14 Energy Resource (2): Distribution, Livelihood & Scarcity Concerns

Dr Soma Sarkar

     

      Learning Objectives:     

  After studying this unit you should be able to:

• Explain basic concept of energy scarcity.
• Understand the status and trends of energy scarcity at global and regional perspective, Explore major factor responsible for energy scarcity, and Understand possible future prospects.

KEYWORDS

Energy resources, energy scarcity, renewable resource, energy poverty

1. Introduction

Global energy markets are in transition, where rapid growth of economy means increase in energy demand. Energy resource scarcity is a global challenge. No single country is self-reliant in resources needed to power its economy. And as a result its effects are not equal across regions. The pressure of energy resource demand is more visible in developing economies, particularly within Asia. The degree of dependence and the types of energy resources are important factors too. It helps in understanding whether the resource scarcity leads to cooperation or conflict. Serious inequities are prevailing in meeting global demand for access to energy. According to US-Energy Information Administration (EIA), 2011 “at present, 1.3 billion people are lacking electricity, and 2.7 billion people still rely on the traditional use of biomass for food preparation, with associated impacts on deforestation rates, soil erosion and human health”. ‘This condition of without access to reliable electricity or the power grid, and entirely dependent on biomass for cooking and lighting, is called energy poverty.’ The dependency on fuel-wood also has a demographic aspect. On one hand, per-person fuel-wood consumption is shown to rise with decreasing size of households, while on other hand it declines with urbanization indicating a wealth effect.

2. Global Trend of energy resources

The demand for energy has surged since 1965 is well known to us. On the consumption scale, global primary energy consumption was 1.8% a year (10-year average) with an increased by just 1% in 2016, following growth of 0.9% in 2015 and 1% in 2014 (Figure 1). Growth was below average in all regions except Europe & Eurasia in 2015. Except oil and nuclear power, all fuels grew at below-average rates. According to IEA 2011, “The shares of energy inputs are likely to change, with the proportion produced from oil decreasing and natural gas increasing. Coal levels are expected to stay relatively constant and nuclear energy use will increase due to investments in Asia. However, with potential policy changes following the Fukushima disaster in 2011, it is difficult to predict the growth trajectory of nuclear power. If nuclear energy plans are not followed through, more coal is likely to be used, with significant implications for climate change mitigation efforts. Developing regions show a particularly strong increase in per-person energy consumption between 2005 and 2010, although, as of 2010, this seems to be levelling off.” Thus, during 2016, energy consumption in China grew by just 1.3%, still for a 16th consecutive year it remained the world’s largest growth market for energy.

Figure1. World and regional consumption of energy resources by 2016. (Source: BP Statistical Review of World Energy 2017)

i. Oil

Oil remained the world’s leading fuel. It accounts for 1/3rd of global energy consumption. Following 15 years of declines from 1999 to 2014, oil gained global market share for the consecutive second year. According to IEA, 2017, “Global oil consumption growth averaged 1.6 million barrels per day (Mb/d), or 1.6%, above its 10-year average (1.2%) for the second successive year. China (400,000 b/d) and India (330,000 b/d) provided the largest increments.

     During 2015-16, production in the Middle East rose by 1.7 Mb/d, while the production outside the Middle East fell by 1.3 Mb/d, with the largest declines in the US (-0.4 Mb/d), China (-0.3 Mb/d) and Nigeria (-0.28 Mb/d).” Thus, the weak supply side was driven by non-OPEC production. The fall is by 0.8 Mb/d, which is the largest decline in last 25 years. The energy report further highlights that, “in recent times, OPEC took some decisive actions which caught many observers by surprise and dramatically changed the course of events. First, by not cutting production in November 2014, triggering a collapse in prices, and then last November agreeing, along with 10 non-OPEC producers, to a production cut totalling 1.8 Mb/d. Such type of decisions cause supply imbalance and stress on resource in the long run…”.

