Triple Crunch

For much of last year, one of the questions I researched in detail was What will Higher Education look like in a 2050 -80% +2c 450ppm world? My research began with a personal interest in Peak Oil and from there led me to look at climate change and the social and economic impacts of these related subjects. The focus of my research was initially an application for a research grant. You can read the application and the judges comments, which were very favourable but ultimately didn’t secure the grant because it was outside the remit of the programme of funding. Oh well. For months after that, I tried to understand the implications of a future where energy production doesn’t meet demand and the impacts of climate change become more apparent and wrote about it regularly under the tag ‘resilient education‘. Ultimately, my research led me to be quite pessimistic about our ability and willingness to deal with the projected problems. If you read my blog posts, you’ll see that there are really deep structural issues that need to be faced, in particular around the relatively recent obsession with economic growth. I say recent, but the underlying logic of capitalism has always been concerned with the accumulation of surplus value in the form of money, something Marx identified in the 19th century, but it’s only in the last 50 years or so that the idea of ‘economic growth’ has been an explicit political priority.

Anyway, the news over the last week or so has reminded me that the government and mainstream media are literally years behind acting on the research available to them. I was encouraged to read that the UK government seems to be acknowledging Peak Oil and is working with an industry group to model the impact on the UK economy if the price of oil rises to $250/barrel in 2014 (it’s currently around $115). This new relationship might have been forged due to the excellent report that the group produced last year, showing the likelihood of an ‘oil crunch’ in the middle of this decade, or it might have been because the International Energy Agency finally admitted that Peak Oil had actually occurred (in terms of crude oil – not total liquid fuels) in 2006. Energy analysts already knew this – you only had to look at the trend in crude oil production to get an idea – but with the IEA now using the term ‘peak oil’, the issue is bound to get more coverage.

Other news in the last week confirms the problems we face with climate change, too. Again, it takes the IEA to speak out before it gets any real coverage, but thankfully they’ve highlighted the the very tight correlation between economic growth (GDP) and rising emissions, saying that “it is becoming extremely challenging to remain below 2 degrees. The prospect is getting bleaker. That is what the numbers say.”

Finally, Larry Elliot, the Economics Editor for the Guardian wrote a column yesterday, which ties everything up together reasonably well. Energy, the economy and emissions are all inextricably linked and point to a ‘triple crunch’ that is yet to fully impact on the UK. I’m pleased to see this kind of reporting in the mainstream media but what’s really frustrating is that it only took me a few months of research to figure this out. The message has been clear for a number of years now and the public discussion is a decade overdue. There is a substantial body of research which I identify in my blog posts, that points to an oil crisis this decade (not what we’re seeing at the moment, but a real crisis where liquid fuel production falls over a number of years), which shows that the -80% emissions target is all but impossible and that when global net energy production falls, so does GDP.

As I’ve said before, this all has significant immediate and long-term social and political implications, including the effects it could have on the provision of higher education. It’s time that a co-ordinated effort was made by the sector to examine these issues in detail, involving academics from across disciplines as well as business continuity managers and VCs. We really do need to start ‘thinking the unthinkable‘…

Energy, the economy and resilience

What impact might the increasing cost of energy have on Higher Education? My interest is not simply about the impact on institutional spending, but rather the deeper and broader socio-economic effects that an energy crisis might have on the provision of Higher Education. To the extent that Universities are businesses, I am interested in ‘business continuity’, but equally I am interested in whether the current energy intensive model of HE will remain viable and whether an energy crisis might act as a catalyst to changes in the nature of Higher Education within society.

This forms part of an on-going series of blog posts/essays, which are being collected under the tag #resilienteducation (RSS feed). My thinking on these issues is by no means complete or even coherent at times but through sketching out these ideas and hopefully receiving feedback, we can all offer useful observations on and possible solutions for the future of Higher Education. You will see that Richard Hall has recently begun to address this too, questioning the relevancy of curricula, and how building resilience to the related impacts of an energy crisis and climate change might inform learning design and pedagogy.

I appreciate that a discussion about energy fundamentals is not part of the usual discourse around educational provision, but my proposal is that it should be and will be, just as there is already a discourse around the increasing role of educational technology, which is, from one point of view, merely leveraging affordable and abundant energy for the purposes of research, teaching and learning.

In fact, the discourse around energy has already begun under the guise of Climate Change and Sustainability. When we speak of sustainability with regards to Climate Change, we are referring to a transition from a society built on fossil-fuel energy to one that is not. If adhered to, this compelling transition will be more profound than anything we have experienced in our lifetimes and is likely to last our entire professional lives, too.

As the crucial issue of Climate Change begins to dominate all aspects of society, so I expect an interest in the fundamentals of energy policy, security, production and consumption to surface in discussions about the nature of our institutional provision of education, just as an interest in carbon emissions and sustainability is surfacing now.

The facts

During the period of 2007-8, GDP in the UK hovered somewhere between 2-3%:

GDP Growth. Source: Office for National Statistics

GDP Growth. Source: Office for National Statistics

Looking at the Consumer Price Index (CPI) between 2007-8, inflation rose from about 2% to 5%:

Inflation 2007-9. Source: Office for National Statistics

Inflation 2007-9. Source: Office for National Statistics

Individual earnings increased, on average, just under 4% each year during 2007-8:

Average Earnings 2007-9. Source: Office for National Statistics

Average Earnings Pay Growth 2007-9. Source: Office for National Statistics

Average household income in 2007-8 was about £30K:

Household Income 2007-8. Source: Office for National Statistics

Household Income 2007-8. Source: Office for National Statistics

Now, moving on to energy, consumer ‘dual fuel’ bills have more than doubled since 2004.

Dual fuel customer bill 2004-9. Source Ofgem

Dual fuel customer bill 2004-9. Source Ofgem

In 2006 (the latest figures I can find), household fuels made up, on average, 3.5% of household income. Though bear in mind that this is an average. For lower income households, it rose to 6.6%.

