Will the oil shock translate into "banker shock..."?
I was just about to write about the soaring oil price, due mainly to the turmoil in Libya and other oil-producing countries, along with the threat of revolt spreading to Saudi Arabia, when an email came in from Jeremy Leggett, the famous oil man turned solar guru.
Here in Britain, the last few weeks in the renewable energy community have been dominated by the Coalition government’s decision to have an early review of the FIT – due to its unpredicted success. In what other area of policy, I wonder, is success punished like this? Certainly it’s not hard to think of other countries, notably Spain, Italy, France and Germany, that have also reviewed and changed their FIT, due to “excessive demand”.
But in policy terms, it seems counter-intuitive, that is, against common sense. Your classic no-brainer. In a nutshell, if we want to reach our renewables targets, the success of the subsidy should be shouted from the (solar) rooftops. Instead, with the price of Brent crude now at $116 a barrel, the talk here is of cutting a planned petrol tax increase so drivers do not suffer.
Without getting into the issue of largely hidden subsidies to fossil fuels, I think we can all see the irony of punishing success, defined in this case as investment in renewable energy.
So what does Jeremy say?
He quotes UK Secretary of State for Energy Chris Huhne who has now warned of a 1970s-style oil shock. “I fear he is wrong,” says Jeremy. “In the two oil shocks of the 1970s, oil flow rates could be lifted after the respective political crises. This time there is real risk that they can’t, for much longer. The peak oil debate is about both ‘below ground’ (geological) and ‘above ground’ (geopolitical) considerations.”
That is, the oil is running out in terms of available, easily exploitable sources, and in terms of countries willing and able to pump enough to export. We all know of the often dire environmental problems created by shale oil and tar sands extraction. In comparison, concerns about the noise that wind turbines might make, or their way of changing the look of a hillside, tend to pale.
According to Jeremy, the UK Industry Taskforce on Peak Oil and Energy Security has been appealing to the UK government for co-operative contingency planning and proactive risk-abatement for three years. “We remain desperately keen to work with the UK government,” he says. “The government is belatedly rushing out a plan to wean the UK off oil this week.” Indeed, Huhne spoke of getting Britain off the “oil hook”.
Jeremy wants a transformation, a “road to renaissance”. “We cannot responsibly afford simply to hope for a comfortable outcome on the peak-oil risk-issue any longer. We all need to be drawing up contingency plans, and taking whatever proactive measures we can.”
Most important, he says: “For businesses, there is now no longer any excuse for following “business as usual” five year business plans, given the pervasive direct and indirect role of affordable energy costs in those plans.”
As business includes banks, venture capital and private equity, the fact is that renewable entrepreneurs constantly come up against the “business as usual” argument, disguised, of course, as return on investment, the dreaded ROI. With capital intensive technology characteristic of the sector, every renewable entrepreneur has to operate in a business as usual environment. How many have been told: “Well, George, your new device is interesting – and expensive. But we are concerned that the average temperature of the planet could rise by 2° C by mid-century. So we are happy to provide the money you need.”
Maybe this dual oil shock will encourage the financiers to ask which planet they actually inhabit – and to invest in it.
Posted 08/03/2011 by Elizabeth Block
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