ODAC Newsletter - 22 February 2008

This week brings a jump in the cost of oil, with record breaking prices beyond the $100/barrel threshold. We hear conflicting views with regard to the future of fuel security at CERA's annual conference in Houston see Hess chief: Action needed to avoid oil crisis & Critic: Facts bury theory on Peak Oil. A similar battle rages on with Peter Odell's response (Reports of the oil industry's imminent death are greatly exaggerated) to Jeremy Legget's article, which appeared last week (The great fuel folly). We bring you guest commentary on this from Dr. Roger Bentley who will also provide a point by point refutation to Odell in next week's submission.


In the UK this week British Gas announced huge profits raising questions about recent price increases, while the government nationalized Northern Rock and also pointed a spotlight on the business of carbon offsetting with the publication of a voluntary code of conduct. Perhaps a more surprising call for regulation came from major institutional investors in the US see Big oil's enemy within.




Reports of the oil industry's imminent death are greatly exaggerated

I am utterly perplexed by Jeremy Leggett's attempt to foretell the impending demise of the oil industry (The great fuel folly, February 5). Unless, of course, he contemplates such a development as being highly favourable to his Solarcentury company. I am one of the economists who, he claims, "tend not to see the problem". But Leggett seriously understates the ability of the many oil-producing countries to sustain provision of oil and natural gas.

"Why have the big five oil companies cut exploration spending in real terms?" he asks. While he correctly states that Shell and Exxon have had opportunities for making record profits in recent years, he is quite wrong to suggest that they, together with the other major oil-producing companies, "are supposed to be expanding their production". It would not be in their interests to do so, as such action would undermine the market value of oil, and thus reduce their profits.

Countries outside the Organisation for Economic Cooperation and Development, together with the OECD members Norway, Italy and Austria, are now at the forefront of the world's oil and gas industries. Between them they account for almost 95% of proven oil reserves and thus dominate the supply side. They already supply more than 65% of total production, and this figure is set to rise.

And countries outside the Organisation of Petroleum Exporting Countries - such as China, India, Brazil and Malaysia - not only have large proven and probable reserves, but are intent on enhancing production at as high a rate as possible. There is a similar situation in some of the former countries of the Soviet Union - most notably Russia, Kazakhstan and Azerbaijan, all of which are already significant exporters and which have great potential for increased production.

Meanwhile, all member countries of Opec continue to increase their annual production (currently 42% of the world's total), and collectively enjoy a reserves-to-production ratio of over 70 years. Recent high oil prices have created funds to expand Opec members' oil production at relatively low costs.

Leggett's fears are further undermined by his exaggerated view of future demand. Referring to comments by the International Energy Agency, Total's chief executive and a former Saudi Aramco executive, he says that "growing numbers of industry insiders are sounding alarms" about energy supplies. But there are many other organisations that disagree, including Exxon, Opec and the US Energy Agency.

Over the past decade the average annual global rate of growth in oil use has been only 1.5%. This low rate is, moreover, more likely to fall than to increase, given that oil use per unit of economic growth has fallen by 50% worldwide in the last 30 years. This indicates that the current 84m barrels per day of oil use will not reach the 115m barrels per day suggested by Leggett until well after 2030, by which time natural gas may well have become more important than oil.

Meanwhile, proven oil reserves worldwide continue to expand - every year more oil is added to reserves than is used. It is thus a fact that the world is running into oil rather than out of it.

· Peter Odell is professor emeritus of international energy studies at Erasmus University, Rotterdam, and author of Why Carbon Fuels Will Dominate the 21st Century's Global Energy Economy

Guest Commentary: Dr. Roger Bentley

The fundamental reasons that Professor Odell can write a piece like this are four-fold:

1. Data access

Perhaps the main reason for the current ‘oil peak debate’ is the difficulty of getting access to reliable data on how much oil the world has discovered.

There are two distinct datasets:

- Reasonably reliable data on oil discovery are given by the proved plus probable (‘2P’) data held by industry, and by the datasets of the commercial data providers (such as IHS Energy, Wood Mackenzie or Energyfiles Ltd.). Virtually every detailed forecast that uses these data (CERA’s being the only exception I know) sees a peak reasonably soon for conventional oil; and most also see a not-too-distant peak for ‘all-oil’. These include forecasts from PFC Energy; Energyfiles Ltd.; Chris Skrebowski’s calculations (see Petroleum Review of the Energy Institute, London); the German consultancy LBST; the private model of Dr. Richard Miller of BP; the calculations from the University of Uppsala; and the 1995 Petroconsultants study (with subsequent updates independently by C. Campbell and J. Laherrere).

- Very poor data on oil discovery contained in the public-domain data of proved reserves (‘1P data’). As Professor Odell’s piece makes clear, if one examines only the latter it looks as if an oil peak must be many years away.

While the industry 2P data are generally expensive, there are some very useful datasets at fairly modest price. Two co-authors and I have sought to explain why the two datasets are so different (and also how to access industry data) in a recent paper: “Assessing the date of the global oil peak: The need to use 2P reserves”, by R.W. Bentley, S.A. Mannan, and S.J. Wheeler; Energy Policy, vol. 35 (2007), pp 6364-6382. (Please note that copyright of this belongs to the publisher; it must therefore not be copied and put up on a website. The paper is available easily enough via inter-library loan.)

2: Lack of discussion

Curiously for such an important topic, there has been very little useful discussion between the two camps. Such discussion needs of course to have access to the industry data, and this can be hard to achieve without compromising sources. Nevertheless, I and several colleagues have frequently carried such data to meetings with individuals, and to public debates, but it has often proved hard to get people in the other camp to examine the data in any detail.

3. Lack of a good source book.

There is still in my view no complete academic source one can go to read up on oil peaking. This is partly because of the data access problem mentioned above, but mainly because the problem was forgotten for so long (having been covered in many engineering energy textbooks in the 1970s) that few have yet had the opportunity recently to put together an authoritative primer. This will need public release of certain illustrative industry data; a full by-field examination of some countries past peak to make the mechanism of peak clear; adequate reservoir engineering to quantitatively identify past and prospective reservoir behaviour and improvements in extraction techniques; useful aggregate 2P data on the global hydrocarbon resources by type and by likely production profile; and a critical discussion of the various forecasting techniques that are used. Sooner or later such a primer will be written, but to my knowledge it does not yet exist. Perhaps the best current primer is the report by LBST (at www.lbst.de).

4. The strength of the ‘economic view’

This reflects the apparent success of the ‘resources into reserves’ and other economic arguments. Again partly based on the poor public domain data, and to some extent on a misreading of past forecasts, a cohesive ‘economic view’ of oil availability built up since the 1970s (by, for example, Adelman, Lynch, Odell, Watkins and others) that saw any oil forecast that assumed a fixed resource base as being fundamentally flawed. It will take a lot of data, and argument, to un-do the lines of reasoning built up over many years that comprise this ‘economic view’.

Dr. Roger Bentley is a Visiting Research Fellow at the University of Reading's Department of Cybernetics. His areas of research include global hydrocarbon depletion, solar energy, and broader energy issues

Back to top


Hess chief: Action needed to avoid oil crisis

HOUSTON, Feb. 15 -- Oil companies, oil-producing countries, and consumers need to act now to avoid the oil crisis that is coming within the next 10 years, said John B. Hess, chairman and chief executive of Hess Corp.

"It is not only a matter of demand. It is not only a matter of supply…. We need to take steps on both fronts, and we need to start today," Hess told an overflow crowd Feb. 12 at the Cambridge Energy Research Associates' annual energy conference in Houston.

"Given the long lead times of at least 5-10 years from discovery to production, an oil crisis is coming and sooner than most people think. Unfortunately, we are behaving in ways that suggest we do not know there is a serious problem," Hess said.

That's partly because of conflicting viewpoints. "Some say that there is a large endowment of resources and that there is nothing to worry about. Some say that we have already hit peak oil, and there's little we can do. Others say that the rapid development of renewables will fill the gap between demand and supply and reduce our carbon footprint in the process," Hess noted. However, he said, "It is imperative that we change our mindset, our sense of urgency, or the consequences will be severe."

On the demand side, Hess said, "We need to improve fuel efficiency in transportation and increase investments in breakthrough technologies to make fuel cell vehicles a reality." As for supply, the Organization of Petroleum Exporting Countries and non-OPEC producers need to increase long-term investments "to grow production greater than currently planned to ensure we avoid a supply shortfall in the next 10 years and the calamity that would ensue," he said.

"Each of us has the responsibility to act in the long-term global interest rather than short-term self interest so that we leave a more secure world for future generations," Hess said. "Resolving this issue through greater global collaboration can be a model for managing other future shortages, such as water, and benefit the global community. The more interdependent we are, the greater our chances of having a sustainable future together."

Most demand is for transportation fuels. In the US, there is an average fuel mileage requirement of 23.4 mpg for passenger cars and 17.7 mpg for light trucks and sport utility vehicles, "all powered by an internal combustion engine that is fairly energy inefficient, with less than 20% of fuel actually converted to useful energy," Hess said.

The federal government has mandated that fuel economy standards increase to 35 mpg by 2020 and new hybrid vehicles are now on the US market. "But unless there is a major breakthrough beyond these improvements, such as the introduction of a commercially and technically proven fuel-cell car, we should not expect to lower demand," Hess warned.

In the developing countries of the world, the problem is worsening with the fast-growing demand for transportation. Goldman Sachs Group Inc. estimates the number of cars on the road will soar to 500 million in China and 600 million in India by 2050. "That's 1.1 billion vehicles in two countries that 3 years ago had fewer than 20 million cars total—creating an overwhelming increase in the need for automotive fuel," said Hess. Countries outside the Organization for Economic Cooperation and Development now account for 40% of total oil demand and is expected to reach 50% of world demand by 2020.

