Energy and Resources
The energy transition will involve a shift from the fossil fuels that have been used for the last three centuries to low carbon fuel sources such as renewables. The scale of the transition will be unprecedented. The world population will rise from 7.5 billion people to nearly 10 billion by 2050, and this population growth looks likely to be accompanied by increased urbanisation. The challenge of meeting this demand growth while meeting climate targets is immense.
New graduates are shunning the oil and gas industry in droves, despite the lure of good salaries. What can the industry do to attract top talent?
We interviewed Mike Burns at CTEC Energy in Newhaven Port. The gasifier project converts plastics and biomass into electricity and heat with significantly lower emissions than a traditional incinerator.
The latest Energy Journal from the International Association of Energy Economics has landed on my doormat with a loud thud. The latest issue is 312 pages long. In Volume 41, Number 6, I was struck by the paper Are Energy Executives Rewarded For Luck? by Lucas Davis...
Coal: Abundant and Cheap
Coal accounts for around a quarter of all energy produced globally. Its main use is for power generation, although it is also used in homes for winter heating, especially in poorer countries. The main advantage of coal is that it is abundant and easy to transport. Coal is usually sold on the open market in US dollars per tonne, although pricing can also be based on its calorific value, which varies greatly across the different grades of coal. These range from poor quality grades such as lignite that produce relatively little energy to high density grades such as anthracite which are more costly and often have specialist uses.
Coal is a widely available solid fuel. It can be transported cheaply and is used for power generation, in industry and manufacturing, as well as for home heating.
The Hidden Costs
Many power companies use coal to fuel their power generation plants because it is cheap. Reserves of coal are found all round the world, and the amount of coal under the earth far exceeds the reserve of oil and gas. Coal is much less subject to the geopolitical pressures that lead to such intense volatility in oil and gas prices. But there are hidden costs. Coal is a much more pollutive energy source than oil and gas, although because it is mainly used for power generation in developed countries, it often escapes the attention of environmentalists. In many lesser developed countries, particularly in South and South East Asia, coal is still used in the home and has an enormous health impact, causing diseases from bronchitis to cancers.
- Coal: Percentage of primary Energy Demand 24% 24%
Oil: A Slow Twilight
Oil makes up around one third of global energy demand, mainly because it is so widely used in transport. Almost all the 1.5 billion cars on the roads are driven by Internal Combustion Engines (ICE) and fuelled by gasoline or diesel. Meanwhile, almost all commercial and military airplanes use kerosene for fuel, most lorries and heavy duty trucks use diesel or gas, and the bulk of the world’s shipping fleet uses either diesel or a heavier grade of oil known as fuel oil. While Electric Vehicles are starting to flood the market in wealthy developed countries, cost remains a problem and EV growth has been unspectacular in the poorer countries of South and South East Asia, Latin America and Africa. In the US and Middle East, cheap oil, image and brand issues, as well as range anxiety mean that most people still prefer gasoline-fuelled cars for the time being.
Crude Oil and Refined Products
Oil has powered the modern age, but at a cost. Oil powers cars, planes, ships and trucks, and most manufactured goods from packaging to paper contain petrochemicals derived from oil.
Gas: Solution or Problem?
Gas has emerged as a strong growth area, given its cleaner carbon profile compared to other fossil fuels. Natural gas comprises primarily methane, and can be liquefied and transported in special ships as Liquefied Natural Gas or LNG. But two other forms of gas could play a role in the energy transition: propane and butane can be liquefied to make Liquefied petroleum Gas, or LPG, and both fuels are increasingly used in lower income and developing countries, and have a much lower carbon footprint than diesel and heavy fuel oil which they tend to replace. Meanwhile, ethane is used in some countries as a petrochemical feedstock. Methane, ethane, propane and butane are all hydrocarbon fuels, although it’s also possible to make methane as a bio-gas, for instance by using waste materials.
Natural Gas and NGLs
As demand for lower carbon fuels increases, methane and other gases have emerged as alternatives to liquid fuels. But they still emit harmful hydrocarbons into the atmosphere.
