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The energy space-time continuum, a big picture-portrait...

Business Maverick

Business Maverick, Politics, Sci-Tech

The energy space-time continuum, a big picture-portrait. Not a pretty one.

The nations set to gather soon in Copenhagen are on a twisting, misty, potholed road in a car with one rickety headlight and hardly any white lines to drive by. The truth is, humanity is facing a future that is at best uncertain and at worst apocalyptic.

Nuclear power, hydroelectricity and stocks of abundant and clean-burning natural gas may be part of an answer to greenhouse gases produced by coal and oil. But the biggest issue facing this month’s climate summit is that “peak oil” is already upon us – when the maximum rate of extraction is reached, after which the rate of production enters terminal decline – and “peak gas” may not be far behind.

The International Energy Agency sees world energy demand rising 50% between now and 2050, with oil, coal and gas still being used as primary feedstock, in that order. That’s sobering when you consider that most of the easy oil has already been found, and according to the University of Cape Town’s Association for the Study of Peak Oil SA (Aspo), gas production is only a generation (say 20 years) behind.

Photo: Steam billows from the cooling towers of Vattenfall’s Jaenschwalde brown coal power station near Cottbus, eastern Germany. REUTERS/Pawel Kopczynski

To get an overall picture of the general energy problem, it’s useful to look at energy usage in the US, the world’s most demanding and sophisticated market. With its 22% share of global GDP and 5% of the world’s population, the US consumes some 25% of the world’s total energy output. Now add China and India to the mix, with their combined energy-hungry populations of some 2.5 billion, and you’ll see why, relative to future supply and demand, the vagaries of world markets make economics the “dismal science” that it is.

Recently, the IEA confirmed that conventional crude output could plateau in 2020. But the question of powering global growth far into the future is not just based on depleting the “easy” oil and gas reserves. The October 2008 crash brought home the reality of oil plunging from some $147 a barrel to $30 almost overnight. This forced global oil companies to cut capital expenditure on new projects as their margins vanished. Apart from roller-coasting the supply and demand curve, this means new exploration and production will lag behind future demand, especially in rapidly developing nations such as India, Brazil, Indonesia and China, where wealthier populations are eager to buy energy-sucking goods such as home appliances and cars.

Photo: Farmers harvest unripened wheat by hand in a field in the Nile Delta town of Mansoura city, 210 km north of Cairo. Some Egyptian farmers are selling their unripened wheat crops for export to produce bio-ethanol in the United States and Europe. Bio-ethanol is sold as a blend component in fuel as it increases octane production while giving cleaner emissions. Egypt is one of the world’s leading wheat importers, usually buying more than 6 million tons a year. REUTERS/Nasser Nuri

In one way this is a good thing. It pushes the world to seek viable energy alternatives, including biofuels, sun and wind. But the problem isn’t refinery capacity (itself a highly variable issue), but the overall supply of oil and gas – including a scarcity of supply of offshore rigs and associated infrastructure, which take time to build and bring on line. The IEA reckons biofuels from sources such as sugar cane, jatropha and maize will take up a tiny bit of the slack to 2030. Currently they provide 0.17% of total energy supply (or 0.45% of liquid fuels demand), rising to 1.5% of total liquid fuels inputs in 20 years’ time. But that largely insignificant number brings with it the possibility of famine and war over already compromised food resources (think shortages, high prices and climate change) that have been turned to energy production in a massively more populated world. And current agricultural machinery and fertiliser production are largely driven by oil and natural gas. Add to all these problems the fast-emerging “resource nationalism” of states such as Venezuela and Russia, which potentially reduces supply and plays havoc with prices, further geopolitical risk associated with chaotic countries like Nigeria and just plain old rogue states like Iran.

Hydroelectric dams are often considered as energy sources that are renewable and non-polluting. But environmental concerns about dams such as China’s massive Three Gorges project show they can disrupt food supply (including altering fish spawning habits) and massively increase the surface area over which water evaporates. Water vapour is a primary greenhouse gas.

Photo: A truck is loaded with sugarcane in Sertaozinho, about 340 km northeast of Sao Paulo. Brazil, the world’s largest producer and exporter of sugar and ethanol, is a pioneer in the use of ethanol made from sugar cane to power cars. REUTERS/Paulo Whitaker

Brazil’s National Institute for Research in the Amazon says that such dams increase the amount of plant matter that decomposes in anaerobic conditions, producing methane which is 21 times more potent as a greenhouse gas than carbon dioxide. But there are many “ifs” in the equation. If that methane can be captured and burned for energy, the carbon dioxide given off is a far less potent greenhouse gas. This prompts the question of whether markets alone can drive the use of alternative fuels, or whether nations need to collectively devise policies based on good science, and drive technical innovation on the principle of global consent.

