2016 World Energy: Unprecedented Changes
To better understand unprecedented changes in the energy sector, the 2016 World Energy Resources Report highlights the key trends in energy usage and identifies implications for the energy sector. The World Energy Council is the principal impartial network of energy leaders and practitioners promoting an affordable, stable, and environmentally sensitive energy system for the greatest benefit of all. Formed in 1923, the Council is the UN accredited global energy body, representing the entire energy spectrum. It includes over 3,000 member organisations in over 90 countries and is drawn from governments, private, state corporations, academia, NGOs, and energy stakeholders.
Energy Sector Positive Changes and Residual Challenges
The energy sector landscape will never be the same again, due to a 15 year pattern of successful growth in the renewable energies market. Enhanced use of unconventional resources alongside improvements in technology development have attracted investors, created new capacity, and offered high growth rates in developing countries.The result? Falling energy prices. A decoupling of economic growth and greenhouse gas emissions. A much more diversified energy mix in most countries. Increase in community ownerships. An evolution of micro-grids.
Several challenges also remain. Clean energy improvements are proceeding at a slower rate than is needed to meet emissions targets. Public acceptance, too, of the necessity of cleaner energy remains unswayed, often leaning toward a “Not in my backyard” attitude. Even increased commodity and energy price uncertainty leads to higher risk. As a result, larger investments with long lead times are less appealing. And businesses of all sizes need to constantly diversify, as, without modifications to stay current with trends and innovation, they might not remain viable. Indeed, as incentives to adopt renewable energies expire, small businesses must confront new methods to attract and retain customers.
Understanding the Larger Context of Energy Transitions
The totality of an energy system has dual, and sometimes conflicting, objectives— the driving forces of economies and the need to preserve the environment. An adequate and secure energy is the main ingredient for the well-being and economic development of a society.
“Energy transitions” are fundamental, structural changes in the energy sector. There are three main drivers of energy transitions, according to the World Energy Resources 2016 report:
- securing the energy supply;
- increasing competitiveness by using least-cost approaches; and,
- environmental concerns
Diversification of energy technologies and resources fosters opportunities and complexities. In the last three years alone, the following influences on energy supply and usage changed the way many constituents thought about energy:
- The climate pledges in connection with the Paris Agreement formed a milestone in international efforts to tackle climate change;
- The record deployment of renewable energies, in particular wind and solar capacity for power generation, increased globally by 200 Gigawatt between 2013 and 2015;
- The world market price for oil was cut in half, from more than 100 US$/Barrel to less than 50 US$/Barrel;
- The shale gas boom took place in North America;
- The decrease in the global coal consumption, which occurred in 2015 for the first time in the current century, was mainly caused by China’s transition to a less energy-intensive society;
- Progress was achieved in the implementation of carbon capture utilization and storage [CC(U)S] technologies, in particular in North America;
- The growing electrification, in particular in the transport sector, with 1 million electric vehicles on the roads, still well under 1 % of the global car fleet, is getting stronger.
Breakouts by Energy Type: A Synthesis of the World Energy Resources 2016 Report
The world currently consumes coal for purposes including power generation, iron and steel production, cement manufacturing, and as a liquid fuel. Coal currently powers 40% of the world’s electricity and is forecasted to be a strategic energy source for the next three decades. Conversely, the implementation of carbon capture utilization and storage (CCUS) is one of the elementary strategies for climate protection.
Oil remains the world’s leading fuel, accounting for 32.9% of total global energy consumption. Asia’s population and consumer growth will support oil demand, and oil continues to be a fundamentally strong industry. The transportation sector will follow an existing pattern of relying on oil for the largest segment of its needs. Upcoming oil industry structural changes include the emergence of non-OPEC supply, energy efficiency trends, marine fuel industry and power generation sector environmental pressures, the emergence of unconventional oil (shale oil, heavy oil, tight oil and tar sands), and increased production both from mature and frontier fields.
Natural gas, expected to grow and play an important role in the transition to a cleaner, more affordable, and secure energy future, reflects 24% of global primary energy. Currently, the fall in demand in Asia and growing export capacity in Asia and North America have created an oversupply globally.
URANIUM AND NUCLEAR
The assessments of global uranium resources show that total identified resources have grown by about 70% over the last ten years and are considered sufficient for over 100 years’ of supply based on current requirements. The development of nuclear power is today concentrated in a relatively small group of countries. China, Korea, India, and Russia account for 40 of the 65 reactors that the IAEA recorded as under construction in December, 2015. The low share of fuel cost in total generating costs makes nuclear the lowest cost baseload electricity supply option in many markets.
