The pioneers of green energy report a ‘gold rush’ mentality as soaring oil prices speed up the search for alternatives
By : Richard Woods At the Lotusengineering works in Norfolk, researchers are working on an idea that seems almost too good to be true: a car that runs on CO2 The very gas that comes out of exhausts and poses the threat of climate change could, they believe, be extracted from the atmosphere and used as a source of synthetic fuel. Hey presto: a carbon-neutral car, planet saved.
From theory to practice is a bumpy road, of course, and Mike Kimberley, chief executive of Group Lotus, readily admits that some alternative fuels “could be more easily implemented than others”. He is optimistic, however, and determined to make Lotus a “world leader in green transport engineering”.
These days even diehard petrolheads know that in the long run there is no choice but to find an alternative to the black gold that has lubricated the world for more than a century. All sorts of initiatives for clean, green and renewable energy are being supercharged by oil prices that hit a new record last week of $146 a barrel – and may well go higher.
Among mainstream analysts, predictions of the price reaching $200 are unexceptional. Last month Gazprom, the Russian oil giant, suggested it would hit $250 next year. The maverick energy guru Robert Hirsch, who forecast the present oil squeeze, has suggested the price could reach $500 a barrel within three to five years.
Gas prices are also soaring and coal, though cheap and plentiful, is one of the worst emissions. sources of CO2 What is bad news for businesses and consumers, however, is good for investors in green energy. Vast sums of money are pouring into technologies that until relatively recently were the preserve of niche businesses and environmental campaigners. This year should see a record £73 billion or more invested in “clean technology” despite the credit crunch, according to a report published last week by the consultants New Energy Finance for the United Nations.
“The green energy gold rush is attracting legions of modern-day prospectors in all parts of the globe,” said Achim Steiner, head of the UN environment programme. Dotcom entrepreneurs, Wall Street financiers and venture capitalists of every hue are piling in.
This 21st-century “green Klondike” stands in stark contrast to the fortunes of ageing icons of the oil age, such as the US carmaker General Motors.
Until recently the biggest vehicle manufacturer in the world, GM is in the middle of an enormous, possibly fatal, slow-motion crash. It has been running low on gas for some time, losing $51 billion in just three years. Last week one of the wheels fell off as it axed four plants that build thirsty sports-utility vehicles and trucks. The company’s outlook is so poor that the investment bank Merrill Lynch has warned that bankruptcy is “not impossible”.
These tectonic shifts are driven in large part by the surging development of China and its 1.3 billion people. While the demand for oil in most western countries has flatlined or even declined over the past 12 months as economic conditions have worsened, in China it is powering away. This demand, and for other commodities, is driving up prices – but also spurring investment in technologies that might unlock a new era of clean, affordable energy.
It prompts several questions: are consumers finally beginning to change their habits? Will alternative energy sources become economically competitive? And could China’s thirst for oil in fact save the planet?
That high oil prices are changing consumers’ habits is clear. In the US the latest figures show that American motorists drove 1.4 billion fewer miles in April than in the same month last year. It was the sixth consecutive monthly drop. Bus and train use has jumped 10-15%.
In Britain similar concern is evident. Petrol sales are down and an AA survey shows that 48% of drivers are considering cutting out short journeys by car and 62% would consider buying a more fuel-efficient model.
Last month Toyota sold its 25,000th Prius in the UK and the hybrid car, powered by petrol and electricity, is in such demand that buyers sometimes face waiting lists, depending on colour and specification. Worldwide, Toyota has sold more than 1m Priuses.
Michael Meacher, the former environment minister, is one of those being spurred into action. His home is heated with oil, and at $146 a barrel it’s time to change. “I looked into wind turbines, which are fashionable, and solar panels, but neither would really work for me,” he said.
“So I’m installing an air-heat pump and a woodchip burner.” The pump will bring heat from the air into his home rather like a fridge in reverse.
Consumer action is also illustrated by Rosemary Randall. Three years ago she founded Cambridge Carbon Footprint, a volunteer group that spreads the message of greener living. It offers to measure people’s carbon footprint for free, explains how to reduce it and advises on deploying renewable energy technologies.
“We are just coming up to measuring our 2,000th carbon footprint, and we think that as a result of coming on our courses people drop their carbon emissions by about a ton a year,” Randall said. “People who come to our groups go on to facilitate other groups. It’s a cascade system.” Juliet Davenport, chief executive of Good Energy, a niche company that supplies consumers with electricity from renewable sources, said: “A lot of people want to be green but haven’t reallyfound it economically necessary.
“I think the urgency is there now. Our website hits are going up 10-15% a month.”
Vital though such local consumer interest is, for renewable energy to become mainstream will require huge investment. That step change now seems under way after funding for “clean tech” surged 60% last year.
Although the credit crunch dented the figures earlier this year, they have rebounded and the UN believes global investment will grow to £225 billiona year by 2012. In Germany, the government believes it will be bigger than the car industry by 2020.