"Current population of the world is 6.6 billion and is projected to reach 9 billion by 2050. As the population in developing countries grows, the demand for oil for personal transportation will increase, too. In many cases, the political decision has been made to put subsidies on gasoline, which inflates demand even more," said Hess.

Meanwhile, a $20-100/bbl surge in oil prices in recent years has failed to weaken world demand for crude because consumer incomes have grown faster than energy expenditures. "While energy's share of personal spending in the US is 6%, it is still much less than food, which is 14%; housing, 15%; and medical expenses, 17%. In fact, even after the recent increase in prices, gasoline on a per unit basis is still three times less than the cost of Evian water and 10 times less than a Starbucks latte," said Hess. "We are currently consuming 86 million b/d [of crude], and we project that oil demand will continue to grow between 1-1.5 million b/d each year for the next decade, at least. Recessions may interrupt this growth, but only temporarily."

"Since 1980, discoveries have not replaced our annual global crude oil production," Hess noted. "Discoveries are getting smaller and located in more difficult environments, such as the deepwater Gulf of Mexico, Brazil, and West Africa, where companies are now drilling in water depths of up to 7,000 ft and searching for targets that are in some cases more than 30,000 ft deep. Such numbers were unimaginable 10 years ago and speak to the industry's extraordinarily innovative technology to meet increasingly complex challenges to find, develop, and produce crude oil."

There is concern whether non-OPEC producing countries can maintain their supply role of a few years ago. According to Hess, US oil production peaked in 1970. North Sea production peaked in 2000. Mexico peaked in 2004. "Within the next few years, conventional non-OPEC production will reach a plateau. In fact, 60% of the world's oil production is from countries that have already peaked," Hess warned.

Renewable fuels, natural gas liquids, and unconventional oil resources such as oil sands and oil shale "need to be encouraged," Hess said. However, he said, "Their contributions to supply are not material enough to bridge the gap in oil requirements over the next 10 years."

With OPEC now down to 2.5 million b/d of spare capacity, Hess said, "We no longer have the safety margin for supply interruptions and demand spikes to ensure price stability. OPEC, with approximately two thirds of the world's proven conventional crude reserves and one third of its production capacity, certainly has the resource base to relieve the pressure." However, he said, "All oil producers—OPEC and non-OPEC alike—simply are not investing enough today to ensure sufficient capacity to meet oil needs in the next 10 years."

Conservation and climate
Hess said, "We need to make significant progress in conservation. The growing population of hybrids and an overall improvement in automotive miles per gallon is helpful, but we need to spend more money on research to make hydrogen fuel cell vehicles a commercial reality so that the average fuel economy of a new passenger car could increase to the equivalent of 80 mpg or better. Anything we can do in terms of fuel efficiency in transportation would have the important added benefit of helping to solve another critical challenge the world faces—climate change."

He said the US "with 5% of the world's population and 25% of its oil consumption needs to take the lead by continuing to encourage fuel efficiency and improvement in mileage standards while driving for a technological breakthrough. With the US setting the example, hopefully, developing nations could also do their part by moving away from subsidies that send a false signal to their consumers about the real cost of energy and artificially inflate demand."

Hess said, "We must increase investment. In 2007, global E&P investment was estimated to be approximately $350 billion, having grown about 15% each year over the previous 5 years. This increased investment has helped offset field declines and added new production." But given the long lead times from investment to production, he said, "The current sum that both OPEC and non-OPEC nations are investing is far below what is needed to ensure sufficient production for our future."

With oil demand growing 1-1.5 million b/d, global crude supply capacity will fall short of global demand between 2015-20. "While the International Energy Agency predicts global demand to average 98.5 million b/d in 2015, based upon current behavior, I do not see how we will meet this projection," Hess said.

Another challenge is the growing cost and reduced availability of equipment, supplies, and services needed to increase production. "All producers have felt the impact of the rapid rise in costs, as rates for steel and offshore drilling rigs have skyrocketed. For example, a deepwater rig that cost $100,000-200,000/day in 2002 today costs $500,000-600,000/day—if you can find one available. Even if the supply industry were able to increase its investment, the significant lag time would still mean a shortfall in terms of meeting future requirements," said Hess.

There also is a shortage of trained and experienced manpower, with US upstream employment down from 700,000 people in the early 1980s to 400,000 today. "The project delays our industry is seeing today result in part from workforce shortages and inexperience. While enrollments in engineering programs have begun to increase, they remain significantly below levels of 25 and 30 years ago," Hess said. "We are replacing our 30- and 40-year veterans with recent graduates. Even if we stepped up our investment levels today where they need to be, we simply do not have the skilled workforce to support the many projects that may be needed."

Back to top


Critic: Facts bury theory on Peak Oil

Bloomberg News - IHS Inc., owner of Cambridge Energy Research Associates, said those who espouse the theory that the world's oil production has already peaked lack evidence to support their claims.

"The only thing that's relevant is our data," Jerre Stead, chief executive at Douglas County-based IHS, said Wednesday in an interview in Houston.

Believers in the so-called Peak Oil theory "don't have our data," he said.

Stead made his comments at an industry conference hosted by Cambridge Energy Research Associates.

U.S. oil futures jumped 57 percent last year on the way to topping $100 a barrel for the first time in January. Crude has traded between $86 and $95 this month.

Peak Oil supporters include billionaire hedge-fund manager Boone Pickens and Houston investment banker Matthew Simmons. Stead said some supporters of Peak Oil are interested in being consultants.

IHS is standing by the facts, he said.

"The Peak Oil discussion is useful in terms of trying to enlighten or shine a light on the discussion about where are the reserves today and what's the production capacity from them," Ron Mobed, IHS's co-president, said Tuesday in an interview.

He said political concerns in places such as Nigeria present larger problems than getting oil out of the ground.

"The production capacity compared to actual production is moderated much more today by what we call above-ground issues than below-ground issues," Mobed said.

Guest Commentary: Peter Weggeman
Consensus About Conventional Oil Depletion?

The CERAWEEK 2008 energy conference was held in Houston last week. CERA also published a full eight pages of commentary in a Special Advertising Section of the U.S. Wall Street Journal on February 12 and 13 titled “Focus On Energy: CERAWEEK 2008”.

CERA states that one of the conclusions of their analysis of the world’s 811 largest producing oilfields is that the big fields start to decline after an average 13 years of production and the smaller fields start to decline after an average 8 years of production.

Since all the fields have been in production for some years it is reasonable to say that today’s largest oil fields will start to show a cumulative decline sometime in the next decade. Isn’t that what most producers outside of OPEC have been saying?

The next question is how much new oil and biofuel will be available in the next decade? CERA reiterates that combined old and new oil plus biofuels will amount to about 112 mbd in 2017 but does not go into detail.

CERA also says, “The issue of climate change poses the first serious challenge to fossil fuels primacy”. How about depletion? We are not looking for oil inside the arctic circle and in ultra deep water because we are afraid of global warming, but because we are running out of adequate conventional oil sources.

Back to top


Oil price breaks through $100 a barrel

Oil prices surged to an unprecedented high in late trading yesterday, settling above $100 a barrel and prompting a new round of concern about the effect of high fuel costs on the health of the global economy.

A rush of speculative buying pushed the price of crude up 5 per cent, on a heady cocktail of fear for supplies, belligerent noises from the Opec oil producing cartel, and the falling dollar. Analysts believe that Opec is unlikely to increase production to alleviate the upward pressure on prices when it meets on 5 March, despite recent overtures from Western leaders including US president George Bush.

"Opec should maintain production or cut production," Venezuela's oil minister Rafael Ramirez said yesterday, echoing comments made by Opec President Chakib Khelil on Monday.

Other cartel officials said it would be hard to justify a reduction in supplies at current price levels, despite expectations that demand will dip seasonally as the Northern Hemisphere winter comes to an end.

Venezuela is locked in a legal tussle with the US firm ExxonMobil, the world's largest oil company, over the nationalisation of its assets in the country. Courts in the US and Britain have frozen assets belonging to the Venezuelan state oil company, and tensions are running high.

Oil prices first touched $100 a barrel on 2 January, when a single trader purchased oil futures at a triple digit price, but the price receded, only to creep higher in the past month, in part because the currency in which oil is traded, the US dollar, has fallen in value.

Adding to concerns yesterday, a rumour swept trading floors that Henry Okah, a rebel leader in Nig-eria's oil delta, had been killed, foreshadowing growing unrest there – although that was later denied by the country's government news agency. Traders also blamed news of a fire at a Texas oil refinery for adding to fears of supply disruptions and increasing pressure on prices.

"It was just a matter of time before we were going over $100," said Tom Bentz of BNP Paribas. "We had a correction to $86, but it's on a straight run right back up ever since. There are enough issues out there to keep things rolling."

Share prices took a tumble after the oil price breached the $100 landmark, giving up early gains amid concern about the effect of high fuel costs on business profits and on already weak consumer spending. A US government survey showed that prices at the pump had soared back past $3 per gallon in the past week.

Back to top


Big oil's enemy within

The ultimate threat to big oil comes not from green campaigners - but its own shareholders

Business leaders are now pleading with governments for regulation. When did that last happen? Executives usually hate anything that interferes with their freedom of movement. But climate change appears to have changed all that.

We really have arrived at a point where the world of commerce - not all of it of course - is frightened of global warming because of the risks and uncertainty it brings. Uncertainty is the thing that business hates more than anything.

So now we have more and more executives calling on politicians to bring in some kind of global order that will allow them to operate on a level playing field, as they like to call it.

A coalition of 40 institutional investors, holding $1.75tn worth of funds, has just demanded that US Congress introduce a mandatory policy to reduce national greenhouse gases to as little as 10% of 1990 levels.