Household Fuel Expenditure 2006. Source: DECC (2008 report)

Household Fuel Expenditure 2006. Source: DECC (2008 report)

With the average household final income at just under £30K and the average annual household duel fuel bill at over £1200, the current percentage expenditure on household energy is more like 4%.

The scenario

In October this year, Ofgem forecast that UK domestic energy bills could rise by up to 60% over the next ten years in a scenario where the economy recovered and there is a competitive ‘dash for energy’ between countries for energy resources. Specifically, they see a difficult period around 2016 due to the closure of domestic facilities and an increased reliance on imported fuels.1 However, last week, at a House of Commons Select Committee, Alistair Buchanan, the chief executive of Ofgem, said that following more recent discussions with energy suppliers and academics, the 60% figure is now seen as too optimistic. He didn’t offer a revised figure from 60%, but we might consider research by Ernst & Young (commissioned by uSwitch), that warns of up to a 400% increase in the costs of domestic fuel by 2020. That is, average annual domestic energy bills could increase from £1243/year to £4733/year.2 This doesn’t mean very much until we compare it to increases in average household income which, looking at the individual income, GDP and inflation charts above, we might optimistically suggest will climb back to about 3-4% each year. The forecast isn’t quite as good as that in the medium term though, with GDP predicted to grow by 1.1% in 2010, 2% in 2011, 2.3% in 2012 and 2.7% in 2013. Inflation (CPI) is likewise forecast at 1.9%, 1.6%, 2% and 2.3% each year, respectively. Anyway, let’s be a bit optimistic and say that the average final household income will rise from about £29K to around £37K in 2020 (about +2.5%/year – my Union has just agreed to a 0.5% pay increase this year). The percentage of household income spent on the £4733 energy bill would rise from 4% to nearly 13% in 2020. That’s a significant chunk of household income that for many people would force ‘efficiencies’ in energy use, result in cuts in other household spending and contribute to further fuel poverty. In terms of the Jevons Paradox, it may be understood as a method of controlling the energy consumption of the average household.

Fuel Poverty 1996-07. Source: DECC

Fuel Poverty 1996-07. Source: DECC

The bigger picture

It’s useful to look at the bigger energy picture presented in my last post and consider the effect that the price of oil had on energy prices, inflation and GDP during the last few years. The prices of gas and electricity correlate closely to the price of oil:

The correlation of energy prices

The correlation of energy prices

Of course, not only does the price of electricity rise with oil, but the price of fuels for transportation rise, too, and when transportation costs rise, everything else, including food and consumer goods, rise.3 Look back to the inflation chart above and see how inflation peaked above 5% in September 2008 not long after the price of oil peaked at $147/barrel in July 2008. The effect is, unsurprisingly, that as living gets more expensive and results in sustained debts we cannot manage, we are forced to curtail consumption and GDP slows.  I mentioned in my last post that there is a belief that oil price spikes lead to recessions.4

Look again at the chart below, which I used in my previous post and shows the price of oil over the last few years with a projection to 2012. The forecast of oil at around $175/barrel within the next two years, based on what we’ve just seen above, suggests the possibility of a sustained recession as economic growth is limited by the availability of affordable energy. Given the recent volatility of the oil market, we should be cautious of forecasting prices, but can, with more confidence, predict supply and demand, which prices are linked to. With oil production at a plateau, “chronic under-investment” in the oil industry (despite record income) and the additional price of carbon added to energy consumption, the retail price of energy to consumers is unlikely to go against the trend shown in this graph.  Other sources confirm the likelihood of an ‘oil crunch’ before 2015. For example, see the interview with the IEA’s Chief Economist and a report from Chatham House, which warns of a crunch by 2013 and the possibility of prices topping $200 per barrel.

World oil supply, demand and price to 2012

World oil supply, demand and price to 2012

Finally, there is a whole other local issue of declining revenues from North Sea Oil, which was presented as a grave problem to the All Party Parliamentary Group on Oil and Gas, this week. If this post interests you, I highly recommend spending 30 minutes reading this paper which accompanied the presentation and discusses these issues in much greater depth and breadth. The paper concludes:

If we look forward, taking into account the biophysical restrictions, a major change in the nature of our economy is certain – if only because the reality of our situation dictates that it can’t stay the same. That is the political issue that British society must reconcile itself to. For the last two decades we have been living a lifestyle that has been sustained by the wealth and power created by indigenous energy resources. That cannot continue, and the process of moving from an economy that has no limits to one that must operate within more tightly constrained limits is going to be a difficult re-adjustment for many: For the political class it means redefining what it is society represents, and what its aspirations should be; for the business community it means redefining what the term “business as usual” really means; and for the public it means reassessing their own material aspirations, and perhaps a return to a far less energetic lifestyle that in terms of energy and material consumption is likely to be similar to the levels which existed in the 1950s or 1960s.

Perhaps at a later date, we might look at Higher Education in the 1950s and 60s in some detail…?

Universities are large consumers of energy

If oil and therefore energy prices are to continue to rise as both the chart above and the uSwitch research warns, what might be the cost to Higher Education? A 2008 paper estimated that UK Higher Education Institutions spent around £300m on energy in 2006, an increase of 0.5% since 2001 and representing 1.6% of total income.5

This review reveals that the energy consumption levels in UK HEIs increased by about 2.7% over the 6-year period between 2001 and 2006. The building energy-related CO2 emissions are estimated to have increased by approximately 4.3% between 2005 and 2006 alone. These trends run contrary to the national plans for emissions reductions in all sectors and are therefore a cause for action.

