Ladies and gentlemen, good evening.
It really is a great pleasure to speak to the Beijing Energy Club. Thank you to Minister Zhang Guobao and Dr Xavier Chen for inviting me.
I have enormous respect for this organisation. It is a platform for the free exchange of ideas among leaders who can use them to make a truly global impact.
As an honorary Vice Chairman of the Beijing Energy Club, I have seen first-hand the important work that Xavier and others have done over the years. I am proud to be a part of that, because it is here in China that the future of the world’s energy and climate systems will be decided.
Xavier asked me to speak today about my book Seven Elements that Have Changed the World.
It is a book about seven chemical elements – iron, carbon, gold, silver, uranium, titanium and silicon – and the ways in which mankind has used them to shape the world around us.
It is also a book of stories – stories of power, stories of human progress, and stories of man-made destruction.
Seven Elements will be published here in China next February by Citic, so I do not want to give so much away that you no longer need to read it.
Instead, I want to use some of the images from the book to take you on a brief digital tour of three of my elements – carbon, uranium and silicon.
I have chosen those three because they chart mankind’s efforts to harness the earth’s resources to produce energy, the interest which unites all of us here.
Carbon:
The most obvious place for me to start is with carbon. It is an element which has defined my career, but which has also made possible the extraordinary human progress of the past two centuries.
When Thomas Malthus famously predicted that resource depletion would lead to a future of disease, war and subsistence living, he failed to foresee the Industrial and Energy Revolutions.
Those revolutions began on what today seems like a laughably small scale.
In the space of half a century, from around 1700, mankind unlocked the power of carbon, and used it to transform society and the way we lived our lives.
Steam engines replaced manual labour, because 70kg of coal could do one hundred times the work of a 70kg man.
And for the same reason, oil replaced horse power as the preferred method of transport.
This period of innovation put Europe decisively ahead of China in the global industrial race. Many people have wondered why that happened, because China had been using its vast coal deposits for centuries, with much greater impact than in Europe.
But for some reason, China’s development stalled, and it was in Europe that the Industrial and Energy revolutions helped mankind to escape the Malthusian trap.
Two centuries later, we have still not completely extinguished the doom and gloom of Thomas Malthus. The world’s pessimists now predict a carbon-fuelled catastrophe in the form of climate change.
It is sometimes tempting to agree with them.
Over the past few decades, China has regained a preeminent position in the global economy. Its carbon-fuelled development has transformed this country once again into a global economic superpower, at a pace which would put the European Industrial Revolution to shame.
A decade ago, I remember walking across a bridge connecting the Kunming Lake to a small central island. I was with the head of BP China, and we were debating some serious issues.
But halfway across the bridge, neither shoreline was visible. The smog-induced privacy was good for business, but terrible for our health. My throat became raw and inflamed, despite the fact that I was a heavy cigar smoker.
It reminded me of my own country not so long ago.
Two centuries ago, coal drove the British, European and then American industrial revolutions. Today, it is doing the same thing in China, marking a change in fortunes for the dirtiest of fossil fuels. It is now around 75 per cent cheaper than oil or imported gas on an energy equivalent basis , and as things stand, coal is likely to remain the backbone of Chinese and Asian energy systems.
Coal’s renaissance could have grave consequences for the world’s climate. The transition to a low and eventually zero carbon economy is essential, but it will be a transition, not a break from the past. Humanity is not about to diverge from centuries of carbon-fuelled development.
That should lead us to focus our efforts on the search for increasingly carbon-light energy portfolios.
In my view, the biggest immediate contribution to the fight against carbon dioxide emissions could come from the very sector which caused so much damage in the first place: hydrocarbons, and specifically, natural gas.
Gas is the most energy-dense of hydrocarbons, and emits around half as much carbon dioxide as coal when burned to generate electricity.
It is also present in vast quantities. Thanks to technological developments like hydraulic fracturing, engineers have uncovered more technically recoverable natural gas in North America than the total proven reserves in Russia, Iran, Qatar, Saudi Arabia and Turkmenistan combined.
As a result, generators have replaced coal with cheap and abundant natural gas, and emissions of CO2 from the American power sector are now at levels last seen in 1994.
That shale gas revolution happened in America because of a supportive legal framework, world-class skills and infrastructure, and a government willing to allow the market to work its magic.
It remains an American revolution, but its effect are already being felt in the rest of the world, as an abundance of natural gas in North America influences the global balance between supply and demand.
