Michael Ball
Today, the world’s energy supply still depends to around 90% on non-renewable energy sources, which are largely dominated by fossil fuels. As the global energy mix is widely expected to continue relying predominantly on fossil fuels in the coming decades, the question arises to what extent and how long fossil fuels will be able to sustain the supply. The projected increase in global energy demand, particularly in the developing nations of Asia (such as China and India), as well as the economic and geopolitical implications of future shortcomings in the supply of oil and gas, are already creating serious concerns about the security of energy supply. Especially, the transport sector, which is still almost entirely dependent on oil worldwide and would be most vulnerable to supply shortages, is increasingly triggering the search for alternative fuels. The following chapter thus focuses primarily on the future avail-ability of fossil fuels in the context of the development of global energy demand and sets the scene for the possible introduction of hydrogen.
3.1 Projections on the future development of global energy demand
In the following, the past and future development of global energy demand and its composition will be briefly analysed. The energy balance methodology for primary energy demand of oil, gas, coal and biomass is normally based on the calorific content of the energy commodities. Depending on the statistical methodology applied, however, figures about world primary energy demand can vary greatly, not only with respect to the absolute demand, but also with respect to the shares of the different fuels, particularly renewable energies, whose share in 2002, for instance, ranged from 6.3% to 13.5% according to different statistics. This is mainly because of the quantification of electricity generated from sources that do not have a calorific value, such as hydropower, wind or solar energy.1Differences also result from the
1To calculate the primary energy equivalent of electricity generated from these renewable sources two methods are used.
In the partial substitution method, the primary energy equivalent represents the amount of energy that would be necessary to generate an identical amount of electricity in conventional thermal power plants, assuming an average The Hydrogen Economy: Opportunities and Challenges, ed. Michael Ball and Martin Wietschel. Published by Cambridge University Press.# Cambridge University Press 2009.
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evaluation of biomass and waste, especially traditional biomass (also referred to as non-commercial biomass) which includes fuels that are not traded commercially: fuel wood, charcoal, dung and farm residues. As the consumption of traditional biomass is very hard to assess and available figures show large discrepancies, it is often not considered in energy statistics, even though it can play an important role in develop-ing countries.
Figure 3.1shows a comparison of the composition of world primary energy supply in 1971 and in 2004 according to the International Energy Agency (IEA). It can be seen that the total world primary energy consumption has more than doubled since 1971, from 232 EJ to 468 EJ. Today, oil is still the dominant energy source: although its share decreased from 44% in 1971 to 35% in 2004, its absolute consumption increased from 102 EJ to 165 EJ. While the share of natural gas has increased from 16% to 21%, the share of coal has almost remained constant. In total, fossil fuels account for around 80% of today’s global energy supply. While nuclear energy was still insignificant in 1971, it contributes more than 6% to total supply today; this surge was mainly a result of the enforced construction of nuclear power plants following the first oil crisis in 1973 and 1974. The share of biomass and waste has slightly dropped, but still amounts to almost 11%; two thirds of this come from traditional biomass, which represents about 20% of total primary energy supply in developing countries, even though the shares differ from country to country (IEA, 2004). Other renewables, such as solar, wind or geothermal energy, still play a negligible role globally today with only 0.5% of total supply.
1971
Figure 3.1. World primary energy supply 1971, 2004 and projection 2030 (IEA, 2006), including traditional biomass for developing countries.
efficiency of ca. 38%. The physical energy content method uses the physical energy content of the primary energy source as its primary energy equivalent, which for electricity from hydropower, wind or solar energy is 100%; the share of renewables is accordingly smaller. For electricity from nuclear power both methods assume an average efficiency factor of 33%. Nowadays most international organisations (IEA, UN, Eurostat) have adopted the physical-energy-content method.
In 2004, the transport sector accounted for 47% of global primary oil consumption (58% of final energy consumption of oil and 18% of total primary energy use), compared with 33% in 1971. The share of oil in global transport energy demand has remained constant over the considered time period, at 95%. As for natural gas, the power generation sector has the highest share in the world gas market, amounting to 38% in 2004; for coal, this share was, with 68%, even higher (IEA,2006).
