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...company Unocal, Chevron has placed a bet on ever-increasing oil prices. (2) Two other oil giants, BP and ExxonMobil, on the other hand, have publicly stated that resources appear plentiful. (3)
Even if the world's oil resources are indeed plentiful, world energy supply remains very much constrained. As a world population headed toward 9 billion strives for a standard of living that the industrialized nations take for granted, energy demand will increase rapidly, straining the entire supply chain from exploration to refining. To complicate matters further, oil and gas resources are concentrated in a small region of the world, leading to a more fragile and more volatile trading system that shows strong monopolistic tendencies. In addition to all of this, environmental concerns pose perhaps the toughest constraint of all.
Forecasts of future energy consumption and of trends in energy infrastructure development are fraught with enormous uncertainties. (4) Strategies for long-term energy planning must be robust to unpredictable variations in the dynamics of world development. This paper develops robust strategies for maintaining economic growth and worldwide development while overcoming shortages in some of the raw resources, as well as supply constraints due to environmental concerns, that threaten to block access to most conventional energy sources.
The paper will make the case that the known energy resource base is more than sufficient to provide a growing world population with energy on the scale to which the industrial countries have grown accustomed and to which the developing countries now aspire--but only if far-sighted investments are undertaken in a timely way. Environmental constraints will be more difficult to overcome, but they, too, have promising solutions, and again a long lead time will be needed. The key to both the supply-side and the environmental concerns will be the timeliness with which decisions are made.
Today's technology base is insufficient to provide clean and plentiful energy for 9 billion people. To satisfy tomorrow's energy needs, it will not be enough simply to apply current best practices. Instead, new technologies, especially carbon capture and sequestration (CCS) at large industrial plants, will need to be brought to maturity. Fortunately, CCS and certain other needed technologies are already in early implementation. However, without substantial progress in the way energy is found, transformed, and transported, the world will indeed run into a severe energy crisis.
The main arguments of the paper can be stated as follows:
--The use of large quantities of energy is central to the functioning of an advanced economy. There are severe limits to energy conservation even in the long run. Global economic growth will bring about significant increases in primary energy demand.
--Energy resources are fungible, especially among the fossil fuels. For example, coal can be converted into liquid fuels such as gasoline at low cost. So, too, can other, nonconventional fossil fuels like oil sands and shale and potentially the methane hydrates that are abundant on the sea floor. Noncarbon energy sources such as nuclear and solar energy could each provide a substantial fraction of the world' s long-term energy needs, but both present problems in the short term.
--There are no serious long-term (century-scale) shortages of fossil-fuel supply once the interconvertibility of oil and other fossil fuels is taken into account. Even the arrival of "peak oil"--the point at which oil production reaches a maximum--would not mean a global energy shortage at today's prices. However, the transition from oil to other sources of liquid fuel will require a significant lead time, and engineering that transition should be part of public policy.
--The greater constraints are likely to emerge from environmental concerns, especially the rising concentration of atmospheric carbon dioxide (C[O.sub.2]) acting as a greenhouse gas. Carbon emissions will have to be mitigated, because the business-as-usual course is fraught with grave global risks. The limits on the global oil supply will not reduce the risks from C[O.sub.2], since coal and other low-cost fossil fuels will in any event substitute for declining supplies of petroleum and natural gas, and their C[O.sub.2] emissions will be larger, not smaller.
--Realistic technologies that can mitigate the carbon challenge up to the middle of this century at modest cost are nearly ready for application. The centerpiece of such a strategy will most likely be CCS at power plants and other large industrial units such as steel and cement factories. The cost of implementing these technologies on a large scale is likely to be below 1 percent of gross world product if they are carded out with a long lead time. In addition to CCS, conversion of the vehicle fleet to hybrid or other lower-carbon technologies is very likely to be cost effective and might well pay for itself.
--An extension of these technologies to implementations that are more exotic but still highly plausible could further reduce emissions in the second half of the century and lead to an energy infrastructure that, by the end of the century, could produce zero net emissions of carbon into the environment.
--These transitions will have to be implemented worldwide, and this will put financial pressure on today's low-income countries. Equity considerations will suggest that the rich countries bear a significant cost of the carbon management that must be introduced in low-income settings.
--On a century-long time scale, the world's current energy technologies are inadequate. Even with a CCS strategy and vast improvements of energy efficiency in transport, continued economic growth will tend to push atmospheric carbon concentrations well above prudent levels. Thus fundamental research into new, decarbonized energy systems is needed, alongside the more practical steps mentioned above in the first half of the century.
The Role of Energy in the World Economy
Technology in general and energy at its base ultimately define the carrying capacity of the Earth for humans. Today's population densities far exceed what could be maintained by natural means. Given the physical size of the human body and empirically observed scaling laws governing animal population densities, the biologically supportable population density for humans should be about 3 per square kilometer. (5) The fact that human populations far transcend this number is surely related to humankind's ability to provide energy far in excess of human metabolic power. Just one pertinent example is the energy used to produce nitrogen-based fertilizers, which have played a decisive role in the rise of food production in the past century. (6)
The amount of primary energy that the average American or European consumes today is roughly 100 times his or her metabolic power. With a population density about 100 times the expected natural level, and energy consumption about 100 times the metabolic level, Europeans and Americans enter the ecological system with a power consumption per unit area that exceeds that of other species by about four orders of magnitude. (7) Maintenance of such an elevated carrying capacity requires continued access to readily available energy.
