Category Archives: Business Investment

Purpose & Policy: Transport

Hereford Station. Usage here and across the network is increasing. Investment is needed: who should pay and own   it?
Hereford Station. Usage here and across the network is increasing. Investment is needed: who should pay and own it?

In my last blog I talked about how Anu Partanen found a purpose underlying the policies that shape Nordic societies, and single terms like capitalism and socialism are not helpful, creating as they do false dichotomies, that can obscure the bigger picture. This way of thinking I find useful in looking at all manner of issues.

Let’s take UK transport policy, and debates around the railways as an example. For most of the last 70 years the UK rail system has largely been underfunded. It is important to note that our rail system has been in decline from the days of private companies before 1948, through the years of a nationalized service and through the last couple of decades since privatisation.

The predominant view was that roads were a more modern alternative. Oil companies and car manufacturers reinforced the politicians in this. Political debate focused on whether the system should be nationalized or privatized. This to me seems a very secondary consideration. Clarifying the long term purpose of what a transport policy should look like, and what part rail should play within that framework, seems to me to be what is required. Then, and only then, does what part of it ought to be in public ownership and what part in private ownership and what other models might be appropriate for various bits of infrastructure become an important issue.

Any sensible transport policy fit for the twenty-first century ought to focus on how we can cut carbon emissions and pollution, ease congestion, increase safety and make mobility affordable and accessible for all. For many decades it has been clear that cars are not suitable for big cities, and that even smaller towns are plagued by too many of them. Rail has many advantages over road transport. Steel wheels on steel rails generate much less friction than rubber tyres on tarmac, and are therefore more energy efficient, and their longer thinner shape further adds to this advantage. Railways are the fastest way to move large numbers of people. Walking, cycling, buses and trams then need to be integrated into the rail system.

UK tragically lost many of its railway lines with the Beeching cuts. Now the government is pushing the HS2 high speed line, which seems a very poor investment. By contrast Switzerland has what is considered Europe’s best railways. They did not experience any equivalent of the Beeching cuts and have not focused on high speed rail. Their priority has been intensity of use, reliability, quality of service and safety. The UK should follow this model and invest heavily in regional railways, suburban rail and tram systems, and in the walking, cycling and buses that are all needed to make any modern city more enjoyable and pleasant to live in. We could also follow Estonia and Luxembourg and make some or all public transport free.

Cars of course will have a role to play, but with excellent walking, cycling and public transport, that role ought to decline, and it would be good to see individual ownership largely replaced by car sharing clubs for those journeys when a car really is the best option. So on to who should own what. The Swiss rail system is a Special Corporation whose shares are owned by the federal government and the cantons. If regional and county councils had a stake in UK rail we might have better provision across the whole country. The cars in our car sharing club are owned collectively by a group of forty or so households within our local community. In Germany the municipal Stadwerke own lots of well functioning infrastructure. There are many possible systems of ownership, and the unregulated free market and the centralized state monopoly may be the two least helpful starting points for thinking about the best future of our infrastructure.

Can Companies Change?

Race Bank_ First Blades

The first wind turbine blades leave Siemens Hull factory for DONG’s Race Bank Offshore Wind Farm

A few days ago I posted a blog about the Norwegian oil company Statoil developing and deploying the world’s first commercial scale floating wind turbines. Statoil is changing its business model. Climate change, ocean acidification, air and water pollution are all largely driven by humanity’s addiction to fossil fuels. Technological innovation and falling prices have made the case to switch from fossil fuels to renewables an economically smart move, as well as being a macro ecological imperative and an absolute necessity for humanity to continue to flourish. The cleantech revolution is happening and is being driven mainly by small start-up companies. What future do the big incumbents have? Will they change with the times or struggle to keep the old polluting economy going? Peabody and DONG provide the most extreme examples of this choice.

