Pathways to Environmental Solutions (Part I)
What three hard truths must we understand in order to combat the world’s energy challenge?
October 15, 2007
The energy challenge is best understood in terms of “hard truths.”
The first hard truth is that global demand for primary energy is not just growing, but that demand growth is accelerating. The main causes are population growth, from six to more than nine billion people worldwide by 2050, as well as higher levels of prosperity, with China and India in particular entering the energy-intensive phase of their development. Energy use in 2050 may be twice as high as it is today, or higher still.
The second hard truth is that the growth rate of supplies of “easy oil” will struggle to keep up with accelerating demand. Just when energy demand is surging, many oil provinces are going into decline.
The third hard truth is that continued fossil fuel dominance in combination with a disproportionaly high use of coal will cause higher CO2 emissions, possibly to levels scientists consider irresponsible.
This is a pretty grim picture. And it would indeed be easy to be discouraged. What are the “solution pathways” that both enhance energy security — and help us to manage emissions?
The first and most obvious solution pathway is energy efficiency. In my view, energy efficiency has two closely related components. One is energy conservation, the other is energy performance.
Energy conservation essentially means that we don’t use energy unless we have to — or use as little of it as possible.
It involves simple decisions and choices for each and every one of us. Billions of energy consumers make tens of billions of small decisions each day to either use or save energy.
In many cases, people opt for what is most convenient. But there is another side to human nature — the desire to overcome obstacles and improve our performance.
And we must improve our performance — for our own sake and that of future generations. Sustainable development requires sustainable consumption.
Governments may have to stimulate behavioral change through education, incentives, taxes and regulations.
The role of industry will be to offer solutions that help people to save energy in a convenient way.
Energy performance is about getting the most out of the energy we use. Each day, the world generates 225-230 million barrels of oil equivalent in primary energy. Less than half of that is used in a productive way.
In an average car, about 20% of every unit of petrol goes into moving a car forward, while the rest is lost as heat. For an aircraft during take-off, the figure is around 8%.
And only 35% of coal burnt in many existing power plants becomes electricity. The rest, again, is lost as heat.
The law of thermodynamics dictates that there are limits to how much we can improve our performance in burning fuels. But we must improve — and we can.
In the area of road transport, where most of the world’s oil is consumed, we are looking for more light-weight and aerodynamic vehicles, with more efficient engines and clean, high performance fuels — be it diesel or gasoline — synthetic fuels like gas to liquids, biofuels, electricity, hydrogen, compressed air, or any of these combined.
It can be done. A few years ago, Volkswagen’s then chief executive Ferdinand Piëch averaged less than one liter per 100 km when he drove an extremely light and aerodynamic diesel car from Wolfsburg to Hamburg to join his company’s shareholders meeting.
The vehicle fleet in the European Union is already nearly 40% more efficient than that of the United States, thanks mainly to higher taxes, which have driven greater car and engine efficiency.
If U.S. cars were as efficient as European cars, this could cut U.S. oil consumption by nearly 3.5 million barrels a day — or the equivalent of the combined daily oil consumption of France and Britain!
The global residential sector is another candidate for huge efficiency gains. It is the largest consumer of energy, with 25% of global end-use demand.
So what else can be done? Take the insulation of homes. In the Scandinavian countries, it is pretty common for houses to be equipped with triple-glazed windows. But elsewhere in Europe, and in other parts of the world, millions of homes are still to be equipped with double-glazing.
A recent McKinsey report argues that, by implementing high-insulation building shells, compact fluorescent lighting and high efficiency water heating, the energy demand growth in the global residential sector could be more than halved, from 2.4% per year to 1% per year.
A third candidate for better energy performance is the electricity generation and distribution sector. While thermodynamics imposes limits, the world would benefit from a higher churning rate of coal-fired power plants. New plants tend to have higher combustion temperatures to burn coal more efficiently. With new plants, efficiency typically goes up to more than 40%.
Moreover, if you equip new power plants with gasification technology, you can further improve their efficiency. Power plants equipped with coal gasification technology typically consume less water and produce less ash and solid waste. They also have lower emissions of CO2 — and much lower emissions of sulfur dioxide, nitrogen oxide and particulates. They also enable the pre-combustion capture of a relatively pure stream of CO2, facilitating CO2 sequestration.
As an illustration of what greater efficiency in the power sector can do, the International Energy Agency says that if China’s stock of coal plants had the same efficiency as the average plant in Japan today, China would use 20% less coal.
Building new plants and introducing new technologies comes at a price. So societies will have to strike a balance between higher capital and operating costs on the one hand — and energy security and fewer emissions, and therefore lower environmental and health costs, on the other hand.
Regarding electricity distribution, another way to improve efficiency in the power sector is to stimulate combined heat and power. Finland, for example, has over a third of electricity and around 80% of heat being co-generated — rather than generated separately.
The concept can be extended to refineries. A good example is Shell’s Fredericia refinery in Denmark, one of the most energy-efficient refineries in the world. Shell sells the surplus heat from the refinery as district heating to three cities in the vicinity. Downtime for maintenance at the refinery does not cause problems because the customers have multiple suppliers.
Another good example is the U.S. state of New York, which has roughly 5,000 MW of combined heat and power capacity installed — and is actively looking for ways to expand that capacity.
Editor’s note: This article is adapted from a speech given by the author at the Finnish Academy of Sciences on August 31, 2007.
Read Part II here.
Chairman, Royal Dutch Shell Corporation Jorma Ollila has been Chairman of Royal Dutch Shell plc and Chairman of the Board of Directors of Nokia Corporation since June 2006. Previously, he served as Chairman and CEO of Nokia (199-2006). He joined Nokia in 1985 and later became President and CEO, a position in which he held […]