Admittedly the timescale they envisage is not until 2050, but it's still a huge step forward. Not only that, but they want the Wall Street financial regulator to force companies to own up to their carbon exposure, and would like to see more analysts taking account of carbon in their analyses of balance sheet risks.

It's all good stuff, except the dear old oil industry seems content to go its own sweet way. Shell briefed in recent days about the dangers of energy insecurity, stressing that the increasing demand for global energy means we need tar sands as well as wind power. And the new BP boss, Tony Hayward, has recently reversed company policy and bought in to Canada's dirty tar sands business too.

But even if the politicians are slow on their feet, the noose is beginning to tighten on big oil. The threat, then, is not coming externally yet - but from the "enemy within": the oil companies' own shareholders.

Back to top


IEA sees boost in peak OPEC flow

HOUSTON, Feb. 18 -- Production projects due on stream this year in members of the Organization of Petroleum Exporting Countries represent peak gross capacity additions of 3.1 million b/d of crude oil and other liquids, says the International Energy Agency.

Last year, OPEC members started up projects with peak total-liquids capacities of 1.25 million b/d.

In its February Oil Market Report, IEA says OPEC members' ability to produce crude oil alone, net of declines in existing fields, could increase by 840,000 b/d during 2008.

NGLs and condensate represent 42% of the peak-capacity estimates for 2008 projects, compared with 20% last year, IEA says.

The agency points out that the time between start-up to plateau output varies from 1-2 months for some projects to 24 months or more for others.

"The net change in OPEC capacity in 2008 is of course markedly less than implied by gross additions starting up in 2008 because of the lag before plateau output is attained and also the offsetting impact of mature field decline," it says.

OPEC members also might defer project starts if they believe global oil demand is declining.

"The proliferation of potential additional liquids volumes in 2008 holds forth the prospect that tight OPEC spare capacity could temporarily ease, even if not everything comes to fruition on schedule," IEA says.

Low spare production capacity and low global inventories are signs of the market tightness that has kept crude oil prices high.

IEA estimates sustainable OPEC capacity to produce crude oil—the output level that members can reach with 30 days and maintain for at least 90 days—at 35.04 million b/d. It estimates January OPEC production of crude oil at 32.02 million b/d.

Although IEA has lowered its forecast for 2008, OPEC output of NGLs remains on a strong climb. The agency predicts OPEC NGL production this year will average 5.18 million b/d, up 365,000 b/d. It earlier expected the increase to be 620,000 b/d.

The scale-back reflects a delay in the start-up of the gas phase of Saudi Arabia's Khursaniyah oil and gas field, which is partly offset by expectations for faster build-up in gas from Qatar's Dolphin project.

Back to top



Calls for inquiry into alleged 'profiteering' of energy giants

British Gas, the country's biggest energy supplier, announced a 500 per cent rise in profits today, fuelling outrage among consumer groups which claim the public is being ripped off by the industry.

Centrica, the parent company of British Gas, will tell the Stock Exchange that the BG retail arm, which receives up to five times as many complaints as its rivals, made £571m profit in 2007.

Most of the money was made between January and March, when the wholesale price of gas plunged as a result of unusually mild weather and a new gas pipeline from Norway.

During those three months, BG's bosses kept prices high, earning what one analyst has described as "absolutely extraordinary" profits.

Yesterday, there were fresh calls for an official inquiry into whether the "Big Six" energy companies have been profiteering and plunging low earners into choosing whether they eat or heat their homes.

"It's quite sickening when companies make these huge profits while, at the same time, we are expecting 25,000 excess winter deaths as a result of people not being able to keep warm," said Lesley Davies, the chairman of the National Right to Fuel Campaign. "The Government must do more for these consumers.

"They prattle on about the winter fuel payments for pensioners but there are just as many single-parent families and others who cannot get the payment."

Energywatch, the independent gas and electricity watchdog, called for the Competition Commission to investigate whether the £24bn-a-year domestic power business was working properly.

This year, five of the Big Six – British Gas, E.on, npower, EDF, Scottish Power and Scottish & Southern – have put up their prices by about 15 per cent to within £100 of each other.

Only Scottish & Southern is substantially cheaper but it is expected to announce an increase in its rates after 30 March.

Political pressure on the companies is mounting, with an investigation into the competitive structure of the market by the Select Committee for Business, Enterprise and Regulatory Reform, and 12 separate Commons' Early Day Motions.

Questions are being asked because, while bills have almost doubled in the past five years, costs have increased at a much lower rate, leading to claims that the companies are profiteering. According to a report by the independent analyst Cornwall Energy Associates for the Right to Fuel Campaign, about £2.3bn of the £8bn increase in prices cannot be accounted for and is likely to be profit.

The companies say they have to invest heavily to improve their environmental performance and develop renewable power.

British Gas, which last month increased prices by 15 per cent, said it had to wait to find out whether wholesale prices fell before lowering prices in March and April. But its annual report will indicate it has been able to make handsome profits, despite claims the industry is extremely competitive. Since the energy market was liberalised, the former state monopoly gas supplier, which has 46 per cent of gas customers and 21 per cent of electricity customers, has been at the bottom of Energywatch's customer service charts.

It receives 45 complaints per 100,000 customers, compared with 10 for Scottish and Southern and about 20 for EDF and E.on.

In its interim results for the first six months of 2007, British Gas made £533m. Profitability then slipped during the second half but the scale of the profits made while wholesale prices dropped means the annual result will be about 500 per cent higher than the £95m made in 2006.

Joe Malinowski, a former energy trader who now runs the price comparison site theenergyshop.com, said: "The first half-year profit was absolutely extraordinary. You don't normally expect a company to make that type of money. The margin was 15 per cent on what is essentially a trading business, buying and selling energy.

"The energy price kept falling. The difference between retail and wholesale got bigger and bigger. Before they cut prices the margin was massive – the money was just flowing through the door."

About four million people are officially in fuel poverty, meaning they have to spend at least 10 per cent of their income on fuel bills. For many others, the reality of rising fuel bills is deeply unwelcome amid strong rises in mortgage payments, council tax and water bills and a background of a weakening economy.

Adam Scorer, campaigns manager for Energywatch, said: "No one has got a problem with energy companies making a profit. But if you are a British Gas customer hearing about this type of profit you are going to be bewildered by the statements that the wholesale market is tough and British Gas is reporting these huge profits."

Peter Lehmann, of the group Fuel Poverty Advisory Group, urged the regulator Ofgem to investigate the market and to close the gap between the price paid by predominantly poorer pre-payment customers and those paying by direct debit.

The GMB union complained that as well as "fleecing its customers and making record profits" British Gas was scrapping its final-salary pension scheme. "It is about time that a full inquiry was conducted into the operation of the energy market," said Gary Smith, GMB's national secretary. British Gas argued that it could not have predicted the steep falls in wholesale prices at the beginning of 2007. "Sharp falls in the price of gas in winter 2006 led to unexpected profits in British Gas early in 2007, but rising costs later in the year also mean that analysts expect margins in the second half to be very thin," a spokesman for the company said yesterday.

Back to top


Price dip hits Gazprom's profits

Russian natural gas monopoly Gazprom has reported a slight fall in nine-month profits, because of a dip in prices and demand.
For the nine months to 30 September 2007, Gazprom made a pre-tax profit of 611bn roubles ($25bn; £13bn), down from 623bn roubles a year earlier.
Its sales rose to 1.7 trillion roubles from 1.6 trillion a year earlier.
Gazprom supplies a quarter of Europe's gas, with much of the gas being piped via Ukraine.

Ukraine row

Earlier this week, Russia and Ukraine reached a deal over Kiev's $1.5bn unpaid bill to Gazprom.
Gazprom had earlier threatened to switch off supplies if the money was not paid.
The spat was just the latest dispute between Russia and Ukraine over gas exports.
A previous row in the winter of 2005/2006 saw a reduction in Gazprom's supplies to western Europe, as a number of pipelines pass through Ukraine.
Gazprom has also had similar disputes with Belarus and Georgia.

Back to top


Energy Geopolitics

Russian energy ties with Iran send U.S. a message

DUBAI/MOSCOW, Feb 21 (Reuters) - As the United States warns the world away from business with Tehran, Moscow's tightening ties to Iran's energy sector underline Russia's differences with Washington over Iranian nuclear plans and Kosovo's independence.

While the timing of Moscow's announcement on Tuesday may have been political, the deal for Russian state-controlled energy giant Gazprom to take on big new Iranian oil and gas projects was a long time in the making and dovetails with Gazprom's strategic ambitions, analysts said.

Gazprom, the world's biggest gas producer, will play a larger role in developing Iran's giant South Pars gas field and will also drill for oil.

"The Russian government and the United States are at loggerheads over how to engage with Iran, with Russia actively favouring a more open relationship," said Ronald Smith, chief strategist at Alfa Bank. "This makes Gazprom rather indifferent to American policy wishes."

The U.S. accuses Iran of using uranium enrichment to develop weapons, while Tehran says it needs nuclear power. Russia has been reluctant to impose more U.N. sanctions on Iran.

Despite voicing its own concerns about Tehran's ambitions, Moscow is building Iran's first nuclear power plant and has supplied the fuel it will use.

Russia opposes Kosovo's split from Serbia, which the U.S. has backed. Despite growing clout on the world stage, Moscow has proved powerless to prevent Kosovo announcing its independence this week.

"There is probably a political element given what happened last week in Kosovo," said Chris Weafer, chief strategist at UralSib bank.

"I would say this investment is in keeping with Gazprom's declared position to become as global as possible but the timing of the announcement clearly has a political message as well."

Gazprom is advancing in Iran while U.S. political pressure has delayed progress on gas projects by European companies such as Total and Royal Dutch Shell and led to some European banks pulling their financing for Iranian oil deals.