ii. Natural gas

According to the International Energy Statistics database, “world natural gas consumption grew by 63 billion cubic metres (bcm) or 1.5%, slower than the 10-year average of 2.3%, while EU gas consumption rose sharply by 30 bcm, or 7.1% – the fastest growth since 2010. Meanwhile, Russia saw the largest drop in consumption of any country (-12 bcm). Global natural gas production increased by only 21 bcm, or 0.3%, because of declining production in North America (-21 bcm), partially offset strong growth from Australia (19 bcm) and Iran (13 bcm).” Outside of the US, Europe rose strongly (6%, 28 bcm) in gas consumption on the demand side. This rise was mainly generated because of “the increasing competitiveness of gas relative to coal and weakness in European nuclear and renewable energy”. It was evident that “gas trade grew by 4.8%, helped by 6.2% growth in LNG imports/exports, where most of the net growth in LNG exports came from Australia (19 bcm out of 21)…. US LNG exports rose from 0.7 bcm in 2015 to 4.4 bcm in 2016.” However, China continued to provide the main source of growth. Looking at the growing market for LNG, and the increasing availability of supplies, few new countries, like Egypt, Pakistan and Poland, have enter the market in the last year or two.

In International Energy Outlook 2016 (IEO,2016) Reference cases, regarding the natural gas it has been predicted that, “World consumption of natural gas for industrial uses increases by an average of 1.7%/year, and natural gas consumption in the electric power sector increases by 2.2%/year, from 2012 to 2040 in the IEO2016 Reference case….The industrial and electric power sectors together account for 73% of the total increase in world natural gas consumption, and they account for about 74% of total natural gas consumption through 2040.”

iii. Coal

Global coal consumption fell by 53 million tonnes (mtoe), or 1.7%, for successive 2nd time. This shift largely reflects structural factors. “The increasing availability and competitiveness of natural gas and renewables, combined with government and societal pressure to shift towards cleaner and lower carbon fuels”, can the possible cause for such decline. The largest declines were seen in US (-8.8%) and China (-1.6%). According to the IEO,2016 report, “in China, which at the beginning of the year introduced a series of measures to reduce the scale of excess capacity in the domestic coal sector, improved the productivity and profitability of the remaining mines. In addition, the government further constrained production by restricting coal mines to operate for a maximum of 276 days, down from 330 days…” The impact of these measures was dramatic: “domestic coal production fell sharply and prices jumped sharply higher”. As a result, the rise in global coal prices further depressed global coal demand. The most affected sector was power sector around the globe. However, this depression in demand and high price proved beneficial towards natural gas and renewable energy source. Therefore, it was reported that, “coal consumption in the UK more than halved (down 52.5%, or 12 mtoe) to its lowest level in our records…Coal’s share of global primary energy consumption fell to 28.1%, the lowest share since 2004…. World coal production fell by 6.2%, or 231 mtoe, the largest decline on record…. China’s production fell by 7.9% or 140 mtoe, also a record decline. US production fell by 19% or 85 mtoe”.

iv. Renewable energy sources: hydro & nuclear energy

According to the IEO,2016, “renewable power (excluding hydro) grew by 14.1% in 2016, below the 10-year average, but the largest increment on record (53 mtoe)”. At global level, wind provides more than half of renewable growth. It took around 20 years to reach the level from mere 15%. Solar energy contributed almost a third of the total. However, compared to wind energy, solar achieved the same degree of diffusion in less than half that time. In sharp contrast, growth of nuclear energy is not that bright. “The main reason for such variation is the fact that the transfer of wind and solar technology is not subject to onerous security restrictions has helped their rapid diffusion relative to nuclear power” (REN21). Europe & Eurasia was overtook by Asia Pacific to be the largest producing region of renewable power. Similarly, China overtook the US as the largest single renewable producer. “Global nuclear power generation increased by 1.3% in 2016, or 9.3 mtoe. China accounted for all of the net growth, expanding by 24.5%. China’s increment (9.6 mtoe) was the largest of any country since 2004. Hydroelectric power generation rose by 2.8% in 2016, (27.1 mtoe). China (10.9 mtoe) and the US (3.5 mtoe) provided the largest increments. Venezuela experienced the largest decline (-3.2 mtoe)” (REN21).

3. Factors determining energy scarcity

A. Population growth: Population is no doubt a driver of global environmental change. Households that form one spatial unit for population study can also be considered as units for analysing consumption patterns. In the developed world, household size and composition changing from extended families to nuclear ones. It is striking that the rise in household units has been faster than population growth in these regions. Conforming to the expectations of economies of scale, larger households generally use less energy per person than small ones. Therefore, household segregations that cause an increase in electrical devices and the level of electricity consumed per person, can cause double the rise in energy consumption that would occur from population growth alone. “The age composition of a household also has an impact on energy consumption, as visible from energy consumption pattern in Australia, Brazil, Denmark, India and Japan. It is found that the residents’ average age is positively related with per-person energy consumption, while household size and urban location are negatively associated” (GEO5).