The evidence suggests that other regions may have similarly large reserves, and that China could have the biggest shale gas reserves in the world.
But we should proceed with caution. Every basin is different. Significant investment in infrastructure, technology and skills will be needed, and operators will have to demonstrate that hydraulic fracturing is safe, that it does not harm the environment, and that it can be done in a publicly acceptable way.
But the prize could be huge. If the world eliminated coal from the energy mix today, and replaced it with an energy-equivalent amount of gas, carbon dioxide emissions from the energy sector would fall by almost 20 per cent.
The American shale revolution is transforming global energy markets, but it has the potential to transform the battle against climate change as well. It offers hope that humanity can continue to harness the power of carbon for progress and prosperity, rather than destruction.
Uranium:
The second element I want to talk about has defined the modern era, and represents the next stage after carbon in mankind’s energy journey: uranium.
Unlike all the other elements in my book, uranium is best known for its destructive power. Carbon was used for good long before we realised the damage it could do, but uranium was only ever meant to destroy.
I don't think you can never fully understand the power of uranium until you have been to Hiroshima, in Japan. That city experienced the full force of the first atomic bomb, the first of two devices which ended the Second World War, but obliterated an entire city.
For a while, it seemed like something good might come from the terrible power contained in uranium. If we could control and harness all that energy, we could use it to produce an almost limitless supply of low-carbon electricity.
Uranium was even turned into a superhero in Captain Atom, one of my favourite childhood comic books.
This shows just how optimistic people were about uranium’s potential. Writers speculated about atomic transport, artificial suns powered by uranium, and an atomic cure for cancer.
But the application which really took off was nuclear power. Just as in the Industrial Revolution, the chemistry was irrefutable: one pound of uranium was thought to be equal to one thousand tons of coal. The potential was massive, and by 2011, one seventh of the world’s electricity came from atomic fission.
But uranium’s power to do good could never really be separated from its destructive potential.
When Queen Elizabeth II cut the ribbon at the world’s first commercial nuclear power station in 1956, she was also cutting the ribbon on the United Kingdom’s nuclear deterrent. The reactors were used to produce both power and plutonium.
Since then, Three Mile Island, Chernobyl, and Fukushima – have all reminded us of what can go wrong. We don’t remember the countless successes, but we do remember the handful of catastrophic failures.
Nuclear power is in fact the safest form of energy, with fewer direct fatalities than any other energy source. In non-OECD countries, coal has been around 12 times deadlier than nuclear power, and oil almost 20 times as deadly. Perhaps surprisingly, thanks to one high-profile incident in this country several decades ago, hydro-electric power has caused more than 200 times as many deaths as nuclear power per unity of energy produced.
Even those deaths caused over the long term from accidental radiation are estimated to be far fewer than those caused by the side-effects of fossil fuels. But despite – or perhaps because – it is the safest, nuclear power is one of the most expensive forms of energy.
The future for nuclear power now looks decidedly bleak. Japan has taken all of its nuclear reactors offline, and Germany has plans to do the same.
Nuclear power’s biggest hope remains in China. The government wants to have 100 reactors operational by 2020, up from 18 today. But even here, local opposition to reactors is causing the country’s leaders to think twice about the technology’s future.
Human ingenuity has overcome the most demanding of obstacles to do great things with the elements. But the dread associated with uranium may be one obstacle too many, and I fear that uranium may never fulfil its post-war potential.
Silicon:
Far more promising is the third and final energy-producing element I want to discuss this evening: silicon.
In 1954, Bells Labs announced the invention of the Bell Solar Battery, which was the first device to exploit the unusual photovoltaic properties of silicon semiconductors.
The battery quickly found a role in providing electricity to remote regions and on satellites sent into orbit.
Decades of development turned those solar batteries into panels that could generate electricity, which were incredibly expensive. Today though, thanks to the huge expansion of Chinese solar cell manufacturing, the cost of a solar module has fallen by eighty per cent over the past 5 years, which in turn has led to a sixty per cent fall in the average cost of solar electricity.
Solar farms are now producing electricity which is converging in cost with its fossil fuel competitors
Amongst all the doom and gloom about climate change, it is easy to forget that we already have the tools at our disposal to control the destructive power of carbon. Solar power made possible by silicon represents a promising and increasingly important part of a low-carbon energy system.
But there is still a long way to go. Last year, solar PV cells produced just over half a per cent of global electricity demand. Some optimists think we could increase that to 25 per cent, but that would require us to install solar panels on an area almost five times the size of Beijing.
