Commercial Benefits Won't Flow Without Commitment To Long-Term Research

Canberra Times Editorial

There is now enough solar power generators installed in Australia to light up 1.25 million homes. Photo: Paul Rovere

Australia reached a significant milestone last week, passing the 5 gigawatts of installed solar power across the country. According to solar energy consultancy SunWiz, that represents enough solar power to light up 1.25 million Australian homes – the equivalent of every household in Brisbane and Perth combined.
Nationally solar now accounts for 9 per cent of total electricity generation, according to analysis of data from the Renewable Energy Certificate Registry. While much of the recent growth in solar energy generation has come from larger facilities, rooftop solar continues to play a significant role, and in Canberra, 16,000 homes now have panels on their roof. A major new industry has emerged thanks in part to the rapid advances in solar panel efficiency and the lowering of costs.
Yet in the same week Australia passed that impressive milestone, the head of the powerhouse behind many of the country's most promising innovations, the CSIRO, was attempting to convince staff that the loss of 350 jobs would be good for the organisation.

Many of the deepest cuts are set to come from the climate modelling and monitoring areas, with chief executive Larry Marshall explaining that after 20 years of work in that area it was time to move on to other priorities.

Mr Marshall is correct when he says that the notion of a customer is often a new one for scientists. There is a growing attitude that in order to pay its way, research must be linked to tangible, commercial outcomes.

Yet impressive milestones like wide scale take-up of solar panels do not happen without the pure science that lead to technological advances. As has been noted elsewhere, some of the CSIRO's most commercially important breakthroughs like wireless internet technology have been accidents discovered while conducting research in other areas like radio astronomy.
Australian scientists and researchers can hold their heads high as some of the best in the world. This week we heard for the first time what gravitational waves sound like, thanks in part to the involvement of Australian National University researchers. Would this breakthrough, that after 100 years validates one of Albert Einstein's most important theories, have happened, had those researchers been pushing for a commercial outcome?
It will be impossible for Australia to benefit from commercial breakthroughs unless we continue to support research for research's sake in fields like climatology that help us improve our understanding of our world. If, as former prime minister Kevin Rudd said in 2007, climate change is the great moral challenge of our generation, how can we hope to solve it while cutting hundreds of jobs from the bodies charged with researching it?
2800 scientists from nearly 60 countries have now signed an open letter to the CSIRO stating, "The capacity of Australia to assess future risks and plan for climate change adaptation crucially depends on maintaining and augmenting this research capacity.
"Without committing to the continued development of next generation climate monitoring and climate modelling, billions of public investment dollars for long term infrastructure will be based on guesswork rather than on strategic and informed science-driven policy. "
Despite the legislative and political uncertainty around renewable energy, Australia has managed to claim a place at the forefront of innovation. Whether we are able to maintain that position in the coming years will be an issue CSIRO management will have to think deeply about as they set their future priorities.

Link

• More than 16,000 homes in the ACT have rooftop solar

Climate Risks Could Wreak Havoc On Financial Markets, EU Watchdog Warns

The Guardian - Arthur Neslen

Banking advisory group calls for risk disclosure and stress tests to protect against climate inaction should move to low carbon economy happen too late

If fossil fuels aren’t taken offline in time, a sudden switch to clean energy would trigger a collapse on the stock markets and trigger a global economic crisis. Photograph: Franck Robichon/EPA

The EU's financial watchdog has called for governments to consider imposing asset disclosures on industry and stress tests on banks as a guard against the economic crisis that could be caused by an emergency switchover to clean energy.
The European Systemic Risk Board – set up by the EU in the wake of the 2008 crash to monitor risks to financial markets – has warned in a new report of economic "contagion" if moves to a low carbon economy happen too late and abruptly.
A scramble to take fossil fuels offline could reduce energy supplies, while increasing their cost and exposing investors to the worst effects of 'stranded assets', or fossil fuel holdings that may never be recouped without causing climate disaster.
Nearly 200 governments at the Paris climate summit in December agreed to bring greenhouse gas emissions down to net zero in the second half of the century, to tackle global warming.
But if governments dither and are then forced to green their economies in a rush, the study warns that banks which are exposed to 'carbon-intensive' or CO2-heavy assets could face systemic risks.
To quantify the dangers, "policymakers could aim for enhanced disclosure of the carbon intensity of non-financial firms," says the board's report, 'Too late, too sudden', published on Thursday. "The related exposure of financial firms could then be stress-tested under the adverse scenario of a late and sudden transition."
The study comes as the debate on carbon disclosures moves from the question of 'if' to 'how'. A warning last December by the governor of the Bank of England that investors face huge losses from climate change was quickly followed by the creation of a new global taskforce.
Michael Bloomberg, the former mayor of New York is leading the task force which aims to produce a voluntary industry-led code for disclosures under the rubric of the G20's Financial Stability Board.
But the new ESRB report appears to go further, by advocating new forms of regulation.
Ben Caldecott, the director of sustainable finance at Oxford University's Smith School, is currently researching how to locate and analyse data on firms' carbon assets, and how to design stress tests for them.
"We need to find an answer to these questions pretty damn fast," he told the Guardian. "Without better data on asset-level and company-level exposure to these risks, effective stress testing will be challenging. Correcting this major flaw in our understanding is now an urgent priority."
Mandatory climate disclosure obligations were strengthened in France last July, under the country's energy transition and green economy law. It responded to a fear that fossil fuel firms are hugely over-valued because they may never fully exploit their carbon assets without causing dangerous global warming.
A market 'correction' could wipe trillions of dollars off the global economy, experts say.
The Institutional Investors Group on Climate Change, whose members represents over €13tn in assets, already asks businesses to address the carbon intensity of their assets and potential impacts of global warming on their operations.
"The longer we wait to engage with this challenge, the greater the risk of abrupt change and far more costly economic adjustments later on," said the group's chief executive, Stephanie Pfeifer.
Companies already have a legal duty to disclose the principal risks, according to Alice Garden, an attorney for the green law firm ClientEarth. "We expect to see carbon intensive companies reporting on these risks in their annual reports this year so investors can make informed decisions about where to invest their money," she said.