With European and U.S. companies out of the competition, Gazprom has an edge as it bids for a bigger role in developing the world's second-largest gas reserves after Russia's own.

"The Russians know full well that they are at a disadvantage in terms of the quality of their technology compared to the West under normal circumstances," said Ali Rashidi, a university economics professor in Iran.

"Under conditions that Iran cannot attract real rather than token Western foreign investment, the Russians are in an ideal situation to fill the void."

Gazprom may also have been able to negotiate better terms due to the lack of competition and Iran's eagerness to press ahead with development despite U.N. and U.S. sanctions, Rashidi said.

Strategically, a tie-up between Moscow and Tehran makes sense, analysts said. Gazprom's major market is Europe, which would also be the likely destination for much of Iran's future production. Gazprom supplies a quarter of Europe's gas needs.

The deal with Iran will do little to help Gazprom's ambition to boost its presence in the United States.

But for now, it's exposure there is small, analysts said. That, and Europe's dependence on Gazprom, would limit the effectiveness of any reprisal action from the United States, said Teymur Huseynov, head of the Eurasia department at risk consultancy Exclusive Analysis.

"Gazprom's vulnerability to U.S. sanctions is minimal," Huseynov said. "And if you put sanctions on Gazprom you are basically threatening Europe's energy security and that would strain the relationship with Europe and the United States."

Increased coordination between the two countries on investment policy and pricing would also boost the chances of the formation of a gas producers' group resembling the Organization of the Petroleum Exporting Countries (OPEC), Huseynov said.

Iran has called on Russia to set up such a group, which has caused jitters in top customers and politicians in Europe.

Gazprom could also help Iran develop its pipeline system, potentially linking the north of the country to fields in the south, Huseynov added. That would lessen dependency on gas imported from Turkmenistan, which angered Tehran when it cut off gas supplies at the end of December.

The Russian gas export monopoly owns all the gas pipelines in Armenia, to which Iran has recently completed a new export pipeline. Gazprom will operate the section of that pipeline in Armenia.

Gazprom has been involved in Iran for years and invested about $4 billion in the country between 2000-2007, said Huseynov. It was involved in an earlier phase of development at South Pars with Total and Malaysia's Petronas. (Additional reporting by Tehran bureau, editing by Anthony Barker)

Guest Commentary: Julian Darley
Russia seems able to play the West like a five dollar banjo. Until the West realises that the only systemic answer is to start reducing consumption and keep reducing consumption (and uncomfortably enough, the same applies to most of the rest of the world), then our supply chains will be at the mercy of any producer who is clever and energy rich.

Back to top



Smoke and Mirrors

No country except the U.S. is crawling with more venture capitalists looking to fund green-energy deals these days than China. The rush has not yet reached dotcom-boom proportions, but VCs and entrepreneurs see big opportunities in helping the country cope with its horrendous pollution problems through alternative-energy development. Deals are getting done. China is applying green principles to the construction of entirely new cities such as Dongtan, an area outside of Shanghai the size of Manhattan, which will use recycled water only and generate electricity using biomass. Last year, 3.4 gigawatts (GW) of wind energy were added to China's electrical grid, making the country the fastest-growing market for wind power in the world. And by 2020, China will quadruple its nuclear capacity from 10 GW to 40, again the fastest rate of growth globally.

But to anyone laboring under the impression that China is well on its way to a carbon-neutral future, reality can be sobering. Despite progress on the alternative-energy front, demand for power is expanding at such an extraordinary rate that it can only be satisfied by the combustion of vast additional quantities of coal, oil and natural gas. For example, between 2008 and 2030, the incremental increase in China's consumption of oil alone is expected to equal India's total annual oil consumption today, according to the International Energy Agency. "The government is being very aggressive in its pursuit of hydro, nuclear and renewables," says Jone-Lin Wang, a senior director at Cambridge Energy Research Associates (CERA), a U.S. energy consultancy. "But overall you're not really moving the dial that much over the next 10 to 20 years. These things take time."

Time is not on China's side. The government has announced plans to add an astonishing 1,300 GW to its electrical generation capacity by 2020. (The U.S. is currently capable of generating 1,000 GW.) The goal is for 25-30% of this to come from clean and renewable technologies. But even if these ambitious targets are achieved, some 70% of China's electricity will still come from coal-fired plants in 2020. That's down from about 78% today.

One reason China is so power-hungry: beginning in 2002, the country began dramatically expanding its heavy industries such as steel and aluminum production and auto manufacturing — capital-intensive businesses that are huge energy hogs. Five years ago, the ratio of heavy industry output to gdp in China was 55%; that rose to a staggering 120% last year. Today, light and heavy industry accounts for nearly three-quarters of the country's energy use. As a result, China is not a particularly efficient consumer of power, lagging well behind Japan, the U.S. and other developed countries in the amount of economic output it generates for every gigawatt consumed. Hoping to become 20% more energy-efficient over the next 12 years, Beijing in 2006 ordered heavy industries and local officials to develop more judicious consumption strategies. The government also increased pressure on provincial governments to enact strict building codes to make new office buildings and shopping centers less wasteful.

Laudable moves, but there's another reason why China is becoming as addicted to hydrocarbons as the U.S.: the middle-class dream is coming true for tens of millions of mainlanders, who are buying their first cars, computers, clothes dryers and other electrical appliances. Some estimate that China last year surpassed the U.S. as the largest producer of the greenhouse gases that cause global warming, yet the impact of the country's growing consumerism has barely started to spread across the world's energy and environmental landscape. To put matters into perspective, consider China's massive Three Gorges Dam, a $29 billion project that displaced millions of peasants in return for a big jolt of clean, affordable hydropower. According to a forecast by policymakers at Beijing's Sustainable Energy Program, electricity demand from air-conditioners purchased by Chinese in 2008 alone will exceed the total capacity of Three Gorges Dam.

Air-conditioners? What if 300 million Chinese decide to buy suvs? "The Chinese are sort of like the Americans," says CERA's Wang. "They like big cars and houses." That's an observation likely to darken the outlook of even the sunniest of solar-power advocates, and knock the wind right out of the sails of wind-power fans. No matter how much China invests in green technologies, it looks like it won't be enough.

Back to top


Eskom to buy back power to stem shortage

Eskom, South Africa’s beleaguered power utility, said on Thursday it would “buy back” power from industrial customers to improve a shortage that is projected to damage growth in Africa’s most advanced industrial economy for the next five years.

Aluminium prices had jumped to a seven-month high after earlier press reports that Eskom was considering a “complete power supply buyback” from aluminium smelters and planning to effectively shut them down for the remainder of 2008.

But the utility said the measure – which is one of several initatives the power company is pursuing to improve supply – would not specifically target international aluminium plants, which are its biggest users of electricity. BHP Billiton, which operates two smelters in South Africa, is Eskom’s biggest industrial customer.

One of the government’s pet foreign investment goals over the past decade was luring the aluminium industry to the country, which still has the world’s cheapest electricity. Aluminium smelting is among the most power-intensive of all manufacturing processes.

“We are considering to what extent we are able to negotiate with some industrial customers to buy megawatts back from them,” Jacob Maroga, Eskom’s chief executive, said on Thursday. “We are looking at buying back significant amounts of megawatts for a significant amount of time.”

A power buyback would involve Eskom paying industrial customers for the lost production caused by retaining a portion of their electricity supply. It is necessary, said an Eskom representative, because the utility “needed firmer measures in place to deal with the emergency than we have at the moment.”

The country’s mining sector is currently operating at only 90 per cent of its normal power supply, but Eskom and the government say this is “voluntary.”

A buyback, said the representative, would be a “far more dependable contractual agreement” than the country’s arrangement with the mining sector.

Mr Maroga’s comments, however, might affect the mining sector’s negotiations with Eskom. The country’s largest gold and platinum producers have all forecast lower production this year as a result of the power cuts.

Eskom stressed that it was considering many options for its buyback scheme and that it is too early to know which customers it would involve. “We can’t just take the biggest customers off the top of the pile and assume that they offer the best solution,” an Eskom representative said.

After BHP Billiton, Eskom’s largest industrial customers are Sasol, the petrochemical company, and Anglo American, the mining group.

Tom Albanese, Rio Tinto chief executive, has said the company would delay buildling its planned smelter at Coega in South Africa until the company had concrete guarantees of its power supply.

Eskom announced its buyback plans on Thursday as one of several “recovery plan” initiatives. The utility will also purchase 45m tonnes of coal over the next two years to improve supply to its coal-fired power plants.

It will also independently accept cogeneration bids from independent power producers. “Within the next month we will present a clear pricing framework with the intention of signing up bidders as soon as possible,” Brian Dames, Eskom’s generation division head, said .

The cheapness of South African electricity has previously deterred foreign power companies from entering the market. Eskom supplies 95 per cent of the country’s power.

Back to top



Boost for micro power studied

Energy minister Malcolm Wicks said yesterday the government would look at ways of boosting the share of Britain's electricity from microgeneration.

The government is planning to launch a consultation early this summer on a new strategy in its drive to meet the European Union's 2020 renewable-energy target. "We will be looking afresh at microgeneration, and any proposals to boost microgeneration, including a feed-in tariff, are ones we are open to consider," Wicks said.

Feed-in tariffs offer above-market payments for wind or solar-generated power. Supporters point to the success of their use in Germany in encouraging green energy production.

The European commission has suggested that the UK should be producing 15% of its energy from renewable sources by 2020, which would require a seven-fold increase. Though the figure has yet to be finalised, Wicks said yesterday in the evidence session of the energy bill that it was going to be "very high".

The minister stressed that the new look at microgeneration - where homes, businesses and organisations produce their own electricity - "is not at all challenging the mainstream renewables obligation".

