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7 June 2017

Evolve or die

old oil pump

I had an interesting (off-the-record) chat with a contact in the energy sector yesterday. I was left with the clear impression that the fossil fuel sector is not only having to contract in the face of the shift to low carbon, but adapt to find the niches in the emerging energy mix where they can support renewables rather than compete head on.

I think this need to evolve is crucial as the changes keep coming, or new businesses will simply grab market share in the new reality. It has happened in electronics when the valve manufacturers didn't adapt to the transistor, and, most notoriously, in photography where Kodak invented the digital camera and then sat back and watch others exploit that technology to cannibalise their market in a matter of years.

One of the interesting things about technology is you often get all the component parts way down the S-curve, but when the ingredients are right and the market ready, the rise can be explosive. It doesn't surprise me for example that electric vehicles haven't yet displaced the internal combustion engine, but when the change happens it could be very abrupt.

So you need to be scanning the horizon for the opportunities in your sector and be ready to exploit them, as those opportunities can be catastrophic threats to those who cling to the status quo.


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5 February 2016

Peak Peak Oil?

old oil pump

"Whatever happened to Peak Oil?" is a question being asked by many commentators as we sit on a global oil glut.

We first have to remind ourselves that Peak Oil Theory is not about oil 'running out'. It is the point where demand outstrips supply. There are implicit assumptions in the theory that demand will keep rising, alternatives will easily not be found, and normal economic supply/demand cycles apply.

The current situation is that demand is stalling and the Saudis are artificially flooding the market in an attempt to kick-start that demand (the House of Saud is facing an existential crisis). But, in the words of one commentator, "no-one is buying it", so the price has plummeted.

This has kicked off a slew of opinion pieces – many calling into question whether "peak oil demand" is a thing or not. The sceptics rest their case on the fact that oil is not as easy to substitute as, say, coal – usually using US consumption figures, rather than the global picture. However, the unexpected solar boom has shown that energy predictions are often highly conservative.

My view is that it is difficult, nay impossible, to work out what is happening as we are in uncharted territory – it may be 5-10 years before we work out where Peak Oil theory stands in the new world order.


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22 April 2015

Not burning fossil fuels? It's a piece of cake...

cakeI'm a sucker for chocolate cake. You put a piece in my view and I want it. What's more, I'll probably eat it. I'm one of those Dads who will hide behind a cupboard door to stop the kids seeing me snarfle a chocolate biscuit. The temptation is always too strong. I am weak.

That's why I gazed with despair on the Earth Day headline that scientists have declared we must leave 75% of fossil fuel reserves unburnt to avoid catastrophic climate change. All those easy calories – doesn't matter how many times we are told they are bad for us, while they are accessible, the temptation will always be there.

Many 'greens' act like food fascists, sneering at the contents of the shopping baskets of those ahead of them in the supermarket queues. It might make them feel better, but it won't do anything to stop obesity.

You can blame politicians, but frankly, it takes a brave soul to stand up and say to the country we must sacrifice short-term gain for the sake of our grandchildren. Actually, it's very easy to say, many do now say it, and many will support the words. The brave bit comes from putting words into action – and we must support them when they do, not the usual fusillades of 'nowhere near good enough' from those who have never had to make a big public decision in their lives.

The answer? I find I can drop the sugar hit if I get it out of my routine. Likewise we've got to get fossil fuels out of the routine of Joe and Josephine Public. We've got to make sustainability the new normal: easy, intuitive, reflexive, unthinking, desirable. Only then will we wean ourselves off fossil fuels.


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2 March 2015

Obama's Litmus Test is Keystone XL, What's Yours?

iStock_000004249001SmallBarack Obama knows that his commitment to tackling climate change will be critically tested by his decision whether or not to permit the Keystone XL pipeline which would massively increase the flow of oil from the Canadian tar sands to the Gulf of Mexico. There was something of a false alarm last week as it was reported that he had vetoed the pipeline, but he had in fact vetoed a bill in Congress trying to force approval - keeping the decision for himself (source Grist).

These big decisions can take on a symbolic significance way beyond their actual environmental importance (although this is important). Personally, I would like to see the environmental movement adhere to the same faith in scientific evidence with which we berate the climate change denial movement, but it's a fact of life that symbolism matters. This is a litmus test, whether Obama likes it or not.

You may think your decisions are insignificant compared to the POTUS, but they carry the same symbolism within your organisation. It is relatively easy to start doing 'good' stuff, but the litmus test is whether you will stop doing 'bad' stuff.

Great examples include Interface killing off profitable product lines because they involve hazardous flame retardants and B&Q refusing to stock patio heaters because they were against their environmental commitments. In both cases planet was given preference to profit.

So your litmus test is what are you going to STOP doing?