The Sustainable ICT project estimated that around £60m of the £300m (1/5th) was to power ICT.6 Since 2006, energy bills have risen by about 25% so we might expect HEIs annual electricity costs to currently be around £375m, with ICT use around £75m. The increase in the number of students in Higher Education has not resulted in a corresponding increase in energy use; closer correlations can be found between floor space and energy use and, interestingly, between research activity and energy consumption. The more research intensive universities use relatively more energy.7 But enough about energy prices. Annual income of HEIs increased by 10% to £23.4bn between 2007-8 and total expenditure likewise increased by 9%.8 How would an energy shock of +400% , increasing sector-wide energy costs from £375m to £1.5bn over the next ten years, be managed when income and spending appear to be so tightly coupled? On a more local level, my institution’s gas, electricity and oil bill is forecast to be £1.63m in 2009/10, up 6% on the last year. What would be the impact on us of an annual bill of £6.5m in 2020? (In 2007, our university had a budget surplus of £2.6m).9 What areas of income are likely to accommodate an increased spend of up to 400% in ten years? Efficiencies in energy use can help, but even with planned cuts in consumption of around 5% next year, the annual cost of electricity, gas and oil at this university is still expected to rise by 0.8% under current energy prices.

Sustainability or resilience?

Resilience is the capacity of a system to absorb disturbance and reorganise while undergoing change, so as to still retain essentially the same function, structure, identity and feedbacks.10

What actions can HEIs take to be resilient and therefore remain relevant as dramatic social changes occur in our use of energy and therefore material consumption and output?

Resilience, it seems to me, is a pre-requisite for sustainability if you accept the tangible and coupled threats of energy security and climate change enforcing long-term zero or negative growth. If oil production has peaked just prior to the worst economic crisis in living memory and faced with the need to reduce carbon emissions by at least 80% in the next forty years, should we not first develop a more resilient model that we wish to sustain?

In terms of energy use, can efficiencies lead to sustainability? At what point does ‘efficiency’ actually mean conservation and rationing? At what point do we change our habits, our practices, our institutions instead of telling ourselves that we are being efficient, as we do today? How can we teach a relevant curricula with less money (due to funding cuts and higher costs) and less energy?

To what extent is Higher Education coupled to economic growth? Universities contribute 2.3% of UK GDP but to what extent are universities dependent on economic growth? How would a university operate under a stable but zero growth economy? To what extent is educational participation dependent on economic growth?

Sorry, lots of questions but fewer answers right now.

The Sustainable Development Commission, “the Government’s independent watchdog on sustainable development”, published a report earlier this year called Prosperity without Growth, the transition to a sustainable economy. The publication (recently developed into a book), examines what ‘prosperity’ means and discussed education alongside other ‘basic entitlements’ such as health and employment.   In particular, the author argues that these basic entitlements need not intrinsically be coupled with growth. He argues that growth itself is unsustainable and that high standards of health, education, life expectancy, etc. are not coupled with higher levels of income everywhere.

Interestingly, there is no hard and fast rule here on the relationship between income growth and improved flourishing. The poorest countries certainly suffer extraordinary deprivations in life expectancy, infant mortality and educational participation. But as incomes grow beyond about $15,000 per capita the returns to growth diminish substantially. Some countries achieve remarkable levels of flourishing with only a fraction of the income available to richer nations. [p. 43]

Participation in education vs. income per capita. Source: Prosperity without Growth

Participation in education vs. income per capita. Source: Prosperity without Growth

Chapter four of the publication includes a useful discussion on economic growth, technological efficiency and resilience concluding:

…the answer to the question of whether growth is functional for stability is this: in a growth-based economy, growth is functional for stability. The capitalist model has no easy route to a steady-state position. Its natural dynamics push it towards one of two states: expansion or collapse.

Put in its simplest form the ‘dilemma of growth’ can now be stated in terms of two propositions:

  • Growth is unsustainable – at least in its current form. Burgeoning resource consumption and rising environmental costs are compounding profound disparities in social wellbeing
  • ‘De-growth’ is unstable – at least under present conditions. Declining consumer demand leads to rising unemployment, falling competitiveness and a spiral of recession.

This dilemma looks at first like an impossibility theorem for a lasting prosperity. But it cannot be avoided and has to be taken seriously. The failure to do so is the single biggest threat to sustainability that we face.

Decoupling participation in Higher Education from energy use and emissions

We can see from the chart above that Cuban citizens enjoy roughly the same level of educational participation as the UK, yet their GDP per capita is just a quarter of that of the UK. Participation in this case, is “the combined primary, secondary, and tertiary gross enrolment ratio.”11 Cuba’s energy use per capita is also just a quarter of the UK’s consumption, suggesting that while GDP and energy consumption are closely coupled, GDP and educational participation need not be.

Oil demand and GDP. Source: The Oil Drum

Oil demand and GDP. Source: The Oil Drum

In terms of UK HEI’s resilience, how can opportunities for participation in Higher Education remain widespread in a low energy, zero growth scenario? The Sector review of UK higher education energy consumption showed that energy consumption is not tightly coupled with student numbers, although close correlations between floor space, the number of research students and FTE staff can be seen. Does that mean that the smaller, less research intensive universities are better placed than the larger, research intensive institutions in an energy crisis scenario? Is a model of fewer universities with a higher staff-to-student ratio the answer? What other attributes, other than floor space and research activity could be used to measure resilience against the economic impact of an energy crisis?

Again, lots of questions, but fewer answers right now. Have you got any?

