Slide1: Energy demand and prosperity
Chris Lambert
Wednesday 17th November 2004
The Institute of Physics
Slide2: “Marjorie, your conservatory is delightful, but it can be terribly stuffy”
Slide3: “I’ll put the patio heaters on, Angela. We can sit outside instead!”
Slide4: “I simply can’t take this heat, Marjorie! I know it’s June but I daren’t turn off the blasted Aga.”
Slide5: “Oh, Angela, you silly thing! Install some AirCon in your kitchen like everybody else.”
Slide6: “And isn’t it about time you upgraded the car, Marjorie? Two-wheel drives are so yesterday. You won’t notice the kerb in a Hummer.”
Slide7: “You’re right, Angela. And technology does help one appreciate the simple things in life.”
Slide8: Girl collecting fuelwood for her Aga
Darfur region of Sudan, 2004
Slide9: Energy Demand & Prosperity
Slide10: Money buys us choice…and given a choice
we will consume until the costs outweigh the
benefits.
The ability to choose is not shared equitably.
Slide11: Contents:
Energy demand, intensity & efficiency
The new ‘China syndrome’
Energy demand, GDP & climate policy
Demand and development issues
The ‘Iraq factor’: oil & global GDP
Energy demand, intensity & efficiency: Energy demand, intensity & efficiency
Slide13: Energy demand = Population + GDP/Capita + Energy/GDP (Energy Intensity) Assumption:
Slide14: Relating energy demand and GDP
GDP drivers:
Demographic trends – age, population size and distribution
Institutional capacity – to allow technology to be implemented
Technology – technological innovation
Energy drivers:
Primary supply – availability and acceptability
Final price – fixed costs, transmission & downstream costs,
taxes
Versatility & quality – potential applications
Slide15: Source: Drivers of the Energy Scene, World Energy Council (2003) Energy demand over time
Slide16: World TPES vs. GDP, 1971-1997 (IEA)
Slide17: Post-1973 World GDP growth Source: Drivers of the Energy Scene, World Energy Council (2003)
Slide18: 1850-1948 1.7% ave. annual growth
GDP drivers:
Demographic trends – population growth slow (1bn 1850 to 2.5bn 1950)
Institutional capacity – beginnings of democracy, freedom
Technology – steam engines, railways, cars etc.
Energy drivers:
Primary supply – abundant coal
Final price – cheap
Versatility & quality – uneasy & dirty
Slide19: 1949-1973 5% ave. annual growth
GDP drivers:
Demographic trends – rapid growth (2.5bn 1950 – 4bn 1974)
Institutional capacity – secure property rights & savings
Technology – cars, aircraft, appliances etc.
Energy drivers:
Primary supply – abundant oil & coal
Final price – cheap
Versatility & quality – liquid oil, electricity grows
Slide20: 1974-present 3% ave. annual growth
GDP drivers:
Demographic trends – start of transition; aging population, growth rate declining (4bn 1974 – 6bn 2004)
Institutional capacity – too little reform
Technology – CCGT, deepwater, IT etc.
Energy drivers:
Primary supply – oil crises, abundant gas & coal
Final price – price hikes, volatility
Versatility & quality – reliance on new rigid energies
Slide21: Present-2050 ≥3% ave. annual growth?
GDP drivers:
Demographic trends – peak in 2100 (6bn 2004–9.5bn 2050)
Institutional capacity – reform in Latin America, Southern Africa. Asian tigers continue liberalisation. M. East stability.
Technology – hydrogen, carbon sequestration, enhanced recovery
Energy drivers:
Primary supply – underestimated reserves of oil and gas
Final price – returning to long-term trend line
Versatility & quality – oil, LNG, existing capital stock
Slide22: Present-2050 <3% ave. annual growth?
