www.paraanaliz.com | 16 November 2016
We all recognize that the world needs to be energized in an affordable, secure, growth-inducing and climate-friendly manner, deploying all available resources, new technologies, policies, institutions and investment dollars. This is critical not only for the needs of today but also for our longer term future given that Planet Earth will be home to nearly 9bn people by 2040, — up roughly 2bn from today — all requiring access to energy supplies and aspiring to live in a prosperous fashion.
Currently about 1.2bn people live without electricity, including many in Africa, where the generation capacity available to the entire continent roughly equals that of California and Oregon in the US. Health, education, and other local services also frequently lack electrical power. Globally, 2.8bn people are still cooking on traditional stoves, with firewood, or cattle dung, or some other form of traditional biomass for fuel. Even when energy is available in the developing world, it is expensive and often unreliable.
Firms in these countries, domestic and international alike, cite energy and infrastructure as the number one constraint to doing business and achieving sustainable development goals. Unless things do not dramatically change, there is no way we are going to meet the 2030 goal to achieve universal energy access. Current efforts to scale up resources for energy access are only attracting about $10bn per year in financing, but the World Bank estimates that about $50bn dollars per year are needed.
If the increasing demand for energy cannot be tempered, other options to reduce greenhouse gas emissions may be to increase the role of renewable energy sources or to make energy-consuming devices or processes more efficient. Along this line of thinking, the U.N.’s universal energy access initiative aims to double both the contribution of renewables in the global energy mix and the rate of energy efficiency by 2030.
The world’s energy map has significantly changed over the past decade or so. With the advent of North American energy abundance in particular, petroleum enthusiasts began to promote the idea of a “new American industrial renaissance” based on accelerated shale oil and gas production and the development of related petrochemical enterprises. Combine such a vision with diminished fears about reliance on imported oil, especially from the Middle East, and the US suddenly has gained a host of geopolitical advantages and fresh life as the planet’s sole superpower.
A new world oil map is emerging, centered not solely on the Middle East but increasingly on the Western Hemisphere. The new oil axis runs from Alberta, Canada, down through the shale fields of North Dakota and South Texas to huge offshore oil deposits found near Brazil. All of this points to a major geopolitical shift, leaving the US advantageously positioned in relation to any of its international rivals. The gas, nuclear and renewables maps of our planet have also changed in ways that are markedly different than in the 20th century.
With a man who says global warming is an “expensive hoax” about to become leader of the free world, it is no surprise that fossil fuel companies have been seen as some of the biggest beneficiaries of the US election result – while renewable energy investors have taken fright. Donald Trump’s presidency is likely to herald a seismic shift in US domestic energy policy, unravelling many of Barack Obama’s key energy and environmental policies. It also threatens the fragile global progress to tackling climate change that Obama helped spearhead – risking undermining the growth of green energy worldwide.
While Obama helped negotiate a climate deal with China that paved the way the historic global emissions-reductions deal in Paris last year, Trump has pledged to “cancel the Paris Climate Agreement and stop all payments of US tax dollars to UN global warming programmes”. Whether countries like China and India would still see merit in green energy in the absence of US action remains to be seen, but Trump’s stance can hardly be helpful – and could potentially be disastrous.
The “bridge” to a low carbon economy. The entire energy sector is coming under increasing pressure on carbon. It is extremely important that the industry recognize the issue at hand — the global issue — and not get too defensive. We need to ask what can we do to change the mindset on this and to find solutions. And what can we do in terms of operations and emissions and energy efficiency? A cost on carbon is something we need to get in place globally. These issues go together: low carbon and low cost. Low costs support carbon efficiency.
Despite falls overall, investment in renewable energy in 2015 remained robust, according to International Energy Agency. The move towards clean energy was driven by government policies, with countries pursuing low-carbon growth. About $313bn was invested in renewable and other low-carbon forms of energy last year (with solar energy accounting for 56% of the total and wind power for 38%), representing about a fifth of total energy spending.
Simply switching from fossil fuels to renewables alone will not solve the climate change problem. We need to start removing carbon from the atmosphere. And we need to tackle the demand side. We cannot simply assume that relentless economic growth is compatible with a green future.