  1. For a good overview of energy security in the EU, see the recent Briefing Paper from Chatham House: Europe’s Energy Security After Copenhagen: Time for a Retrofit? []
  2. Household fuel bills to hit almost £5K in ten years time (PDF)  []
  3. For 2008 average fuel prices, see The AA’s Fuel Prices 2008 []
  4. See James Hamilton’s paper, ‘Causes and Consequences of the Oil Shock of 2007-08′. It’s worth starting from a discussion on The Oil Drum, where you can download the paper. For a more succinct summary, see the FT article here and a rebuke here. Still, even the rebuke recognises the impact oil can have on an economy: “It is through second-round effects that inflation can rise. For an oil importer, a rise in the price of oil means that the country is poorer as a whole. No matter what policy action they take, their terms of trade have deteriorated.” []
  5. Ian Ward, Anthony Ogbonna, Hasim Altan, Sector review of UK higher education energy consumption, Energy Policy, Volume 36, Issue 8, August 2008, Pages 2939-2949, ISSN 0301-4215, DOI: 10.1016/j.enpol.2008.03.031. []
  6. Sustainable ICT in Further and Higher Education: SusteIT Final Report, p. 97 []
  7. Ian Ward, Anthony Ogbonna, Hasim Altan, Sector review of UK higher education energy consumption, Energy Policy, Volume 36, Issue 8, August 2008, Pages 2939-2949, ISSN 0301-4215, DOI: 10.1016/j.enpol.2008.03.031. Another interesting figure that the paper observes is that the ‘downstream’ energy use for the sector, which includes suppliers, business and student travel represents 1.5 times the direct energy consumption of the sector. []
  8. HESA: Sources of income for UK HEIs 2006/07 and 2007/08 []
  9. University of Lincoln Financial Statements []
  10. Although it requires more elaboration and consideration in terms of educational provision, this is the common definition of ‘resilience’ used by the Transition Town movement adopted from Brian Walker and David Salt, (2006) Resilience Thinking: Sustaining Ecosystems and People in a Changing World. See Rob Hopkins (2008) The Transition Handbook. From oil dependency to local resilience. For an academic critique of the Transition Town’s use of ‘resilience’, see Alex Haxeltine and Gill Seyfang, ‘Transitions for the People: Theory and Practice of ‘Transition’ and ‘Resilience’ in the UK’s Transition Movement’. A paper presented at the 1st European Conference on Sustainability Transitions, July 2009 []
  11. What is the Human Development Index? []

Oil and the story of energy

In my previous post, I discussed energy efficiency and our carbon emissions. I tried to highlight how despite our apparent efficiencies, our absolute emissions have risen 19% since 1990. One of the reasons for this is known by Economists as the Jevons Paradox.

The Jevons Paradox (sometimes called the Jevons effect) is the proposition that technological progress that increases the efficiency with which a resource is used, tends to increase (rather than decrease) the rate of consumption of that resource… In addition to reducing the amount needed for a given use, improved efficiency lowers the relative cost of using a resource – which increases demand and speeds economic growth, further increasing demand. Overall resource use increases or decreases depending on which effect predominates… The Jevons Paradox only applies to technological improvements that increase fuel efficiency.

You will see from the Wikipedia article, that one method of controlling consumption of the resource is a tax to try to ensure that the price and therefore the demand for the resource, remains roughly the same. As I understand it, this is what the CRC Energy Efficiency Scheme is attempting to do. It will force universities to become more energy efficient in order to lower our emissions. Rather than then use those efficiencies to purchase more emissions producing resources, which is what we normally do, the fines and reputational incentive will force us to keep making year on year savings of carbon emissions.

As the CRC Energy Efficiency Scheme highlights, the most effective way to reduce our emissions is to focus on our consumption of energy. Around 75% of worldwide C02 emissions caused by humans are due to the use of fossil fuels to make energy.1 Last week, the International Energy Agency published their annual World Energy Outlook, regarded as the most authoritative assessment of worldwide energy production and consumption.2 The graph below shows their ‘reference scenario’, which is a snapshot of the current picture and, if we make no changes at all to our use of energy, where we are heading.

WEO Primary Energy Demand Reference Scenario

As you can see, coal, oil and gas make up the majority of the world’s sources of energy and without making changes, we are heading for an increase of 40% by 2030. Projected to 2050 and beyond, this results in around 1000ppm CO2 equivalent, more than double the safe target figure.3

The IEA’s ’450 Scenario’, which refers to the 450ppm of C02 equivalent emissions discussed previously, is a different picture.

WEO Primary Energy Demand

In the 450 Scenario, energy related emissions peak in 2020, together with global demand for fossil fuels and our use of renewables climbs steadily. Forecasts like this are notably about what we should do, not what we will do. We might also consider what we can do.

David McKay, Cambridge Prof. of Physics and Chief Scientific Advisor to DECC, has written Without Hot Air, a well regarded book that can be downloaded for free. In it, he examines in detail, the supply and demand for energy in the UK.  His conclusions offer five energy plans for Britain, All plans take into account energy efficiencies through the use of more efficient technologies. The five plans that he offers are technically achievable but as you read through them, I think you’ll find that they severely test your belief that they can be achieved. They all assume that our use of energy remains largely the same, driven by the objective of economic growth. MacKay recognises that the plans might sound absurd and invites readers to come up with something better, “but make sure it adds up!” Finally, he notes a plan might be to decrease power consumption per capita or reduce our population, neither of which are any easier to achieve. A further complication to all of this is that the IEA 450ppm scenario offers a global picture whereas MacKay’s book concentrates on a UK scenario. If the five plans he provides look absurd for the UK to achieve, it is reasonable to assume that a scenario where every other country addresses their energy infrastructure with similar plans, might be even more absurd.

Peak Oil

In an earlier post, I introduced Peak Oil and this is what I want to discuss for the rest of this post. It’s a simple idea to understand but has profound implications for the next few decades. In fact, the implications are much more difficult to grasp than the idea itself and, if correct, will certainly impact on the way Higher Education institutions operate and the nature of public education.

Previously, I introduced the idea of ‘resilient eduction’ and asked how it might be developed in the context of Higher Education.

…a pedagogy and curriculum that both encourages and fosters the radical change that is necessary as well as ensuring that the present depth, breadth and quality of education is sustainable in a future where there may be less abundance and freedom than we have become accustomed to.