B. Urbanization: “Urban areas, which house half the world’s population, utilize two-thirds of global energy, and produce 70 per cent of global carbon emissions” (IEA 2008). In developing countries the locations of basic amenities like school, hospitals, shopping centres are widely spread and lacks connected by a public transport system. Thus, with the increase in income, individuals are likely to make more personal trips, and ultimately acquisition of personal vehicles. Moreover, most energy for transport comes from fossil fuels. Thus, rise of the car users produce various environmental impacts, from ‘urban health problems (through land and water degradation) to contributing to climate change’.

C. Economic development: Production and consumption are both components of economic development. During the last century, with global economic output grew more than 20-fold; the resource extraction and exploitation grew to almost 60 billion tonnes/year. Technological efficiency is a key factor in the development and production of goods and services. It is important in terms of environmental impact too. Studies have noted the energy efficiency gap for years. “Despite the potentially favourable returns in energy costs saved particularly when life-cycle costing is applied, neither consumers nor industry have made significant economically beneficial investments in closing that gap” (GEO5).

4. Status of energy scarcity

According to World Energy Outlook 2016, “The energy transition is redefining energy security. Deployment of renewables and energy efficiency play an important role in moderating oil and gas imports, providing an extra tool to mitigate traditional energy security concerns. On the other hand, the increased role of electricity in all economies and the rising share of variable renewables (wind and solar) in power generation put electricity security under the spotlight.”

Therefore, owing to the expanding economy, rising population, and climate change, energy resources have become highly sensitive to higher prices (Figure 2), export restrictions, and supply shortages. In a world in which there is a big and growing appetite for energy and no abundant, cost-effective substitutes, countries is viewing oil and gas supply security as a top national security issue. Energy use in the world’s developing countries is increasing rapidly due to the driving factors like, population growth, economic growth, and increasing urbanization.

Figure 2: Fossil Fuel Prices, 1968-2001 (Source: Energy Information Agency, Annual Energy Review 2005)

According to the energy report, “as for the Gulf countries, (the world’s largest oil and natural gas producers), they too suffer from several internal and external security problems — the Arab- Israeli conflict, Islamic terrorism, political instability in Iraq, and Iranian hegemonic ambitions in the region….Thus, violent conflicts and other forms of political instability could lead to major disruptions in energy supply, which, under certain circumstances, would necessitate the use of military force to protect the flow of oil and natural gas….National differences on a market model for energy also exacerbate tensions and raise the prospect of conflict.” For example,” In the Caspian region, where significant amount of oil and natural gas is present, major powers (China, Russia, Europe, US, and India) have been fiercely vying to secure their energy interest. In the Persian Gulf, Japan, India, and China have stepped up their diplomatic efforts to secure their share of oil imports”.

a. Oil resource

For quite a few years, fears about approaching oil shortage were far reaching as arguments about peak oil consistently resurfaced. We have passed one essential “peak” when good-grade resource reserves have to a great extent been exhausted. Regardless of past efforts, discoveries of new reserves have stayed low. What remains is becoming progressively expensive and hard to create – in budgetary, technological, and ecological terms. Geopolitical strains over outstanding resources are likewise obvious in numerous areas, for example, the Arctic. “In addition, an estimated 65% of global oil reserves are under state ownership, these raising concerns that the availability of oil will become even more politicised than it is already in the years to come.” This boost in global demand will mainly generate from non-OECD countries, particularly budding Asian economies. Understanding the past scenario, it has been predicted that energy trade between regions is expected to rise by 2030…”as major consumers, such as the U.S. and China and emerging economies become more dependent on oil imports from the Middle East, Africa, and Eastern Europe/Eurasia (the Caspian region)”.

