Position of power: global energy

6th April 2018


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Author

Astrid Fellingham

Gail Tverberg on why our global energy problem comes down to quantity rather than quality.

Reading many of today’s energy articles, it is easy to get the impression that our energy problem is a quality problem—some energy is polluting, while other energy is hoped to be less polluting.

There is another issue though that we are not being told about. It is the fact that having enough energy is terribly important as well. Total world energy consumption has risen quickly over time. In fact, the amount of energy consumed, on average, by each person (also called ‘per capita’) has continued to rise, except for two flat periods.

There is a good reason why energy consumed has risen over time on a per capita basis. Every human being needs energy products, as does every business. Energy is what allows food to be cooked and homes to be heated. Energy products allow businesses to manufacture and transport goods. Without energy products of all kinds, workers would be less productive in their jobs. Thus, it would be hard for the world economy to grow.

When energy consumption per capita is rising, it is easy for workers to become more productive because the economy is building more tools (broadly defined) for them to use, making their work easier. Manufacturing cell phones and computers requires energy. Even things like roads, pipelines, and electricity transmission lines are built using energy.

Once energy consumption growth flattens, as it did in the 1920-1940 period, the world economy is negatively affected. The Great Depression of the 1930s occurred during this flattened consumption period. Problems, in fact, started even earlier. Coal production in the UK started to drop in 1914, the same year that the First World War began. The Great Depression didn’t end until the Second World War, immediately after the 1920-1940 flattened consumption period.

During this period, many people, especially farmers, were not able to earn an adequate living. This situation is not too different from today, when many young people are unable to earn an adequate living. Strange as it may seem, this type of wage disparity is a sign of inadequate energy per capita, because jobs that pay well require energy consumption.

The 1980-2000 flat period was in many ways not as bad as the earlier one, because the lack of growth in energy consumption was planned. The US changed to smaller, more energy-efficient cars to reduce the amount of gasoline consumed. Oil-powered electricity generation was taken out of service and replaced with other types of generation, such as nuclear. Heating of homes and businesses was moved to more efficient systems that did not burn oil.

The indirect effect of the planned reduction in oil consumption was a drop in oil prices. This adversely affected all oil exporters, especially the Soviet Union. Its central government collapsed, at least partly because of its reduced revenue stream. Member republics continued to operate, somewhat as in the past. Russia and Ukraine cut back greatly on their industrialisation, leading to less use of energy products. Populations tended to drop, as citizens found better work prospects elsewhere.

Wage disparity is a sign of inadequate energy per capita, because jobs that pay well require energy consumption

Eventually, in the early 2000s, oil prices rose again. Russia was able to become a major oil exporter again, but Ukraine and other industrialised areas were totally handicapped by the collapse. Countries affiliated with the Soviet Union (including Eastern European countries, North Korea, and Cuba) found themselves consistently lagging behind the US and Western Europe.

Recently (2013-2017), the world economy seems to have again reached a period of flat energy consumption, on a per capita basis. In many ways, the flattening looks like that of the 1920-1940 period. Increased wage disparity is again becoming a problem. Oil gluts are again becoming a problem, because those at the bottom of the wage hierarchy cannot afford goods using oil, such as motorcycles.

Compared with their parents, young people are finding their standards of living falling. They cannot afford to buy a home and have a family. Governments are becoming less interested in cooperating with other governments.

Why is world energy consumption per capita flat, or actually falling slightly, after 2013? The answer seems to be diminishing returns with respect to coal production. Diminishing returns refers to the fact that while at first coal is inexpensive to extract, the cost of extraction rises after the thickest seams and those closest to the surface have been extracted.

A chart of China’s energy production shows how the country’s coal production first rose as its low cost made its usage advantageous, and then fell owing to diminishing returns. It experienced a major ramp-up in coal production after it joined the World Trade Organization in 2001.

As the extraction of coal progressed, China found itself with many mines experiencing rising production costs. Coal prices did not rise to match the higher cost of production, so, from about 2012, a large number of unprofitable mines were closed.

A major reason for the flat world per capita energy consumption, which began in 2013, is the corresponding fall in China’s coal production after 2013. As the cost of production rises, and as users become aware of coal’s environmental issues, production is falling in a number of other countries too. Other sources of energy have not been rising sufficiently to keep total per capita energy consumption rising.

The chart on Energy Production in China illustrates that wind and solar production are not rising sufficiently to offset the nation’s loss of coal production (wind and solar are covered by the ‘Other Renewables’ category.) This situation occurs elsewhere as well.

Wind, solar and the problem of scale

What role do wind and solar play in maintaining world energy supply? The truth is, very little. While a great deal of money has been spent on them, wind and solar together amounted to only about 1% of total world primary energy supply in 2015, according to the International Energy Agency.

A major problem is that wind and solar do not scale well. As larger quantities are added to electricity networks, more workarounds for their intermittency (such as batteries and long-distance transmission) are needed. Bid prices for wind and solar give a misleadingly low impression of their real cost, unless the projects include many hours’ worth of storage to offset the impact of intermittency.

The key to rising energy consumption seems to be the falling cost of energy services, when efficiency is included. For example, the cost of delivering a package of a given size a given distance must be falling, relative to inflation. Similarly, the cost of heating a home of a given size must be falling. Governments must be able to tax producers of energy products, rather than providing subsidies.

Globalisation requires ever-expanding energy supplies to meet the needs of a rising world population. To maintain globalisation, we need a growing supply of energy products that are very cheap and scalable. Unfortunately, wind and solar don’t seem to meet our needs. Fossil fuels are no longer cheap to extract, because we extracted the resources that were least expensive to extract first. Our problem today is that we have not been able to find substitutes that are sufficiently cheap, non-polluting, and scalable.

Consumption and production

World Energy Consumption graph

World Per Capita

Total Energy and Coal Consumption Per Capita

China's Energy Production

All charts courtesy of Gail Tverberg, OurFiniteWorld.com

Picture credit: Getty

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