The government says that the renewables obligation has helped bring about a large increase in the number of projects and calculates that it will soon be worth more than £1bn to the industry.

"I think it is important for confidence, including investor confidence, that we don't, as it were, change policies halfway through," Wicks said. "I am confident about the reforms we are making."

[ Note: BERR consultations home page: http://www.berr.gov.uk/consultations/ ]

Back to top


Viewpoint: Darkness Looms

It is a little over half a century since I joined the Financial Times as a feature writer and found myself writing about the threat to Europe's oil supplies from Colonel Nasser's closure of the Suez Canal. It is a little over a quarter of a century since Margaret Thatcher appointed me U.K. Energy Secretary. So one way and another, I have been a close observer of the energy scene for quite a long time now. But I cannot recall a time when it was arguably more dangerous, or certainly more bizarre.

Discussion of energy in Europe today tends to be dominated by what are described as environmental issues, chiefly the question of carbon emissions and global warming. So much so, in fact, that the rather more urgent matter of security of supply is all too often overlooked.

But it is now becoming acute. It has two dimensions. The first relates to the potential unreliability of our sources of primary energy. We have long been used to the fact that our oil comes overwhelmingly from the endemically unstable Middle East — an instability that in the age of al-Qaeda has grown, just when the decline of North Sea oil is increasing our dependence on it. But Europe is now, in addition, substantially and increasingly dependent on Russian gas to fuel its power stations. As Javier Solana, the E.U.'s High Representative for Foreign and Security Policy, delicately put it earlier this month, "There is justified concern across Europe about Russia seeming more interested in investing in future leverage than in future production." Not that Europe is doing anything about it, by way of constructing adequate gas storage to meet any interruption of supply.

But the greater threat to Europe's energy supply lies at home, in the looming prospect of a growing gap between demand for electricity and the capacity of power stations to supply it. The problem is probably most acute in Germany, which is committed — on politically compelling but rationally inexplicable grounds — not only to building no more nuclear power stations, but to closing down those it already has. But environmental opposition to building conventional, fossil-fuel power stations, because of the carbon-dioxide emissions these cause, is also strong and growing stronger, supported by the environment wings of Europe's governments.

As a result, it has been calculated that Germany will lose some 25% of its electricity-generating capacity by 2030; and today, it is only barely sufficient for the country's needs. Germany hopes to import the electricity shortfall from France, which generates roughly three-quarters of its electricity from nuclear power, and is happy to do so. But France will not generate enough to satisfy Europe's growing shortfalls. For Germany is by no means alone.

The essence of the problem is the reduction of emissions to which Europe has committed itself, coupled with largely environmental planning delays. A top executive at E.On, Germany's largest energy group, recently pointed out that, while nuclear power stations take a long time to build, partly because of the very necessary safety standards that have to be met, in Europe it takes even longer to get a planning application approved.

But the position is little better with coal-fired power stations, which are more economic than nuclear power and rely on an indigenous fuel supply which exists in abundance. The British government is expected to approve, subject to it satisfying a host of conditions, the construction of the first coal-fired power station to be built in the U.K. for decades — as it happens, by E.On — at Kingsnorth in England. One of those conditions, which the government proudly trumpeted, was that it should be fitted with carbon-capture and storage technology (CCS).

This is a wonderful solution to the emissions and energy-security problem, since the carbon dioxide produced by burning the coal is captured and buried deep underground, rather than being let loose in the atmosphere. There is only one snag: the technology does not exist. It may, in 10, 20 or 30 years' time: there is growing R&D activity in this sphere. Or it may not: as the present Chancellor of the Exchequer, Alistair Darling, told the House of Commons early last year, when he was the minister responsible for U.K. energy policy, the technologies required for commercial CCS "might never become available." Not surprisingly, Whitehall has now discreetly dropped the CCS condition for Kingsnorth.

All in all, the likelihood of the lights going out in Europe at some point over the next 20 years has never been greater. But the chances are that, although there may be occasional blackouts, the gap between supply and demand will be met partly by a substantial rise in the price of electricity and partly by reducing demand as Europe gradually becomes a manufacturing-free zone, as its industries migrate to China, India, Turkey, Morocco, or anywhere where planning delays are negligible and electricity is cheaper. This is not, of course, going to reduce global emissions at all; but we can perhaps console ourselves that it is a more useful form of overseas aid than most. But it is, as I said, bizarre.

Lawson is Britain's former Chancellor of the Exchequer and Energy Secretary

Back to top



Clean Power from the Deserts

Every year, each square kilometre of hot desert receives solar energy equivalent to 1.5 million barrels of oil. [1] When multiplied by the total area of deserts worldwide, this amounts to several hundred times the entire current energy consumption of the world.[2]

Given current concerns about energy supplies and the need to cut CO2 emissions, these rather startling statistics seem to be a cause for optimism. But, you may very reasonably ask: Can we tap into this enormous source of energy at a reasonable cost? Can we get it to where people are living? And, if those things are possible, what other snags or problems might there be? The purpose of this article is to describe some answers to those questions and suggest that one’s initial sense of optimism may be something more than just a mirage.

The key technology for tapping in to the solar energy of desert regions is ‘concentrating solar power’ (CSP). This is not some futuristic possibility like fusion nuclear power. It is the remarkably simple idea of using mirrors to concentrate direct sunlight to create heat and then using the heat to raise steam to drive turbines and generators, just like a conventional power station. However, in some variations, the heat is used to drive a Stirling engine that drives a generator.

A useful feature of CSP is that it is possible to store solar heat in melted salts (such as nitrates of sodium or potassium, or a mixture of the two) so that electricity generation may continue through the night or on cloudy days. This overcomes a common objection to solar power: that it is not available when there is no sun. CSP is very different from the better-known photovoltaic (PV) panels and, with current prices for PV, it can deliver electricity more cheaply in situations where lots of direct sunlight is available. However, PV may become cheaper in the future and methods for storing PV electricity are likely to improve—so the balance of advantage may change. Just to confuse matters, the technique of concentrating sunlight with mirrors is sometimes used in conjunction with PV, to minimise the amount of PV that is required.
The relative merits of different technologies and different versions of CSP will, no doubt, be the subject of study and debate for years to come. The key point for present purposes is that the technology works, it is relatively mature and has been generating electricity successfully in California since the mid 1980s. Currently, about 100,000 Californian homes are powered by CSP plants, new plants came on stream recently in Arizona and Spain , and others are being planned or built in several different parts of the world.

Getting the energy to where it is needed
Given that, with a few exceptions, desert regions are not places where many people choose to live, it is natural to ask how all this plentiful supply of energy is to be used. One possibility is to move energy-intensive industries such as aluminium smelting to desert areas. But even if all such industries were relocated, there would still be a need to transmit electricity to towns and cities elsewhere.

The high-voltage AC transmission lines that we are all familiar with work well over relatively short distances but they become increasingly inefficient as distances increase. Fortunately, it is possible to transmit electricity efficiently over very long distances using high-voltage direct-current (HVDC) transmission lines, a technology that has been in use for over 50 years. With transmission losses of about 3% per 1000 km, it would for example be possible to transmit solar electricity all the way from North Africa to the UK with less than 10% loss of power.

To meet the need for this kind of long-distance transmission of solar power, the ‘TREC’ international network of scientists and engineers[3] propose the development of an HVDC transmission grid across all the countries of Europe , the Middle East and North Africa (EUMENA). Apart from long-distance transmission of solar power, there are other good reasons to build such a grid. For example, if there is a surplus of wind power or hydro-power in one area, it is very useful to be able to transmit that electricity to places where there is a shortage. Without that facility, and without any economical means of storing the power, any excess is simply wasted! And although wind power may be quite variable in any one location, it is much less variable across a large region such as Europe or EUMENA. Large-scale grids are also needed to take advantage of large-scale but remote sources of renewable electricity such as offshore wind farms, wave farms, tidal lagoons and tidal stream generators.

For these kinds of reason, the wind energy company Airtricity has proposed a Europe-wide ‘Supergrid’ of HVDC transmission lines and others have proposed a worldwide HVDC transmission grid. Interestingly, Airtricity propose that all the HVDC transmission cables may be laid under the sea, thus simplifying construction and avoiding the visual intrusion of transmission lines over land.[4]

These kinds of grid would not replace existing HVAC grids: they would integrate with them and reinforce them.

How much will it cost?
While fossil fuels are artificially cheap (because they use the atmosphere as a free dumping ground for CO2 and because they still receive subsidies in many parts of the world) and until CSP costs are reduced via economies of scale and refinements in the technology, there will likely be a need for price support via direct subsidies or market mechanisms such as ‘feed-in tariffs’. Then, according to the ‘TRANS-CSP’ report from the German Aerospace Centre,[5] CSP is likely to become one of the cheapest sources of electricity in Europe , including the cost of transmission.

Others take an even more positive view of costs. The legendary venture capitalist Vinod Khosla has suggested that CSP is poised for explosive growth, with or without public support.[6] In a report in Business Week,[7] the CEO of Solel is quoted as saying, “Our [CSP] technology is already competitive with electricity produced at natural-gas power plants in California.”

CSP bonuses
One of the most fascinating aspects of concentrating solar power is the potential that it has for producing other benefits besides plentiful supplies of pollution-free electricity.

Perhaps the most interesting possibility is that waste heat from steam turbines (used in the production of electricity) may be used to desalinate sea water. This could have a major impact in alleviating shortages of water in drier parts of the world, a problem that is likely to become increasingly severe with rising global temperatures. Waste heat from electricity generation may also be used for air conditioning.

