Winter is Coming
Catherine Mitchell, IGov Team, 15th June 2015
I have got into the habit of thinking ‘winter is coming’ (ie Game of Thrones) whenever I read my daily energy newsletters or news apps to catch up on energy industry news. For those who have never watched the TV series, Game of Thrones (GOT) is about seven warring Kingdoms of Westeros who should bury their differences in order to overcome the challenge of the White Walkers who are moving inexorably south to Westeros, killing all people in their way, only to raise them up again as White Walkers, thereby adding to their already enormous army.
‘Winter is Coming’ is the phrase used in the series to incorporate two points together: the practical: winter is coming (and Westeros has decade long winters) so food and shelter has to be sorted out – but also strategic: the White Walkers, for reasons unknown and to many’s disbelief, have risen after centuries of inactivity and need to be stopped. The good guys are all busy trying to get people to work together on the big picture – ie stave off the White Walkers – rather than fighting amongst themselves and making everything worse rather than better. Sadly, however, there are lots of characters who are more concerned with their short term interests and so it is a rather disparate bunch of allies who take on this vital, life-changing task.
Written like this, I can see why this thought of ‘winter is coming’ keeps popping into my mind when I read about energy.
Certainly, energy news is disperate. Last week we had the oil companies letter to the UN asking for a carbon price to be sorted out at the Paris COP21 at the end of the year. As Nick Butler and Pilita Clark argue in a useful short FT podcast this is unlikely to lead anywhere other than more discussions. On the other hand, China, working on its own and skipping the complexities of joint international agreements, is setting up its own pilot internal carbon market which may have a (beneficial) global impact. The European Court of Justice has just ruled that the German tax on nuclear fuel is legal – another nail in the coffin of nuclear power in Germany which is also bad news for the already beleaguered conventional German utilities. However, the same Court also ruled that Britain could not reduce the VAT on energy efficiency measures so both good and bad news for non-traditional business models (NTBM). We had EDF refusing to comment on whether it would withdraw from Hinkley C. On the other hand, we have Tunisia signing a Memorandum of Understanding with the Russian state-run atomic energy company Rosatom to develop a nuclear energy infrastructure based on the traditional utility model while Australia is becoming the latest country where energy supply is being turned upside down – both in terms of disinvestment campaigns but also moving to small scale, domestic-sized energy systems.
In the end, energy news stories fall in two areas – the conventional, traditional industry trying to keep things going and / or undermining new ways of doing things; and then stories about the NTBM driven by new technologies and better economics which enables new business models, new customer relationships and bottom-up developments, where people and communities have given up on top-down government action and are increasingly doing their own thing.
As a daily energy news reader, this dual reality comes across very powerfully. The latter will win out because of the economics, as Nick Stern’s latest book shows. Just like Westeros is building up to a huge battle with the White Walkers, so the global energy system is building up to a sharp confrontation between fossil/nuclear and conventional utility models with new technologies, operation, practices and NTBM. When I think ‘winter is coming’ I use it as a short hand for ‘change is coming’. Just like I am sure the good guys in Westeros will win out against the White Walkers (no doubt after several more series and many setbacks and gruesome deaths) so ‘winter is coming’ to the conventional energy industry.