Figure 3.2shows the development of global primary energy demand since 1965, broken down into different world regions, as well as the projection until 2030 according to the IEA Reference Scenario (IEA,2006). Between 1965 and 2005, global demand has been steadily increasing by about 2.5% per year on average, showing only a slowdown during the first and second oil crises (1973–74 and 1978–79) and the Asian economic crisis (1997–98).
Until 2002, North America used to have the highest share in total world primary energy demand. In 2004, this share amounted to 27%, of which the USA had nearly 23%; the share of North America in world population, however, is only about 5%.
North America and the EU25 (17%) together made up around 44% of total demand in 2004, representing 16% of total population. The country with the highest share in primary energy demand in the EU25 was Germany with 3.1%, followed by France with 2.5%. As can be seen, around the 1990s, the breakdown of the Eastern bloc led to a strong decline in energy demand in that area. The increase in global energy use in
Total North America
Excludes traditional biomass for developing countries 0
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
EJ
Population 2004 2030
Africa 14.0% 17.8%
Asia 60.4% 59.4%
Europe 11.3% 8.5%
Latin America and the Caribbean 8.7% 8.8%
Northern America 5.1% 4.9%
Oceania 0.5% 0.5%
World total 6.5 billion 8.2 billion
Figure 3.2. Development of primary energy demand for different world regions since 1965 and demand projections until 2030 (BP,2006; IEA,2006; UNPD,2006), excluding non-commercial biomass for developing countries.
recent years has mainly been caused by the growing demand in the Asia Pacific region, where more than half of the world population lives, and which accounted for 32% of total energy use in 2004. China today is responsible for more than 40% of total demand in the area, followed, with a significant difference, by Japan, India and South Korea, altogether representing almost 80% of regional demand; the average annual growth rate in the region has been 4.3% since 1990, largely driven by China.
In contrast, the shares of Africa and South and Central America in world primary energy use amounted to 3.0% and 4.6% respectively only, while representing around 23% of world population. The Middle East region, with its major reserves of oil and natural gas, only had a share of 4.8%.
The most important recently published world energy scenarios looking at the future development of global primary energy demand with a time horizon 2030 are the World Energy Outlook (WEO) of the IEA (IEA,2006;2008a) and the International Energy Outlook of the US Department of Energy (EIA, 2008); the World Energy Technology Outlook (WETO H2) of the European Commission (WETO,2003;2006), the Energy Technology Perspectives of the IEA (IEA,2008b) and the Shell Energy Scenarios (Shell,2008) cover the time horizon until 2050. A complete comparability of these scenarios is not possible, as country groupings and other boundaries are not uniform. All in all, however, the scenarios depict a largely similar picture of the projected development of world energy demand as well as on the composition of the global energy mix. In the following, the IEA WEO 2006 Reference Scenario until 2030 will be representatively investigated in more detail. (The IEA WEO 2008 (IEA, 2008a) was published after the analysis in this book had been completed. Nevertheless, as the WEO 2006 and 2008 Reference Scenarios are not substantially different, (WEO 2008 forecasts a slightly lower growth in energy demand until 2030) the validity of the conclusions drawn in this chapter is not affected.)
AsFig. 3.2displays, global energy demand is expected to continue to grow until 2030, with 1.6% p.a.; however, to a lesser extent than in the period 1965 to 2005, with an average annual growth of 2.5%. This means that world energy use will increase by 53% until 2030. The rationale behind this forecast is the further growth of world population (from 6.5 billion today to more than 8 billion in 2030) and an assumed continuing growth of world GDP by an average of 3.4% p.a. (between 1971 and 2002, world GDP grew by 3.3% p.a.), particularly in transition countries such as China, India and Brazil (expressed in US$2005 purchasing power parity (PPP) terms). Over 70% of the increase in demand over the projection period is expected to come from developing countries, with China alone accounting for some 30%, thus shifting the centre of gravity of global energy use.
According to the IEA Reference Scenario, almost half of the increase in global primary energy use goes to generating electricity and one-fifth to meeting transport needs – almost entirely in the form of oil-based fuels. Regarding the relative shares of the different fuels in the energy mix, only minor shifts are expected (Fig. 3.1). Fossil fuels will remain the dominant source of energy, accounting for some 83% of the
overall increase in demand until 2030; the total share of fossil fuels is even projected to increase to 81%. The demand for oil is assumed to grow by 1.3% per year (from 81 million b/d to 116 million b/d in 2030), for natural gas by 2.0% and for coal by 1.8% per year. (The IEA World Energy Outlook 2004 assumed an increase of 1.6% for oil, 2.3% for gas and 1.4% for coal.) The share of renewables other than biomass is expected to remain marginal.