GDP drivers:
Demographic trends – ageing, peak by 2050? (6bn 2004 – 8bn 2050)
Institutional capacity – lack of progress in DW. Asian tigers – unstable growth, instability Middle East
Technology – no seismic shifts e.g. viable fuel cells
Energy drivers:
Primary supply – supply & environmental crises
Final price – volatility, rising costs
Versatility & quality – infrastructures need to be changed?
Slide23: World primary energy intensity, 1970-2020
Slide24: World TPER vs. GDP, 1965-2002 Source: Drivers of the Energy Scene, World Energy Council (2003)
Slide25: Sector Intensities & Total Economy Effect, IEA-11 Energy intensity declines have slowed in all sectors since the late 1980s
Slide26: Energy intensity follows a bell-shaped curve with increasing GDP/capita
Industrialised countries: higher incomes, development & diffusion of energy efficient goods. Post-industrial phase – service industry increasing vs. manufacturing. Economies of scale. Loosening association between energy demand & economic growth e.g. US, EU, Japan
Transition economies: central-planning to markets increases efficiency of industry/energy use e.g. EE/FSU
Developing countries: depending upon stage of development, growth in energy demand may exceed economic growth. New capital stock required, inefficient/unincorporated technologies etc.
close association energy demand & economic growth
e.g. China, India, Latin America, Africa
Slide27: Energy efficiency vs conservation…
‘THE UK CAR DRIVER’
PRESENT 6 gals x 40 mpg = 240 miles/wk
CONSERVATION 4 gals x 40 mpg = 160 miles/wk
(walk more!)
FUEL EFFICIENCY 4 gals x 60 mpg = 240 miles/wk
(drive according to the book)
Slide28: Domestic energy price rises - UK
Effect of a 15% price rise on domestic energy consumption:
Poorest 20% - energy consumption drops 10% & causes hardship
Middle 20% - 6% drop in consumption
Top 20% - 2% reduction: barely notice
Energy Intensity of Rio Tinto Products: Energy Intensity of Rio Tinto Products Precious Processed Bulk 0.1 Smelted
The new ‘China Syndrome’: The new ‘China Syndrome’
Slide31: China & oil China only demands 8% of world oil but was responsible for 40% inc. in global consumption since 2000 – China’s consumption inc. 15% last year alone. In 2003, China consumed 40% of all the coal and 30% of all the world’s steel, and is the leading consumer of copper and cement.
Effects:
Prices will become volatile - a slowdown in China’s economic growth is predicted but if too much then investment in raw materials drops demand and price will fall
Basic industries are highly energy intensive but not necessarily for oil (ie coal).
As individual incomes rise (=cars, appliances) oil demand rises sharply
Japan and S Korea’s oil demand rose from 5–15 barrels oil per head in 10 years
If China follows this pattern its energy demand will quadruple. This increase alone will be greater than US total demand today, plus if car ownership keeps on current track by 2020 China will have 650m cars - more than in world today!
Much scope for greater energy efficiency so predict doubling of demand by 2020. As of 2000-2001, China's economy was eight times more energy intensive than Japan and three times more energy intensive than the US.
Slide32: China & emissions China's now accounts for 13 percent of the global emissions total, compared with 26 percent for the United States.
China's share of emissions is expected to exceed the United States, by around 2020, with China contributing 30% of global emissions by 2025.
China, along with India and other developing countries, argue that the developed countries should take the lead as they generate more greenhouse gas per capita.
China's per capita emission rate is much lower than the United States & Europe but will catch up as its GDP per capita increases.
The developing nations have so far resisted calls for restrictions on their emissions on the grounds that they would hamper growth. Gao Guangsheng, deputy director-general of the National Development and Reform Commission: “The priority is to satisfy our basic demand. The economy must develop. China has 1.3 billion people and we have to live."
The scope for reducing China’s carbon intensity is huge. China still relies on coal for about 75 per cent of its energy and renewable sources account for <1%.
Energy demand and climate change policy: Energy demand and climate change policy
Slide34: UN Convention on Climate Change
...stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.
