A Note by the Director (Ditchley 2003/13)
12-14 December 2003
Over the weekend of 12-14 December we looked at one of the great issues of the coming century: how to meet growing global needs for energy. We were fortunate to have around the table scientists, technical and other experts as well as those responsible for framing policy at a national and international level, from a wide range of countries. Our Chairman was also able to draw on many years of experience not only of the technical issues but also of policy advice.
Before we looked in detail at carbon, renewable and nuclear sources of energy we considered the general problem. Energy, we were advised, was essential to our civilisation. Without sufficient energy, growth was stunted. 1% growth in an economy was roughly the equivalent of a 1.5% increase in energy supply. We now faced the problem of increasing demand world-wide at a time when it had become generally accepted that the environment and energy use were inextricably linked. There also appeared to be a consensus in many industrialised countries that market policies should apply to energy. The UK had led the movement to deregulate the energy market. But if we were to rely on a price mechanism we should acknowledge that it was much more complex than finding the optimal price for a single commodity. One of the biggest problems was that currently no cost was attached to the emission of carbon dioxide into the atmosphere. We acknowledged that it was hard to make a rational response to fears about energy changes. A large majority of people seemed convinced of the link between carbon emissions and global warming but few were apparently prepared to change their lifestyles. It was suggested that in addition to thinking about a world without oil we might wish to stop using oil for environmental reasons. There was also a risk that oil might run out before alternatives had been identified or developed, and finally there was the problem that a high proportion of the known oil reserves were located in areas of political instability.
We looked at some of the major drivers for change and identified global population growth which some thought synonymous with growth in energy consumption, together with a growing gap between the rich and poor nations which 25 years ago had been 25:1 and was now 40:1. Two of the main centres of population growth were India and China (both with abundant supplies of energy in the form of “dirty” coal). We asked ourselves what would happen if, and when, Africa began to approach Indian and Chinese levels of development. Crises such as the oil price shock in 1972, had, in the past, caused major changes to behaviour in consuming countries, but the effects had been short-lived. Some thought that the current US Administration did not apparently believe in climate change, had no wish to curb consumption of carbon fuels and was sceptical about multilateral solutions. How could we persuade the USA to join with the rest of us in tackling this problem? We were told that some change in the USA was starting but that sustained political action was unlikely. The current US Administration would not back down on Kyoto. Little progress had been made with the Energy Bill recently before the House.
At several points in the conference we discussed the role of education as a way to change social attitudes to the use of energy. How much longer would it be acceptable to fly to the Maldives for a holiday or expect, all the year round, to see green beans or strawberries from Kenya and other countries on the shelves of our supermarkets? There was also the problem of timescales. The experts hoped that it might be possible to stabilise greenhouse gasses in 40 years, but 5 years was already a long time in politics. Nevertheless we were told that current energy use did not meet our goals of sustainable development. In looking for solutions we touched on renewables, and were told of an energy foresight exercise which was looking up to 50 years ahead, in particular at exportable technologies developed in partnership with developing countries. In China, we were informed, central planning was showing itself capable of taking major decisions for the long-term. Technologies were being purchased and developed to enable coal to be burned cleanly. We speculated whether an inexpensive way of generating hydrogen in the next 30 years might be found, and what roles fission and fusion might play?
In looking in more detail at the use of carbon fuels we considered their pricing, their geopolitics and the potential of a crisis, education and tax incentives to move us onto a path of a low or no carbon based system.
We focussed more closely on the “end of oil” and concluded that there were sufficient reserves to meet the medium term (undefined) requirement and that because of the difficulty of its substitution for transport, oil would continue to be a major component of final energy consumption. Access in difficult places might be more of a problem and at $30 dollars a barrel we saw scope for some “cross-over” to alternatives such as petroleum-derived liquid fuels. Some of us saw a chain of development of fossil fuels that derived liquids, to a system which produced hydrogen with carbon sequestration, but with liquid fuels bearing their true costs, including climate change. We considered the role of markets and noted that on their own they would not deliver public or social goods. Governments would have to set the framework within which the market would act. We were, however, warned against over-detailed intrusion by Governments. Although dirigisme might make sense in China it was not necessary in developed countries where it would be better to regulate the outputs and seek a combination of markets and regulation to achieve the desired outcomes.
Natural gas was thought not to face the same concerns about depletion as oil. Because natural gas was not fungible, both the UK and North America were looking to Liquified Natural Gas (LNG) to help meet future demand, notwithstanding safety concerns about its transportation. Coal was also seen as a long-term energy source but with carbon sequestration as a vital enabling technology. We needed to find a way safely to dispose of the resulting carbon in deep oceans or aquifers. China was cited as an example of a country which was actively seeking solutions to these problems and, indeed, developing technology which could, with advantage, be used in the West.
