[Saturday Special Report]
by Jessica Cheam, Feb 21 2009
Once the domain of dreamers, the development of clean, green energy is now more critical than ever
NOT so long ago, talk of “green” renewable energy was largely the domain of dreamers, hippies and assorted crackpots.
Harnessing the energy of the sun, the wind and the tides, for instance, sounded wonderful in principle, but any realistic person knew it was far from viable.
The same profound scepticism had long greeted notions that the global climate was inexorably warming as a result of man-made carbon emissions.
But 2008 may well go down in history as the year this mindset was cast aside for good by key decision-makers – in both governments and businesses worldwide, including, perhaps most significantly, giant global oil companies.
It was the year crude oil prices rocketed to record highs as fears over energy security gripped many nations. At the same time, the science of climate change became far more widely accepted and many started dubbing the 21st century the dawning of an “age of renewables”.
For decades, it had been business as usual for the “old” energy industry, with just the occasional fleeting crisis.
The same had been the case for ordinary consumers – long lulled into taking instant energy for granted.
Flick a light switch and a light comes on. Turn the key in the car ignition, and the engine purrs into action.
Relatively cheap oil, coal and gas have enabled the energy sector to help global economies drive the computing, dot.com and biomedical booms of recent decades.
But now the energy sector, rocked by these uncertainties, has found itself to be the “next big thing”, if only it can reinvent the way mass energy is produced.
Already, venture capitalists, including big-time investors who played a key role in previous booms, are aggressively driving investments in renewables – global titans such as Google founders Larry Page and Sergey Brin and Sun Microsystems founding chief executive Vinod Khosla.
An industry long besmirched by images of dirty smokestacks and crippled supertankers spewing oil into the oceans has suddenly become cool and sexy.
The new face of energy today features idyllic scenes of sun-powered panels and wind-powered turbines.
Investment in this fast-emerging sector, reports British research firm New Energy Finance, stood at an estimated US$155 billion (S$236 billion) last year, up 44 per cent from 2007, despite the ongoing global financial and economic crisis.
From 2004 to 2007, investment surged a staggering five-fold – a rate unseen in any other industry – from US$33.4 billion to US$148.4 billion.
The underlying reasons for this energy renaissance lie in the fundamental changes that have profoundly affected the industry in recent years.
Last July, oil prices soared to a record US$147 a barrel, fuelling inflation in economies worldwide while consumers and businesses battled rising costs. Prices have fallen a long way since, to about US$40 a barrel, but analysts agree that much higher prices will inevitably return.
With this in mind, governments the world over were jolted into facing the reality of their vulnerable energy supplies.
Dovetailing with this is intensified pressure for the world to take action to mitigate climate change. Awareness of the associated environmental and geo-political problems were heightened by catastrophic natural disasters such as Hurricane Katrina in New Orleans, Cyclone Nargis in Myanmar, and other extreme weather conditions around the globe.
The unprecedented heat and dryness that set the scene for Victoria’s recent deadly bush fires was an extreme event anticipated by climate change experts.
In the face of these challenges, even previously vetoed energy sources in Singapore, such as nuclear power, have recently been put on the table. Solar energy has also taken off to a significant degree and has been identified as one of the emerging pillars of Singapore’s economy.
The energy challenge
THE cold, hard truth has dawned on the world – oil can no longer be relied on to be cheap and the era of unbridled economic growth that comes with it is over.
EnergyAsia.com editor Ng Weng Hoong says oil prices of about US$200 a barrel are on the five-year horizon.
Easy oil, he says, is no longer easy to find. The International Energy Agency reports that production at global oil fields will decline faster in the years ahead, putting pressure on future supplies.
Today, the world uses about 245 million barrels of oil-equivalent energy daily. This is set to double by 2050.
Oil giant Royal Dutch Shell has summed up the world’s energy challenges in what it calls the “three hard truths”.
First, the surge of energy demand, especially from economic giants China and India; second, the decline of easy oil and gas, just as the demand trend is growing; and third, the need to reduce greenhouse gas emissions even as the demand and production of energy must increase.
This “trilemma”, says Shell chief scientist Sergio Kapusta, is likely to result in one of two scenarios.
One is a “scramble”, whereby countries rush to secure supplies such as coal in their own interest. In this scenario, carbon emissions are not addressed.
Such high carbon growth, says former British Treasury economist Nicholas Stern, will only prove to be self-destructive, partly through energy prices but also through the more hostile physical environment it creates.
In this situation, the probability of global temperatures rising by 5 deg C by the end of the century is about 50 per cent, he says. This will “rewrite where we can all live, how we live our lives” and will involve the mass movement of populations, likely billions of people – leading to global conflict, he adds.
For a low-lying island like Singapore and many others, this scenario is a grim one. Last November, Minister Mentor Lee Kuan Yew warned of “deep trouble” ahead if major global economies do not start taking climate change seriously.
Fortunately, there is a second possible future – what oil major Shell calls the “blueprint” scenario – whereby energy supplies and environmental concerns are addressed, and governments set global standards in energy efficiency and also place a price on carbon – that is, where carbon polluters have to pay their way.