Another interesting side-effect of CSP is that the area under the mirrors of a solar plant is protected from the harshness of direct tropical sunlight. These shaded areas may be useful for many purposes including living space, stables for animals, car parks and so on. Although the area under solar collectors is in shadow, it should still receive quite a lot of light, quite sufficient for growing plants and without the damaging effect of direct tropical sunlight. Thus land that would otherwise be useless for any kind of cultivation could become very productive. An obvious problem is that plants need water and that is not plentiful in hot deserts. But desalination of sea water may provide the fresh water that would be needed for ‘CSP horticulture’.

CSP has the potential to become a large new industry in the world with many benefits in terms of jobs and earnings. Many of the world’s hot deserts are in countries that are relatively poor so we may suppose that concentrating solar power could be a particularly welcome new source of income via taxes or earnings from the sale of electricity.

Plentiful and inexpensive supplies of electricity from CSP would open up many interesting possibilities for taking fossil carbon out of transport by road and rail. For example, the latest generation of plug-in hybrid electric vehicles (PHEVs)—with relatively large batteries—can, for many journeys, be run largely on renewable electricity from the mains. Batteries may also be topped up from photovoltaic panels on each vehicle’s roof. Railways can be electrified and run on renewable electricity. CSP provides the means of avoiding the many disadvantages of nuclear power.[8]

More generally, CSP can alleviate shortages of energy, water, food and land and reduce the risk of conflict over those resources (a risk that is likely to increase as climate change takes hold). And the development of a CSP collaboration amongst the countries of EUMENA is a positive way of building good relations amongst different groups of people, with potential advantages over the more confrontational policies that have been pursued in recent years.

The availability of plentiful “clean power from deserts” can enable countries like India and China to leapfrog the ‘dirty’ phase of development, it can enable countries like Saudi Arabia to move directly from being oil-rich to solar-rich, and it can thus help to break deadlocks in international negotiations about cutting CO2 emissions.

Possible problems
It is rare for any technology to be totally positive in its effects, without any offsetting disadvantages. That said, I believe that there are good answers to most of the queries or doubts that may be raised about CSP.

Security of supply
If Europe , for example, were to derive a large proportion of its energy from CSP, people would naturally wonder whether supplies might be suddenly cut off by the action of terrorists or unfriendly foreign governments.

In the scenario up to 2050 described in the TRANS-CSP report, there would be an overall reduction in imports of energy, an increase in the diversity of sources of energy, and a corresponding increase in the resilience and security of energy supplies. Imports of solar electricity would be an exception to the rule of reduced imports and would, in any case, be not more than 15% of European energy supplies.

Compared with sources of supply for oil and gas, there is a relatively large number of places that have hot deserts. So in principle no country need be overly dependent on any one source of CSP. HVDC transmission grids can be designed to be robust in the face of attack, in much the same way that the internet was designed to carry on working even if part of it is damaged. Transmission cables can be buried underground or laid under the sea where they would be relatively safe from terrorist attack.[9]

Isn’t this just another smash and grab by rich countries upon the poor?
One may wonder whether CSP might become another case where rich countries take what they need from poorer countries leaving little for local people, except pollution.

There are reasons to think otherwise because several of the benefits of CSP are purely local and cannot easily be exported or expropriated. These include local jobs and earnings, local availability of inexpensive pollution-free electricity, desalination of sea water, and the creation of shaded areas with the kinds of uses mentioned above.

Desert ecology
From at least as far back as Walt Disney’s The Living Desert, wildlife films have made us aware that hot deserts have their own vibrant ecology. If the world’s hot deserts were all to be covered with CSP plants, there would indeed be cause for concern about the animals and plants that live there. But less than 1% of the world’s deserts would meet current world demands for electricity and even in pessimistic scenarios, it seems unlikely that more than 5% would be needed in the future. It should be possible for CSP plants and wildlife to co-exist.

There is no doubt that planet Earth’s ability to support the human tribe is being put at risk by a combination of inappropriate technologies, huge and increasing material demands, and the sheer weight of human numbers. CSP is not a panacea but it can be a useful plank in the new ways of living that will be needed if we are to survive and prosper in the future.

Further information may be found at www.desertec.org and www.trec-uk.org.uk.

This article is an updated version of an article that was first published in the Newsletter of Scientists for Global Responsibility, Summer 2007, Issue 34. It is republished with permission. Dr Gerry Wolff PhD CEng is Coordinator of TREC-UK, www.trec-uk.org.uk [1] Trieb, F. & Müller-Steinhagen, H. (2007). The DESERTEC Concept – sustainable electricity and water for Europe , Middle East and North Africa , Chapter 3 (pp. 23-44) in Clean Power from Deserts, the “White Book” published by the Club of Rome and the Trans-Mediterranean Renewable Energy Cooperation, http://www.trec-uk.org.uk/reports/TREC_Whitebook_final.pdf. This is a summary of the ‘MED-CSP’ and ‘TRANS-CSP’ reports (http://www.trec-uk.org.uk/reports.htm). [2] Dr Franz Trieb, project manager for the MED-CSP and TRANS-CSP reports, personal communication. This information is derived from information in the ‘MED-CSP’ and ‘TRANS-CSP’ reports but does not appear explicitly in those reports. [3] ‘TREC’ stands for the “Trans-Mediterranean Renewable Energy Cooperation” (www.desertec.org).

[4] With “HVDC Light” technology from ABB, submarine and underground power cables are, for distances of 600 km or more, only about 20% more expensive than overhead cables.

[5] German Aerospace Center (2006). “Trans-Mediterranean interconnection for concentrating solar power” (‘TRANS-CSP’). This report can be downloaded from: http://www.trec-uk.org.uk/reports.htm or http://www.dlr.de/tt/trans-csp. Also relevant is the earlier ‘MED-CSP’ report, 2005, which can be downloaded from http://www.trec-uk.org.uk/reports.htm or http://www.dlr.de/tt/med-csp. [6] Khosla, V. (2006). Presentation at the Solar Power 2006 conference, California . It can be heard via links from http://www.trec-uk.org.uk/resources.htm.

[7] Sandler, N. (2006). “Israeli solar startup shines.” Business Week, 14/02/06.

[8] Wolff, J G (2007). “Why we don’t need nuclear power,” at http://www.mng.org.uk/gh/no_nukes.htm.

[9] With “HVDC Light” technology from ABB, submarine and underground power cables are only about 20% more expensive than overhead HVDC transmission lines for distances of 600 km or more.

Back to top


Russo-German Wingas to develop biogas facility in Bavaria

Russo-German gas company Wingas said Monday it has teamed up with energy distributor Infra Fuerth to jointly develop a biogas facility in Bavaria, Germany.

The project is in the technical planning stage and is subject to official approval.

The new facility at Fuerth, northwest of Nuremberg, is planned to generate about 800 cubic meters/hour of processed biogas, which would be fed into Infra's regional gas grid.

The expected biogas output would equal an annual heat volume of about 75 million kWh and would correspond to the annual gas consumption of 5,000 single family homes, Wingas said.

"Our cooperation with Infra demonstrates that we as a long-distance gas distributor are both involved with regenerative energies and implement specific projects together with our customers," Wingas managing director Gerhard Koenig said.

Wingas said it would focus on concept creation, planning, construction and optimization of the facility for processing the biogas up to natural gas quality.

Infra, which supplies energy, water and district heat in the region, will concentrate on issues related to the site, financing, planning the fermentation facility, coordinating the interfaces for local agriculture as well as logistics and disposal.

Germany's Wintershall owns 50% plus one share in Wingas, with Russia's state-owned Gazprom holding the rest.

Back to top


Reasons to see red over green energy

Government apathy sabotages Britain's shift to a low-carbon economy

You'd hope, wouldn't you, that the government department responsible for energy to heat our homes, power our cars and so on would be on top of two key issues - a switch to a low-carbon economy and the possibility that oil might run out sooner than we thought.

Both these issues should concern us greatly and, indeed, there is growing discussion of them everywhere. But, the Department of Business As Usual (DBERR) doesn't seem to be on the case at all.

It spends most of its time pointlessly changing its name (from the Department for Trade and Industry, you will recall) or changing ministers so often that few have time to get their feet under the desk before they are gone.

Ed Matthew of Friends of the Earth puts it bluntly. "BERR [the department has inexplicably even dropped the D] is not fit to govern. They should all be sacked."

That may sound a bit harsh but you have to wonder whether he has a point.

First, renewable energy. The figures we uncovered last week were shocking.

BERR is set to underspend the paltry £18m in domestic grants of its low carbon buildings programme by £10m over the three years to March 2009. This in spite of strong demand for renewables among the general public.

How bad is the situation? Well, BERR handed out grants for part of the cost of fitting solar photovoltaic systems covering only 270 houses last year. The Germans fitted 130,000. We have a total installed capacity (including commercial) of 16 Megawatt peak (Mwp). They have 3,800 Mwp.

But even worse, during the year the pace of grant-giving slowed. Last May BERR simply slashed the grants and made them more difficult to get. The result, entirely predictably, was a collapse.

Throughout much of 2006, for example, it was making 30-40 grants a month for ground source heat pumps. In the last three months of 2007, no such grants were made. There is a similar decline for solar thermal (hot water) and micro wind turbines. Not a single grant was allocated for a domestic solar PV system last month while the Germans installed about 12,000 systems.

Malcolm Wicks, BERR's energy minister, recently acknowledged that Britain needed a "revolution" to have any chance of raising the share of its energy derived from renewables to 15% by 2020, as the EU demanded last month, from 2% - the lowest in the EU after Malta and Luxembourg.

It's important to remember, though, that the EU wants 20% of its energy from renewables by 2020 but allowed Britain to shave that to 15%. Thank goodness the EU has set a demanding target. So why is Wicks still trying to claim that Britain is showing "leadership" on renewables? The UK has about 40% of the EU's wind, yet only 10% of the installed wind capacity of Germany. Sorry to go on about this but it really does bear repeating.