In all this we looked at the questions of political stability, particularly in oil producing nations – we speculated about the effect of Russia’s recent emergence as an important oil supplier and gave some thought to education, and fiscal incentives. We identified future demand in India and China as possibly the key issue. Education of consumers, particularly in the developed world, was thought by some to be of great importance. Others were less confident about the chances of changing personal behaviour. At the level of individual states it was thought that developing countries would be driven by their immediate needs rather than future concerns about the climate, and were anyway unlikely to be persuaded by lectures from developed countries who did not themselves follow their own advice. Some thought that developing countries needed help with capacity building and structures of good governance to make full use of any technology transfers. The “educationists”, however, maintained their view and extended it not only to consumers but also to politicians and policy advisers. In terms of sending the right price signals, emissions trading was seen as a first and important step. Regional or global carbon taxes, advocated by some, but were thought to require unprecedented fiscal co-ordination and to be difficult to reconcile with the needs of developing countries. This was an issue on which the developed countries would need to make the first moves.
A number of policy recommendations were put forward for carbon fuels. Governments were invited to lead by example in ensuring that their own behaviour was compatible with the advice they gave to other consumers. Oil producing countries should engage in R & D for “clean oil technologies” and even consider carbon emission trading among themselves. Governments should support joint ventures to transfer capacity and technology. There should be R & D tax incentives to focus on alternative transport fuels, technology, road access pricing and above all on carbon sequestration. Air travel might pay towards the pollution it created. Education reform might also help to change attitudes to energy use.
In our consideration of the contribution renewables might make to growing demand we looked in particular at the time-horizon, end-use applications and types of renewables, bearing in mind that much of the energy generated was for local consumption. We thought that the contribution of non-hydro renewables to total energy supply would rise to 7.1% by 2030 and taken with hydro, approximately 14% of global energy supply now came from renewables, a significant contribution by any measure. Expansion in renewables was not just driven by concern about climate change, their use was, we considered, destined to grow because of the need to ensure security of supply. For example, China intended that wind would, by 2020-2030, provide 10% of its needs and hydro was intended to provide a steady 20% of its expanding demand. Scotland planned to have 40% of its energy supplied by renewables by 2040. Wind and hydro were intended to contribute to electricity generation for the grid while solar and biomass had potential for certain niche on-and-off-grid applications.
Looking at the development of wind power in Denmark we identified a number of factors which were characteristic of renewable energy. The first was that it was in competition with networks and systems for fossil fuel energy that had been installed with worldwide investment over a long period. It had, however, become almost a religion in Denmark to invest in renewables. Long-term stable prices had been agreed for wind’s contribution to the grid and sizeable subsidies had also been available. Wind farms had moved off-shore because on shore sites were less popular. The costs of off-shore production were higher but so was the relative efficiency: 35% to 45%. Economies of scale in manufacturing and R & D were bringing costs down to approaching the cost per KW of fossil fuels. There were, however, problems of intermittency and storage. Some four days a year in Denmark were windless which meant that back-up generation needed to be kept in reserve. The same problem of intermittency affected solar power systems and although storing electricity generated from wind in the form of hydrogen or pumping water was feasible, it was also costly. We were, however, told that intermittency was only a problem when renewables supplied a significant proportion of the total energy requirement. 10% might be manageable, 20% might be a problem.
In terms of hydro we were told that Russia’s great hydro storage lakes had affected the local weather but worst of all had had a disastrous effect on agriculture by removing good land from production. For those not used to the scale of operations in China it came as something of a shock to hear that 1.5 million people had been moved to make way for the Three Gorges project. Nevertheless for Brazil and many countries in equatorial Africa, hydro was a significant and growing factor in their energy provision.
We also considered solar, wave and tidal energy, biomass and geothermal sources of energy. All had their uses and could be developed in the future but like all renewables they were subject to a number of factors which inhibited their greater exploitation. First among these was the volatility of oil prices together with rapid technological change which resulted in the postponement of investment decisions. Possibly the most important factor was the failure of fossil fuel energy producers to internalise the external costs of the damage they created to the environment. Overall we saw a need for regulatory frameworks to encourage renewables by such devices as long-term feed-in tariffs and an obligation on utilities to generate a significant percentage of their energy from renewables. It would also be important for local communities to profit from renewables through tax credits, purchase of renewable energy at reduced rates and co-ownership of projects. In the developing world greater use of renewables would depend on mechanisms such as carbon funds and the Clean Development Mechanism established under the Kyoto Protocol.
