Icarus’ Legacy — Episode 2 — Energy Consumption Trends
(Google Doc version more suitable for PC and Tablet is here)
In episode 1
Energy is the key to a world that is far better, or worse
Climate Change and Global Warming are upon us and we need to act urgently if we want to limit their devastating effects. More and more countries have pledged to take action and reduce their greenhouse gas (GHG) emissions in a significant way.
The production and use of energy are responsible for nearly ¾ of the global emissions. While climate change is a complex topic, with a lot still to learn, we know that by transforming the energy sector towards low-carbon sources, we will also reduce pollution and health problems, and improve access to clean energy for billions of people to support their development, which is something we can quantify with precision today.
We and our children are the new Icarus and we want to pursue our dream, made of sun, wind and water.
A Serious Game we need to play now
Like in a game of Tetris, we need to remove the pieces from the screen so they don’t reach the top and it’s game over. To do this we need to slow down the emissions, and make sure that all new emissions are matched by removal of GHG from the atmosphere.
Our screen is filling up, the atmosphere is loaded with our emissions as never before. But we can still win.
The required energy system transformation is starting. It can count on many forces that are now working together, financially, economically, politically, organizationally, and most importantly in the minds of us humans, who can push to enable change at unprecedented speed. We can start to play with less and less fossil fuels.
The full first episode is here
In this episode
A high level overview on energy consumptions, and the trends that should guide analysis and decision making for individuals, organizations and countries.
A Fourth Transformation
Since the beginning of the industrial era, over 200 years ago, energy has been supporting the development of communities, growing productivity, reducing manual work, reducing travel times and transportation costs, improving residential and commercial standards along with quality of life.
Energy is like stamina in video-games: it’s not free. Humankind found several sources in different levels of the game
Three transformations, fuelled by fossils: Three times already the energy system went through major transformations, introducing coal, oil and natural gas, which are now the dominating energy sources. Before we started to use fossil fuels at scale, in the second part of the 19th century, the predominant source was traditional biomass, including wood and charcoal, often harvested in an unsustainable way.
1890, 1950, 1980: that’s when Coal, Oil, Natural gas started to have large scale impact: they changed how people worked, ate, slept. In a word: lived
Clean and renewable sources like solar, wind, hydroelectric, geothermal and tidal energy, currently only represent 4.4% of the energy sources at a global level. It’s a small but fast-growing share. In some parts of the world they are already a dominating force in the production of electricity, one of the many ways we access energy.
A fourth transformation, to renewable sources, has started.
2020–2050: the scientific community agrees that, to support our net-zero ambitions, CO2 emissions need to drop by at least 45% by 2030, at least 70% of our energy must be from renewable sources by 2050, and 90% of the renewable energy should come from clean, non-emitting sources
Here’s now, and our chance to go back to renewable sources
It’s Official: In 2020, Renewable Sources Beat Fossil Fuels in Europe’s Electricity Generation
Renewables rose to generate 38% of Europe’s electricity in 2020 (compared to 34.6% in 2019), for the first time overtaking fossil-fired generation, which fell to 37%. This is an important milestone in Europe’s Clean Energy Transition
All eggs in one fossil basket
As the human population continues to grow, and as more and more people emerge from poverty in developing countries, we witness a constant increase in the production and use of energy
Since 1800, the world population grew from 1 billion people to 7.8 billion of 2020, and the per capita energy consumption has nearly quadrupled from 5.7 MWh to 20.6 MWh per year per person. The impact on the environment and climate change has been astounding.
While the world population grew from 3 billion to 7.8 billion since 1980, energy use grew even more quickly than population. Per capita energy use will continue to grow to support livelihoods.
A recent study estimated that every year 8.7 million people die from pollution generated by burning fossil fuels. That’s nearly one in five deaths, worldwide.
The increased dependency from fossil fuels has also created very weak and expensive supply chains with a number of geopolitical and economic issues:
- The dependency from fuels often extracted in far away countries, that in some cases rank very low in the democratic scale
- The cost and risk of transportation and infrastructure
- The limited resiliency of the supply chain
- The volatility of primary fuels’ costs, often left to the unilateral decisions of cartels or to regional conflicts and tensions, leading to unpredictable market conditions
By moving to renewable sources of energy for a growing population we will not only reduce emissions and fight climate change, but we will also reduce non required international dependencies and tensions, and we will reduce costs, risks and energy consumption from extraction, transportation and transformation.
Every country in the world has a combination of solar, wind, hydroelectric, geothermal and ocean power at their disposal.
Iceland, Paraguay, Costa Rica, Albania, Uruguay, Tajikistan, Namibia and Norway have all achieved 100% renewable electricity production in 2020.
And they couldn’t be more different in terms of climate, economy and geography.
Energy Consumption Trends
With the world population predicted to reach 9.8 billion by 2050 and energy consumption to grow by 50%, our actions will need to be decisive and take the highest priority if we want to avoid the worst part of this announced catastrophe. Our objectives are possible, but they require unprecedented and urgent action
3 billion people — 40% of the world — do not have access to clean fuels for cooking
The number of people without access to clean fuels and technologies for cooking is higher still. Three billion people — around 40% of the world — do not have access.