Richard Hall at De Montfort University has recently responded to this in a long and thoughtful post. As part of our ‘blog conversation’, in which Warren Pearce and Nick Fraser are also contributing, I’d like to offer an overview of the story of oil and, in later posts, point to how the current provision of Higher Education can be seen as a product of an abundance of oil. On the flip side, in a future where oil becomes more scarce, our provision of education might have to change radically. An overall response to this future might collectively be to increase our ‘resilience’ to the impact of peak oil.4 Here’s why:

Hubberts Curve. Source: The Oil Drum

Hubbert's Curve. Source: The Oil Drum

This is Hubbert’s Curve. It  was proposed by Hubbert in the 1950s and, with a reliable amount of accuracy, has so far predicted the global rate of oil production. The dotted line is the actual historic rate of production until 2004. What it tells us is that we produced (due to demand), more oil than the model predicted during the 1960s and 70s. The energy crisis of the late 1970s led to an adjustment (the dip) and since then the world has been following Hubbert’s curve very closely. The very end of the dotted line shows that production in 2004 exceeded Hubbert’s proposal and might lead us to think that with more recent data, we’re repeating the 1970s all over again. This is not the case as you’ll see a few charts down as production has plateaued since 2005. Before we look at that, it’s worth noting that the rate of oil discovery has been in decline since the 1960s. Discoveries have been made since 1964, only they have been smaller amounts of oil and do not add up to what was available to us fifty years ago.

Global Oil Discovery. Source: The Oil Drum

Global Oil Discovery. Source: The Oil Drum

Hubbert’s original work, while employed as a Geophysicist with Shell, predicted the peak of oil production for the USA and this provides a useful historical example that can be extrapolated globally.

US Peak Oil. Source: The Oil Drum

US Peak Oil. Source: The Oil Drum

As you can see, oil production in the 48 states of the USA peaked in 1970. As this became apparent, oil production in Alaska was increased to make up for the shortfall but capacity also began to decline in Alaska in the mid-1980s. When the production rate of oil began to decline in the USA, the production rate of oil in the UK and Mexico was increased but this also went into decline. The UK has been a net importer of oil since 2004.

North Sea and Mexico Peak Oil

North Sea and Mexico Peak Oil. Source: The Oil Drum

The map below offers a global overview of countries where oil production has peaked (around two-thirds).

Which countries have peaked? Source: ODAC

Which countries have peaked? Source: ODAC

Critics of peak oil think that there is plenty of oil left, not only to be discovered but already discovered and not yet fully exploited. Their argument often points to the availability of oil in the tar sands of Canada and other so-called Megaprojects. There are many problems with this view, not least that the production techniques emit more carbon emissions than conventional oil production, but here it is worth noting that they too are subject to decline and make up a relatively small amount of the global requirement for oil.

What can the mega projects contribute? Source:

What can the 'mega projects' contribute? Source: The Oil Drum

The chart below, shows the November 2009 forecast. Click on the image to read what it means in detail, but the point to make here is that global oil production has plateaued since 2005, leading many analysts to believe that Hubbert’s Curve and other similar forecasts, were correct. In effect, we are at the top of the peak.

Novembers forecast. Source: The Oil Drum

November's forecast. Source: The Oil Drum

Moving from production rates to pricing, it is useful to note that as the production of oil has plateaued since 2005, the price of oil continued to rise until June 2008. The recession and consequent drop in demand for oil sent the price of oil down to $34/barrel in February and has rebounded to around $80/barrel in the last month.

Production vs. Price. Source: ODAC

Production vs. Price. Source: ODAC

World Supply, Demand and Price to 2012. Source: The Oil Drum

World Supply, Demand and Price to 2012. Source: The Oil Drum

What is especially interesting to me is that because oil is a primary energy source used in the extraction and transportation processes of other energy sources, the price of electricity, largely derived from coal and gas, follows the price of oil very closely. Therefore, we might reasonably assume that as the production of oil declines over the next 20 years, the price of electricity will rise.

The correlation of energy prices. Source: ODAC

The correlation of energy prices. Source: ODAC

Oil demand and GDP. Source: The Oil Drum

Oil demand and GDP. Source: The Oil Drum

It’s interesting to see that recessions follow oil price spikes quite reliably, as happened in 2008. One observation that has been made is that the USA doesn’t seem to be able to sustain economic growth when oil prices are consistently above $80 or so. James Hamilton, at the University of California, argues that oil prices tipped the US economy into recession.

Oil prices and US recessions. Source: The Oil Drum

Oil prices and US recessions. Source: The Oil Drum

Where will we get our energy from?

Like all fossil fuels, oil is a finite resource and there is no disagreement about the supply of oil eventually running out. The point however, is not about oil running out but rather when it becomes uneconomic as a source of energy. The IEA would agree with this as do the UK Energy Research Council, who last month, published the Global Depletion Report, which is an authoritative review of all available evidence to date. They conclude:

On the basis of current evidence we suggest that a peak of conventional oil production before 2030 appears likely and there is a significant risk of a peak before 2020.

If we accept that there will be a peak in the production of oil within ten years, if it hasn’t already occurred, we need to return to David MacKay’s Five Energy Plans for Britain, and consider the alternatives. There are two significant variables that need to be taken into account when considering a transition from oil to other energy sources. The first is how long it will take to replace our current oil-based global energy infrastructure with something we think is a viable alternative.

In a 2005 report for the US Department of Energy,5 Robert Hirsch stated:

The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.

The second significant variable is the net energy that can be extracted from other sources of energy, such as nuclear, solar and wind.  (We should also note that oil is not just a source of fuel, but a composite in plastics, fertiliser, medicines, rubber, asphalt and other useful products. As a replacement for oil in products other than fuel, nuclear, wind, solar, etc. are not viable. Anyway, here were are discussing primary sources of energy).

Below is a diagram by Charles Hall of SUNY, (click to enlarge), which offers a view of the Energy Return on Investment (EROI) of various sources of energy. It is difficult to be very precise when calculating net energy, or what energy is left over after energy is invested in producing energy, but this is the most thorough analysis available and offers a rough index.