In considering the future contribution of nuclear power there was a general view that it would be unwise to rule out any energy source. This was particularly the case if it was necessary to move to a lower-carbon economy in the time-scale of a few decades. Fission power was, we considered, a well established technology with the potential for a substantial increase in efficiency and reduction in cost due to material and technology developments over recent decades.
We spent some time discussing the two most controversial aspects of nuclear power : waste and proliferation. On waste we were told that it was possible to reduce the amount of radioactive waste as a result of increased efficiency. One participant commented that fast-breeder technology had been tested and was about 60% more efficient than current fission plants. Nevertheless, it would continue to be necessary to store waste safely over very long periods. This provoked discussion over the possibility of full fuel cycle control and internationally approved storage areas. The Soviet Union used to require all spent fuel from the reactors in its satellites to be returned to it for storage. Currently the practice was for all countries to deal with their own waste which was a particular burden for smaller countries without adequate resources. In France there was a major reprocessing industry but there were difficulties over the return of reprocessed rods because of concerns about their safety in transit. The proposal was made that one or two international storage sites might be approved to which waste would be taken. If properly and securely run, such sites would probably attract investment and could become financially viable operations. Overall, it was suggested, public concerns would not be allayed by the nuclear industry adopting a defensive, reactive approach. The Government and the industry should put forward the case for nuclear power, including waste disposal. The public should be engaged in the debate.
In looking at the Non-Proliferation aspects, it was proposed that a strengthened regime of international action was required to ensure that the NPT provisions were observed. For example, a regime of strong sanctions might be automatically applied to any state announcing its unilateral withdrawal from the NPT. Some thought would also need to be given to research reactors – the source it was claimed of the enriched uranium for India’s nuclear weapons, and also to uranium used in medical procedures. A “dirty” bomb could be based on such uranium. It was pointed out that Canada, which supplied 90% of the uranium for medical purposes, required the return of all such material. Safety and efficiency were also considered. The advanced Candu reactor was mentioned as were the passive-safety pebble-bed reactors from South Africa which were designed with safety and a modular build in mind. Realistically, however, there was no absolutely safe option, but that applied equally to carbon based generation. The risks needed to be evaluated dispassionately and not on the basis of dogmatic opposition to the nuclear industry. Finally the possibility of a terrorist attack against a nuclear plant was considered. Modern plants which included double walls as a safety feature were considered resistant to such attacks. Attitudes to nuclear power appeared to divide between those developing countries where energy demand was growing rapidly, who were sanguine about its use, and developed countries which were unenthusiastic. A major problem was identified in the retention of the skills needed to build nuclear plants. Lack of investment in the 1990’s had led to a sharp decline in qualified manpower. R & D spend was seen as essential to maintain the skills and interest in the industry. One participant suggested that future energy consumption might broadly divide between fission/fusion for developed countries and gas/oil for developing countries.
We moved on from fission to fusion where the fuels were lithium and a form of hydrogen with helium as the product which is not radioactive. Passive-safety in a fusion plant seems assured since there is very little fuel or energy in a fusion device at any one time and the radioactive hazard of the plant decays on a timescale of years to decades. We were informed that fusion power above 10 MW had been demonstrated and a decision was imminent on a site to build a power station scale device, ITER, on a world cooperative basis. The main problems envisaged at this stage were thought to lie more in the metallurgy and other industrial aspects than in the fusion. However, fusion was unlikely to provide electricity to the grid in less than 25 years. However, China, we were told, was planning on access to fusion-delivered electricity from 2050. It was pointed that, on current estimates, if we wished to move from a carbon to a hydrogen economy (hydrogen being a vector for energy) we would need to doubt electricity supply.
In looking back at the ground we had covered we recognised that we had been dealing with a global problem which required a global solution. But decisions needed to be taken at the local level and would be influenced by a number of cultural and developmental factors. Consumer behaviour was integral to this and attempts, should, in the view of some, be made to influence consumers and thus the demand side of the equation. We did not think there was a “magic bullet”, one solution would not resolve all problems. We agreed that we needed to use existing fuel sources more effectively. But we were faced, in the majority view, by the inescapable fact of carbon emissions affecting the environment. Renewable technologies, although desirable, seemed unlikely to fill the gap created by rising demand and carbon sequestration was not yet a proven technology. It was hard, argued many of us, not to see nuclear fission being a bridge to fusion. But the problem of radioactive waste remained even though international storage sites might be a partial answer. This risk had, however, to be set against the hundreds of thousand deaths annually in China, for example, caused by carbon emissions. Population growth, especially in developing countries seemed to lead to the conclusion that the developed world should, in their own interests, transfer appropriate technologies and also resources to help build civil society and governance to those countries.
