Decarbonization is in the hands of digitization

The digitalization of the energy sector will provide the only sure-fire route to decarbonization, according to a leading economist and energy academic. Kelvin Ross hears him explain why

“We will not solve climate change with existing technologies.” So says Dieter Helm, Professor of Energy Policy at the UK’s Oxford University.

Prof Helm believes that digitalization, robotics, artificial intelligence and 3D printing will all change the face of energy.

“These are dramatic changes. Everything digital is electric, therefore the future of energy is going to be much more about electricity than it has been in the past. The general trend tells you that if you want to address climate change in particular, or energy usage or energy policy, it’s electricity you should start with.”

Technology will change the face of energy
Technology will change the face of energy
Credit: Hannover Messe

Helm, who is an economist and a former special advisor to the European Commissioner for Energy, says that decarbonization “is unstoppable” but is highly critical of many decarbonization policies. “We have spent a lot of money on addressing climate change – but we could do better, and indeed we have to, because we are not making enough global progress on climate change.”

He says he is “quite optimistic about how we crack decarbonization – but not in the conventional way”.

“Technology is what is going to drive through decarbonization. Top level agreements like Paris – whether they’re good or bad – are not going to solve the problem.”

But he adds that “we will not solve climate change with existing technologies. I don’t think technology is going to solve everything, but I do think that it’s a bet that we have no option but to pursue.

“The costs of R&D and the costs of developing next-generation technologies are pretty low compared with the cost of deploying existing technologies, some of them very expensive”.

He says that “there are only four ways of doing low carbon”: nuclear, hydropower, geothermal and solar.

He swiftly dismisses the first three. On nuclear: “I doubt anyone believes we are going to build several hundred big nuclear reactors in the next 20 or 30 years – we are struggling to build just one or more in Britain and many other countries have given up.” On hydro: “A lot of the best stuff has been done and a lot of the future hydro is quite questionable from an environmental point of view.” And geothermal “potentially could really help, on the heating side in particular, but it’s located where volcanoes and cracks in the earth’s crust tend to be, so it really requires other technologies”.

That leaves solar. “You have to say that solar is where you would want to chuck some R&D money,” said Helm. “Why? Because it is effectively infinite.” He said further scientific research was clearly needed to be able to harness more of the sun’s power, “so we need a science budget. We have to be able to do that if we are going to have enough low carbon energy to make a difference to climate change. I’d throw a billion at that rather than a billion offshore any day.”

Helm was speaking at an event in London to promote his latest book, Burn Out – The Endgame for Fossil Fuels, in which he outlines the energy industry of the future.

He has never subscribed to the notion of fossils fuels running dry any time soon: “The peak oil idea is nonsense. There’s more than enough oil and gas to fry the planet many times over. Whether it lasts another 100 years or 150 years is irrelevant.”

In the book, he is very bleak about the future prospects of the Middle East – particularly Saudi Arabia – and very bullish about the prospects for the US. He says Donald Trump “is a very lucky president, in energy terms”.

“He arrives after Obama presided over the largest increase in fossil fuels that America has seen since the Second World War. Obama is the ‘Fossil Fuel President’. Cut the rhetoric – that’s what he presided over. America is nearly on course to having rough energy independence: it has abundant gas, it can re-shore the petrochemical industry; and technology will bring back companies anyway because no longer they need cheap labour overseas because of digitalization.”

Indeed, Helm cannot overstate the importance to the energy landscape of new technologies.

“These new robotic technologies, AI, 3D printing – all are zero margin cost. The electricity market in the world I am describing is a capacity world, not a wholesale variable cost world. Yet the entire structure of the electricity industry and almost all the policy is based on the idea that what really matters is the wholesale price. And it doesn’t as we go forward. It won’t go to zero. It still balances the market. But it becomes less and less important.”

He said a fixed-price capacity world “is a securitization utility world. This is a very different model and vertical integration has no sense in this model whatsoever. The strategies that may have worked in the past no longer work.”

Therefore, he said utilities would continue to “break themselves up – they divest of components. And you get lots of new entrants coming into the market. In five to ten years’ time it will be a very quaint idea that you just sell electricity and gas. It’s all about new companies – the game has changed.

“The most likely players on the energy pitch in ten to 15 years’ time are companies that you’ve never heard of.”

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