Stand by for a world energy crisis

Jeremy Leggett couldn’t have chosen a better time to warn that we are heading for a world energy crisis so ghastly that the Great Financial Crash will look like a storm in a teacup.

The “Big Six” energy companies are in the dock squabbling over rising charges, the politicians are electioneering with dodgy promises to reduce prices while a horrifying number of people say they will choose between heating and eating this winter.

If Mr Leggett is right, it’s not only candles and jumpers we will need but our own generators as well. And we don’t have long to stock up. He’s predicting a massive energy shock in 2015 that sends prices spiralling even higher and another financial blow-out.

His reasons are fourfold: the world’s big energy companies are running systemic risks similar to those that built up ahead of the financial crash: rub these risks together with rising world temperatures, carbon-fuel asset stranding in the capital markets leading to a carbon bubble, oil depletion, the shale-gas surprise and you get a toxic implosion.

“Even the US military now regards the world’s energy problem as a serious security issue,” he says.

Scary stuff. Big Energy and the Opec oil producers of course deny such warnings, claiming there is enough oil to last 50 years and gas for another 250 years. But if the financial crash taught us anything, it’s that no one paid attention to the warnings, even those of the experts. It’s why Mr Leggett has written a new book – The Energy of Nations: Risk Blindness and the Road to Renaissance – which tracks oil’s inexorable price rise since 2004 and explains why we are heading for Doomsday unless governments take radical action.

Like the most committed of poachers, Mr Leggett learnt his game-keeping on the inside. He trained as an oilman, studying geology and then the history of the oceans for his doctorate at Oxford University and was funded by BP and Shell while lecturing at the Royal School of Mines. He was also a contemporary of BP’s ex-chief executive, Tony Hayward.

While Mr Hayward climbed the BP ladder, Mr Leggett turned green in the late 1980s and joined Greenpeace.

Then came the light. In 1998 Mr Leggett founded Solarcentury, now the UK’s biggest independent manufacturer and installer of solar panels.

Solarcentury is growing fast – sales were up 30 per cent to £80.5m last year. Earnings before interest, taxes and amortization was £2.4m and it employs 130 people.

With staff Mr Leggett owns 30 per cent of the company, which gives 5 per cent of its profits to SolarAid, the charity he set up to help Africans buy solar lights instead of using dangerous kerosene ones.

As technology improves, the costs of panels are coming down, but the returns on the business are not quite as speedy as investors would like.

“One of the problems for ‘cleantech’ generally is that growth is not as fast as many venture capital firms have been used to with internet companies,” he admits.

Even so, his venture capital backer, Vantage Point Capital Partners, has stayed loyal.

As his book so cynically shows, Solarcentury has been used by prime ministers to show off their green credentials with sunny photoshoots.

“Tony Blair, David Cameron – they have all come and had a look around. They were keen and green then. But it looks as though these latest price rises may mean the end of green subsidies although the truth is all energy is subsidised.”

Yet for all his gloom, Mr Leggett is an optimist for the long term, which is why half the book is dedicated to the road to renaissance – or people power.

“What’s so irritating is that we have all the tools in our hands now to turn this crisis around using a mix of solar, wind and water. Even at the present rate of current technology, these renewables will be able to power modern economies by 2030 and certainly by 2050. If a fraction of the money that is being spent on nuclear was being spent on solar, then we would see huge leaps in technology.”

Germany is the model the UK should be looking at more closely, he says. At least 20 per cent of energy on the grid is now renewable.

What’s so striking about Germany is that nearly half of the country’s 63,000 megawatts of wind and solar power are owned locally, either by private home owners, farmers or local communities.

“Once they gave up nuclear, the Germans have really taken to the idea of owning their own energy – and making money from it too as many of them see the future pay-backs as saving for their pensions.”

But he’s not sanguine about the UK’s ability to push through either a coherent renewable programme or challenge Big Energy, believing that only a nasty shock to the system will force change.

“If consumption in the developing world continues to increase at current rates, the consumption of oil-producing nations continues to rise, and American tight-oil production peaks in the 2017 timeframe, the cumulative impact on global supplies could be significant. The consequences of such events would be potentially catastrophic.”

As chairman of Carbon Tracker, the financial think tank, he’s put out red alerts to the highest levels, including writing to the Bank of England’s Financial Policy Committee. He claims there’s a systemic risk to financial markets because of the way that Big Energy measures its “unburnable carbon” and that their asset assessments are systematically overstated.

“Like the banking industry, we need a new generation of leaders, and companies.

“Big Energy will not change willingly. They must be forced to change.”

Yet there are progressives in government and the industry.

“There are people in positions of power – renewable energy is surprisingly apolitical – who understand what’s happening and they need to stand up and shout louder than ever. If the green technological revolution runs as fast as the digital and internet one has done, then why don’t they adapt? Why are they standing in its way?”