Global oil demand will increasingly focus on the transportation sector, which is responsible for two thirds of the demand growth, and in 2030 52% of primary oil use will be for transport (compared to 47% in 2004). More than 70% of the increase in oil demand comes from developing countries, which see an average annual demand growth of 2.5%. The IEA Reference Scenario further assumes that oil will remain the largest single fuel in the global energy mix until 2030 and continue to provide more than 90% of the energy demand for transportation. While the demand for natural gas grows the fastest in Africa, the Middle East and Asia, notably China, North America and Europe are going to remain the largest markets.
The power sector accounts for more than half of the increase in primary gas demand, increasing its share in global electricity generation from 21% in 2004 to 24% in 2030. Coal sees the biggest increase in demand in absolute terms, remaining the second-largest primary fuel. Power generation accounts for 81% of the increase in coal use, boosting its share of total coal demand from 68% in 2004 to 73% in 2030;
accordingly, coal is also going to keep its high share of more than 45% in global electricity generation. Most of the growth in demand comes from Asia, particularly China and India, which alone account already for almost 80% of the entire increase in coal use until 2030 (seeFig. 3.3).
Figure 3.4 shows the past and expected future development of global energy-related CO2 emissions for selected years, from 1971 until 2030 for the above-described IEA Reference Scenario. According to this scenario, global CO2emissions will increase by 1.7% per year over the projection period, from 26.1 Gt in 2004 to 40.4 Gt in 2030 (see alsoChapter 2).
On a country basis, the United States had, with 22%, the highest share in global CO2 emissions in 2004, followed by China, with 18%, and Russia, with 6%; the EU25 share was about 15%. Developing countries account for over three-quarters of the rise in global CO2 emissions between 2004 and 2030, with China alone being responsible for nearly 40% of the increase. Developing countries will become the biggest emitter, as their share in total emissions rises from 39% at present to 52% by 2030. Today, the power sector accounts for 41% of total CO2emissions, followed by the transport sector with 20% and industry with 18%. Power generation is projected to contribute almost half the increase in global emissions; transport around 20%.
While the power sector is expected to account for 44% of total emissions by 2030, transport remains the second largest sector, with its share of total emissions stable at around 20% throughout the projection period. Coal recently overtook oil as leading contributor to global energy-related CO2emissions (41% in 2004) and is likely to consolidate that position through to 2030.
0
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
EJ
Total South and Central America Total North America
Total South and Central America Total North America
Total South and Central America Total North America
Oil
Gas
Coal
Figure 3.3. Development of oil, gas and coal consumption for different world regions since 1965 and demand projections until 2030 (BP,2006; IEA,2006).
3.2 General classification of reserves and resources
The previous section outlined the future development of global energy demand until 2030, as expected by various world energy scenarios, of which the IEA Reference Scenario has been exemplarily discussed in more detail. With the major part of the increase in energy use projected to come from fossil fuels, the aspect of their long-term availability needs to be addressed. Given the natural limits of fossil energy resources, the question arises: to what extent and how long a worldwide steadily growing energy demand can be met, particularly by oil and gas, which are the most depleted fuels today. Hence, the consequences of the above demand scenario for the future availability of oil and gas must be investigated.2
To assess the future availability and lifetime of fossil fuels, their occurrences are categorised as reserves and resources. However, a wide variety of terms is used to describe energy reserves and resources, and different authors and institutions have different meanings for the same terms; meanings also vary for different energy sources (WEA,2000). Among the ways resources can be categorised are the degree of certainty that they exist and the likelihood that they can be extracted profitably. For explaining the differences and the boundaries between reserves and resources in a schematic way,
0 5 10 15 20 25 30 35 40 45
1971 1990 2004 2015 2030
Gt CO2
Rest
Transition economies OECD Pacific Africa Latin America India China
OECD North America OECD Europe
Figure 3.4. Development of energy-related CO2emissions (IEA,2006).
