Given the punchy title you might think that Professor Dieter Helm, Oxford University’s preeminent energy academic, has finally turned on the industry to which he is closely associated. Not so, Helm’s narrative of a long-term decline, via a “golden age for gas”, is quite closely aligned with what oil and gas industry lobbyists are currently saying. “Burn Out” turns out to be more of a fizzle and while Helm’s economic and political analysis is insightful, it is disappointing that, in the face of climate change and the environmental and geopolitical havoc caused by resource exploitation, one of our leading energy thinkers cannot see beyond a strategy of burn more gas and await new technology.

I think at this point I should declare some vested interest, or at least non-neutrality. The first half of my energy career was spent working as a consultant in the oil industry and so I have a fair understanding of the “dark side” of energy. I have spent the last decade in the renewable energy sector. So, in my role as a director at Regen, as well as someone who is deeply concerned about climate change, I am clearly coming to this book as a renewable energy advocate; and while I consciously read “Burn Out” with a mindset to be independent and balanced, I cannot be neutral. I am also an Oxford PPE graduate from Thatcher’s eighties, so there is probably some residual resistance towards the way economics was taught to me, and probably still is, in the era of privatisation, blind faith in a free market and monetarism.  

Having got that out of the way, there is a great deal in “Burn Out”, and in Helm’s general analysis of the energy industry’s future direction that a renewables advocate can agree with. The title of the book and its clear message, that we are now entering the endgame for fossil fuels, is startling. More so since this is coming from an economist who has been closely associated with the oil and gas industry, and someone who has the respect, and the ear, of many of the world’s major oil companies.

Helm’s core analysis is that a combination of the impact of climate change science (which he calls “the carbon constraint”), reducing demand, over supply from conventional and unconventional resources, and ultimately technological innovation will lead to the slow but inevitable demise of the fossil fuel industries.  This demise will be proceeded by a period of downward oil and gas price pressure and increasing economic and social hardship for those countries that have become dependent on fossil fuel exports. Hard to disagree with that, although some would argue that oil price volatility (not just falling prices) will hasten its demise as high price periods drive consumers to look for alternatives, while low price shocks deter both human and capital investment.

Helm goes on to describe what the endgame process might look like; the impact of shale and global over supply on oil prices; the collapse of coal as it is replaced by gas; and then the more gradual reduction in demand for oil, and for gas itself, as the world develops new technologies and finds new forms of energy for transport, heating, agriculture and construction.

So far so good, and I think that there would be a very broad consensus and agreement, from those of us involved in sustainable energy, with Helm’s analysis.

Burn Out” is however a frustrating book to read. Helm sets up a very logical and compelling argument, but he then either pulls his punches or does not follow his argument to its logical conclusion. The fossil fuel industry, and its nervous shareholders, will not mind Helm’s focus on lower prices - no harm in announcing a closing down sale - but they will be pleased that Helm dwells little on the other symptoms of a dying industry; stranded or at best overvalued assets, the choking of investment or even an active divestment and the loss of talent and human resource that the industry is already enduring.

Helm is critical of the oil companies and their inability to innovate but makes little by way of recommendation on how they should change. Nor does he mention, even in passing, those oil companies (traitors perhaps?) like DONG energy that are already making that transition.

He identifies new technologies – such as electric vehicles – which would radically change our demand for oil but then seems to downplay their significance, or at least the speed of uptake.  

Ouch… why does Helm hate wind turbines?

A further source of frustration is Helm’s invective towards renewables. I was prepared for that given his previous work, but the way renewable technologies are dismissed as inefficient, intermittent, costly, supported by lobbyists and subsidy junkies, is more Daily Mail than Oxford academic.

This, “solar panels are useless at night” level of analysis is simplistic and Helm offers very little evidence to back his strident views.  It also feels quite dated, for which I sympathise because the pace of change has been so fast of late. Helm refuses to acknowledge the critical role that renewable energy technology is playing to reduce CO2 emissions. There is no recognition of the scale of renewable deployment, the level of global investment or the significant cost reduction that has been achieved; which is already driving coal from the market and will soon be cost competitive with gas.  

Helm refuses to contemplate that the continued innovation and investment within these technologies may lead to better solutions. There is little analysis of the pivotal role of energy storage, or of the opportunity that greater integration between energy systems, that will enable the optimisation of renewable generation technologies and reduction in system costs. 

Interestingly nuclear does not fare much better from Helm’s bashing.

