other people have different views on these so-called Hubbert peaks for oil and gas production. [ Here would have been an ideal place to mention these alternate views, since they carry much more weight than Odell's strangely optimistic predictions. Instead the author continues on with Odell... - Ed ] One striking forecast from Odell is that the world will consume 1,660 gigatons (1,660 billion tons) oil equivalent of carbon energy in the 21st century, more than three times as much as the 500 gigatons consumed in the 20th century.
The point is that even if there is plenty of oil around there will also be plenty of demand, and not just from the new economic giants, China and India. Developing countries will be lifting their energy consumption towards advanced-country levels (at present the richest 20% of the world’s population consumes two-thirds of global energy). Oil output can increase further, but it cannot increase by enough to keep up with rising demand.
Not only that, but government commitments to reduce carbon- dioxide emissions, whether or not America persists with its Kyoto opt-out, will frame energy policy. Britain under this government is committed to a so-called “low carbon” economy and a 60% cut in carbon-dioxide emissions by 2050.
That implies a huge change. At present Britain is very much a carbon economy with nearly nine-tenths of primary energy demand being met by gas (39%), oil (35%) and coal (15%). Restraining demand, by using energy more efficiently in cars, homes and commercial buildings, will help, building on past experience. Since the 1970s the economy has doubled in size in real terms, but energy consumption has risen by only 15%.
Restraining demand will not, however, change the energy mix. Here, there are huge holes in the government’s strategy. While renewables — wind, water and biomass — are scheduled to provide 10% of electricity generation by 2010 (compared with 2% in 2002), this will still represent a small portion of total energy use. Alternatives tend to be expensive and have environmental question marks of their own. They can help, but they will not solve the problem.
Nuclear, it seems, is a much better bet, but the government as yet cannot bring itself to admit this. Its updated energy strategy, released earlier this year, said “we do not rule out the possibility” of new nuclear power stations, but noted that “the current economics of nuclear power make it an unattractive option for new generating capacity and there are also important issues for nuclear waste to be resolved”.
But higher oil prices, if sustained, change the relative economics of nuclear power. The industry is also getting better at cleaning up sites. Only this month the UK Atomic Energy Authority announced a reduction of £1.5 billion (from £6.3 billion to £4.8 billion) in the decommissioning costs of existing plants at Winfrith, Harwell, Windscale, Dounreay and Culham, and cut the end-date for decommissioning by up to 35 years. Things are changing in a way that will make the nuclear option hard to reject.
That is also true on a global scale. Even a carbon man like Odell predicts a rise to 30% in the portion of energy from non-carbon sources, including nuclear.
A recent interdisciplinary study from the Massachusetts Institute of Technology (MIT), The Future of Nuclear Power, noted that nuclear faced four hurdles: costs, safety, proliferation risks and waste. But it also suggested that work should proceed on overcoming these problems, notably by developing the technology known as the once-through fuel cycle, because of the contribution nuclear could make to reducing the global warming that would otherwise occur. There were, it also concluded, plenty of uranium resources available at reasonable cost.
But the MIT report also underlined the scale of the challenge. Nuclear currently supplies 17% of world electricity. To increase that share even modestly, to 19% by 2050, would require a near-trebling of nuclear capacity. Put another way, between 1,000 and 1,500 large nuclear power stations would have to be built worldwide.
Gaining public acceptance for such a programme presents an enormous challenge; protecting them from terrorists another. But it has to be done. The world faces a choice between chronic energy shortages and allowing a bigger role for nuclear power. And it is not one that can be ducked for much longer.