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15 December 2014

The Oil Industry: Resurgence or Death Throes?

old oil pump

Like many, I've been completely gobsmacked by the plummeting oil price - down from over $100 a barrel at the start of the year to $64 a barrel this month. Trying to unpick what has happened has led me to the following line of thinking:

  • The growth in demand is slowing dramatically, worrying all producers (IEA);
  • Production is actually falling (IEA);
  • Shale oil production in the US is threatening OPEC's stranglehold on oil markets (BusinessWeek);
  • OPEC are trying to drive out shale oil and other competitors by keeping quotas high (BusinessWeek) - presumably draining their stocks.

Given this political/economic wrestling match, it is very hard to say where oil prices will be in 2-3 years time. Given the relative flexibility of shale oil extraction compared to lumbering OPEC conventional extraction, I can't help but think, like BusinessWeek, that OPEC are going to emerge a much weaker force as a result of their tactics. It may be they are up against the wall and lashing out in desperation. So the answer to my question above is: both - resurgence for shale, long term decline for OPEC.

This uncertainty is a massive problem for investors in alternative energy - who need to know what the market will be like to invest. I can't help but think that the solution is still a carbon tax to reflect the damage done by carbon based fuels - along with the removal of fossil fuel subsidies. This would stabilise the market and give renewables a level playing field.


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21 June 2013

Book Review: The Burning Question, Mike Berners-Lee & Duncan Clark

Burning QuestionThe central thesis of The Burning Question is that all our wonderful solutions to the climate crisis - renewables, nuclear, population control, energy efficiency - come to nowt unless about half of fossil fuel reserves remain where they are - underground.

That might seem a statement of the bleedin' obvious, but all too often we ignore the obvious in favour of the complex. For example, many have called for the exploitation of shale gas to drive down emissions from coal burning. But use of shale gas in the US has simply driven down the price of coal, leading to generators in other countries such as the UK switching from conventional gas to coal and increasing emissions. This type of 'rebound effect' suggests that, if fossil fuels are in the game, they will be used.

As the authors point out, financial markets are clearly assuming that identified reserves will be exploited at a similar or faster rate than they are today. This means they have rated the risk of those reserves being written off in favour of a low carbon economy as zero. It is worth noting that the markets have been wrong, very wrong, recently on the dotcom boom and the subprime mortgage market with quite spectacular results, but it would be more reassuring if they saw a clean energy revolution as something worth investing in.

After discussing the reasons why this might be, the authors take a slight, but interesting and potentially crucial, tangent. By moving swiftly to tackle non-fossil fuel greenhouse gases, such as methane from landfill and nitrous oxides, we could relatively painlessly buy ourselves some time to tackle the more ingrained problem of fossil fuels.

The longer term solutions put forward for our fossil fuel addiction are:

  • Waking up: facing the facts;
  • Capping the carbon: a global cap and trade scheme and divesting in fossil fuel companies;
  • Pushing the right technologies hard: carbon capture, renewables, nuclear - we'll need them all;
  • Dealing with land and smoke: protecting forests, dealing with methane and black carbon;
  • Making a plan B: geoengineering;
  • What can I do - personal interventions such as speaking up and eating less beef and lamb.

This is a short, punchy, provocative book. However, it suffers from the problem that most such books suffer - that the solutions provided at the end are rather vague compared to the precision with which the authors analyse the problem. In this case they briefly cover the pros and cons of different options but rarely nail their colours to any particular mast (with the notable exception of the need to tackle non-fossil fuel sources of greenhouse gases.)

That grumble aside, The Burning Question is definitely worth a read, if only to remind ourselves of that key central truth - that about half of the world's fossil fuel reserves must remain untouched, or everything else we do will be in vain.


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16 May 2012

Who owns solar energy?

I saw this cartoon on Facebook last week and it made me giggle. Then it made me think.

While it is primarily a pop at the conservative instincts of the traditional energy sector, the more I thought about it, the more it resonated with deeper issues such as:

1. Renewable energy is completely different from other forms of energy as it is intrinsically democratic - supply of fuel cannot be exclusively auctioned off to the highest bidder by Governments - which means anyone can take part.

2. This is a massive threat to the traditional sector as their strengths in economies of scale and economic/political heft do not confer the advantages they used to.

3. It also means the barrier to entry is much lower - hence as all those individual householders claiming Feed In Tariff on their solar energy elbowing their way into the energy business. Move over EDF, Mrs Miggins of Acacia Avenue is selling these electrons.

4. Without their aces, can Big Energy compete in the unfolding new energy world? Or will they become the fossilised energy industry as I have predicted?

5. This is very exciting. This is Energy 2.0 which opens up masses of possibilities just as Web 2.0 did.

6. But, without that economic firepower, who is going to invest in the infrastructure such as the smart grid and storage facilities required to manage a new democratic system? How will they earn a return on that investment? Who will police it?



Cartoon © Mike Peters - reproduced under "fair use"

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