Friday, July 18, 2008

Energy Demand - Just because we want it, doesn't mean we are going to get it!

Listening to a podcast on the solution to the energy problem (nuclear in the case), I was increasingly frustrated by the fundamental assumptions the speaker was making about the future that are dubious if not plain wrong. So at a future date I am going to do a blog on all the assumptions, often unstated, that are being made in the energy area. These include, oil production will continue to increase (Internation Energy Outlook for 2008 EIA), mix of energy types (liquid/gas/electric) will remain about the same, energy production will continue to be largely centralised, no new technology that can significantly effect supply or demand, the future will continue the trends of the past and for this post, energy demand will continue to grow at current rates.

(Note that graph does not seem to match with text in EIA report:
Total non-OECD energy demand increases by 85 percent in the IEO2008 reference case projection, as compared with an increase of 19 percent in OECD energy use. The robust growth in demand among the non-OECD nations is largely the result of strong projected economic growth. In all the non-OECD regions combined, economic activity—as measured by GDP in purchasing power parity terms—increases by 5.2 percent per year on average, as compared with an average of 2.3 percent per year for the OECD countries.)

For energy demand to continue to increase at this rate, the assumptions underlying this are:
  • demand = consumption
  • consumption is met by energy producers
  • increasing demand/consumption requires additional energy generation capacity
The first assumption under this heading, is that energy demand equals energy consumption. In the past the market has been able to match demand by increasing production. The whole point about peak oil is that production cannot be further increased and therefore there may be a demand there, but it cannot necessarily be met.

The second assumption is that there will continue to be a centralised model of energy supply. Large power stations or windfarms put electricity onto the grid and the consumer takes electricity from the grid. Large oil companies supply liquid fuels to filling stations. Gas companies move gas along pipelines to point of use. Distributed power generation is increasing with small generation also feeding into the grid, but micro-generation can bypass the grid altogether, feeding direct to an appliance or into a buildings supply. Farmers are growing their own biodiesel and having it processed locally. It is therefore possible for energy consumption to increase but for demand for energy from suppliers to decrease.

For our lifetimes, energy has been cheap. So cheap that we can afford to waste it. Electricity suppliers have been forced to meet our demands to use as much energy as we want whenever we want. This leads to huge peaks and troughs in demand both an a daily, weekly and seasonal basis, and sudden peaks such as the end of a the World Cup Football when all the kettles go on. Variable pricing and smart metering is starting to be introduced and the effect of this will be to allow us to make use of energy when it is cheap (and plentiful) and defer use when it is expensive. We can run our washing machines when it is windy and cheap, rather than waiting to run out of clean clothes. Businesses can top up their refrigerator plant on windy nights and shut them down quickly in the case of sudden peaks of electricity demand. Petrol has been so cheap that we can afford to lose 80% of it's energy in heat and friction in the combustion engines that drive our cars, electric cars are inherently more efficient, even including losses from electricity generation (see

We have an insatiable appetite for cheap energy and my long term view is that we will work out how to harness the abundant energy that surrounds us. In the future we will be able to generated energy when we want it and where we want it. Each machine will create its own energy and maybe our homes will be their own mini-grid. The national grids will become a phase in history and energy demand and energy consumption will only be of interest to academics who must estimate our usage.

But I do not expect to see that in my lifetime! In developed countries, in the short term, I expect to see the need for large scale additional energy production decline because:

  1. Production from power plants will be used more efficiently. With smart metering, variable pricing, intelligent homes and demand response we can flatten the peaks and use up the troughs.
  2. The price of energy is reaching a tipping point where it is eating into peoples disposable income. People will be actively looking for ways to reduce their energy use by reducing waste and using costly energy more efficiently - sales of SUVs are falling, more is being spent on home insulation etc.
  3. Innovation around energy use in products will significantly increase their efficiency. It has not been cost effective until now to spend significant money on R&D in this area. Once product designers start looking at the way products use energy as a whole, rather than just increasing efficiency of existing technology, significant gains can be made. The promise of nanotechnology is to create minute motors that use far less energy and increase the efficiency of energy generation. This might mean shaking a laptop once an hour to generate enough energy to run it!
  4. Micro generation is becoming affordable, reducing demand from the grid.
  5. Repair rather than Replace. As it becomes more expensive to make disposable products because of the increase in price of energy to make and distribute products and the increasing price of feedstock (plastic is made largely from oil), companies will move towards designing products for repair. This is already happening as insurance companies seek to repair instead of replace on claims. Repairs, especially with development of small scale fabrication equipment mean components can be manufactured locally, and this will require less energy.
(I have to say I am not 100% convinced of my own argument that we won't need additional large scale generation plant - but I want to throw it out there just to challenge assumptions that are being made.)

Developing countries have the opportunity to avoid our wasteful mistakes but also have different challenges:
  • increasing population - fertility rates in developed countires are generally less than replacement, which is about 2.33 but depends on the country. See league table here and article in wikipedia
  • need to address poverty - increasing standard of living for the poor requires more energy.

So while some of the factors for developed counties hold true, energy consumption will certainly increase if economic conditions allow. However, some of this consumption could be from locally produced supply.