Energy consumption is unavoidable in maintaining an organized state away from thermodynamic equilibrium: dissipation of energy will eventually cause such a system to disintegrate unless energy is allowed to flow through it. Any highly organized society will therefore consume a large amount of energy. How much energy depends on the activities the society pursues. A society that relies on intensive travel, for example, will require more energy than one that uses telecommunications for most interactions. Energy consumption patterns also will depend on the ability to minimize energy dissipation rather than compensate for it with additional energy. This is the role of improving energy efficiency.
World primary energy consumption today is about 14 terawatts (TW), or about 2.2 kilowatts (kW) per person. The United States consumes about 11 kW per person, whereas in the poorest countries the consumption of commercial energy is not much different from the human metabolic output of about 100 W (figure 1). About 85 percent of all commercial energy consumed in the United States today is derived from fossil fuels. Annual U.S. consumption of carbon amounts to roughly 5.5 tons per person, or 1.6 billion tons (that is, 1.6 gigatons of carbon, or GtC) in total. (8) Annual world consumption is 6.8 GtC. (9)
[FIGURE 1 OMITTED]
If the whole world consumed carbon at the U.S. per capita rate, carbon consumption and carbon emissions would be more than six times higher than they are. This greater use would not only exhaust the available oil by the end of this century (and perhaps sooner) but also threaten massive environmental damage. The key energy challenge is thus to accommodate rising energy demand, as part of global economic development, within the constraints on oil and climate.
Solar energy is by far the largest ultimate source of energy available for human use (other sources include geothermal and fission power). The Earth intercepts 170,000 TW of power from the sun; (10) this solar flux exceeds human primary energy consumption by some four orders of magnitude. (11) Biological systems--plants--capture via photosynthesis less than 0.1 percent of this energy (100 GtC equivalent, (12) or about 130 TW) and convert it into chemical energy. Although most of this energy is used by the plants themselves, a small fraction of energy-containing biomass remains to be consumed by animals and humans as a metabolic energy source, and by humans to generate heat or electric power through non-metabolic combustion. Solar energy is also the ultimate source of fossil fuels, which are the fossilized remains of energy accumulated through photosynthesis in geological time, as well as the source of wind power (about 200 TW worldwide) and hydropower (driven by solar-powered water evaporation and precipitation in the planet's hydrologic cycle).
Harnessing a much larger proportion of the solar flux for commercial energy use, for example through photovoltaic conversion to electricity, is very likely to be the main long-term, low-cost solution to the problem of supplying sustainable, renewable energy (with nuclear power a possible long-term alternative). However, most forms of solar power are still too costly to provide plentiful, abundant, low-cost energy on the scale of current fossil-fuel use. A major, if not the major, energy challenge over the coming decades is to bring down the cost of solar energy. In the meantime, access to fossil energy must be maintained.
Substitution among Energy Sources and Carriers
The various forms of energy are very much interchangeable. Oil, coal, and gas are nearly completely fungible, and the conversion of one form into the others adds comparatively little cost. SASOL, a South African energy company, converts that country's coal into gasoline and diesel at prices competitive with crude oil at about $35 to $50 a barrel (less than the cost of crude at current prices as of this writing), (13) using a method known as the Fischer-Tropsch process. Some engineering studies today suggest that this conversion could be done at even lower cost. (14)
The input to the Fischer-Tropsch process is synthesis gas, a mixture of carbon monoxide and hydrogen. The hydrogen reacts with the carbon and oxygen to form liquid hydrocarbons and water. Products range from methanol to alkane chains such as octane and decane (the constituents of gasoline and diesel fuel) to paraffin waxes, the specific product being largely determined by pressure and temperature conditions during the reaction and by the choice of catalysts. Synthesis gas can be produced from virtually any carbonaceous input stream. It can be the result of partial oxidation and steam reforming of natural gas, but it also can be produced in the gasification of coal (as by SASOL) or of biomass. It can also be used in the production of other chemicals.
If oil were to run out, the liquefaction of coal would be an obvious candidate for filling the gap, as would conversion of tar to synthetic crude oil. Another option would be to liquefy natural gas or methane obtained from methane hydrates. Moving from the handful of coal-to-liquid plants that have been built so far to the thousands of plants necessary to replace oil would very likely cause a significant drop in the unit cost but would require a long lead time. Past experience suggests that it would be very surprising if the cost did not come down by at least a factor of two under such conditions. Therefore the long-term price of liquid hydrocarbon fuels may be lower than it is today, even allowing for pessimistic forecasts for oil and gas reserves. Even with the most conservative assumptions about learning curves, it appears quite safe to predict that the cost of synthetic oil from coal or other processes, after some transitional pains, will be below $30 a barrel.
