The balance between energy demand and availability is much discussed and increasingly viewed as a major constraint to industrial development and economic growth in many regions.
Human endeavour, driven by the evolution of needs and restrained by basic economics, first sought to satisfy the need for domestic light, heating and cooking and exploited what came first to hand – such as biomass in the form of wood, vegetable oil and animal fat.
The Chinese first used coal as an energy source thousands of years ago, but it was only in the 18th century that the energy output available from locally mined coal spurred the Industrial Revolution in Britain and energy resources became a critical determinant of economic development.
Industrialisation led to urbanisation and this exposed the fact that the use of fuels like coal and biomass was extremely undesirable in areas of high population density because it resulted in the ‘pea soup’ fog for which London was notorious even up until the 1960’s. Many developed countries have adopted the use of other fuels like oil, natural gas, radioactive isotopes or hydropower either because of lower operating cost, or more often to minimise environmental damage.
A report released by the Energy Information Administration of the US discusses the growing consumption of primary energy globally and projects the trends until 2020.
The detailed report essentially finds that:
Estimates vary from source to source, but at projected rates of usage we probably have reserves of around 50 years of oil, 80 years of natural gas and 200 years of coal. This of course does not allow for major new sources (such as gas held in clathrate form in oceans) or highly advanced extractive techniques not yet developed (in-situ coal gasification) – and hence, could be regarded as a very conservative estimate.
Natural gas is projected to be the fastest-growing component of primary world energy consumption, more than doubling between 1997 and 2020.
Oil currently provides a larger share of world energy consumption than any other energy source and is expected to remain in that position throughout the forecast period.
Coal’s share of total energy consumption falls only slightly, from 24% in 1997 to 22% in 2020 and continues to be a major fuel source for electricity generation worldwide.
The prospects for nuclear power are uncertain, despite projected growth in total electricity demand because of concerns around safety and high capital cost.
Modest growth in renewable energy is projected to continue, maintaining an 8% share of total energy consumption over the forecast horizon.
Of the three fossil fuels coal has the most widely distributed reserves and is mined in over 100 countries, and on all continents except Antarctica. The world’s largest coal deposits are found in the US, Russia, China, India, Australia and South Africa in descending order of size – together these countries hold 84% of all known accessible deposits of coal.
More than a quarter of the world’s coal reserves lie within the US, and the energy content of that country’s coal resources exceeds that of all the world’s known recoverable oil.
According to Elliot H. Gue, the US ranks only seventh in terms of coal exports, yet Figure 3 above shows that the trend’s now clearly shifting.
Looking back to the first quarter of 2006 and there are two obvious trends. Firstly, that coal imports are largely falling, even as there’s a significant surge in export volume. Secondly, 44% of US exports in 2007 went to Europe, with the EU still a giant consumer of coal.
Gue confirmed that consumption and the demand for imports has increased since the late ‘90’s, explaining how growth in renewable power capacity spells more demand for conventional power plants. German transmission grid operator E.On Netz said in a 2004 report on Germany’s wind industry, “The increased use of wind power in Germany has resulted in uncontrollable fluctuations occurring on the generation side due to the random character of wind power feed-in.”
Traditionally, the EU has been able to import seaborne coal sourced from countries such as Australia or South Africa. However, developing Asia is a new player in the global coal trade and in 2007 China became a net importer of coal for the first time in its history.
Having exported more than 80 million metric tonnes to Japan, South Korea and India as recently as 2002, this new shift to import comes as a stark contrast and as a result, Europe is getting squeezed. Hence the trend to import coal from the US emerges, also driven by lower cost due to the weak US dollar.
Technical developments could increase the useful energy output from the use of fossil fuels. For example, the use of waste heat from Rankine Cycle electricity generation (Combined Heat and Power) could raise efficiency from 40% to high 80%.
Investment in clean coal technologies is seen as vital for the EU to continue benefiting from the availability, proximity and flexibility of this abundant source of energy. To tap the full potential of the nation’s enormous coal supplies, the US Department of Energy’s Office of Fossil Energy is working with the private sector to develop innovative technologies for an emission-free coal plant of the future.
Oil, because of convenience and the lack of suitability of most other fuels, continues to dominate the transport industry worldwide. The rapid and unprecedented rise in the market price for crude oil is probably the most discussed economic issue worldwide and there are no signs of it declining to the $70 – $80 per barrel level believed to be OPEC’s current target range.
