Low investment in renewables technology is damaging our education system!

OK so the headline makes you think I’ve finally flipped.  But bear with me and I’ll try to explain.  Firstly a statement of the obvious which is that the availability of both young and perhaps not so young well educated personnel is essential for the energy industry regardless of which sector of it you are in and at which level you’re recruiting.   

But many complaints are made about our education system and its ability to deliver literate, numerate and well rounded youngsters. However, for a long time now though it has seemed to me that the problems may not actually lay with the system itself, the quality of teaching or necessarily the aptitude of pupils but with something else entirely.  It’s one of those bees in my bonnet I had difficulty in getting rid of because it seemed to me that whatever Government tried it didn’t really make a lot of difference.

I was therefore interested to spot a recent report in the Financial Times where in a letter to Boris Johnson - the Conservative shadow minister for higher education offering comment on an article Mr Johnson had written which despaired of the fact that Britain was no longer producing physicists, Sir John Rose the CEO of Rolls Royce pointed out that "if you don’t have a nuclear industry, then anyone who is smart enough to be a nuclear physicist is not going to choose that career”.

In other words, it's a question of demand.  If the demand is not there for physicists, chemists, electronics engineers and so on and so forth then students will quite rightly tend not to go down that route.

The real question we have to answer then is why demand has fallen?   A recent comment from Richard Lambert - the Director General of the CBI - provided a very good clue. He said "In today's rapidly changing economic world order, we must create more global enterprises if we want the UK to remain in the top tier of world economies. Yet in the past 20 years the number we have built from scratch has been low."    

Well we are already aware that in Scotland the birth rate of high growth companies is well below what it should be and indeed Mr Nicol Stephen – the now former Enterprise Minister - gave us a partial  explanation for that during last years Global Scot Conference when he quite correctly stated "private sector funders were hampering the drive to improve the number of successful start-ups by starving companies of the kind of risk capital that could make a vital difference to early-stage ventures."   He went on to say "That is very dangerous and short-sighted and ultimately damaging for the economy."  

You can hopefully see a pattern emerging here. 

Certainly, as the energy industry evolves and changes as it is expected to over the next decade or more and becomes increasingly technically wider and more sophisticated - for example fuel cells, energy storage technologies, bio-fuels and hydrogen systems - then the broader and deeper the educational needs and skillsets become.  But if Richard Lambert is right then it’s not a matter of whether the education system can provide what the industry will need but whether the industry is going to have sufficient critical mass to be able to attract people to it in the first place and inspire them to get the education and qualifications they need to take part in it.

At the moment there isn’t a lot of sign that this is happening.  What action there is in developing and bringing new products to the market isn’t moving here on anything like a large enough scale or at a fast enough pace to give me any confidence that demand is really going take off. 

This is concerning because the “New Energy Era” is surely something that today’s young are already taking a huge interest in. Are we seriously going to fail to capture, focus and direct that youthful enthusiasm so that it can benefit this country both economically and environmentally?

The answer is almost certainly that we will.  To my mind there is just not the same appetite here as there is in other countries to really grab this new opportunity.

Well let me clarify that.  For sure the appetite exists amongst engineers, academics and “green” entrepreneurs. It’s just that there is very little real appetite amongst funders to get behind them. 

Contrast this with the USA. Vinod Khosla a top venture capitalists in Silicon Valley said "The best brains in the country are no longer working on the next pharmaceutical drug or the next Silicon Revolution. They want to work on energy"   He also said that although commercial success could take years, venture capitalists are pouring cash into solar power, fuel cells, wind energy, biofuels, new lighting microchips, "smart" power grids, and other innovative energies. 

But that’s the American way isn’t it.  In fact here’s an interesting tale of two banks that also demonstrates the difference in thinking between us and our transatlantic cousins.

Bank number one has just announced a £10 billion, 10-year initiative that encourages the development of environmentally sustainable business practices through lending, investing, philanthropy, and the creation of new products and services.

It will commit £9 billion in lending, advice and market creation to help commercial clients finance the use and production of new products, services and technologies. In addition, the bank will commit £0.7 billion to achieve Leadership in Energy and Environmental Design certification in all new construction of office facilities and banking centres; donate £25 million to support non-profit organizations focused on forest preservation, innovative energy conservation, developing green affordable housing and other environmentally progressive activities; and invest £50 million in energy conservation measures for use in all its company facilities.

This initiative is without doubt an extremely visionary one and commercially highly astute. It is also exactly what the big banks should be doing.

Bank number two on the other hand has announced a $70bn takeover attempt to buy another bank in Europe.

Now you may be getting all excited about Bank number one but don’t be because the bank in question is the Bank of America.

Kenneth D. Lewis, Bank of America's chairman and chief executive officer said when announcing this initiative "Today, we have a tremendous opportunity to support our customers' efforts to build an environmentally sustainable economy - through innovative home and office construction, new manufacturing technology, changes in transportation and new ways to supply our energy,"

What can one say?  The man is right and in the context of my argument about creating demand for well educated graduates and others he’s helping that happen.  It’s the American way but it’s certainly not the British let alone Scottish way. 