b. Natural Gas

Demand for natural gas is expected to increase in coming years. Because of an absence of adequate domestic supply to take care of developing local demand, imports will ascend for all present net importers. “Between 2006 and 2030, dependence (ratio of total imports/total consumption) of the EU is projected to jump from 57% to 86%, China’s from -1% (net exporter) to 48%, and India’s from 26% to 61%. Moreover, natural gas resources are also highly concentrated in the hands of a few national companies. For instance, Gazprom, National Iranian Oil Company, Saudi Aramco, and Qatar Petroleum own 46% of total natural gas reserves and are responsible for 26% of total world production. The same 17 national oil companies own 63% of total natural gas reserves and produce 40% of the world’s gas”…( IEO,2014)

The energy scarcity and uncertainty in the near future is dependent on a number of factors like, population growth, technical change and capital stock turnover, economic output and structure, fossil fuel supplies and extraction costs, energy market developments, energy subsidies, human attitudes and behaviour, and changing environmental objectives and policies, among few to mention. According to World Energy Outlook 2014, “Energy demand growth shifts decisively away from OECD countries. China dominates energy demand growth until the mid-2020s, but as its population levels off and its economic growth slows around that time, India takes over as the leading engine of energy demand. Despite the strong growth, energy use per capita in 2040 in non-OECD countries is still well below the average of OECD countries in the 1970s at comparable levels of GDP per capita. Technological progress and improved energy efficiency, however, allow a higher level of demand for energy services to be satisfied per unit of energy.”

5. Future outlook

As the global population expands, more individuals aim for better and higher material expectations (standard of living) for everyday comforts – making an ever expanding interest for goods and services, and in addition for the energy required to assist them. However, the rate of development is likely to diminish in future because of an expected levelling of populace development and proceeded with enhancements in energy efficiency.

“The shares of energy production are likely to change, with the proportion produced from oil decreasing and natural gas increasing. Coal levels are expected to stay relatively constant, and nuclear energy use will increase due to investments in Asia. However, if nuclear energy plans are not followed through, more coal is likely to be used, with significant implications for climate change mitigation efforts”.. (IEA 2011). Further, “on a per-person basis, the largest growth in electricity production occurred in the developed countries and will continue. The global average per-person electricity production grew by 33 per cent between1992 (2.2 MWh) and 2008 (3.0 MWh), while that of developing countries grew by 68 per cent, from 1 MWh to 1.7 MWh” (IEA 2010).

As per WEO 2015 report on ‘Global energy trends to 2040’, “World energy sector investment totals $68 trillion from 2015 to 2040, of which 37% is in oil and gas supply, 29% in power supply and 32% in end-use efficiency. Of the power generation capacity investment in the New Policies Scenario, more than 60% goes to renewables, led by China, the European Union, the United States and India.”

Renewable energy production is gaining ground. “There has been a 30,000 per cent rise in solar energy supply since 1992, a 6,000 per cent increase in wind energy, and a 3,500 per cent rise in biofuel production, all from very low bases. For this the credit goes to the decreasing cost of these technologies, and the 2010 adoption by 199 countries of policies to promote renewable energy” (REN21 2011).

Owing to the growing economy of developing countries, global energy consumption is expected to continue to grow, and will lead to rise in CO2 emissions. To stem the rise in global GHG emissions, the Kyoto Protocol encouraged the transfer of cleaner technologies from developed to developing economies, and recommended for reduction in existing trade barriers.

SUMMARY

As no single country is self-sufficient in resources needed to power one’s economy, energy resource scarcity is a global challenge, and its effects are not equal across regions. The pressure of energy resource demand is increasingly coming from developing economies.

Owing to the expanding economic activities, urbanization process and growing population, the energy use in the world’s developing countries is increasing rapidly.

Renewable energy production is gaining ground. Due to decrease in cost of these technologies, huge leap in solar, wind and biofuel production, all from very low bases have been registered.. For this the credit goes to the decreasing cost of these technologies.

REFERENCES

1. IEA (2011). World Energy Outlook 2011. International Energy Agency, OECD, Paris.
2. IEA (2010). CO2 Emissions from Fossil Fuel Combustion. International Energy Agency, Paris.
3. IEA (2008). World Energy Outlook 2008. International Energy Agency, OECD, Paris
4. IEA (2017). World Energy Outlook 2017. International Energy Agency, OECD, Paris
5. REN21 (2011). Renewables 2011 Global Status Report. Renewable Energy Policy Network for the 21st Century, Paris