In some final comments we reproached ourselves for not having been adventurous enough in our thinking to take in possibilities up to the end of the century. Our society seemed addicted to energy and it was not clear that attempts to change our behaviour would succeed. Demand had doubled over the last 50 years and might quadruple in the coming century. Technologists and scientists would probably lead the way. As an illustration of transformational discoveries, the Lunar Society, founded in 1776, had researched the phenomenon of gravity and over the next 100 years had profoundly altered all our thinking on the force which powers the world: gravity, about which we still knew little. The intense power concentrated in a black-hole the size of an atom would bear consideration.
On this futuristic note we ended in the knowledge that we had been discussing an issue which is fundamental to the future of our planet. It is a question to which Ditchley will need to return to see if our predictions and policy advice have stood the test of time. I am grateful to those who attended, some from some distance, and to our Chairman for the way in which he guided our discussions.
This Note reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.
PARTICIPANTSChair : Professor Ian Fells
Principal, Fells Associates; Professor of Energy Conversion, University of Newcastle upon Tyne (1975-87); Scientific Adviser, World Energy Council (1990-)
Professor Victor M Mourogov
Deputy Director General, Department of Nuclear Energy, International Atomic Energy Agency CANADA
Dr Mark Jaccard
Director, Energy and Materials Research Group, Simon Fraser University (1986-)
Mr Andre Plourde
Acting Assistant Deputy Minister, Energy Sector
Dr Robert G Skinner
Director, Oxford Institute of Energy Studies (2003-)
Mr Murray J Stewart
President and CEO, Iter Canada Host (2002-) CHINA
Professor Li Junfeng
Deputy and Head, China Renewable Energy Industry Association FRANCE
Dr Claude Jablon
Senior Vice-President, Scientific Development, Total
Monsieur Richard Lavergne
Secretary General, Energy Survey Department and Energy, Economics and Mineral Resources Survey Department (1996-)
Dr Francis Perrin
Editor, Arab Oil and Gas, Arab Petroleum Research Centre IAEA
Dr Vladimir Kagramanian
Department of Nuclear Energy IEA
Mr Jun Arima
Head of Division, Country Studies, Long-Term Co-operation and Policy Analysis, International Energy Agency (IEA) SAUDI ARABIA
Mr Adeeb Al-Aama
Crude Oil Coordinator, Saudi Petroleum Overseas Ltd, Saudi Aramco (1992-) UNITED KINGDOM
Mr David Anderson
Chairman of the Energy Board, Institution of Civil Engineers
Mr Brian Anderson
Sir Eric Ash CBE
Chairman, Ocean Power Technology Inc
Professor Michael Laughton
Royal Society Energy Policy Committee
Mr Andrew Levi
Head, Aviation, Maritime and Energy Department, FCO
Dr Valerie Marcel
Royal Institute for International Affairs; Adjunct Professor International Relations and Geopolitics, Institut d’etudes politiques de Paris (2001-02)
Dr Richard Mayson
Technology Director for Reactor Systems, BNFL
Ms Claire Nasir
Mr Stephen O’Sullivan
Co-Head of Research and Head of Oil and Gas, United Financial Group
Chairman, House of Lords, Science and Technology, Select Committee
Ms Siobhan Peters
Strategic Policy Team, Directorate for Strategy and Innovation, FCO
Mr Philip Sellwood
Chief Executive, The Energy Saving Trust
Dr David Ward
Leader, Socio Economic Studies UKAEA Fusion, Culham Science Centre
Professor John Wood
Chief Executive Officer, Central Laboratories of Research Councils
Mr Rob Wright
Director, Energy Strategy Unit, Department of Trade and Industry UK/USA
The Hon Barbara S Thomas
Executive Chairman, Private Equity Investor Plc; Deputy Chairman, Friend’s Provident Plc; Director UKAEA and The Energy Group of The Department of Trade and Industry; a Governor, The Ditchley Foundation UNITED STATES OF AMERICA
Dr Art Cyr
A W and Mary Margaret Clausen Distinguished Professor, Political Economy and World Business, Carthage College (1998-)
Mr Anthony L Gardner
Director, European Industrial Business Development, GE Europe (2002-)
Mr John Riggs
Executive Director, Program on Energy, the Environment and the Economy, The Aspen Institute (1995-)
Ms Sheila Slocum Hollis
Managing Partner, Duane Morris LLP; Chair, Environment, Energy and Resources, American Bar Association (2001-02)
Mr Louis Tomson
Chairman, NanoTech Resources Inc (2003-); formerly: President, Lower Manhatten Development Corporation