While the exact causes for this increase remain unclear, it can be noted that the surge starting in 2003 coincided with the invasion of Iraq and the threat of conflict in Iran is certainly a factor. In addition, the rapidly increasing demand from the fast-paced industrialisation of both China and India are often quoted drivers for energy price inflation.
The slow-down in oil supply growth, which has continued since oil production surpassed new discoveries in 1980, and the fact that global oil production will decline at some point, is the main long-term fundamental cause of rising prices. Remaining reserves become more technically difficult to extract and therefore more expensive, which eventually will only be economically feasible to extract at extremely high prices.
It is thought by many, including energy economists such as Matthew Simmons, that prices could continue to rise indefinitely until a new market equilibrium is reached, at which point supply satisfies worldwide demand.
Natural Gas Energy
Natural gas is used in the residential, commercial and industrial energy sectors because it is clean, abundant and suitable. Gas demand has increased by an average of 2.6% per year over the last two decades, primarily in power generation and heating, and is fast replacing coal, oil and nuclear power in other sectors.
As oil supplies tighten, gas must become a focus for exploration not just in the population centres.
Total global gas reserves and resources are estimated at the equivalent in energy content terms to 2.2 Bn Bbls of oil. Russia holds by far the largest share and the US also held large quantities of gas, but has already used up substantial volumes.
Since 1980, exports of Liquefied Natural Gas (LNG) from 12 producing countries have increased by 6.5% per year from 38 Bcm to over 150 Bcm, but does not yet exceed 6% of total global gas production. LNG is now the world’s fastest growing fuel and growth is expected to average 10% per year to 1240 Bcm per year by 2025, or 26% of the total.
Although most developed countries with a local gas supply already have pipeline networks, a surge in the number of trunk pipelines across countries and borders is forecast.
Indigenous supplies are already declining in the three gas importing areas – North America, Western Europe and North Asia and around three quarters of new gas production will be traded across borders into these three regions.
The international gas supply trade is set to double from around 24% in 2003 to perhaps 50% by 2025, a level where oil trade is right now. Such a market shape will favour the rapid expansion of LNG, allowing spot cargoes, short-term contracts and flexible trading alongside traditional long-term contracts.
The LNG business is poised for a period of strong growth in capital expenditure, with energy analysts Douglas-Westwood predicting Capex – including eight offshore terminals – of some $67bn for the period 2005-2009.
“Annual expenditure on LNG facilities is forecast to increase dramatically from $7.2bn in 2004 to $17.5bn in 2009,” stated John Westwood, presenting the firm’s latest World LNG & GTL Report in Houston last month.
Of all the primary energy sources available today, Nuclear Reactors are the most controversial and yet if anticipated Carbon Capture and Sequestration legislation penalises fossil fuel energy sources for the volume of CO2 they release, they could easily deliver electric power at lower cost than Combined Cycle natural gas fired generators.
The debate on nuclear energy is blurred with out-of-date perceptions of the industry.
Low investor confidence in the face of political opposition to a Nuclear Renaissance, based on massive historical plant construction costs and the impact of lower than expected output efficiency, plus unreliable power delivery performance, has resulted in the OECD countries reluctance to build any new nuclear plants in recent years.
“We can expect some nuclear reactors to be built but not the numbers that are predicted,” Frank Barnaby, Consultant at the Oxford Research Group, said.
“High capital costs, difficulties in convincing banks to loan the money needed to build them, and uncertainty about future political support are just some of the hurdles that could scupper nuclear projects.
Meanwhile, the few nuclear engineering firms in the world able to build the plants are already stretched with over 30 reactors under construction globally and about 90 more planned.”
The overwhelmingly important element in the total costs of nuclear power is the cost of construction (capital cost), the temporal component of which is a significant determining factor. This typically accounts for some 60-75% of the generating cost of nuclear power.
Other elements of nuclear cost are either subject to limited uncertainty – operating performance, the cost of fuel and operations and maintenance (O&M) – or are potentially manageable even at low rates of discounting the future – waste and decommissioning.
Nuclear power gives rise to major externalities (impacts not captured, or borne, by producers or consumers). Positively, greenhouse gas emissions are reduced and security of supply may be enhanced. Negatively, there are short and long-term risks of radiation release and also proliferation issues.