The resulting energy landscape, which would promote clean energy and carbon capture and storage (CSS) underground, for example, would lead to a more stable, less hostile world, says Dr Kaputsa.
Tectonic shifts
THE world’s pressing energy and climate challenges have sparked a nascent revolution to change the way the world works, how people consume, and how firms do business.
The question, say analysts, is whether the world will adjust quickly enough.
One only has to look to the most visible, “Big Oil” companies such as ExxonMobil, Royal Dutch Shell and BP to see the effects of change. The “supermajors”, as they are dubbed, have long struggled with image problems – consumers accuse them of profiteering when pump prices are high, while environmentalists accuse them of harming the environment.
In the past, any new clean technology that loomed as a threat to the interests of the supermajors was effectively quashed. Mr Ng cites the case of the electric vehicle developed in the United States in the 1970s, which was eventually shelved.
Today, these “big energy companies are indeed evolving and in some cases scrambling to meet the realities of a changing political world”, observes United Nations Environment Programme executive director Achim Steiner.
The time for questioning the science is over. Now, it is the call to action, he says.
Mr Steiner told The Straits Times that earlier this month in Texas, “senior oil company executives, including once long-standing opponents of climate action such as Exxon, were discussing whether carbon trading, carbon caps, or a carbon tax was the best way forward — not whether climate change is happening but how best to respond”.
Some, such as BP and Shell, were ahead of the game in acknowledging the need to address climate change in the late 1990s, while others – Chevron, Total, ConocoPhillips – came on board later.
Even Exxon, which has been routinely accused of funding some groups that refute climate change science, is said to have discontinued such funding and has climbed aboard.
“Public perception,” says public affairs manager William Cummings, “is important to us…Exxon’s approach to the challenges it faces is driven by discipline and sound science and sometimes…is misunderstood by some members of the public.”
Almost all the majors now have portfolios that include a whole range of clean energy: Shell is in hydrogen; Chevron in geothermal, which harnesses hot underground water; Total in biomass, such as agricultural waste; and BP in wind.
Others such Exxon and ConocoPhillips, conspicuously absent in the renewables landscape, have chosen to focus on what they know best, investing in CCS or fuel and vehicle efficiencies, for example.
Getting these firms to work to a common goal is important, says Singapore Environment Council executive director Howard Shaw: “They are a sector that has been driving efficiency in energy for the longest time, and are the ones with the big bucks which can fund research.”
Business, not passion
BUT of course, the supermajors are only part of a bigger picture.
All players – from national energy firms to governments start-ups and even consumers – have a role to play, says MrKhosla, a renowned venture capitalist who now heads Khosla Ventures.
Technology will be key to helping the world write its new energy future, and it’s not just energy that must be revolutionised, but also everything from infrastructure to consumer appliances.
However, this must be achieved at a reasonable or “Chindia price”, where technology solutions are cheap enough to be adopted on a large scale, he adds.
And of course, such projects need to make money. After all, it’s business. “We need to pay attention to economics, not just be green fanatics,” he says.
He identifies the polluting industries of oil, coal, steel and cement as the ones with the most potential to be revolutionised by radical new technology.
“Companies like Exxon are right that we need a disciplined, economically justified approach to renewables,” says Mr Khosla. “But where they are wrong is in assuming renewables cannot be justified economically. They assume very little innovation. I believe that with enough R&D and innovation, some but not all of renewables can be cheaper unsubsidised, than fossil fuel-based power – if we have a price on carbon.”
Why it matters to you
THE subjects of energy and the environment are hardly of pressing interest – especially in the midst of a serious global recession. Many might wonder: What’s it got to do with me?
Says BP Alternative Energy chief executive Vivienne Cox: “We are at a decision point. And depending on how people react, and their individual choices, we can either go backwards or forwards.”
Head of the Intergovernmental Panel on Climate Change, Dr Rajendra Pachauri, also the 2007 Nobel Peace Prize winner, cites high energy prices, food crises, massive population shifts and global conflicts as problems that will affect everyone if the world does not respond to the call for change – whether in the products we buy, or the votes we cast.
And even though survival might be the top priority in this economic crisis, and money into renewables is faltering, the opportunity to invest in a sustainable energy future is staring at us in the face, DrPachauri says.
British Treasury economist Lord Stern warns that our planetary crisis is bigger than our economic one.
Former British prime minister Tony Blair, at the recent World Energy Future Summit held in Abu Dhabi, told reporters that the world’s current economic woes should not be “an excuse for inaction, but a reason for acting”.
The year ahead is set to be a crucial one in the history of mankind – especially as world leaders are due to meet in Copenhagen at the end of the year to ink a monumental global deal on the world’s energy future and climate change.
It is now, says Mr Blair, that as our thoughts are centred on the economic challenge that we must resolve to put the world on a path to sustainable growth for the future. “The decisions of 2009 will determine the world of 2029 or 2049. The way to the future must be opened in the present time.”
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