Lord Ronald Oxburgh is currently Chairman of the Carbon Capture and Storage Association and serves in an advisory role to Deutsche Bank and McKinsey on energy and environmental matters. He is a Fellow of the Royal Society and the Royal Academy of Engineering. He retired as Chairman of Shell in 2005. He is a former President of the Geological Society and has also served as Head of the Cambridge Department of Earth Sciences, President of Queens’ College, Chief Scientific Adviser in the Ministry of Defence, and Rector of Imperial College. He entered the House of Lords in 1999 and has chaired the Science and Technology Select Committee.
Shale gas and tight oil have certainly altered the energy landscape in North America, but the full effects have not yet been seen. Because gas exports from the US are constrained by the shortage of liquefaction terminals and political antipathy, there is a gas glut. Domestic gas prices are unsustainably low and there has been little effect on the international market. As soon as exporting facilities are built domestic prices will rise perhaps from $3 to $7 and there should be downward pressure on LNG prices for SE Asia.
The main advance that could affect global energy markets would be cost-effective energy storage technology. In many parts of the world there are abundant sources of renewable energy but they are mostly intermittent and are often not available when needed. An intermittent source supported by a good storage system would be equivalent to a conventional power station and could meet demand as required.
The political crisis in the Ukraine clearly introduces a degree of uncertainty into European energy supplies. However, Europe is fairly diversified in its energy sources and there is an effective pan-European electricity grid. Currently there is a mix of nuclear, coal, renewables and gas. Some of that gas comes from the North Sea and some from Russia via the Ukraine. Interruption of the latter supply would certainly be felt but would not be catastrophic. The lesson for Southeast Asia is that those countries that depend on energy imports should both diversify their suppliers as far as possible and do whatever they can to develop indigenous resources.
The contribution from renewables to the UK energy mix has certainly increased rapidly in recent years. There are two important considerations. The first is near term cost. By comparison with electricity generation by fossil fuel most renewables look expensive and commercial developments will not happen without some kind of financial or taxation incentive. However, once the investment has been made, for the next 25 years or so there will be only the cost of capital and minimal maintenance costs while over the same period fossil fuel prices are expected to continue to rise. The expectation is therefore that they represent a good long term financial investment as well as increasing energy security.
The second consideration is intermittency which is a feature of wind and some other renewables. As the proportion of intermittent renewables on the electricity grid increases, provision has to be made to balance the grid either by importing electricity at short notice through interconnectors or by using hydropower or fossil fuelled power stations locally.
The opportunity for renewables varies from place to place and so is essentially local. Some countries have good wind, while others have tides, waves or geothermal, or have good opportunities for hydropower. In tropical countries with abundant rainfall and ideal conditions for rapid plant growth bio-reactors, producing bio-methane may be the way forward.
Countries have reacted differently to the Fukushima incident. I think that it is now generally accepted that the disaster could have been avoided; the failure was human by not implementing contemporary safety standards and practices. The main argument for nuclear power is that it offers a low carbon energy source of base-load electricity; fuel can be bought upfront for the lifetime of the reactor and that it is not sensitive to external political or economic pressures. In that sense, it is similar to renewables in so far as once the substantial initial investment has been made costs are then fixed for the life of the system. The UK certainly sees nuclear as an essential part of the future energy mix.
There is now considerable international interest in small modular nuclear reactors that could be largely factory built, and operated either locally in small groups or centrally with a combined output of a conventional power station. The loss of economies of scale would be balanced by the speed of construction, more flexible operation and the more limited effect of any malfunction. Such reactors might be fuelled by thorium rather than uranium. World resources of thorium are significantly greater than uranium and there are safety advantages in operation. However, thorium reactors require significantly more development before they become a practical alternative to uranium.
In general, it is expensive to distribute energy, whether it is the fuels that are moved or the electricity that they generate. This means that although China will import gas from Russia, closer energy connectivity between Europe and Asia at present is likely to be restricted to technology. Europe has experience in incorporating renewables into large power grids and may play an important role in developing small modular nuclear reactors.