The digitalization of the energy sector will provide the only sure-fire route to decarbonisation, according to Dieter Helm, Professor of Energy Policy at the UK’s Oxford University.
“We will not solve climate change with existing technologies,” he said in London yesterday, adding 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, its electricity you should start with.”
Helm, who is an economist and a former special advisor to the European Commissioner for Energy, said that decarbonisation “is unstoppable” but was highly critical of many decarbonisation 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 said he was “quite optimistic about how we crack decarbonisation – but not in the conventional way”.
“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 said that “there are only four ways of doing low carbon”: nuclear, hydropower, geothermal and solar.
He swiftly dismissed 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 to promote his new book, Burn Out – The Endgame for Fossil Fuels, in which he outlines the energy industry of the future, which will be formed by 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 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 securitisation 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 10-15 years’ time are companies that you’ve never heard of.”