Although the abundance of coal reserves and the existence of low-cost processes for transforming coal set a ceiling on the likely long-term cost of oil-like hydrocarbons, this does not guarantee that future development will actually gravitate to coal. It is possible that oil and natural gas will not run out after all, or that other options such as tar sands and oil shales will prove more competitive. Tar sands in particular have proved competitive at oil prices below $30 a barrel, but it will take time to build up the necessary capacity.15 Although they are not yet competitive, methane hydrates found under the Arctic permafrost and, more important, on the ocean floor could potentially provide a virtually unlimited source of methane.
Substitution away from fossil carbon altogether could also happen. Nuclear energy can already provide competitively priced electricity. Wind and solar energy could add to this pool. Biomass carbon could replace at least some fossil fuels, for example in the transportation sector, using in effect the same technologies that allow the substitution between various fossil fuels.
Just as different energy resources can substitute for each other, so, too, can different energy carders also compete with each other. The dominant carrier today is electricity, followed by liquid fuels (gasoline, diesel fuel, and jet fuel) for the transportation sector and gaseous fuels (natural gas, and to a limited extent manufactured gas, or "town gas") for industrial uses and for the residential and commercial heating sector. Solid fuels play a much smaller role as energy carders. Their usefulness seems to be limited to certain industries, such as steel production and cement manufacture, and to the generation of electricity. (16) A small amount of energy is brought to the consumer directly as heat.
There are limits to substitution among carriers, however. Electricity usually requires wires and thus is most suitable for stationary applications. Heat pumps are not cost effective enough to allow electricity to replace chemical fuels for space heating, although they do well for space cooling. With heat pumps, electricity could provide low-grade heat more efficiently than the combustion of chemical fuels. Transmitting electricity via microwaves has been discussed in the past, (17) but it has not found a foothold in today's economy. An interesting possible application of such a technology may be the short-distance transmission of power from a roadbed to vehicles. Of course, it is not impossible to use wired electricity in the transportation sector--witness its use in railroad systems around the world. Although the idea seems futuristic, there is no obvious reason why automobiles could not be driven with externally provided electricity, and if hybrid gasoline-electric automobiles prove to be a real success, they may offer an effective means of combining an external electric charge (through plug-ins at home or recharge from the roadbed) with battery storage on board the vehicle.
Other substitutions rely not on substituting one form of energy for another but on replacing energy consumption with other alternatives. A large fraction of efficiency improvements ultimately fall into this category. Greater investment in the energy-efficient design of automobiles, for example, is a way of reducing their emissions. By using computers to optimize route planning and clever pricing algorithms to minimize unsold seats, the airline industry can reduce total miles flown, or increase passenger-miles flown for a given amount of fuel, and thus reduce energy consumption.
Higher energy prices also reduce consumption. But the price elasticity of demand for primary energy seems surprisingly small, typically estimated in the range of -0.1 to -0.5 in the long run, and closer to -0.1 in the short run. (18) It is difficult to find substitutes for energy, and cost-effective options for increasing energy efficiency are more limited than is often suggested.
Limitations on Energy Supply
In recent years much has been made about the possibility of the world's energy resources running out. This concern arises, however, from mistaking oil and natural gas for all primary energy. Although these may run out relatively soon, the world's total energy resources will last far longer. In particular, the vast reserves of coal and coal-like resources ensure that hydrocarbon fuels in their various forms--solid, liquid, and gas--will be in plentiful supply, at today's prices or less, over a century-long horizon and more. (19)
Oil and Natural Gas
Crude oil is today probably the world's most intensively utilized energy resource and thus may indeed be the first to be exhausted. Indications that oil reserves are gradually being depleted can be found in a general trend toward smaller and more remote oil fields producing lower-quality oil. (20) On the other hand, according to the BP annual survey, (21) total proven reserves have grown steadily over the last twenty years, and the ratio of proven reserves to annual production has risen from about 30 in 1984 to 40 in 2004. Even at current high prices, which indicate supply bottlenecks, proven reserves held steady in 2004. The reserves-to-production ratio, however, dropped because of a significant increase in demand.
Is oil production near its peak, as some observers claim? Assuming a logistic curve for the extraction of oil, maximum production will be reached when half of the oil has been consumed. Based on this logic, M. King Hubbert in 1956 correctly predicted that oil production in the continental United States would peak in the early 1970s. (22) Since worldwide proven reserves today appear to be comparable in size to all the oil that has been consumed, it has been argued that the peak of global oil production should be near. (23)
There is, however, a risk of circular reasoning in estimating the oil peak, which comes down to the meaning of "proven reserves." To a large extent, proven reserves are those reserves that oil companies have chosen to put on their books as long-term inventory. If this inventory stock is kept proportional to expected sales, as it must be if it is the minimum amount needed to support current rates of extraction, then the ratio of proven reserves to consumption will be a constant, as indeed it has been, more or less, over the last thirty years. Since historical consumption is well represented by an exponential growth rate, the amount of...
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A robust strategy for sustainable energy: comments and discussion., September 22, 2005
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