Links

• Stock markets hit by global rout raising fears for financial sector
• We print money to bail out banks. Why can't we do it to solve climate change?
• Global markets turmoil echoes 2008 financial crisis, warns George Soros
• Carney warns of risks from climate change 'tragedy of the horizon'

The Oil Industry Got Together and Agreed Things May Never Get Better

Bloomberg Business - Andy Hoffman   Grant Smith   Javier Blas   Angelina Rascouet

Thousands of industry participants gathered in London for their annual get-together, only to find a world awash in crude and hardly a life jacket in sight.



The thousands of attendees seeking reasons for optimism didn’t find them at the annual International Petroleum Week. Instead they were greeted by a cacophony of voices from some of the largest oil producers, refiners and traders delivering the same message:
There are few reasons for optimism. The world is awash with oil. The market is overwhelmingly bearish.

No Hope
Producers are bracing for a tough year. Prices will stay low for up to a decade as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to Ian Taylor, chief executive officer of Vitol Group, the world’s largest independent oil trader. Even refiners, whose profits have held up better than expected, are seeing a worsening outlook.

“The oil industry is facing a crisis,” said Patrick Pouyanne, CEO of Total SA, Europe’s biggest refiner. BP Plc boss Bob Dudley described himself as “very bearish” and joked that the surplus is so extreme that people will soon be filling swimming pools with crude.
As the world runs out of places to store oil, “I wouldn’t be surprised if this market goes into the teens,” said Jeff Currie, head of commodities research at Goldman Sachs Group Inc.

Cuts? What Cuts?
Crude prices surged briefly last month on speculation the Organization of Petroleum Exporting Countries would team up with Russia to cut production. The head of the nation’s biggest oil company had other ideas.
“Tell me who is supposed to cut?” said Igor Sechin, CEO of Rosneft. "Will Saudi Arabia cut production? Will Iran cut production? Will Mexico cut production? Will Brazil cut production? Who is going to cut?”
Supply exceeds demand by as much as 1.7 million barrels a day, so cutting 1 million from production would in theory make prices more “reasonable,” Sechin said. Nevertheless, Rosneft is focused on preserving its traditional markets against the competition, he said.
Cuts on the scale required to balance the market just aren’t happening. While some fields have started to fall victim to low prices, only 0.1 percent of global output has been curtailed because it’s unprofitable, researcher Wood Mackenzie estimates.

A Profitable Opportunity
Traders are the only ones enjoying the slump as they profit from sky-high volatility and a market structure called contango - where prices in the future are higher than today - that means they can make money just by keeping oil in storage tanks.



As the price of U.S. benchmark West Texas Intermediate crude slumped close to 12-year lows this week, another opportunity emerged: super-contango. Places to store oil on land are running out in some places, and the contango is getting so steep that it’s becoming profitable to hire supertankers, fill them with crude and anchor them offshore.

Terrible Market, Great Party
Throughout the gloom, champagne flowed, backed by a jazz quartet.
If it's hard times for the industry, that wasn't obvious from the cocktail party circuit. Kuwait Petroleum Corp. welcomed guests to ballroom of the Four Seasons hotel in London’s exclusive Mayfair district with hospitality as if nothing had changed since 2014, when oil was $100 a barrel. Tables were laden with shashlik, oysters and even a whole lamb carved by a chef. In the dessert room, a chocolate fountain bubbled alongside bowls of strawberries.
The State Oil Co. of the Azerbaijan Republic - where a currency crisis has provoked street protests - offered four whole roast lambs, a sushi bar and chocolate truffles to thousands of guests at Park Lane’s Grosvenor House Hotel.
“We didn’t cut back,” said Elshad Nassirov, the company’s vice-president of marketing and investments, “in order not to spoil the mood.”