German revolution
I am hearing, though, that many branches of government are fed up with the situation and are putting pressure on BERR to get real with its policies, particularly regarding the feed-in tariff (FIT) behind Germany's renewables revolution that has been copied in so many other countries.

This works by rewarding those who produce power from wind or solar power with an above-market payment guaranteed for 20 years. The additional cost is spread across all power users, since the saving in carbon is shared by all. It is a market-supporting mechanism since the FIT is reduced slightly each year for new projects as increasing scale reduces the cost of the equipment (a solar PV system in Germany, for example, now costs half the UK level).

A properly designed FIT rewards early adaptors, helps kick-start a new industry and creates jobs. The German PV industry added 10,000 jobs last year.

Friends of the Earth want the chancellor, Alistair Darling, to put tackling climate change at the heart of next month's budget. They want a FIT for households and businesses generating their own power and a top-up of the LCBP to £1bn a year to meet half the cost of any renewables anybody wants to fit.

The Treasury, after all, commissioned Lord Stern to write his review of the economics of climate change in 2006. He recommended spending 1% of gross domestic product each year, straight away, to combat climate change. That would be £13-14bn in the UK's case. So £1bn in the LCBP is not a lot to ask.

Another key reason to push for a dash for renewables is energy security.

There is a growing fear among academics and many in the oil industry, that oil may be running out quicker than we thought.

I used to write about the oil industry 15 years ago and more and back then the conventional wisdom was that "peak oil" theories had been right about US oil production but were fantasy for the world as a whole. As soon as the oil price rose, went the argument, producers would spend more on getting oil out of the ground.

Well, oil prices have been rising for about a decade. They've gone up 500% roughly. That's a lot. You might expect that, even allowing for the lags in developing new fields, supply might have responded by now. This is basic economics.

But it hasn't, not really. We are stuck at about 85m barrels a day in global production. And the output of the oil majors Exxon, Shell and BP fell last year!

I don't want to get into an argument about whether peak oil is upon us but you have to admit that it could be. After all, UK oil production peaked at 3.2m bpd in 1999 and has since halved. Dirty tar sands in Alberta could perhaps produce 3m bpd (Canadian estimates, not mine), but that's not going to be enough. Not that it ever should be dug out - it's filthy stuff that requires huge amounts of energy to produce.

The point is that you may hope BERR would have a plan for coping with oil at $200 or $300 a barrel in a few years' time, or a physical shortage (remember the fuel protests of 2000?). As my colleague George Monbiot noted last week, when asked about peak oil, BERR also quotes the International Energy Agency as saying the peak won't be till 2030. But the IEA doesn't say that any more - it has said there is a great deal of uncertainty about the issue.

So you might think BERR would have a Plan A in case peak oil is upon us. But no, they don't want to work on a contingency plan in case news gets out about what they are doing and causes a panic.

That panic, though, would be nothing compared to the panic if oil starts to run short. If I were BERR I would be having a dash for renewables. They plan to subsidise nuclear power for decades to come so why not bung some money at proper green energy that won't need subsidy for very long?

Back to top



Watching over the offsetters

Will a voluntary code of conduct make us any more confident when choosing a carbon offset scheme?

To date, the carbon offset industry has been on easy street, a wild west of an industry that has largely been making up its own rules as it has been going along.

First, there is the fact that there is little or no standardisation for calculating carbon footprints.

This means anyone wishing to offset, say, a flight from Europe to Australia, can simply cherry pick the lowest footprint they can find being quoted by the various offsetting companies in order to suit their conscience or budget.

Why would you choose a company telling you that this flight will emit five tonnes of carbon dioxide and cost £50 to offset, when another company says the flight will emit just two tonnes and cost £20 to offset?

Another problem with the way carbon offset firms currently operate is how they choose to spend your money. As long as the carbon offset industry has been around there have been reports of the once-popular, but now largely shunned, tree-planting schemes displacing native communities or using non-native species.

More widely, offset schemes - which can now mean anything from the handing out low-emission cooking stoves in Africa to buying up hectares of rainforest in Brazil - have been accused of profiteering, neo-colonialism and being underpinned by flawed science.

But over the past year, the Department for Environment, Food and Rural Affairs has been consulting the various interested parties about how best to clean up the industry in order to regain the trust - and interest - of a now largely sceptical public.

This week, Defra finally publishes details of a voluntary code of conduct for the industry, but will it be enough?

I'm not so sure. I think the whole concept of offsetting is largely beyond repair. Most people now see them for what they are - cosmetic window dressing, if we are being kind, or, as I believe, a dangerous camouflaging of the real task at hand, namely reducing emissions.

Much of the debate during the consultation process has been over Defra's promise to base any standards it implements on the use of certified credits from a portfolio of offsetting projects officially recognised as part of the so-called Kyoto protocol Clean Development Mechanism (CDM). These credits are referred to as "Certified Emissions Reductions" (CERs), as opposed to "Voluntary Emission Reductions" (VERs), which are by far the favourite of the offsetting industry and, as their name suggests, are underpinned by little more than self-selecting criteria.

The industry doesn't think the public will buy into CER-based offset schemes that can prove X tonnes of carbon dioxide have been prevented from being emitted by a coal-fired power station in China, which is the sort of thing CDM is said to guarantee. It thinks the public is more engaged by tales of villagers in developing nations being given solar ovens, which is the type of project that earns VERs. They are probably right, but it is a pretence to claim that they can ever know precisely how that equates with the emissions of your flight to Australia. Sure, handing out solar ovens is no doubt a good thing, for a whole host of reasons, but it shouldn't be handed out on the proviso that it doubles up as a conscience-salving pill to pop for those enjoying carbon-intensive lifestyles in developed nations.

I'm far from convinced, but will a voluntary code of conduct, albeit one overseen by Defra, make any difference to your confidence in choosing an offset scheme?

Back to top


Climate conversion

Increasing numbers of Americans are converting to the cause of combating climate change and demanding action from their government, claims a Harvard professor

The US public is at a tipping point (to use that favourite journalese cliche) in its attitude to climate change. That's according to Prof John Holdren at Harvard University, who is chairman of the American Association for the Advancement of Science and a passionate advocate for more robust action to curb greenhouse gas emissions.

Here's my interview with him at the AAAS annual meeting in Boston, in which he reveals why he believes the US public has been slow to wake up to the dangers of climate change, and why he thinks attitudes could now change rapidly.

Back to top



Wheat prices surge to new high

Prices for top-quality spring wheat have jumped by 90 per cent in the past month and a half, boosted by a scramble by corporate consumers to secure scarce grain and speculative buying by investors.

A surge on Friday in prices for wheat used in bread to an all-time high of $19.88 a bushel – the highest yet paid for any wheat contract and a three-fold increase from a year ago – prompted the US baking industry to call for wheat exports to be curtailed.

The American Bakers Association stopped short of asking for an export moratorium but pressed for curbs on foreign sales. Lee Sanders, ABA vice-president for government relations, said there was usually a surplus in the US wheat market equivalent to three months of US consumption.

“It is currently at a very low one-month level, which is extremely concerning,” she said.

Cereals traders said it was unlikely Washington would support export curtailments, but added that the call highlighted the tightness of the market.

The US is the world’s largest wheat exporter. Faced with strong overseas demand after extreme weather damaged other countries’ crops, its wheat stocks are set to fall to a 60-year low this year.

The shortage of top-quality spring wheat is forcing US millers to consider buying Canadian supplies. Vance Taylor, the general manager at state-owned North Dakota Mill, said his company could buy Canadian wheat for the first time since 1922. “Spring wheat is in very short supply in the US,” he said.

Supplies of lower quality soft wheat, used for baking biscuits and other products, are more plentiful, traders said. In Chicago, soft wheat traded at about $10.25 a bushel.

Rising food prices will be the focus this week of the US department of agriculture annual outlook conference, the main gathering of the industry.

Since last year’s edition, food inflation has surged around the world.

William Lapp, president of Advanced Economic Solutions, a Nebraska-based food consultancy, said that one of the key themes of this year conference would be the realisation that the price surge was not a temporary hump but rather a structural change.

“We are not facing a short-term price blip...but a sustained move to a new and higher plateau for prices,” he added.

Back to top


US annual trade deficit narrows

The US trade deficit narrowed in 2007, official figures show, as a rise in exports offset the country's large growth in oil imports.

The deficit reached $711.6bn (£361.1bn) last year, down from $758.5bn in 2006, the Commerce Department said.

Strong demand for oil from overseas had seen the trade gap set records for five consecutive years.

December's trade deficit fell to $58.8bn from $63.1bn in November - a bigger decline than expected.

China gap widens
The decline in the dollar helped to spur exports, analysts said, as this made US products cheaper abroad and therefore more competitive.

President George W Bush's administration has said that its free trade policies have also bolstered sales overseas.

However, critics point to a deficit that is almost double the level of 2001 when President Bush came office.

As analysts had expected, the trade deficit with China grew in 2007 despite the string of recalls of Chinese-made products during the year.

The trade gap with China jumped by 10.2% to $256.3bn - the biggest the US has had with a single country.

The next largest deficits were with the European Union at $107.4bn, and Japan at $82.8bn.

Commerce Department figures showed that exports, which were helped by farm products and car and vehicle parts, totalled $1.62 trillion, while imports, led by oil, rose to $2.33 trillion.

Back to top


China inflation hits new high

China's politically-sensitive inflation rate has jumped to its highest level in more than 11 years, as harsh winter weather helped drive food prices up by almost a fifth.

According to official data released on Tuesday, the main consumer price index (CPI) soared to 7.1 per cent in January, pushed up by an 18.2 per cent jump in the cost of food.

The figure for January compared with a 6.5 per cent in December, and was the highest since September 1996, when the CPI rose 7.4 per cent.