2The assessment and quantification of the remaining reserves and resources of fossil fuels is a very complex and broad field, characterised by a lack of internationally harmonised definitions and standards, great data uncertainties and discrepancies and, consequently, the potential danger of data abuse for political purposes. Within the scope of this publication, only an overview of the range of the currently available estimates of fossil resources is provided and the focus is rather on the general discussion of potential sources of uncertainty, than on a detailed assessment of the different methodological and statistical approaches and discrepancies at country or even field level.
the McKelvey diagram can be used, which presents resource categories for finite raw materials in a matrix with increasing degrees of geological assurance and economic feasibility (seeFig. 3.5). For the classification of renewable energy sources, seeChapter 5.
In the above classification system, resources are defined as concentrations of naturally occurring solid, liquid or gaseous material in or on the Earth’s crust in such form that economic extraction is potentially feasible. The geological dimension is divided into identified and undiscovered resources. Identified resources are deposits that have known location, grade, quality and quantity or that can be estimated from geological evidence. Identified resources are further subdivided into demonstrated (measured plus indicated) and inferred resources, to reflect varying degrees of geo-logical assurance and the ease of extraction of reserves. Reserves are identified resources that are economically and technically recoverable at the time of assessment.
Undiscovered resources are quantities expected or postulated to exist under analogous geological conditions and which could be recovered economically today or in the future. Other occurrences are materials that are too low-grade or for other reasons not considered technically or economically extractable. For the most part, uncon-ventional resources are included in ‘other occurrences’.
The boundary between reserves, resources and other occurrences is current. For several reasons, reserve and resource quantities and related supply–cost curves are subject to continuous revision. Production inevitably depletes reserves and eventually exhausts deposits, while successful exploration and prospecting add new reserves and resources. Price increases and cost reductions expand reserves by moving resources
Resources Resources
Sub-economic
Resources Reserves
Economic
Speculative Hypothetical
Probability range Indicated
MeasuredDemonstrated Inferred
Undiscovered resources Identified resources
Unconventional and low-grade materials Other
occurrences
Increasing geological assurance
Increasing economic feasibility
Figure 3.5. McKelvey diagram of reserves and resources (WEA,2000).
into the reserve category and vice versa. The dynamic nature of the reserve–resource relationship is illustrated by the arrows inFig. 3.5. Technology is the most important force in this process. Technological improvements are continuously pushing resources into the reserve category by advancing knowledge and lowering extraction costs. The outer boundary of resources and the interface to other occurrences is less clearly defined and often subject to a much wider margin of interpretation and judgement. Other occurrences are not considered to have economic potential at the time of classification. But over the very long term, technological progress may upgrade significant portions to resources.
Reserves of oil and gas are reported according to the deterministic or probabilistic approach. The deterministic approach refers to reserves (sometimes also called proved reserves) as those quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., on the basis of assumptions about cost, geology, technology, marketability and future prices; estimates of reserves change over time as those assumptions are modified. There is, however, no inter-nationally agreed benchmark or legal standard on how much proof is needed to demonstrate the existence of a discovery, and everyone seems to have his own definition of what is reasonably certain;3nor are there established rules about the assumptions to be used to determine whether discovered oil or gas can be produced economically (IEA,2004). This has created inconsistency and confusion about the amount of oil and gas that can be extracted economically in the long run, and attempts have been made to harmonise definitions and methodologies and to improve the transparency in the reporting of reserves.
The Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC) developed a probabilistic hydrocarbon-resource classification scheme, that takes into account the probability with which a reserve can be produced (SPE, 2007);4 but such a probabilistic assessment is also subject to a potential level of misinterpretation.5 Finally, as for resources, very few estimates exist, and those estimates that do exist are also subject to considerable uncertainty and the specula-tive character is even more pronounced than for reserves.6 BGR (2003) refers to resources as those quantities that are geologically demonstrated, but at present
3There is also no single, commonly accepted technical definition of (proved) reserves, and in the above definition many words are ambiguous and without any quantification; a major drawback of the deterministic approach.
4In the SPE/WPC scheme, reserves are classified according to the probability with which they can be produced into
4In the SPE/WPC scheme, reserves are classified according to the probability with which they can be produced into