The name DONG stands for Danish Oil and Gas. In 1972 it was set up by the Danish government to develop North Sea oil and gas fields. It expanded into electricity supply and owned coal fired power stations. Fossil fuels were its core business. As it has grown it has transformed itself into a cleantech pioneer. It is now the world’s largest builder and owner of offshore wind farms. 80% of its capital is employed in the wind sector and just 4% in oil and gas, and it has said it will sell off this vestigial side of the business while investing heavily in more offshore wind. Last week the first wind turbine blades left Siemens new Hull factory for DONG’s Race Bank Offshore Wind Farm. DONG has also invested in the Cambeltown wind tower factory in western Scotland, owned by Korean company CS Wind. DONG is also now developing some interesting waste to energy projects such as the REnescience project at Northwich, Cheshire. It is creating lots of useful jobs helping develop the technologies that will help combat climate change.

Peabody is a much older company, founded in 1883 in Chicago, USA. It was and remains focused overwhelmingly on coal. To quote Wikipedia ‘Peabody has been an important actor in organized climate change denial.’ It has totally failed to make the transition to a cleantech future. It filed for Chapter 11 Bankruptcy in April 2016. The day after the election of Donald Trump its shares shot up by 50% and in April 2017 it emerged from bankruptcy. It still owns vast coal reserves. If this coal is ever going to be exploited then Peabody has economic value, but if, as climate change and the cleantech revolution show, these assets are just worthless liabilities then a return to bankruptcy seems inevitable.

Most of the world’s huge oil companies, such as Exxon, Chevron, BP and Shell, are still dominated by their oil interests. Most of them have dabbled in renewables but their main capital resources are still overwhelmingly in oil. Will they make the change and fully commit to the post fossil fuel future or will they cleave to the old polluting past? My hunch is that most of them have left it too late: cleantech start-ups will grow exponentially and squeeze them out of the energy market. Their stock market values are likely to plummet as the realization that the reserves they own and that underpin their stock market valuations are worthless. Oil and coal will follow flint from being key economic assets to interesting geological curiosities. When in 1991 the first offshore wind farm opened at Vindeby in Denmark many in the global energy industry thought offshore wind a ludicrous idea. Nobody would say that now. A lot has changed in the last 26 years: much more will do so in the next quarter century as the pace of change inevitably quickens.

Queensland: Coal or Solar

fish on Great Barrier Reef

The future of the Great Barrier Reef, and the planet’s climate, will be greatly affected by plans to export vast quantities of coal from Queensland. There is an alternative.

Two worlds are colliding. The fossil fuel industry and its pet politicians plan ever greater acts of folly, piling more money into ever more reckless projects. Climate change, ocean acidification and air pollution all suggest it would be more sensible to quit all investment in fossil fuels and just leave them in the ground. There are better, less polluting and increasingly cheaper alternatives. Take what is happening in Queensland, Australia, as an example of the choice humanity must make.

The Great Barrier Reef is dying mainly due to the warming ocean. The Queensland government, led by climate change denying Pauline Hanson has approved several massive new ports to export vast quantities of coal. Huge swathes of sea will need to be dredged further damaging the reef. Avaaz, WWF and Greenpeace all have campaigns and petitions opposing the development. (Do please sign their petitions)

In remote northern Queensland a couple of small rays of hope suggest a better alternative. The Kidston Energy Park is just about to start building a 50MW first phase solar photovoltaic project, which it is planned, will then be expanded to 270 MW. What makes this project especially interesting is that a 250MW pumped storage hydro system is planned to be co-located on the site, meaning that excess solar energy from the middle of the day can be turned into more valuable evening electricity, or be stored for use on the occasional cloudy days. The whole project is located at an old gold mine at Georgetown with the pumped hydro system located in the old gold mine workings. This will be a world first, co-locating solar with pumped storage hydro.

Another pioneering cleantech project is planned for Hughenden, Queensland. The Kennedy Energy Park is due to start construction in early 2017, with a first phase to be 30MW of wind, 20 MW of solar pv and 2 MW of Lithium Ion batteries all co-located and grid connected. Further expansion of the site would only be possible with improvements to the grid.

As I wrote in a blog last August, Australia could be a world leader in solar power. It has the perfect climate. Sadly is does not have the politicians able to take a lead. Last week I blogged about Mauritania, a country with a similar vast solar potential as Australia. Australia has much greater technical and financial clout, and is doing a number of useful projects, but I’d put money on Mauritania getting to a solar powered economy long before Australia, given the strength of Australia’s coal lobby and their political puppets.