The latest figures will be a setback to the government which has been trying to tame rising prices and prevent China's fast-growing economy from overheating.

Soaring food prices in particular are already becoming a strain for millions of Chinese consumers and threaten to become a major political problem for China's leaders.

The latest data, for example, shows that the price of pork – a staple meat in China – has risen by 58.8 per cent compared with a year ago.

Last month, in an effort to step up the fight against inflation, the cabinet ordered food producers to get government permission before implementing any new price increases.

Yao Jingyuan, chief economist with China's national statistics bureau, blamed the rise on "severe snow disaster" that swept south and southwest China at the end of January, destroying crops and disrupting power and transport networks.

But while the recent harsh winter weather helped fuel rising food and energy costs, analysts say broader trends are driving up inflation which is expected to remain high for several more months at least.

Other Asian countries are also battling rising prices, with Singapore, for example, facing inflation at a 25-year high.

Adding to the dilemma for China's leaders is the challenge of slowing inflation just as an economic contraction in the US could slow international demand for Chinese exports.

As part of efforts to keep a lid on the economy, authorities last year raised interest rates six times and increased the amount of money commercial banks needed to set aside in reserves 10 times.

Chen Xingdong, a senior economist at BNP Paribas in Beijing, said a key sign that inflation has become an acute problem is the rise in China's producer or wholesale prices, which rose 6.1 per cent in January from a year earlier - the fastest rate in over three years.

"Energy costs, raw materials, mineral products are all shooting up. Labour costs are also increasing," she told AFP. "These have to translate into inflation in one way or another."

Back to top



Northern Rock's rescue is part of a geopolitical sea change

The world is holding its breath, still trying to grasp the potential enormity of what is unfolding. Economic downturns and stock market crashes are hardly unfamiliar, of course, even if a decade or so seems a long time ago for western consumers habituated to rising house prices and non-stop shopping. But this crisis threatens to be rather different, a Big One. Already it has forced the government to engage in what has been a heresy for almost three decades: nationalisation. Major crises such as the Northern Rock debacle are not matters of punctuation or pauses for reflection, but defining historical moments, marking the end of one era and the beginning of another. The 1970s was a classic case, as huge oil price hikes fed an inflationary spiral that brought both the long boom and the postwar welfare consensus to an end, and led to the rise of neoliberalism and deregulation.

This crisis, however, threatens to be even more fundamental. While the 1973 gyrations were the result of a temporary shift of power from the industrial world to Opec, the underlying cause this time is permanent and far-reaching - a fundamental shift in power from the developed world to the developing world, and above all China and India. We have not witnessed anything like this since the inception of the west as an industrial powerhouse in the 19th century.

The economic and political consequences will be of such a scale that they are impossible to comprehend. The present crisis has been long in the making, even if it has been obscured by the US spending over a decade in denial, as illustrated by the absurd post-9/11 neoconservative hubris about America becoming a latter-day Rome and the failure to address the growing imbalances between the US as a huge over-spender and East Asia as a massive saver.

There are two conclusions that we can draw from the economic crisis that began last August and might, in some form or another, last for a prolonged period. First, it heralds a major reduction in the global economic and political influence of the US, rather in the manner that the 1931 crisis announced the final and belated end of Britain's global economic supremacy. Fundamental systemic crises are often associated with the decline of the dominant imperial power and its increasing inability to sustain the system over which it had previously presided. The profound instability of the interwar period owed much to Britain's inability to maintain its role.

The present crisis, at root, is a consequence of the economic decline of the US and its increasing weakness at the apex of an international financial system of which it was the architect and chief beneficiary. This is most clearly expressed in the US's chronic balance of payments deficit and its long-term dependence on East Asian inward capital flows to shore up the value of the dollar. Perhaps the present turmoil will ease, but in truth the old arrangements are now coming apart and, in anything other than the short term, seem patently unsustainable. We are entering a period of protracted instability as the old order breaks down, the US seeks to resist change and the world embarks on a conflictual and painful passage towards a new global economic order.

The second conclusion is that the political consequences of this shift will be enormous. The interwar crisis led to the second world war and the birth of Keynesianism. The less significant Opec crisis of the 1970s destroyed the social-democratic consensus and led to the triumph of neoliberalism. And this time? One thing seems certain: the neoliberal orthodoxy will be undermined. This could come in many different forms. It could lead to a rise of protectionism in the US and Europe against developing countries such as China, or new regulations designed to prevent sovereign wealth funds from taking over what are deemed key strategic assets.

When the free market and deregulation are the means by which the western world extends its global economic power over the developing world, then they are deemed highly virtuous, but it is a different matter when they become the instrument by which developing countries can extend their influence over western economies. Similarly, during a recession the state is likely to be called into active service on a far more regular basis as western governments seek to deal with the mushrooming effects of market failure. It is not an accident that developing countries - virtually the whole of East Asia, for example - view the role of the state in a far more interventionist way than does the Anglo-Saxon world. Laissez-faire and free markets are the favoured means of the powerful and privileged. The decline of the western world could well usher in a significant change in this mind-set.

How will our own political elite respond to these changes? At best, very belatedly. Thatcherism, after all, was native to this country, a response to the 1970s crisis, and it has subsequently shaped the outlook of the governing elite to a greater extent than anywhere else apart from the US. To this day that elite remains shackled by its logic and assumptions. A classic illustration of this has been the timidity and cowardice of the government in the face of Northern Rock - the first domestic political challenge of the new global crisis. The Tories engaged in a similar knee-jerk response: the only voice of reason was provided by then acting Liberal Democrat leader Vincent Cable, who rose above the prevailing fear and prejudice, and had the courage from the outset to think outside of the ideological box. Finally, the government now seems to have come round to his view.

The political terrain is shifting. Attitudes towards the US are a case in point. The move towards neoliberalism in Britain was intimately bound up with the embrace of the US as the country to be aped and copied. The American model was celebrated by Thatcherites and New Labour alike, California worshipped as the model of the future, "Anglo-Saxon" embalmed as the fitting metaphor for the shared Anglo-American legacy, Europe denigrated and the rest of the world ignored. How perceptions of the US have changed: a country living beyond its means, dependent on large helpings of Asian credit, characterised by huge inequalities, its great financial institutions guilty of huge folly, forced to rely for their salvation on the sovereign wealth funds of China and elsewhere. And, remember, we are only at the very beginning of the biggest geopolitical shift since the dawn of the industrial era.

· Martin Jacques is visiting research fellow at the Asia research centre, London School of Economics

Back to top


Green housing plans will fail without more regulation, developers warn

Shortages of environmentally-friendly building materials and skilled labour will undermine the government's drive for low- and zero-carbon homes over the next decade, a report warned today.

The National Trust and two mass-market builders say a flagship development has revealed problems in finding suitable double-glazed windows, or paint glossy enough for would-be buyers. Energy-saving measures have also fallen short due to failures to lag heating pipes properly.

The culture of the building industry, under which contractors remain unpunished for failing standards, must also be changed if the government's edict that all new homes are zero-carbon by 2016 is to be achieved, according to the report. There should be compulsory testing of new homes to prove they are as energy-efficient as their builders claim.

The National Trust, Redrow Homes and Bryant Homes have been co-operating on Stamford Brook, a 750-home development on trust land at Altrincham, Cheshire. To date, about 270 apartments and houses have been completed.

A Stamford Brook progress report warns that builders will struggle to achieve the next level of mass market low-carbon homes unless action is taken to regulate homebuilders more tightly.

The trust's specifications for the development, the purpose of which was to prove mainstream homes could be built to environmentally-friendly standards, were prepared before the government introduced new measurements of progress. Stamford Brook would, however, reach level three on the government's code for sustainable homes, as the houses are 25% more energy efficient than current building regulations require — albeit well short of what would be needed to be zero-carbon, as all new homes will have to be from 2016.

Measures to reach level three include better insulation and glass to reduce heat loss, more air-tight construction, and the use of dual-flush lavatories.

The partners in the project allowed an extra £3,000 per plot to meet extra standards, and they are not passing on the costs to buyers. But timber-framed double-glazed windows, which had to be imported from Scandinavia, were so expensive - about £1,500 more per plot, or half the total allowance - that the rest of the development will use use less environmentally friendly PVC frames instead.

Paint with lower than usual carbon-based chemical compounds took so long to dry that mechanical driers had to be brought in. They also did not provide the high-gloss finish expected by potential buyers.

However, Redrow Homes and Bryant Homes have both committed to using low-flush toilets in all their new homes.

Mark Mainwaring, the director and general manager of Bryant Homes North West, which is part of Taylor Wimpey, warned that forward-looking builders could be hamstrung by contractor shortages. Company demands for certain standards of workmanship were limited "because contractors can simply walk away and gain employment on other sites".

David Houston, project manager for the trust, said: "It is simply naive to expect all developers across the industry to deliver higher standards when there is virtually no enforcement ... There is a serious risk that all the investment made by our development partners in Stamford Brook will be undermined when they attempt to replicate these standards on other schemes."

The Stamford Brook site also includes the largest river restoration scheme in England, which is transforming a previously canalised and straightened brook into a new 1.8km meandering stream. There is evidence rare water voles have set up home there. But the report says that legal problems in establishing a new urban drainage system to reduce flooding risk must be avoided in future developments if widespread use of such systems is to follow.

Back to top




The items contained in this newsletter are distributed as submitted and are provided for general information purposes only. ODAC does not necessarily endorse the views expressed in these submissions, nor does it guarantee the accuracy or completeness of any information presented.

FAIR USE NOTICE: This newsletter contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of environmental and humanitarian significance. We believe this constitutes a 'fair use' of any such copyrighted material. If you wish to use copyrighted material from this newsletter for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.