The commitments made at Paris still fall far short of what is required to halt global warming at the 2°C mark, never mind reversing the growth of greenhouse gases in the atmosphere. The simple truth is that the Paris agreement is blind to the fundamental, structural problems that prevent us from decarbonising our economies to the radical extent needed.
There are some hard facts that cannot be ignored:
First, the renewable schemes to date have largely been at the expense of unpopular nuclear installations, while the global share of fossil fuel-generated energy consumption remains at about 80-85 percent: just where it’s been since the early 1970s. Yes, massive solar and wind parks are being built around the world, but they have not yet changed the business models of Shell, BP and other fossil fuel giants. On the contrary, they feel more secure than ever to invest in fossil fuel sources, particularly gas.
Second, the massive amounts of land required for installing gigawatts of solar and wind power will destroy natural habitats and take away valuable farmland. This is already evident in the way existing biomass production schemes – forests in the US for instance, sugar cane in Brazil or palm oil in Malaysia – have had serious environmental and social side-effects to the extent that they have been labelled as “greenwash.
Third, together with demand from electric vehicle manufacturers, a worldwide renewables boom would rely on a 5 percent to 18 percent annual increase in global production of minerals for the next 40 years. We cannot simply assume that relentless economic growth is compatible with a green future. Similarly startling projections are made for other materials oiling the wheels of green capitalism, including silver, lithium, copper, silicon, gallium and the rare earths. In many cases, supplies of these raw materials are already dwindling.
Lastly, the climate challenge is so urgent and huge that we actually need to remove carbon from the atmosphere, rather than just switching to renewables. Even if we switched to zero-carbon energy sources today, we would still be facing a serious climate challenge for centuries to come.
Major international oil companies have gradually shifted focus towards gas; to the extent that they are now sometimes jokingly referred to as “Big Gas” rather than “Big Oil”. For companies like Shell or BP gas now comprises more than 50 percent of their total production. The 2011 IEA report “Are we entering a golden age of gas?” reflected the industry thinking at the time.
Reduced costs and climate concerns result in renewables now making significant inroads – which is more of a concern for gas than for oil. The only place where gas has a high and increasing share in power generation is the US. This is solely due to low cost shale gas – which does not help the majors in any way. In Europe gas is being squeezed in between coal (which still enjoys significant political support in Eastern Europe) and renewables. European gas demand is 20 percent lower than what it was a decade ago.
The oil companies are now taking precautions as the world moves towards low-carbon energy. The oil and gas majors are starting to use clean-energy investments to hedge their bets that markets for oil and gas will exist decades from now. These investments are of varying degrees of seriousness. They have invested in wind farms, electric battery storage systems and carbon capture and storage.
What this all means is that the Paris agreement does not go far enough. In fact, it might give us the impression of moving in the right direction, but actually the pledged actions are so far off what is needed, it spreads false hope. So, what is needed then?
A realisation that simply switching to renewables and gas alone will not solve the climate change problem. We need to start removing carbon from the atmosphere. We need to tackle the demand side. We cannot simply assume that relentless economic growth is compatible with a green future. These points raise uncomfortable questions that only those who can think and act against the grain dare to ask. It is not to say that we should not transition to renewable energy. Not at all. But that alone will not save the climate.
The relative abundance or scarcity of natural gas supplies might affect the use of natural gas as a bridge fuel to a low‐carbon future. Abundant natural gas supplies increase use in most sectors of the economy but do nothing by themselves to create a bridge to a low‐carbon future. Without a carbon policy in place, abundant and inexpensive natural gas fosters greater energy consumption and displaces the use of nuclear and renewable resources to generate electric power. Even though coal and oil use fall, the result is higher CO2 emissions.
Inexpensive natural gas provides a low-cost transition path from higher-carbon-content fuels such as coal and petroleum. For economic and pollution reduction reasons, more natural gas is needed for electricity production around the world. But betting too much on natural gas and its infrastructure intensive requirements could result in overinvestment in infrastructure that is unnecessary in the short and long run, creates stranded assets, and suppresses investments in low-carbon resources.
Natural gas may act as a “bridge fuel” to move away from higher-polluting coal and oil. But the bridge fuel hypothesis also postulates that there will be a follow-on transition to renewables as a primary generation resource. As such, finding a careful balance of natural gas and renewable energy/advanced technology portfolios is one of the most pressing imperatives for governments and energy industry stakeholders.
The Bosphorus Energy Club