Energy Return on Energy Invested. (Click to enlarge) Source: Charles Hall (SUNY)

Energy Return on Energy Invested. (Click to enlarge) Source: Charles Hall (SUNY)

It shows two significant things that need to be highlighted when considering the transition from fossil fuels to renewables.  The first is that oil, coal and gas are more intensive forms of energy than other sources of raw energy. “A litre of oil packs 38MJ of chemical energy, as much energy as is expended by a person working two-weeks of 10-hour days.”6 The second, is that the EROI of renewables, even nuclear, is less than that of oil, coal and gas. None are direct replacements for fossil fuels and, as David MacKay has shown, it is very difficult (‘absurd?’) to stack all viable renewables up together as a replacement for current UK consumption levels of energy. Remember, that no-one expects our consumption of energy to voluntarily decrease. Our emissions from fossil-fuels are expected to decrease, but somehow the expectation is that we will continue to use the same, if not more, amounts of energy as we do today.

The Post Carbon Institute recently published a report based on the work of Charles Hall, which offers a very readable introduction to EROI (they call it Energy Returned on Energy Invested (EROEI). A summary of the analysis of EROEI can be seen below.

Energy Returned on Energy Invested (EROEI). Source: Post Carbon Institute

Energy Returned on Energy Invested (EROEI). Source: Post Carbon Institute

The report concludes that substantial per-capita reductions in energy use is the only way we can look forward. “…the question the world faces is no longer whether to reduce energy consumption, but how.”7

If this is the predicament we are in, how do we fruitfully manage the desire for economic growth, the time required to transition from a fossil-fuel-based infrastructure and the replacement of carbon-emitting oil, coal and gas with other forms of energy that provide a similar net value to our lives? The report offers several recommendations, including the need to move to a no-growth, steady-state economy, because as we have seen from the GDP chart above, energy and economic activity are closely tied.

It is true that improvements in efficiency, the introduction of new technologies, and the shifting of emphasis from basic production to provision of services can enable some economic growth to occur in specific sectors without an increase in energy consumption. But such trends have inherent bounds. Over the long run, static or falling energy supplies must be reflected in economic stasis or contraction.8

It is pointless me re-iterating the full conclusion of the report, but I should note that there are other reports that offer similar conclusions.9

A Resilient Education

Richard mentions the Resilient Nation pamphlet from Demos. In it, the author recognises how education already plays a part in teaching people how to be resilient in the face of threats such as fire and first-aid, but highlights the need for society to become more resilient to other threats such as natural disaster and the impact of energy shortages. Documents like this provide a useful contribution for us to begin to think about resilience and how it affects both the operation of our institutions and the development of a more relevant curriculum in a world facing impacts from climate change, peak oil and zero-growth or even a ‘planned recession‘. We need to consider our use of and the benefits of technology both as a way of running resilient institutions and as effective tools for teaching about resilience. For example, is the promotion of cloud computing and ubiquitous internet access increasing our resilience or not?

The Transition Town movement is increasingly being seen as a way to think and learn about ‘resilience’. The reports mentioned from NEF, PCI and SDC all refer positively to the Transition Town movement. It borrows the term from the ecological sciences, so there is a history of the term ‘resilience’ which educators can draw on when considering how it might be usefully employed both operationally, in terms of institutional continuity (whatever form that takes), and in the delivery of a relevant curriculum which produces graduates who are both prepared for the future impacts of climate change and peak oil and eager to work to address the challenges. There are a growing number of Transition groups meeting across the country and people working in universities, like myself, are members attempting to work with local government to create more resilient communities.

The purpose of this post, however, was to provide an overview of energy and oil as a reference for moving on to think more about a ‘resilient education’. My interests are in the institutional and organisational effects this might have, particularly relating to our dependence on technology to operate Higher Education Institutions and deliver teaching and research. Another important area to consider is how to develop resilient citizens, as Richard has begun to do. Since its discovery, oil has changed the way we live. It has changed the fabric of society, the institutions we have created, our expectations of the future and our ambitions for ourselves. As the availability of oil changes, so will our institutions and our communities. My interest is the impact to and role of education within this environment of change. My specific interest is the role and value of technology (in whatever forms) to teach and learn in this environment of change.

  1. See the IPCC 2007 Summary for Policy Makers, p.5 for a break down. Note that fossil fuels only account for 56% of total greenhouse gas emissions. []
  2. The authority of the IEA has been somewhat undermined by a whistleblower but nevertheless, it’s the most complete assessment available to us. []
  3. How the Energy Sector Can Deliver on a Climate Agreement in Copenhagen, IEA, 2009, p.10 []
  4. I acknowledge, as Richard has discussed at length in his post, that we are both borrowing from and aligning with the Transition movement’s use of the term ‘resilience’ in the face of peak oil and climate change. In effect, we are contributing to the Transition movement’s work by specifically examining Higher Education in a period of transition. []
  5. The ‘Hirsch Report’: Peaking of World Oil Production: Impacts, Mitigation and Risk Management (PDF). []
  6. Richard Heinberg, Searching for a Miracle, 2009, p. 32 []
  7. Richard Heinberg, Searching for a Miracle, 2009, p. 65 []
  8. ibid, p. 67 []
  9. For example, see Prosperity Without Growth – The Transition to a Sustainable Economy from the Sustainable Development Commission, ‘The Government’s independent watchdog on sustainable development’ & Nine Meals from Anarchy from the New Economics Foundation []

Thinking the unthinkable

For the last couple of weeks, I’ve been dipping in and out of a bid that I am writing for JISC’s Greening ICT Programme. Those of you that follow me on Twitter will have seen me drop related tweets into the stream. I’ve been a bit nervous about doing so because they seem quite unrelated to my usual topics of conversation. Also, the subject matter can be pretty depressing and I worry that it might get on people’s nerves after a while. Oh, well.1

Anyway, Peak Oil and a related energy crisis is something I’ve been interested in for a few years and is a topic I discuss regularly with friends face-to-face. Over the years, I’ve found that a lot of people aren’t interested; either because the consequences are just too depressing and/or because the the other ‘big issue’ of climate change is surely what we’re supposed to be worrying about now. (It is, but peak oil is likely to increase our consumption of alternative fossil fuels and therefore increase our carbon output). When we hear politicians questioned about an ‘energy crisis’, they say there is no crisis as long as we concentrate on a shift to the use of a mix of renewables and greater energy efficiency. I tend to disagree because…

The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.2

My bid to JISC comes under their ‘Small Scale Exploration Studies of Aspects of Green ICT’. It’s basically part research project and part scenario planning for HEIs and JISC to help them consider and plan for a long-term energy crisis. In JISC’s recent Strategy Review 2010-2012, they include a section on Priority Investment Areas, under which there is a sub-section called ‘Efficient and Effective Institutions‘. This includes providing ‘leadership on Green Computing and environmental sustainability‘ and ‘guidance on sustainable business models’. The sub-section is split into the Here and Now, On the Horizon (2-5 years), and Beyond the Horizon (3-10 years).

