The Economic View

President George W. Bush of the United States of America (USA) refused to sign up to the Kyoto Protocol on Climate Change as he thought that to do so would damage the USA economy.

It is not in doubt that there will be considerable cost involved in the creation of the technology and the infrastructure necessary to realise the Hydrogen Economy but such a future is seemingly not envisaged by that administration.

The key to the choice of perspective is the interpretation of some key economic drivers. All powerful and stable economies have achieved that status due to the plentiful availability of relatively cheap energy. From the discovery of fire which allowed humankind to control their lives more independently of nature, through the mastery of water management, the coal-fuelled Industrial Revolution upon which the British Empire was built to the exploitation of oil and gas that gave the USA its current dominance, it is plentiful energy that made it all possible.

It is those countries that exploited their natural resources to supply energy therefore freeing up people's time to think about and do other things, that have become the most successful. It seems that to exploit other, possibly less tangible natural resources such as solar radiation and wind and building the capability from scratch does not equate to prosperity for some current governments, even if such resources have no in-built limit.

Therefore, I suspect that to embrace the spirit from which Kyoto Protocol and other such actions were created, would bring economic benefit if it combined with some foresight. The development of technology that enables a country to become independent of external fuel pricing in itself is beneficial as the results can be exported to those countries also wishing to be more energy independent. But to gain that independence, which is currently becoming a major driving factor of world activity, would return that key economic controlling factor back to the governments who deliver on the challenge of developing or adopting such technology.

It is well known that economic growth is closely allied to the availability of plentiful, cheap energy. It is therefore somewhat confusing why the inevitable loss and increasing cost of a limited fuel supply is not spurring politicians into ensuring a reliable, cheap energy supply to gradually replace the current one.

Replacing the fossil fuel economy has many implications. However, one that seems to be overlooked in many estimates of future energy consumption is the energy required to generate the new fuels.

Total energy used by a nation is calculated by adding the total fossil fuel used (including imports) to the mains electric produced by non-fossil fuel means (e.g. nuclear, renewables and imports). Predictions scale this by incorporating estimates of increased use combined with increasing efficiencies. However, they seldom include the energy required to generate any replacement for those fuels, which must incorporate the difference in energy values between the original fuel and its replacement.

Following this approach, the future energy requirements would be substantially larger than scaled current values. Therefore, the primary energy generators (solar, wind, nuclear, etc.) will need to produce enough energy to create the new fuels, accounting for inefficiencies, as well as service the base load. Simply aiming to replace a percentage of current fossil fuel energy will fall significantly short of the required value.

Therefore, it is pragmatic to attempt to reduce the base demand. This could be the mandation of thermally insulated housing to reduce heating and cooling costs; installation of integrated solar panels to every property; reduction of the number of private vehicles. However, these measures are far more contentious than aiming for massive electrical power generation.

Unfortunately, it is likely that both approaches will be required when one accounts for the amount of energy required to generate any replacement of fossil fuels.

Such a scale of generation cannot simply be achieved using renewable power, although it is a possibility. Due to the highly distributed nature of renewable power, wind for example, it would be necessary to regularly update existing wind turbines and generators to higher capacity ones (assuming the wind resource exists) and install new masts, turbines and generators at many more locations. The latter requirement is already falling foul of social rejection on the basis of "industrialisation of the countryside", disruption of fishing areas and shipping lanes and an amount of the "not-in-my-back-yard" mentality. However, none of these problems should slow the deployment of new capacity and the search for new sites. They can always be taken down again if a suitable alternative is found.

The solution is not straightforward but one needs to be found. Many favour investment in Nuclear Fusion as a relatively favourable way to harness the power of the atom. Some say nuclear fission should be resurrected until a less socially troublesome alternative becomes available.

However, the development of whatever technology is necessary will take time and there will be iterations of deployed technologies with false starts and failures along the way as well efficiency and design improvements. What has to be borne in mind, therefore, is that this development needs industry to work on the problems and develop solutions but it's not going to do that without the favourable environment that only a supportive government can provide.

Acting in time will boost industry and produce a favourable technological position as well as bolster the electrical mains generation. It will give time to address the problems of site location and investigate options for progress.

The publication of an energy strategy that encompasses the desire to replace the use of fossil fuels with hydrogen will focus the intellectual and financial energies of academia and industry towards a common goal.

The assurance that a sustainable energy basis is being developed and deployed will also help other industries, all of which are reliant upon energy, to confidently adopt the new technologies.

Failure to act will mean a reactive response such as happened during the 1970s oil crisis. However, such is the scale and complexity of any replacement techology then no reaction will be quick enough to avoid the subsequent economic consequences.

As we become increasingly dependent on imported fossil fuels for our transport, industry and electrical power generation, we become increasingly susceptible to the pricing strategy of other nations, many of whom will be reliant upon that income for their nation but have a captive customer base, making them less susceptible to political pressure. As prices increase, there is little to deflect that cost other than incorporate it into the economy as a detriment to growth. If a rise were to occur at an economically inconvenient time or at too great a rate, it can undermine any level of economic strength. Such variability also makes economic planning very difficult, not knowing how much the nation will be spending on its energy from month to month, let alone year to year.

Energy sits at the core of a nation's economy. It would be best to ensure its cost is controllable.