Currently 375ppm; ideal target = 550ppm which (it is perceived) will limit global temperature rises to 2 degrees above today’s
Slide35: Regional trends: carbon dioxide emissions, 1980 - 2001 Source: World Energy Use and Carbon Dioxide Emissions, EIA (2004)
Slide36: World and regional carbon dioxide intensity (total CO2 emitted per unit GDP), 1980-2001 Source: World Energy Use and Carbon Dioxide Emissions, EIA (2004)
Deep reductions will be needed: Battelle Memorial Institute Deep reductions will be needed Emissions (GtC/yr)
Commitment to Emissions Stabilization Requires Closing TWO “Technology Gaps”: Commitment to Emissions Stabilization Requires Closing TWO “Technology Gaps” 1300 GT C 480 GT C Source; Battelle
Business-As-Usual Gap Extraordinary Improvement is Built in to BAU: Business-As-Usual Gap Extraordinary Improvement is Built in to BAU “Business-As-Usual”
Technology Gap Source; Battelle
Stabilization Gap Tremendous Additional Technological Advance Required : Stabilization Gap Tremendous Additional Technological Advance Required “Stabilization”
Technology Gap Note: Conceptual Market Penetrations Source; Battelle
Slide41: The Technology Challenge Stabilising Greenhouse Gas Concentrations in the Atmosphere Vehicles: Efficiency, Bio- fuels, Hydrogen Fuel Cells Zero Net Emission Bldgs., Industrial Efficiency, CHP Nuclear Power Generation IV Renewable Energy Technologies Advanced Power Grids Bio-Fuels and Power Carbon (CO2) Sequestration 41 No single technology or policy can do it all Different
- regions - resources
- markets - preferences
- scale-up - technology
requirements timing
- infrastructures
Slide42: Climate Change: The Technology Challenge To meet energy demand growth & stabilize CO2 concentrations, technologies that deliver gigatons of carbon avoided are necessary
If stabilisation is to occur in this century, unprecedented technological change must occur
Energy demand, GDP & development issues: Energy demand, GDP & development issues
Slide44: 0 1,000 2,000 3,000 4,000 5,000 1970 1980 1990 2000 2010 2020 2030 Mtoe 2000 2030 World Primary Energy Demand
Slide45: Bridging the Welfare Gap
Slide48: Market share of primary energies Higher energy prices limit access to poorer individuals
Slide49: Increasing Energy
Demand Increasing Energy
Imports Transportation
Bottlenecks Domestic Unrest Geopolitical
Instability Technological
Development Market
Deregulation Energy Price
Volatility Energy
Investment Energy
Supply Reliable Energy Supplies: Barriers to Bridging the Welfare Gap
Slide50: Relationship between energy consumption and Human Development Index Source: World Energy Use and Carbon Dioxide Emissions, EIA (2004)
The ‘Iraq Factor’ & oil prices: The ‘Iraq Factor’ & oil prices
Slide52: The Iraq Effect : Oil & Global GDP
Oil price in 2004 has averaged 20$ per barrel above the norm, & global GDP growth has slowed 0.85% in 2004 as a result
Increased oil price has included a 15% risk premium component (therefore 75% of 2004’s price rise was due to rising demand)
Of this 15% risk premium 50% has been solely due to the ‘Iraq effect’
The 0.85% global GDP reduction equates to $300bn lost – so if 7.5% of this was due to Iraq, then the Iraq effect cost $23bn in lost global GDP
Exxon makes $23bn profit in six months
Source: Global Insight on back of envelope!
Slide53: Rising energy demand, especially for oil, means there will be major challenges for, and conflicts between,
Economic growth, esp. in developing world (ie accessibility)
Geopolitical stability
Environmental Ideology – coal and nuclear are here to stay
Climate policy - attempts to stabilize emissions will cost $$$
The coming storm will affect us all…