This comes at a large health cost: when people do not have clean cooking fuels they burn solid fuels such as charcoal, wood, and crop residues. This results in indoor air pollution which results in at least 1.6 million premature deaths each year.
Regional Energy Consumption Predictions
Most of the growth in energy consumption is expected from non-OECD Asian countries, and primarily China, India, Pakistan and Indonesia, as a combination of population and economic growth
African countries, which are expected to grow their population by over 1 billion people, and Middle East countries, will also see a significant increase, but from a relatively small share of global energy consumption
The countries that are part of the Organization for Economic Co-operation and Development (OECD) which broadly correspond to developed countries, and non-OECD countries in Europe and the Americas will see a stable trend of energy consumption
Tetris cheat-sheet
At this level of the game, pieces will fall more quickly (because population will increase). And there will be new shapes (because of increased energy use in developing countries)
Changing Economies
The richer a country the more energy it uses, right?
Not so much: while from the 80s until early 2000s in the 37 OECD countries it was easy to correlate the growth in per capita energy with the growth in per capita GDP, in the past 15 year this trend has been reversed: overall energy use has been stable, or marginally reducing, despite large population and economic growth, so per capita energy use and energy use per GDP unit has been reducing considerably.
This seems good news coming from a large part of the world, but what about the rest?
This is the result of industrialization and urbanization internal to China, though a large part of this energy is fuelling the production of goods for the developed world.
The same unbalance is visible when looking at figures per capita
So while it’s true that developed countries have become more energy-efficient, the story of the past 30 years is one where industrial production has largely shifted from them to Asian countries and China in particular.
Looking forward, developed countries have already peaked in their historical energy consumption and population, and their GHG emissions have been trending downwards for over a decade. And still, getting to net zero by 2050 will require aggressive measures.
But if we look at the rest of the world, reducing emissions will be even harder, given the significant population growth expected (by 2050, 80% of the world population will be in Asia and Africa) and improving living standards, resulting in increased energy requirements.
The Country of the responsible Dragon
China’s economy growth expectations may be a worry for the environment, but there are some really good news to share: China has recently pledged to reach net zero emissions by 2060, a clear, powerful signal sent by China’s President Xi Jinping during a speech at the United Nations.
China is responsible for 28% of global emissions, trending upwards, so this is of enormous importance.
The pledge from China is very new, and very few details have been provided. More are expected as part of the 5-year economic plan (2021–2025) about to be released.
It is also a message for other countries in a similar position: India, Brazil, Russia, Australia and Saudi Arabia have not made any such pledges yet, and now they are even more under pressure to do so.
Experts in China and around the world have tried to model this pledge to see what it could entail in terms of transformation and costs, to support the expected economic growth over the next 40 years. The different models, broadly include:
- Peaking emissions by 2030, then dropping significantly after 2035
- Massive increase of electricity production, largely from renewable sources
- Deploying battery storage at scale
- Ramping up nuclear power
- Cutting down coal power production
- Carbon capture deployment at scale, in proximity with remaining coal power generation
- Green transformation of industries
- Green buildings
- Green finance and technological innovation
Where do we begin?
Fossil fuels are the dominating energy source — by far.
80% of energy consumption is concentrated across transport, industry and residential use.
The recipe for transition to net zero will be very different for the different sectors of society, given where they stand today. Electricity is the final means of consumption for only 19% of the energy, while most end-users consume energy directly in its fossil fuel form (e.g. oil products in cars, ships and airplanes, natural gas in buildings, coal in heavy industry).
This means that the transformation will need to address, in most cases, the technology implemented by end users, as well as the whole energy supply chain.
Oil products are primarily used in transport
Coal is primarily used by industry
Natural gas is significant in industry and residential use
Electricity is where we expect to see the largest growth to meet net zero ambitions and displace fossil fuels, as this is how we can deliver energy produced from renewable sources
Tetris cheat-sheet
You’ll get good at managing the pieces that are most common in a given level of the game
The new old is the new new
Now we know that fossil fuels have a huge social and environmental cost — the so called “externalities”. But what about their direct financial cost? A lot has changed over the past 10 years. If you were investing your money now, what energy source would you use to produce electricity?
How would we compare the cost of the different sources over their full life cycle? Let’s read this chart together.
(1) First we need a way to measure costs that is independent from the energy source. We have one: it is called LCOE (*), and it includes all costs of running a power plant, including the cost to build it and to decommission it
(2) Then we can see how the cost for a given source changed over the past 10 years. The bars show the full range, while the lines point to average costs
(3) Finally, we can compare the latest costs with the cost of electricity production from fossil fuels (the box that goes across the whole chart)
What the chart tells us:
- Renewable power generation costs have fallen sharply, now undercutting the cheapest and dirtiest fossil fuels.