Among those searching for change are the Google billionaires Sergey Brin and Larry Page. Through Google.org, a philanthropic arm of the company they founded, they have committed £42m to developing solar and wind power, plug-in hybrid cars and other ideas. One of their aims is to make “RE<C” – shorthand for renewable energy cheaper than coal. Elon Musk, co-founder of PayPal, the internet payment system, is the driving force behind the Tesla, a high-per-formance sports car powered entirely by electric batteries.
Vinod Khosla, one of the founders of SunMicrosystems, is an advocate of certain types of biofuel as the answer to new energy for cars. And the veteran tycoon T Boone Pickens recently announced a deal with General Electric to build the world’s largest wind farm in the heartland of the US oil industry – Texas.
In the UK the venture capitalist Martin Wright and mechanical engineer Peter Fraenkel are leading the way in tidal power. Their company Marine Current Turbines installed the first commercial-scale tidal power system in the UK and it should start generating this summer. If it works as planned, the company intends to develop an entire “tidal power farm” off the coast of Anglesey by 2012.
For the moment wind power is the favoured technology, since it is proven, simple and enjoys political support. In the longer term solar cells will come to the fore, according to a leading international investment company specialising in clean tech.
“At present wind is cheaper,” said Alexander Rohde, a spokesman based in Switzerland for Good Energies, which has an annual investment budget of £250m. “The question is, over the long run can you make it cheaper than it is? We do not see over 20 to 30 years that there will be technology to bring the cost down. On the other hand, the solar cost per watt is coming down quite steadily.
“In the US they are asking where the next great technology will come from. We are not sure that is needed. The technologies are there in solar and wind – the point now is to get the cost down.”
Jeremy Leggett, a long-standing proponent of solar photo-voltaic power (PV), feels vindication – and despair that the British government is still doing too little. “It’s now inevitable, and I used the word advisedly, that solar electricity is going to be cheaper than electricity from gas and coal,” he said. “It’s straight manufacturing economies of scale, while we all know what is happening to oil and gas.”
Bulky panels that used to be bolted on are giving way to integral thin-film technology. Solar-century, a company founded by Leggett, now supplies some builders with solar tiles that fit seamlessly onto roofs alongside ordinary tiles. “The technology is so efficient now it just needs grey light to work,” said Leggett. “The future can be really different from the way we have done things in the past.”
US researchers are manipulating materials on the nano-scale to keep sunlight “bouncing around” inside solar panels to boost the amount of electricity produced. They reckon this could bring the cost per watt down to about £1 – much closer to the cost of electricity from coal and without the emissions.
So far, however, the UK government has concentrated on wind, at the expense of solar. “The government has just put out a consultation which is supposed to be a green revolution. It’s pretty much all about wind,” said Leggett. “If you look at the figures, they have solar PV producing less than 0.5% of UK primary energy 12 years from now. It’s a catastrophic failure of imagination.”
From tomorrow Gordon Brown and leaders of the other main nations will gather in Tokyo for a G8 summit. On the agenda are oil and food prices, and climate change. Though many observers would like to see an agreement to cut carbon emissions by 50% of their 1990 level by 2050, the scale of the challenge is enormous.
At present renewable energy sources make up just 1% of the world’s primary energy consumption; gas accounts for 21%, coal 25% and oil is the single biggest energy source at 35%.
When it comes to electricity, 40% is produced from coal and a further 20% from gas; hydro power produces 16% and nuclear 16%; renewables again account for just 1%.
To escape our reliance on oil and to create energy that is clean will require more than the endeavour of private investors and individuals. It needs political courage.
Lord Browne, European managing partner of the Carlyle investment group and former chief executive of BP, recently argued that the necessary knowledge and skills are available, but one other factor is key, he said: “It is one thing to know what needs to be done and quite another for the details of those policies to be worked out, enacted and enforced.
“Getting from the former to the latter requires political leadership. I believe this remains today’s determining step.”
There is an added motivation for western politicians. The spike in oil prices is handing yet more power to oil-producing nations, some of them hostile.
To reduce the dependence on these countries is becoming more of a geopolitical priority.
Innovators, investors and entrepreneurs are optimistic change can be achieved with political backing. Michael Liebreich, chairman and chief executive of New Energy Finance, said: “The high oil and gas prices are certainly helping to drive that investment, but investors are still looking for stronger signals on policy because they worry about what will happen if, or when, the prices recede.”
In the right political environment, even hard-nosed bean counters are optimistic. A report by Price Waterhouse Coopers last week reckoned the change to a low-carbon future can be achieved by 2050 at the cost of “one year of global GDP growth . . . ie, reaching the same level of GDP in 2051 as might otherwise have happened in 2050”.
It seems a modest price to pay for what Liebreich calls “nothing less than the complete restructuring of the world’s energy industry”. Are you listening, Mr Brown.
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