I am optimistic though. Solar power has already transformed the energy industry, and if it continues to be deployed sensibly and in a cost-effective way, it could go a long way to taming the destructive potential of carbon.
It is easy to overlook the other contribution which Bell Labs made to the energy industry.
The world’s first silicon-based transistor was produced by three Nobel-prize-winning physicists at Bell Labs, and went on to become the building block of the circuit boards found in almost every electronic device we now use.
Today, those transistors are as small as 22 nanometre, just nine times wider than a DNA chain. Every year, the world now produces more transistors than grains of rice.
I used to be on the board of Intel, so I witnessed the development of computer chips first-hand. But during my time at BP, I also saw the profound effect that silicon had on the energy industry. In many ways, the story of the modern energy industry is a story of silicon-based computing power.
When I joined BP, I spent much of my time on reservoir simulation. I spent many long days and nights with very primitive IBM computers, and BP’s early application of computing technology gave us an edge over our competitors.
Back then, computers were a novelty. Today, they are indispensable. From 3D seismic imaging to modern reservoir simulation, and from enhanced oil recovery to deep-water structures, the modern energy industry is built on silicon.
Without it, the shale gas revolution we are witnessing today would not be possible. Nor would the deep-water exploration of the pre-salt layers in Brazil and Angola, or the ambitious attempts to develop the extensive oil and gas reserves in the Arctic.
Silicon is even shaping our demand for energy, as better computing hardware and software enable us to become more energy efficient.
So with natural gas, nuclear power and renewable energy, all put to work with the help of computing power, we have the tools at our disposal to fuel mankind long into the future. A secure, low-carbon and publicly acceptable energy mix is a future within our grasp.
But we must also plan for less benign circumstances, and overcome the global political challenges which these could bring, my final point this evening.
Today, China imports half of its oil and gas. By 2035, that is expected to rise to 80 per cent. India is also expected to become much more dependent on imports, while Japan and Korea are predicted to experience no change – because they already import all of their oil and gas.
Asia is facing a future of increased dependency on commodity markets beyond its borders.
This dependence is in fact mutual. Reductions in American and European imports mean that energy exporters will have to look elsewhere for their revenues. By 2035, the IEA expects 90 per cent of energy exports from the Gulf to go to Asia, up from 50 per cent today. The two regions will become increasingly interdependent.
It is not just the Middle East that is looking for new markets. As Europe looks to produce more of its own gas in the long run, relies on coal and renewables in the short run, and consumes lower quantities of oil, Russia will be seeking new buyers for its exports.
When I was at BP, I spent many years trying to secure terms for a pipeline from the east of Siberia into China. A pipeline between the world’s biggest hydrocarbon producer and the world’s largest energy consumer seemed an obvious choice, but we could never agree on a deal acceptable to all parties.
To me, that is the story of energy policy: the obvious rarely happens, and what seems rational at a micro-level is swamped by politics at the macro-level. Take Saudi Arabia, which burns one million barrels of oil a day just to desalinate water. That is neither efficient, environmentally sound nor the most productive use for that oil – but it happens, because it makes sense at some political, emotional level.
Circumstances do change, and today, China and Russia are closer than ever to agreeing terms for a natural gas pipeline. Saudi Arabia is looking at how it can reduce its domestic oil consumption.
But change in the energy industry is slow, so the most successful countries and companies are those which start reacting to change early. The world should take concrete steps now to prepare for the great shifts which are taking place.
One step is to expand participation in international energy policy and governance. Neither China, India nor Indonesia is a member of the OECD or the IEA, an arrangement which I think ought to change.
Another is to start thinking deeply about the future of coal. Current projections for the expansion of coal consumption are simply not compatible with attempts to prevent damaging levels of man-made climate change. Kicking the can down the road – as they say in America – is potentially a very damaging course of action.
With that in mind, we would also do well to recognise that there may be no such thing as a perfect, economically rational energy policy. We may be wasting our time looking for one, because energy markets operate under conditions of great uncertainty in which there may be no exact solutions.
Or viewed from another angle, the current patchwork of fiscal regimes, regulations and behaviours might already represent a set of optimal energy policies, because we can never really know what that would look like.
So ladies and gentlemen, on that ambiguous note, I would like to hear your thoughts and invite any questions you might have, either on my book Seven Elements or on any other topic.
Thank you very much.