While Europe and the US lead the drive to legislating cleaner and greener energy usage, markets in their current form are the forces that will ultimately make or break the take-up of solar, wind and wave energy – to the point where they become commercially viable. The UN estimates the world’s population will grow to 9.1 billion (from 6.8 billion) by 2050, with most of that happening in poorer parts of the globe. That’s long after the expiry date of peak oil production and, peak gas production too, by some estimates. By then forests may be so denuded at current rates of destruction, that the climate change tipping point will be upon us. And while it’s easy to fudge figures and be emotional in this debate (check out the University of East Anglia row), a new report dubbed the “Copenhagen Diagnosis” – delivered by the Intergovernmental Panel on Climate Change – shows this is an issue way beyond gross politicking. Rather, it’s a scientific case for possible species annihilation (or, at least, a return to something completely different).

Unfortunately, all the good sounding alternatives to dirty energy sources are in their technological infancy. Big companies run the show (with quarterly profits of oil majors exceeding the annual GDP of some of the poorest nations). And while they are researching many other means to run industry, light up homes and power cars, they are not about to kill off their coal-, oil- and gas-based profits.

So, too, countries are heading in different directions when it comes to utilising finite resources. For a start, while the US expects 900 of its next 1,000 power plants to use natural gas, China (which has four times the population – some 1.3 billion people) is building two large coal-fired power stations a week. And, yes, there are ways to clean-up the greenhouse emissions from coal, but they are very costly, uni-directional, and siphon money and attention away from the world’s need to become almost totally reliant on sustainable and green energy resources.

Photo: Electric cars can be downright sexy, as the soon-to-be launched Tesla Model S easily proves.

But enough of the scare-stories. What are the “facts” surrounding oil and gas? The first fact is they are finite. The second is that they can’t be measured with any accuracy to the last “drop”. The third is that this means conversion to sustainable energy is a matter of common survival and political will – that cuts through the usual “isms” of economic production (capitalism, communism, socialism, fascism, autocratism etc.), towards one -ism: realism. And the fourth is that it requires hugely expensive inputs to liquefy and re-gasify natural gas between the world’s ports and its end-usage. Inputs that currently don’t nearly match the networks for distributing oil.

According to the Energy Information Administration of the US government, the vast majority of hydroelectricity production (almost 88%) is evenly distributed across four of seven global regions: Asia-Oceania (26.6%); North America (22.4%); Central-South America (21.3%); and Europe (17.8%). Eurasia, comprising Russia and its neighbours, accounts for 8.1% of world hydroelectric production, while Africa (3%) and the Middle East (0.8%) contribute the least. And while hydroelectricity is the current leading renewable energy source for electricity generation, it’s based on the activities of just 10 countries – which account for some 68% of world production, and much less of the world’s population. The problem with this, like natural gas, is the massive infrastructure required to export this electricity, and the capital inputs therein. And with energy majors cutting back on expenditure as a result of the severe global economic downturn, it’s moot as to whether supply will ever match demand. More technically, the cost of providing energy will escalate, just as the world demands much more of it, leading to a period of protracted – and global – stagflation, which is pretty much the way Japan’s economy bumps along at present.

Photo: A worker carries rocks on his back in front of the Three Gorges Dam located northwest of Yichang city in Hubei Province, central China. REUTERS/David Gray

And while conventional hydroelectric generation is by far the world’s largest source of current renewable electricity, output in the US has stayed about the same at 248 billion kilowatt hours, following a sharp decline in 2007, and is subject to factors such as drought, thereby making it itself a possible victim of climate change.

So, too, while the US Renewable Fuels Association reports that the number of operating ethanol refineries in the country rose from 81 in 2005 to 170 in January 2009, large listed producers such as VeraSun Energy Corp. found the journey from market peak to bottom can be quick and terminal. VeraSun, went public in 2006 at $18.25 a share, but is now being liquidated after its share price dropped to around $0.05, mainly because of lousy economic conditions prompted by the global markets bust, and the very bad bets it made on maize futures. Another big US ethanol producer, Aventine Renewable Energy, also went public in 2006 at $43 a share, and recently closed around $0.43. Such refineries were responsible for producing 220 million barrels of fuel ethanol in 2008, but that is a drop in the ocean compared with world oil consumption of about 88 million barrels a day.

And how are things close to home? According to UCT’s Aspo, fossil fuels comprise some 87% of South Africa’s primary energy supply. And coal comprises nearly three quarters of this. Nearly 60% of coal consumed domestically is converted into electricity, while another 18% is converted into synthetic liquid fuels by Sasol, a world leader in coal-to-liquids technology. South Africa’s electricity production is overwhelmingly dependent on coal (93%), with Koeberg’s nuclear plant in the Western Cape supplying only 6%. Renewable energy production in this country is currently insignificant. And while the abundance of coal provides a substantial buffer against the effects of peak oil, on a per capita basis South Africa is among the world’s top emitters of the greenhouse gas carbon dioxide. About 14% of SA’s primary energy needs are met by oil, but about 95% of that is imported, mostly from Saudi Arabia and Iran, presenting a possible supply risk.

