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ABN AMRO’s developing vision on
alternative energy sources
ROTTERDAM 22 May 2011 -
The exceptionally strong
earthquake and tsunami in Japan and its looming, catastrophic
nuclear aftermath, as well by the widespread political and social
unrest in the Middle East have led to sharp corrections on stock
markets worldwide. In addition, these events are merely the
beginnings of a fundamental rethinking of the way we consume and
produce energy. Question is to which extent biomass-generated energy
can be part of the solution.
Seemingly
safe and stably generating sources of energy production are now in
the spotlight and their safety and continuity are now questioned.
Oil has been
an important source of energy for decades and will remain so for
decades to come. Studies conducted by leading bodies, such as the
International Energy Agency, have pointed to this. But one thing is
certain and that is that uncertainty related to oil supply will
increase, due to growing geopolitical unrest. Larger fluctuations
and a further rise in the oil price are, therefore, more than
likely.
There have
luckily been no large incidents related to atomic energy production
since Chernobyl in 1986. The safety of nuclear power plants has
also improved over the years, according to experts in the field. But
as with everything in life, it also holds true for nuclear energy:
absolute safety can never be guaranteed. A major complicating factor
with this form of power generation is that if things go wrong, the
consequences can be enormous, widespread and very difficult to
manage. Risk is defined as the chance of an accident times the
consequences.
The human
consequences of the nuclear disaster in the area of the Fukushima I
and II nuclear power plants are very big and very hard to imagine.
The environmental damage is still unclear, but all around the world
higher levels of radioactivity are being measured. It has also
become very clear that the nuclear disaster has an equally large
impact on the Japanese economy. Next to the unimaginable direct
damage (estimated to be over 200bn euros), the degree of economic
vulnerability is even more striking. In the period after the
earthquake nuclear power plants in Japan have (temporarily) been
closed, leading to a shortfall in electricity production of over 30%
in the whole country. Businesses had to close down for parts of the
day. The same is true for the consequences of the temporary
suspension of a number of older nuclear power plants in Germany: the
wholesale prices of electricity in Europe rose dramatically after
the decision.
It is,
therefore, extremely important to disperse the sources of energy
generation. Therefore, it may be of interest to pay some attention
to the developments around natural gas. The source of energy has,
although being a fossil fuel, a far better track record on climate
change impacts than oil and coal. And the estimated proven reserves
are equal to over 250 years of current annual consumption. But is
also a call for more wind-powered and solar energy and the use of
other alternative, renewable energy sources. Biomass-generated
energy is one of the options in this respect. These ways of
producing energy are still a relatively small portion of the global
energy mix (around 15%, if you include hydro power as well).
All types of
energy generation are having their pros and cons and diversification
is helping to limit the vulnerability of our economic systems.
Biomass seems to be the most logical solution for fulfilling part of
the energy demand from the transportation sector. Obviously, biomass
may be used for the generating of electricity and heating as well.
Compared to
wind and solar energy, financing biomass may have some additional
challenges. Supply chains may be long and quite unclear. Biomass may
be coming from areas where it ‘competes’ with the production of
food, or it may use scarce water sources. So financing biomass
related energy generation requires additional attention from banks,
especially since banks are monitored closely on their sustainability
efforts as well.
ABN AMRO
supports the RBCN and hosts the RBCN network meeting of 8 June 2011
at the ABN AMRO Rotterdam branch.
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