You’ll see from my comment, that when I read this, it occurred to me that JISC’s Strategy didn’t seem to recognise the possibility of disruptions to energy supply and significant spikes in the cost of energy over the next ten years. There’s the welcome and necessary acknowledgement of ‘Green Computing’, ‘sustainability’ and ‘efficiency’, but these don’t show an awareness of the fundamental problems that JISC’s Vision, Mission and Objectives would face in the event of an energy crisis.

“But what crisis?!?” I hear some of you say.

Well, there’s a lot of good research available from very credible sources. Today, the BBC and Telegraph reported on The Global Depletion Report,  from the Government-funded UK Energy Research Council. The report, launched today, is authoritative in that it’s a review of all the available evidence and arguments around the issues to-date. You only have to read the Executive Summary to find assertions which should cause us all significant concern.

It confirms what some of us have been reading for years, that global peak oil, the point where it becomes increasingly uneconomical to supply the oil that is demanded by the world, is imminent.

On the basis of current evidence we suggest that a peak of conventional oil production before 2030 appears likely and there is a significant risk of a peak before 2020.

The estimated range they give is actually between 2009 and 2031, but this doesn’t really matter because they quickly acknowledge that whether it’s already here, ten or twenty years away, the time frame is very tight when it comes to developing substitute fuels. Note that production of oil has actually plateaued since 2006.

Oil production

The report is up front in saying that it doesn’t discuss the consequences of peak oil or how we might tackle it:

The report does not investigate the potential consequences of supply shortages or the feasibility of different approaches to mitigating such shortages, although both are priorities for future research.

Which is why I hope JISC will recognise that this is a vital area of research they should be funding. I had no idea that this report was being prepared – there are plenty of others that offer the same conclusions – but it does seem very timely given JISC’s Greening ICT programme of funding. As I write in my bid outline:

As HEIs increasingly turn to ICT to enhance, support and deliver education, we ask the question: “What will happen to the provision of a technology enhanced education when the consumption of energy is restricted by recurring interruptions in supply and significant spikes in costs?”

In preparing my bid, I’ve obviously tried to pull a few key points together to convince the judges that this is worth pursuing. The first important point to get across is that oil is fundamental to the UK way of life. Pretty much every material benefit we enjoy can be traced back to the discovery, production, supply and exploitation of oil.  Not only does the supply of oil affect the supply of other forms of energy, as the graph below illustrates, it is used in the production of food, plastics, medicines, chemicals, lubricants… you name it and oil plays a part in the process somewhere.

Correlation of oil, coal and gas prices

Source: ODAC

The UK doesn’t rely on oil directly for the production of electricity. We get it from a mixture of coal (32%), gas (45%), nuclear (13%) and renewables (5.5%), importing a third of our gas requirements (this is expected to rise to around 85% of our requirements by 2020). However, we can see that when the price of oil rises, the price of other fuels and, in turn, electricity rises. We’ve all felt this over the last couple of years as we’ve seen consumer electricity prices rise.

As you can imagine, for an organisation the size of a university, rises in the price of electricity can have pretty large financial consequences. Typically, a HEI will tender for a fixed term contract of a couple of years to protect from unforeseen spikes in prices. This is good if the price is relatively low at the time of your tender, like now, but what if your HEI had to renew its electricity contract last year when prices were very high? Our institution, small by comparison with some, is forecasting an annual electricity spend of £1.2m in 2009/2010, up 13% on 2008/9. Even with planned reductions in efficiency and consumption, we’re only likely to be able to reduce the increase from 13% to a 6% increase in spending. Gas, fuel oil and other utilities are in addition to this, too. I might add that we underwent a ‘server consolidation’ exercise last year and most of our server infrastructure is now virtualised, so we’ve already taken steps towards greater energy efficiency there. Of course, there is more we can do.

So, I’ve touched on the cost implications of a peak oil scenario. The bottom line is that it will get much more expensive to run a university, despite increased efforts to reduce energy consumption and improve efficiency. What’s also worth pointing out is that as we increase the efficiency of things that consume energy, we only counteract that by using more energy in other ways. So far, innovation, growth and progress has ultimately required more energy than it’s saved3 which is partly why we’re using 11% more energy now than we were in 1990.4 This is a global problem to which, despite our best efforts, we are not immune. The OECD European countries are slowly reducing their consumption of oil over the last few years5, yet consumption pretty much everywhere else is on the rise and so the supply and cost implications still affect us all.

It’s interesting to note that four out of five recessions since 1970 have been preceded by a spike in the price of oil6, as we saw last year when it hit $140/barrel.

Oil and Recessions

A report from Chatham House, last year (with a postscript in May 2009), concluded that a ‘crunch’ in the supply of oil (i.e. Peak Oil) is likely around 2013 with prices rising to around $200. They note that although recessions temporarily reduce demand for oil, the investment in energy efficiencies decreases during recession, too, and consumers prefer to hang on to less energy efficient appliances for longer because of income fears and unemployment, both of which contribute to an even greater demand for oil as the economy improves. In addition, investment in oil production drops during a recession, so innovation in improving oil extraction from existing reserves and discovery of new reserves is slowed. Any delay in the 2013 crunch which might have come from reduced demand is, according to Chatham House, negated.