The Pebble Bed Modular Reactor (PBMR)
(Figure 7), under development in South Africa and with BNFL as a minority partner has been much publicised as a more radical alternative.
The PBMR is a development of an earlier German high temperature reactor design, originally hoped to complete as a demonstration plant by 2003 and allowing for commercial ordering soon after.
However there have been delays to this timetable, most recently the legal revocation of an earlier environmental approval to construct the demonstration plant. Such a plant is now unlikely to be complete before 2010 at the earliest.
The PBMR essentially comprises a steel pressure vessel which holds around 450,000 fuel spheres. The fuel consists of low enriched uranium triple-coated isotropic particles contained in a moulded graphite sphere, while a coated particle consists of a kernel of uranium dioxide surrounded by four coating layers.
The PBMR system is cooled with helium, with the heat that is transferred by the helium to the power conversion system, is converted into electricity through a turbine.
Nuclear fusion looks an even more appealing technology to satisfy future energy demands. According to EURATOM/UKAEA Fusion Association, nuclear fusion will take over from the existing fission technology within 30 years with a prototype station supplying the national grid.
Fusion has the potential to deliver a cleaner, safer and more efficient energy capacity solution within a generation and more should be done to facilitate this technology in the UK.
According to an analysis from the Standord Humanities Lab, the past 15 years has been a period generally considered to have exhibited robust global economic growth.
During this time the consumption of energy worldwide has increased at about 1.5% per year. Forecasts for the next 20 years suggest energy consumption will grow by 2% per year, far outstripping recent growth.
At this rate, the world would double its current consumption of energy in only 36 years. An increased push for greater energy efficiency in the developed world is expected to help curb growth, but the rapid industrialisation of billions of people in Asia, where energy use is less efficient, will probably continue to drive the search for more energy.
Recent price spikes in oil and natural gas suggest that the supply of these two largest energy sources is coming under strain. The expected accelerated growth of energy consumption will further tax supplies, however the composition of energy sources will probably not vary much in the near to medium term.
Oil has plenty of supplies to power our transportation needs for the next century, but it is a finite resource and one day will need to be replaced. Coal still has plentiful reserves throughout the world, and the emergence of clean coal technologies is expected to drive a small revival of this once ‘dirty’ fossil fuel.
Natural gas is the current energy source of choice for growth, thanks to its relatively clean combustion and largely untapped supplies, but challenges remain in efficiently transporting it.
Despite current plentiful reserves of the three primary fossil fuels, infrastructure limitations and the desire for cleaner energy are likely to make the use of alternative supplies paramount to meet the rising growth in demand.
Wind energy is currently the fastest growing energy source in the world thanks to advances in technology, but limitations on suitable sites will keep wind a modest if significant source of power. Biofuels catch a lot of interesting press, but the sheer size and scale of resources needed to generate large amounts of energy this way will probably keep it a relatively small contributor at best.
Only nuclear and solar power have the potential to dramatically alter the energy supply landscape, as both could potentially produce enormous amounts of energy. The policy dilemma of nuclear power – abundant energy with no air pollution versus radioactive waste disposal, large upfront costs, and catastrophic accident potential – is one for legislators to debate.
Expect some countries to eventually follow France’s lead and ‘go nuclear’ while the majority look elsewhere.
Solar energy is currently cost prohibitive, but if technological improvements and rising prices for other energy sources allow it to become cost competitive, the whole energy landscape could change. Hydrogen and cold fusion could possibly be regarded as wildcards: unlikely to materialise but they could have a profound impact if they did.
Fischer-Tropsch gas to liquids (diesel) technology seems to be the most viable technique for gas to oil substitution but over the last decade development has been very slow. By 2015 it is expected that only 20 plants will be operating with a combined capacity of around 375,000 bbls per day.
Assuming that new projects continue to come on stream at the same rate, total capacity might reach 2.5 mm bbls per day by 2025. These plants would require dedicated gas production of around 215 Bcm of gas per year, or 4.5% of the total.
Other and Renewable Energy sources
In late 2008, the incentives for developing and commercialising new, innovative renewable energy sources are more compelling than at any time in human history – given the mounting pressure to address the greenhouse effect and climate change, in addition to energy price inflation and the threat this poses to already strained world economies.
To date, the exploitation of renewable energy has really only been significant in regions where unique conditions made this inevitable, such as Hydropower in Brazil and Canada and Geothermal power in New Zealand.