Energy in 2013: Changes and Constants

author vaclav smil

Vaclav Smil

Diversity of energy sources and uses guarantees that every year will bring some new, notable developments, and 2013 was no exception. In the US hydraulic fracturing lifted the output of crude oil and natural gas to such an extent that in 2013 the country became, once again, the world's largest producer of hydrocarbons (the USSR began to out-produce it in oil in 1975, and in gas in 1983). This has led to widespread expectations of the US also becoming a rising energy exporter. Domestic impact has already been clear, with coal-fired electricity generation in retreat, and with plans to expand industrial production based on the availability of cheap and abundant energy and petrochemical feedstocks. Domestic prices of natural gas diverged sharply from those of crude oil and differentials for natural gas on the world's markets reached record levels, with Americans paying a third of what the EU countries do and just a quarter of the price that Japan must pay for its LNG imports.

At the same time, China has just replaced the US as the world's largest crude oil importer and it has reaffirmed ambitious plans to develop more domestic gas. In fact, China's shale gas resources are larger than those of the US, but the country does not have the rich expertise of US drillers in developing such resources and, a serious drawback given water-intensive hydraulic fracturing, its North and West, where most of the shales are found, already have serious and chronic water shortages. That is why China also wants to import more LNG – but coal still dominates its energy supply and in 2013 all major industrial regions (including Beijing and Shanghai) experienced incredibly high levels of air pollution, an order of magnitude above the concentrations considered as harmful by international norms.

Russia lost its global primacy in hydrocarbon production – a shift that should, eventually, have some notable economic and strategic consequences: gas importers are already pressing for lower prices, Russia is circumventing Ukraine by building a pipeline across the Black Sea to bring more gas to the EU, and it hopes to sell more of its Siberian gas to China. Japan's closure of its nuclear power plants continued the necessity of importing more fossil fuels, incurring (after decades of surpluses) trade deficits, and generating more CO2. Fukushima clean-up experienced more problems and delays. While the future of the country's nuclear industry remains unsettled, the odds are that there will be no permanent total ban but rather a gradual restarting of some plants. Germany, Europe's leading economy, kept pursuing its infatuation with renewable energies, even as the country's ordinary ratepayers face higher electricity costs, while large companies have been sheltered from these rises in order to remain competitive.

insights smilAll of these developments are interesting, some have been rather unexpected, but none of them change two of the world's energy fundamentals: the slow pace of energy transitions and the continued high inequality of energy use.This is not at all surprising, because the global system of energy production, trade and conversion is the world's most fundamental, most complex, and most costly, but, for all of these reasons, is also an exceedingly inertial arrangement: although it is constantly changing the rate of change is slow. At the beginning of the 20th century the global consumption of fossil fuels (at that time mostly coal with some crude oil and very little natural gas) surpassed the combustion of traditional biofuels (wood, charcoal, straws and stalks) – and we have been a fossil-fueled civilization ever since, albeit with non-negligible contribution of two kinds of primary electricity, hydro and (for the past 50 years) nuclear.

As we move through the second decade of the 21st century, media attention paid to solar and wind electricity and to new liquid biofuels has created a widespread impression that we are experiencing an accelerating transition from fossil fuels to new renewable sources of energy. Undoubtedly, these sources have grown strong in absolute terms, but the demand for fossil fuels has also been rising and in relative terms the transition to renewables is proceeding as all of the past energy transitions (from coal to crude oil, from coal and oil to natural gas) have done: slowly. In 1990 the world derived 88% of its primary commercial energy from fossil fuels, a generation later, in 2013, that share was only marginally lower at almost 87%. Some countries will move much faster in their quest to supply larger shares of their energy demand from renewables, but the world of 2020, 2030 or 2040 will be still energized mostly by fossil fuels.

During the past two decades the progress in narrowing the great energy gap between the affluent nations (USA, Canada, European Union, Japan, South Korea, Taiwan, Australia, New Zealand) and middle- and low-income economies has proceeded (largely because of gains in China and Brazil, also in India and parts of Africa) faster than in the preceding 20 years. China's progress has been unmatched: in 1990 the country's average annual per capita use of energy was only 10% of the US level, by 2013 it had surpassed 25% of the US rate, and it was equal to about 60% of the average European consumption. In contrast, Africa still has a long way to go before its energy use will be able to guarantee decent quality of life. The continent's mean per capita energy use is now just 20% of the Chinese level and it is actually a slightly lower share of the world's consumption than it was a generation ago.

Fortunately, raising energy use in low-income countries is not a challenge limited by resources: there is no imminent global output peak as far as any fossil fuels or hydro generation are concerned, and new renewables are still in early stages of expansion. But it is a major challenge of investing in requisite infrastructures and an enormous challenge of training new labor force. And because the world is so heavily dependent on fossil fuels the greatest challenge may be the way we will cope with global climate change.

Unfortunately, our models of global warming cannot tell us with a high level of confidence how rapid that change will be and how high the temperatures will rise in 50 or 100 years: difference of a single degree of Celsius translate into very different environmental and economic consequences. If we knew what was coming with certainty we could decide which one of the two main courses of action – gradual adaptation or an all-out effort aimed at emission reduction – is the more rational choice. But we do not, and this means that our production and use of energy, and hence our economic and social well-being, will continue to unfold in a world of profound uncertainty. That, too, is one constant that will not change for decades to come.

 

Vaclav Smil is a Distinguished Professor Emeritus at the University of Manitoba and a Fellow of the Royal Society of Canada (Science Academy). He has published more than 30 books to date and was listed by Foreign Policy in 2010 as one of the top 100 global thinkers. Smil's admirers include Bill Gates, who proclaimed, "There is no author whose books I look forward to more than Vaclav Smil".

 

 

 

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