But Aspo researcher, Jeremy Wakeford, says the “myth” of coal is even bigger than gas. “It could peak in 15 to 20 years by some estimates,” he says. “And as for annual rates of production, the cheapest fields are exploited first, with more cost and energy needed to extract the rest.”

Photo: Windmills turn in the breeze at Horns Rev 2, the world’s largest wind farm, 30 km off the west coast of Denmark near Esbjerg. The wind farm officially went online during on September 17, 2009. REUTERS/Bob Strong

So what of the future of oil, coal and gas? Current and future trends put oil at 38% of global usage for energy, followed by coal at 26% and gas at 23%. Hydroelectric and nuclear power provide a paltry 6% each, and alternatives such as biofuels, solar, wind and geothermal energy constitute less than 1% of inputs. So, too, most of the world’s coal resources are spread evenly between North America, Europe and Eurasia, and the Asia-Pacific region. But oil and gas are a different matter entirely, centred in deeply unstable regions such as the Middle East and re-emergent Russia. The heavyweight of the former Soviet Union now provides some 25% of Europe’s gas needs, but turns off the taps when places such as the Ukraine behave too independently and democratically, or fail to pay the gas bill.

Another big question is how fast natural gas reserves will dwindle when demand for coal declines – prompted by new legislation and accelerated by world markets. Opec nations such as Saudi Arabia and Iran treat their oil and gas reserves as state secrets, despite having most of the world’s known oil reserves. This lack of transparency adds to market uncertainty, and adds hurdles to the economic case for converting to more sustainable energy resources. And widespread corruption and opacity of numbers – especially where new producers such as Nigeria and Angola are concerned – add combustibility to the already volatile mix.

But here’s the rub. What to believe when it comes to the “facts” of the known reserves of fossil fuels. Sasol claims coal will last another 150 years at current rates of production. But add a 50% increase in energy demand to 2030, and 25% population growth to 2050, and you get an entirely different outlook. And, while there is potential for tapping 400 million trillion cubic feet (a very big number) of methane hydrates (which give off natural gas) under oceans, big lakes and permafrost, it is not yet remotely technologically feasible or commercially viable compared with the 5,500 trillion cubic feet of known and potentially extractable natural gas reserves.

So, too, the economics, environmental impacts and energy efficiencies of alternatives to conventional fossil fuels remain almost totally unknown. Canada’s vast tar sands are currently hugely problematic in terms of extraction and commercial viability. The big picture is really about what the world needs to do to stop carbon pollution, before it’s too late. A quick trip to some of China’s biggest cities will illustrate the problem. And if you think smoking is bad for you, try living in Bangkok or Hong Kong.

Aspo says oil provides 90% of global transport needs. But while natural gas, electricity and liquid nitrogen are seen as alternatives, don’t forget that conventional fossil fuels help power such energy generation. And demand for oil and coal from rapidly emerging markets such as China and India far exceeds the pace of their technological development and implementation. Nuclear energy may be a viable and ultimately cheaper alternative. Such technology allows France to export 18% of its energy production, 90% of which comes from about 60 nuclear power plants. But elsewhere, many people fear it, it’s very expensive to build, and relies on depleting reserves of uranium – much of which is dug up in potentially unfriendly places such as Niger, Russia and Kazakhstan.

And then there’s the huge potential of fusion power (which is how the Sun works). But that’s a piece of physics that has not yet come into the blinding light of day. So what’s left? How about using less of everything, telecommuting more, and hoping like hell that energy alternatives such as a new $400 billion initiative to use solar power from the Sahara desert to heat and drive 15% of Europe’s electricity needs by 2050 will come about – regardless of the destructive intent of militants allied to al-Qaeda’s North African Wing.

In reality, humans are probably at a juncture best described by William Shakespeare’s Macbeth.

“Tomorrow, and tomorrow, and tomorrow,

Creeps in this petty pace from day to day…

Life’s but a walking shadow, a poor player,

That struts and frets his hour upon a stage,

And then is heard no more. It is a tale

Told by an idiot, full of sound and fury,

Signifying nothing.”

May the future have mercy on us.

By Mark Allix

Read more: Guardian co.uk, Energy Bulletin, International Energy Agency, BBC, The New Nation, US Department of Energy, Princeton Plasma Physics Laboratory, Energy and Capital, Guardian.co.uk, New Scientist, Copenhagen Diagnosis, China Three Gorges Project

Main photo: A miner smokes a cigarette during a break at a coal mine in Changzhi, Shanxi province November 25, 2009. China, the world’s top emitter of greenhouse gases, is aiming for many more years of rapid growth fuelled by coal as its main energy source. Picture taken November 25, 2009. REUTERS


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