China's consumption of energy is growing rapidly and 70% of it from Coal. World energy production will be heavily influenced by what happens in China. It is not clear to me what proportion of China's energy is used in producing goods for export, which will suffer a downturn should energy production and transport costs become high enough to make local production cheaper. eg. foods and other perishables. If there is also a move to repair rather than replace, what will this do to energy consumption? There is an overview of China and energy here: and I would be interested to hear from anyone with more information.

There is one final assumption - that the world economy will continue to grow. Just because it has done during our lifetimes, does not make economic growth inevitable. If we have a world recession, there is a whole different scenario, but shhhhh, don't say anything because if you do, it might happen.


Phoebe Bright said...

Interesting article from Tom Raftery at that relates to both this post and the one from OC BBQ.

Talks about how ITC can reduce carbon emissions. Quoting from a Climate Group Report:

1. Smart motor systems - optimised motors and industrial automation would reduce 0.97 GtCO2e [0.97 giga tons CO2 emissions] in 2020, worth €68 billion ($107.2 billion)
2. Smart logistics - global savings from smart logistics in 2020 would reach 1.52 GtCO2e, with energy savings worth €280 billion ($441.7 billion)
3. Smart buildings - smart buildings technologies would enable 1.68 GtCO2e of emissions savings, worth €216 billion ($340.8 billion) and
4. Smart grids - smart grid technologies were the largest opportunity found in the study and could globally reduce 2.03 GtCO2e , worth €79 billion ($124.6 billion)


Wag the Dog said...

1. Production from power plants will be used more efficiently.

This requires an infrastructure upgrade which itself uses up energy but this is a one-off. Then there's the rebound effect to worry about. If this boost in efficiency saves people significant amounts of money, they will spend it on more energy intensive activities (trips around the world, big screen plasma TVs, etc)

People will be actively looking for ways to reduce their energy use by reducing waste and using costly energy more efficiently

But it is a bit of a Prisoner's Dilemma. The early adopters of efficient technology incur a significant penalty since the price of new technology is expensive (only mass adoption brings down the price), but thanks to their reduced energy demand the price of energy drops for everyone who in turn feel less pressure to switch. The energy system has a lot of inertia.

The promise of nanotechnology is to create minute motors that use far less energy and increase the efficiency of energy generation.

You're starting to sound like a one of those Singularity believers. Ray Kurzweil loves to cite nanotechnology whenever he downplays global warming. It's basically a race between peak energy and the geek rapture.

4. Micro generation is becoming affordable, reducing demand from the grid.

Renewable energy accounts for a small percentage of total energy usage and microgeneration only a tiny percentage of that. Will microgeneration allow this to be scaled up at a rate to match declines in oil/gas? Can nuclear? There are a number of issues to look at: cost per kilowatt hour, commissioning time, and amortised cost of installation over lifetime, cost of decommissioning.

5. Repair rather than Replace.

Again you're dealing with a consumerism based economic system with lots of inertia. The Story of Stuff explains this well -- a repair based society is completely antithetical to what we have now. Such a transition cannot happen overnight, but how much time do we have, really?

Recall that Peak Oil is less about the end goal not being possible. The scenario you outline is definitely feasible. It is more about the journey to get there and the many hazards along the way.

Phoebe Bright said...

wag the dog, I agree with where you are coming from on this. I think that there is a huge amount of inertia to overcome to change the way we generated, distribute and use energy but when people have a personal need to make changes and have the ability to do so, we can do so incredibly quickly. Response during previous oil crisis was rapid and inventive, but once the need had gone, people quickly slipped back into their old ways.

Re nanotechnology. I don't wish to sound as though this technology is just around the corner, but progress is being made and it certainly holds promise for the future - how long depending to a great extent on the state of the economy and funding available for research which does not deliver immediate benefit.

If we can deliver demand response (real time electricity pricing coupled with automated swithing on and off of devices according to price) we could see very rapid gains in efficiency without any changes to the grid infrastructure. I have some ideas on how to do this a low cost which I will publish soon.

Micro-generation, if you include solar thermal and ground source heat pumps, is already spreading rapidly, though I would be interested in seeing studies on how much is actually being saved in terms of fossil-fuels. Windmills and micro-turbines are starting to appear as well. I agree with your view on people just using more with increased efficieny in a business as usual scenario, but with prices rising rapidly we may see the opposite effect. As people start to include efficiency tools and micro generation in their own homes and businesses they become more aware of how much energy they are using and are much more likely to waste less.

Re Rapairs - again, in a business as usual scenario I think you are spot on, but all that can change very quickly if people cannot afford to replace goods. If new businesses spring up offering the ability to repair items, the old stalwarts are not going to stand by a lose their market. They will adapt to produce whatever will sell and that business model might be very different from 'pile it high and sell it cheap'.

Re the journey, Later this year I will be working with Richard Douthwaite to update the work we did at, and look at three scenarios to do with the timing of transition. One where we move rapidly and can maintain a positive economy. One where we leave it 5 years before making serious change and one where we leave it so long we have few resources with which to adapt. More later...

Thanks for your thoughtful comments . It's great to be challenged!