- Solar photovoltaic costs have dropped by 82% since 2010
- Wind has become 39% and 29% cheaper respectively from onshore and offshore plants
More recent trends show that renewable prices continue to fall.
(*) The Levelized Cost of Electricity (LCOE) is the net present cost of electricity generation for a power plant over its lifetime. This includes initial investments for production and installation, and maintenance and operation costs, until full closure. In this way we can compare different energy sources.
So, does it make (economic) sense to switch to renewable sources?
It’s a no-brainer, really — renewable sources are cheaper, and they will help us fight pollution, global warming, poverty and other global issues…
- In 2020, 90% of all new and additional power generation installed, was from renewable sources.
- Once production plants from clean renewable sources (wind, solar, hydro, geothermal) are up and running, production costs are close to zero, as there are no fuels to buy, and the supply chain is short and resilient.
- With the Covid-19 pandemic, during the lockdowns, national grid operators chose to reduce fossil fuel power generation and not clean renewables’ generation. The resiliency shown by these renewable sources is a strong message about the opportunity costs, going forward.
- Biofuels, on the contrary, followed the opposite trend and their consumption dropped, as power generation still requires source materials, which don’t come for free. Biofuels can be a sustainable source, but they follow different economics and they have additional constraints, such as the vast land use.
- The Covid-19 crisis has reduced global coal-based energy consumption to below 20%, and it is expected that coal consumption will not go back to pre-crisis levels, as coal plants continue to be phased out.
- Moving to net zero will require replacing existing fossil fuel plants, during their useful lifespan. These decisions will become increasingly easier, due to dropping renewable energy prices.
We Should Feel Electrified
Electricity is the way we deliver energy sourced from most of the clean and renewable sources.
This means that in our path to net zero emissions, we need to increase the use of electricity at destination (electrification) and retire what uses fossil fuels directly, from familiar petrol engines and gas boilers to coal-fired industrial plants.
So increased electrification of industry, transport and residential uses can also be seen as a preparatory step, as energy sources shift from fossil to clean and renewable.
As electricity grows as the primary means of delivering energy to end users, we can increasingly address the way electricity is produced, and shift more and more towards renewable sources, without affecting end users appliances and technology.
Today, electricity is still mostly produced with fossil fuels (64%). Over time, natural gas, a relatively cleaner fossil fuel, has replaced coal for electricity production in large parts of the world (especially in the developed countries)
But coal is still the primary source, and countries like China and India are still building new coal power plants. Renewable sources stand at around 26% in the electricity mix, with their share growing thanks to wind and solar over the past decade. Nuclear provides a solid contribution with 10% of global electricity.
To be in line with net zero emissions by 2050, we will require at least a 40–45% reduction of emissions by 2030, which in turn would require that electricity production grows by around 20%, and that 75% of all the electricity is produced from clean or renewable sources (up from 36%) which, compounded, means that we will need to produce 2.5 times the amount of electricity from renewables respect to 2018 (75% of 120% is 2.5 times 36% of 100%).
The most immediate areas where we could see significant electrification of end use are:
- Heating of air and water for residential and commercial buildings, displacing natural gas
- Electric vehicles (especially cars and light trucks), displacing oil products
- Parts of industrial use cases, where high temperature processes are not required, displacing natural gas and coal
In all cases this would not only allow for the growth of renewable sources, but also for more efficient energy use (e.g. heat pumps can be 4 times more efficient than gas boilers, electric vehicles can be 4–6 times more efficient than equivalent petrol or diesel cars, etc.) that would therefore result in a net decrease in energy use, in like-for-like scenarios.
Heat and High Energy? Look for Water
The areas that we will not be able to address through electrification, because their requirements cannot be fulfilled with today’s technologies are:
- Industrial plants that require high temperature processes in furnaces and kilns, such as cement, steel and some chemical productions, as this type of heat cannot be generated through electricity, but requires fuel combustion, today provided through coal and natural gas
- Heavy transportation like aeroplanes, ships and lorries that would not efficiently operate at long range with electrical batteries, due to their low energy density, and possibly long charging times
To have an idea of the scale of the problem, this is how the different sectors contribute to global emissions, including both the energy they use and the other types of emissions:
- Cement production contributes 8% of global GHG emissions
- The Iron and Steel industry accounts for approximately 7.2% of total global GHG emissions
- Aviation and Shipping contribute respectively 1.9% and 1.7% of global GHG emissions
- Medium and Heavy trucks contribute to 29.4% of transport emissions, which is over 6% of global GHG emissions (transport represents 21% of GHG emissions)
The decarbonization of these industrial and transport sectors will be more complex than the equivalent exercise in buildings and light transport, and it will require innovation: with the current technologies, a conversion to renewable sources would be prohibitively expensive.
But there is hope: interestingly it’s water, and Hydrogen in particular, that can come to the rescue, as we will see in the next episodes.
In the next episode I’ll tell you about history and perspectives of clean and renewable sources of energy.