It’s all quite complex, but happily (?), even for a lay observer like myself, there is sufficient comprehensible primary research and analysis that it’s not too difficult to get a decent picture of why an energy crisis is imminent and then consider the possible implications of such a scenario.

JISC have already funded work on Scenario Planning. They describe it as:

Scenario planning or scenario thinking is a strategic planning tool used to make flexible long-term plans. It is a method for learning about the future by understanding the nature and impact of the most uncertain and important driving forces affecting our world.

Many of the regular methods for strategy development assume that the world in three to ten years’ time will not significantly differ from that of today and that an organisation will have a large impact on its environment: they assume we can mould the future. Scenario planning however assumes that the future can differ greatly from what we know today.

Participants in Scenario Planning are encouraged to ‘think the unthinkable’ and ask the question, ‘what do we need to do (now) to be ready for all scenarios?’ This is what I propose to do, together with our Business Continuity Manager, Environmental Sustainability Manager, ICT Information Security Manager and other colleagues. We need to be thinking the unthinkable a lot right now and JISC’s Strategy for energy efficiency and sustainability needs to be informed by more than the climate change debate, important though it is.

We will seek to clarify the areas of uncertainty with respect to sustainable ICT by re-framing the provision of Higher Education within an energy crisis scenario that may arguably emerge in the next ten years – the reference period for JISC’s 2010-2012 Strategy.

While the policies to mitigate an energy crisis are often complementary to those required to combat global warming, the explicit policy-making in the UK for global ‘Peak Oil’ is nothing like as advanced as climate change, yet the threat to institutional business continuity is arguably greater in the short to medium term. The project will seek to effect attitudinal and behavioural change across the sector by developing scenarios for HEIs that examine the provision and continuity of education within the context of a long-term global energy crisis and suggest actions that JISC and the community may make to forecasts widely held by energy analysts though rarely acknowledged by government policy and strategy.

This is important to me, not least because the social implications are so great, but because increasingly I’m thinking that Educational Technologists are building a house of cards. We’re investing our occupation in developing a vision of the future which there is good evidence to suggest, won’t exist.

Everything is put at risk by peak oil. The manufacture of microchips and hard drives7, the transportation of ICT equipment to consumers, the reliable supply of electricity to power equipment.8  And it’s not just the obvious things that it will affect. I was discussing this with our Business Continuity Manager recently and she pointed out that if there is no power to the fire detection and alarm system, the building has to be evacuated.9 Our UPS and backup batteries will allow for a graceful power down in some parts of the campus in the event of power cuts, but they won’t maintain business as normal. We had a three-day-week in the UK for three months in 1974, in order to conserve electricity. ‘South African style power cuts’ are forecast for the UK by 2015. What might be the government’s response to an energy crisis and how might it affect HEIs and our provision of an industrialised education? Some local authorities are beginning to take the issue into their own hands.10 I think Educational Technologists should be leading on this in our sector, too.

Postscript

The bid to JISC was not funded though I quote their feedback below:

The main reason that your proposal was not approved for funding was that, although the evaluators thought the question you posed was of great importance and one that really ought to be answered, they decided that it really did not belong in a JISC funded call for projects around Green ICT.

For example, in the question of the overall fit to call, they said:

“Whilst in the general area of sustainability and a piece of useful work, its link to the specifics of the programme is a little thin. Not about Green IT but energy uses response.”

and

“The proposal is very left of afield (sic), it is a good idea and while I am sure it would be extremely interesting to pursue; it does not, I feel, fit within the scope of the call.”

and

“Think this is a very interesting bid that is likely to produce some very thought provoking outputs. It does seem to be slightly orthognonal to the issues described in the call but I think that it would be very useful despite that. It is very clearly written and makes its case well.”

Under the question of the workplan one said:

“Most of it seems well planned. However, I am concerned about only allowing a month for the survey and dissemination. The recruitment risk is significant. Dissemination is very strong.”

In terms of value for money concern was expressed at the high cost of the scenario planning exercise and it was felt overall to be not good value for money.

Overall Comments from the evaluators were:

1. A good proposal, of value to JISC but consideration needs to be given to its relationship to the programme. It appears to be out of scope.

2. Quite interesting as a proposal and possibly work that JISC might want to consider funding under a future call. However, this does not fit well within the current call.

3. An interesting and thought provoking bid that looks to be very useful I would like to give it an A but I have a number of minor concerns as discussed above.

…the evaluation panel came to the conclusion that it was too far from the scope of the programme that we could not fund it. However the panel wanted to pass on their encouragement to seek other sources of funding for this idea and keep in touch with JISC.

  1. Somewhere in this post, I just want to say thanks to Richard Hall at DMU for encouraging me to write about this. []
  2. The ‘Hirsch Report’: Peaking of World Oil Production: Impacts, Mitigation and Risk Management (PDF). An often cited report commissioned by the US Department of Energy in 2005 []
  3. An extensive UK government-funded report that discusses this in detail is Prosperity without growth? The transition to a sustainable economy []
  4. Digest of United Kingdom Energy Statistics 2008 []
  5. Energy Information Administration, International Energy Outlook 2009 []
  6. What’s the Real Cause of the Global Recession? For a more detailed analysis of historical recessions, see Causes and Consequences of the Oil Shock of 2007-08 []
  7. I ran across an article yesterday that describes how Intel Executives are trying to petition the US government to focus on the problem []
  8. See also, the report by the UK Industry Taskforce on Peak Oil & Energy Security, which includes Yahoo! and Virgin, among others. []
  9. UPDATE: If they cannot be powered the Unviersity will either have to employ fire marshalls patroling buildings keeping a fire watch or when the battery power backups fail they will have to move to another building. In addition the University would have to go back to manual fire alarm e.g. bells, or an alternative manual warning system (e.g. person shouting being the last resort). []
  10. See the The Welsh Local Government Association’s Peak Oil and Energy Uncertainty,  and ODAC’s Preparing for Peak Oil: Local Authorities and the Energy Crisis []