Energy crisis cannot be solved by renewables, oil chiefs say

The world is blinding itself to the reality of its energy problems, ignoring the scale of growth in demand from developing countries and placing too much faith in renewable sources of power, according to two leaders of the global energy industry.

The chief executive of Royal Dutch Shell today calls for a “reality check”. Writing in The Times, Jeroen van der Veer takes issue with the widespread public opinion that green energy can replace fossil fuels.

Shell’s chief gives warning that supplies of conventional oil and gas will struggle to keep pace with rising energy demand and he calls for greater investment in energy efficiency.

Instead of a great conversion to wind power and solar power, Mr van der Veer predicts, the world will be forced into greater use of coal and much higher CO2 emissions, “possibly to levels we deem unacceptable”.

Alternative energy sources, such as renewables, will not fill the gap, says Mr van der Veer, who forecasts that even with major technological breakthroughs, renewables could account for only 30 per cent of energy supply by the middle of the century.

“Contrary to public perceptions, renewable energy is not the silver bullet that will soon solve all our problems,” he writes.

The warning from Royal Dutch Shell coincides with a critique of public energy policy by Rex Tillerson, the chief executive of ExxonMobil.

Speaking at the Royal Institute for International Affairs in London, Mr Tillerson pointed to a widespread failure by policymakers to understand the extent to which the aspirations of people in developing countries are fuelling growth in demand for energy.

Mr Tillerson said that world energy demand would rise by 45 per cent by 2030, and fossil fuels – oil, natural gas and coal – were the only energy sources of sufficient size, adaptability and affordability to meet the world’s needs.

Mr van der Veer casts doubt today on the oil and gas industry’s ability to keep up with accelerating demand. “Just when energy demand is surging, many of the world’s conventional oilfields are going into decline,” he writes.

Although there is no shortage of oil and gas in the ground, Mr van der Veer says, the industry currently lacks the technology to recover even half of that resource.

Mr Tillerson, speaking at Chatham House, expressed doubts about the oil industry’s ability to raise its game significantly without access to the oil reserves of the Opec countries of the Middle East.

“The supply outlook for nonOpec countries will be modestly up or flat,” Mr Tillerson predicted. He was sceptical about the drive by governments to increase use of biofuels and said that a fifth of America’s corn crop was being used to produce four billion gallons of ethanol, compared with targets of 12 billion gallons by 2012.

The ExxonMobil chief criticised the EU’s carbon trading system, calling it an administratively complex system that lacked transparency and failed to deliver a uniform and predictable cost of carbon. “It’s all about moving the money around,” he said.

Mr Tillerson said he would prefer a carbon tax that would enable the cost of carbon to spread through the economy in a uniform way, letting governments use the revenues to mitigate its effect by reducing employment or income taxes.