It is maybe wishful thinking to expect that Helm would put renewable energy at the heart of his future energy vision but as an alternative Helm offers very little. There is a rather soft argument that we should wait for some yet unidentified new energy technologies. Perhaps some radical new source of solar energy and maybe something digital made of graphene. The danger of this “billy goats gruff” (don’t eat me, wait for my fatter brother) approach is complacency. New technology will absolutely be part of the answer, but probably as an evolution from existing technology and Helm refuses to accept the key point that we can’t afford to wait.

In more practical terms Helm’s main answer to the climate change challenge is to replace coal with less carbon intense gas, leading in Helm’s view, to a “golden age” of gas. This analysis overlooks the fact that, while gas is clearly better than coal, it is still a long way above the carbon intensity which is needed if we are to avoid disastrous climate change. So, our reliance on gas must be very short lived and, as we are already seeing in the UK, may well favour less efficient peaking gas technologies providing marginal electricity balancing, and not base load, energy. Hardly a golden age.

A decade ago this would have been radical stuff but right now “kill coal” is an easy message to give. It is in fact closely aligned with what the oil majors are saying and, although Germany and parts of Eastern Europe are currently coal miscreants, coal’s death is to a large extent already happening here in the UK and in the USA (despite Trump’s pledges). Even in China the number of new coal plants is already dropping.

More fizzle than burn

So, there is a suspicion that despite the title, Helm is still essentially providing an oil and gas industry narrative, and appealing to people and politicians that are ideologically anti-renewable.

Throughout, Helm is at pains to emphasise the very gradual nature of the change that is to come – especially for oil. He doesn’t put an end-date on the “burn out”, but talks in terms of decades and maybe longer; something board members at Shell and BP, and their shareholders, will be comfortable with.  

This view chimes with what the oil industry is already saying. Any self-respecting oil industry leader has got to say that the end of fossil fuels is coming – the only alternative is to stick to climate change denial - but their message is then self-serving; “kill coal, burn gas, delay costly policy interventions that might distort the energy oligopolies and await new technology”.

Even if this strategy would work – and it is hard to see how, with falling oil prices, any new technology will be developed without policy intervention – we don’t have time. The world has now passed the 400 parts-per-million thresholds for CO2 in the atmosphere, our weather systems and our oceans are already being impacted and if we don’t act in the next decade – even imperfect actions with imperfect technology solutions – we will have little chance to avert global environmental degradation and all that that entails. 

Not a climate change denier but in denial about climate change?

Helm displays the expected clarity of argument and measured tone of an Oxford trained economist, but there is also a fair degree of underlying cynicism in the narrative. Helm doesn’t believe in the multilateralism expressed at the Paris COP and he clearly doesn’t hold out much chance that the world will be able to wean itself from its fossil fuel addiction in time to meet a 2-degree global warming target. He is also very doubtful that any of the policy measures taken to date to reduce CO2 emissions have been effective.

In “Burn Out” Helm recognises that climate change presents a very real threat to our world.  It is interesting however that in terms of language, Helm more often refers to climate change in conceptual terms – the “science of climate change”, the “politics of climate change”, the “carbon constraint” or the “climate change agenda”.

In his concluding chapter Helm states that; “If climate change is the existential threat many scientists tell us it is, then the great new wave of inventions is a get-out-of-jail free card…”. 

It is as if climate change is some abstract thing, a political thing, but not something that is already happening and must be urgently addressed. Helm’s belief that new technology will deliver the world from the perils of climate change is dangerous. Combined with the message that innovation and change can only be delivered by the free market, with seemingly no room for people, politicians, communities, cities or indeed companies themselves to make a substantive difference, Helm’s analysis is an invitation to do nothing.

This is depressing and, having worked with many communities and individuals who are determined to accelerate the transition to a low carbon economy, I do not believe it is true. I don’t want to be accused of naivety, or to side with a Michael Gove view of experts, but surely economists have begun to build into their thinking the fact that people, and society at large, can make a difference.

 True cost of our fossil energy addiction

The second half of “Burn Out” takes us on a world tour of fossil fuel dependent states, from Russia and China, to Europe, Middle East and of course the USA.  This historical overview shows the brutal reality of our fossil fuel addiction. What Helm refers to as the “resource curse” has inevitably led to corrupt and despotic regimes, wars, bloodshed, terrorism and civil conflict leading to failed economies and failing societies. All policed at great expense (far more than renewable energy subsidies) by the west, and in the future maybe also by China.

So having read Helm’s damning description of the social and geopolitical problems caused by oil dependency I was waiting for him to draw the logical conclusion – good riddance to fossils and lets now harness renewable resources that are both ubiquitous and assessible; democratise energy, transform society; and partially remove at least one source of human conflict.

Unfortunately, this isn’t the conclusion that Helm is prepared to draw..…

Author: Johnny Gowdy

Contact: jgowdy@regensw.co.uk