Which bank is bank number two?  Well it doesn’t really matter because it is irrelevant in terms of what we in this industry are trying to achieve but it’s based in Edinburgh.  

Just remember though that every time one of our financial institutions comes up with excuses for doing as little as possible in terms of investing in this sector then they’re not only harming us economically but the evidence suggests they’re almost certainly harming our education system as well.  Makes you think eh!

(first published in May 2007 in the P&J Energy supplement)

North Sea viability dependent on New Technology – again..

At the recent ITF technology showcase in Aberdeen BP’s North Sea regional president, Trevor Garlick was reported as saying “If new technology is not developed fast enough the life of the North Sea oil and gas industry could be shortened”.

Without being cynical I know many will have heard this before so let me give Garlick a history lesson and some advice.

Between the early 80s and middle 90s the Marine Technology Directorate (MTD) used to invest £10-12million every year in R&D programmes involving the universities, operators, contractors and particularly SMEs.

Around £5m of that came from the Engineering and Physical Sciences Research Council and the remainder from industry. MTD was the only private sector organisation managing Research Council funds.

Then, shortly after the Blair-led Labour Government was elected in 1997 EPSRC advised MTD that it intended to pull that funding back in house. Despite MTD’s success this was a political decision as it was to protect jobs within EPSRC, which was undergoing a “reorganisation”.

MTD’s membership included most of main oil/gas operators and it was hoped they could be persuaded to lobby the Government to reverse the EPSRC decision and reinstate MTD’s funding.

Instead though the operators – or a few of them – thought it would be a much better idea to merge MTD with the Petroleum Science and Technology Institute (PSTI) of Aberdeen and Edinburgh to form a new organisation called the Centre for Marine and Petroleum Technology (CMPT).

PSTI was also a membership based research enabler but its work was mainly aimed at sub-surface issues.  It was just as successful and invested roughly the same amount as MTD.

The aim with CMPT was to have a properly financed organisation that would act as a broker/agitator/catalyst working with operators, contractors large and small, the DTI (now DECC) and the universities to develop appropriate research projects some of which CMPT would manage. 

Unfortunately, CMPT’s interim management team (drawn from the DTI, operators, universities and so-forth. did not take into account the actual costs of the start-up (severances, legal fees, headhunter fees, etc).

In addition, they did not properly take into account the inherited costs of on-going projects. Consequently CMPT started life with an £800,000 collar around its neck.

The interim management team also agreed – under pressure from some but not all operator members – to reduce the subscription to CMPT from the joint £75,000 that its predecessors MTD and PSTI received to £30,000.

The interim board then further bemused many in the industry by appointing a CEO from a military background who had absolutely no experience of the oil and gas industry, no experience in running what was a small company and no direct experience of technology development.  He was a really nice bloke though.

Despite this CMPT was able to get some useful projects going including a number of so-called Pathfinder projects which were low cost, short term feasibility type programmes quite a few of which later evolved into much larger projects and eventually commercialised. 

Regrettably though, this all coincided with the collapse in the oil price to $10 per barrel during the late 1997 through early 1999 slump and the resultant, crisis-driven setting up of the Oil and Gas Taskforce the role of which was – in part – to develop better ways of ensuring a flow of new technology into the North Sea. 

Of course the oil price was actually only at $10 a few days and in fact recovered fairly rapidly from March 1999 to comfortably pass $21 before the end of that year. The barrel has of course been on the up pretty much ever since,

Sadly for me, 25 of my then colleagues (yes, I was a director at CMPT), the R&D programmes we were running and the network of university technology centres CMPT was involved with, one of the outputs of the Oil and Gas Taskforce was that our organisation should be killed off and replaced with the Industry Technology Facilitator (ITF). It was a triumph of process over progress.

Trevor Garlick may like to know that the BP manager involved in that decision said to me at the time that BP didn’t actually need ITF or any other third party-type R&D organisation and that if BP wanted to do some R&D the company would just do it anyway.

This arrogant and patronising statement told me that the whole deal of setting up ITF was essentially politically expedient.

The proof of the pudding is of course that since its inception ITF has only secured project funding of around £50million.

That’s £50million over 12 years, or an average of less than £5million per annum.

That’s a third or a quarter of what MTD and PSTI were investing before the “suits” came along and probably less than the cost of maintaining BP’s board.  To say the least it’s shameful.

ITF’s chairman, Melfort Campbell, also said that, despite the oil and gas industry being the largest industrial investor in the UK for 25 years, less than 0.5% of government spending on research and development had been in the sector.

Energy readers knew this of course because we’ve talked about the UK’s lousy record on energy technology R&D often.

But we also know that in Brazil firms are ordered to spend 1% of their revenue on R&D. Even in Newfoundland there’s a diktat.

But here in the dear old UK where so many of our assets are foreign-owned to boot, there is no such requirement. Why? Because Whitehall puts ideology ahead of national and economic logic and ignores what our competition does.

So Trevor, if you’re really serious about the technology issues you’ve raised then the answer is in your hands and the hands of the other operators.

Stop repeating the old and well worn “we need new technology” mantra, start doing some real innovating and above all get your corporate wallet out and be prepared to fund it properly.

Then you might actually see some results and get what we all want. A longer-lived North Sea industry.