Hydropower has grown by 39% from 2005 to 2015, with an average growth rate of nearly 4% per year concentrated in developing countries. It is estimated that 99% of the world’s electricity storage capacity is in the form of hydropower, including pumped storage. It provides an array of energy services beyond power, including black start capability, frequency regulation, inertial response, spinning and non-spinning reserve, and voltage support, which are increasingly important to the stability of the energy system. Hydropower is the leading renewable source for electricity generation globally, supplying 71% of all renewable electricity.
Biomass here is defined as traditional biomass (example forestry and agricultural residues), modern biomass, and biofuels. It represents the transformation of organic matter into a source of energy, whether it is collected from natural surroundings or specifically grown for the purpose. There are multiple challenges and opportunities for bioenergy as a potential inspiration for sustainable development. International trade is driven by pellets and liquid biofuels. With biofuels being the most viable and sustainable option in replacing oil dependency, future demand will come from the need for renewables in transport, followed by heating and electricity sectors.
WtE remains a costly option for waste disposal and energy generation, in comparison with other established power generation sources and for waste management. Combustion plants are no longer a significant source of particulate emissions, owing to the implementation of governmental regulations on emission control strategies. Biological WtE technologies will experience faster growth as new technologies (e.g. anaerobic digestion) become commercially viable and penetrate the market.
Capacity for solar-powered electricity has seen an exponential growth and in 2015 produced 1% of all electricity used globally. Expansion of solar capacity could be hindered by existing electricity infrastructure, particularly in countries with young solar markets. Costs for solar power are falling rapidly and “grid parity” has been achieved in many countries, while new markets for the solar industry are opening in emerging and developing countries. Policy and regulatory incentives, oversupply of installation components, and advancements in technology are driving the reduction in cost.
Geothermal energy produces less than 1% of the world’s electricity generation output. A disproportionate percentage of installed generation capacity resides on island nations or regions (43%), providing not only a valuable source of power generation but also both heat and heat storage over a wide spectrum of conditions. Geothermal energy currently finds itself burdened by higher installation costs and longer development periods, relative to solar and wind. As a result, in many countries, geothermal energy projects have been and are reliant on government incentives in order to compete against both natural gas and other renewable generation.
World wind power generation capacity has reached around 7% of total global power generation capacity. Installed offshore capacity has been gained through 73 offshore wind farms in 15 countries. Wind deployment continues to be dominated by onshore wind, supported by continual cost reductions. Innovations are also reducing costs for offshore wind. Floating foundations could be game changers in opening up significant new markets with deeper waters.
To date only a handful of commercial ocean energy projects have been delivered. Sweden has begun construction of the world’s largest commercial wave energy array at Sotenas. They have also recently installed a second project in Ghana consisting of 6 devices, together providing 400 kW of capacity. The high costs illustrate the immaturity of these technologies and the relatively short gestation period that ocean energy technologies, with the exception of tidal range, have undergone. Despite positive developments, a large number of projects have been suspended as public and private funds have been withdrawn, but many of the cost issues could be addressed through ongoing R&D efforts.
CARBON CAPTURE AND STORAGE (CCS)
CCS is currently the only available technology that can significantly reduce GHG emissions from certain industrial processes. and it is a key technology option to decarbonise the power sector. In terms of the scale of CCS deployment, there are 22 large-scale CCS projects currently in operation or under construction around the world, with the capacity to capture up to 40 million tons of CO2 per year. These projects cover a range of industries, including gas processing, power, fertilizer, steel-making, hydrogen-production (refining applications), and chemicals. Even though the cost of CO2 transportation is relatively low compared to the cost associated with capturing and storing the CO2 , the scale of investment in CO2 transportation infrastructure required to support large-scale deployment of CCS will be considerable.
The concept of energy storage is not new, though development has been mainly restricted to one technology until recently. Pumped hydro storage accounts for well over 95% of global installed energy storage capacity. Compressed air energy storage and the total battery capacity in electric vehicles is also growing rapidly. Small-scale energy storage installations are not necessarily well represented in global statistics. Large batteries are also being developed with flow batteries, and, if developed further, could produce significant change in the medium term. Most commercial interest is in battery storage, and the costs of several storage technologies will fall as production volumes increase.
The World Energy Resources Report has been produced by the World Energy Council for over 80 years. This year’s report covers more than 180 countries and ends with an admonition about the future of heat generation and cooling technologies, which are lagging behind in terms of innovation. Also, increased use of natural gas, combined with decreased use of coal, will see energy-associated carbon dioxide emissions from natural gas surpass those from coal. Failure to timely plan for replacement of decommissioned baseload power plants, too, might pose a risk to energy reliability in some countries.
Interested in learning more? Then consider the full report as excellent bedtime reading….
Photo Credit: World Energy Resources 2016 Report