Renewables and Scale
Renewables include a range of energy sources including solar power, onshore and offshore wind, tidal and wave power, geothermal energy, biofuels including biomass, biogases and algae, and in some narratives hydropower is included. All of these energy sources have the potential to generate electricity, but the problem faced by all of them is scale and cost. Building renewable energy on the scale required to meet the energy needs of the growing world population in a way that is cost effective is a huge challenge. So far, solar and wind are emerging as the clear winners. Costs have been reduced significantly as the industry has scaled up. But the sun does not always shine, and the wind does not always blow. The problem of intermittency requires that backup energy sources — from energy storage or low carbon gases — are available.
Renewable energy is widely seen as a panacea for climate change. Breakneck growth has proved their viability, but scaling up to replace the approximately 80% of energy that derives from fossil fuels will be an enormous challenge.
From Little Seeds
Only 5% of the world’s energy comes from renewable sources like solar and wind power, but that’s a significant increase from just 2% at the start of the last decade (2010). The share of renewables in overall primary energy demand varies greatly by geographical region, from negligible amounts in Russia and the CIS to around 10% of the total in Europe and the Americas. China was the world’s biggest investor in renewable energy in recent years, and renewables now account for nearly 5% of the energy used in the world’s most populous country. Whether this will continue to grow will be influenced heavily by politics: the Paris Agreement in 2015 followed a historic alignment of Chinese and US interests, but this is now threatened by the trade war between the two superpowers. The trajectory of economic growth after the Covid-19 virus and global lockdowns is also at stake.
The kinetic energy of water stored in reservoirs behind dams can be used to turn turbines for electricity generation. But there is a tension between the use of water for drinking and health, and the use of water for producing energy. Water is essential for life. The bulk of the world’s 7.5 billion people live in cities located on rivers or by the sea, and depend on water for sanitation, sewerage and nutrition. But water is also used in many of the processes used to produce oil and gas, including the controversial process known as “fracking” in which water is blasted into shale to release the oil and gas it contains. Water is also used intensively in petroleum refining.
Energy and Water
Making energy requires huge amounts of water. Transporting water requires huge amounts of energy. There is no simple solution to the energy vs water conundrum, but advances are being made.
The geopolitics of water
Geopolitical tensions in the 20th century were dominated by access to oil. In the 21st century, water is emerging as the most likely cause of war between countries. Water is a gift of nature, but the rivers and lakes that are created by the water cycle often span national boundaries. The use of water and related resources is frequently contested, and few treaties exist defining the rights and obligations on the use of water between countries. Most recently, Egypt and Ethiopia came close to conflict over plans to dam the Nile river, which Egypt believes will take a toll on its agricultural output. The delicate web that links human society with nature reflects the interconnection of all life. Water use is often taken for granted, but one community’s use of water may have a critical impact on other communities.
Minerals and New Energy
Many of the metals and minerals needed to make advanced batteries are found in only a few countries, some of which are in war zones and some with unenviable human rights records.
Lithium and cobalt, the main elements used in electric vehicle batteries, are found in relatively few countries and reserves will become depleted as the EV fleet grows.
Mining communities offer suffer from the intensive development of resources, particularly when working conditions are unsafe and jobs are poorly paid.
The use of workforces from outside the indigenous communities can also lead to disease and sexual exploitation.
As new battery and energy storage technologies are developed, resource pressures will be felt along the value chain.
An Interconnected World
This section on energy and resources has emphasised throughout that there is no simple solution that will “save the planet”. Meeting the scale of global energy needs is a huge challenge, and every solution has pros and cons. There is no silver bullet. This is not a recipe to do nothing, but it reflects the reality that systemic change has potential consequences that need to be thought through carefully. All eco-systems are interconnected, just as are all human beings: as the poet John Donne put it, “No man is an island / Entire of self”. No man (or woman) exists in a bubble; we all have an impact on each other. Rather than providing blanket solutions, Resource Economist believes that specific pathways should be selected depending on local resources and needs.