Energy Transitions, Not So Fast!

Spread the knowledge
  •  
  •  
  •  
  •  

Summary

  • Three energy categories are defined: geological energy, vegetal biomass, and solar-derived energy.
  • Each individual energy paradigm can actually be traced back from the time of its first commercial use to the time of its peak relative demand, with wood, coal, oil, and natural gas peaking respectively in 1750, 1913, 1973, and 2020 (expected).
  • Since 100 years energy demand is growing linearly with human population at a rate of 24,000 TWh per billion of population
  • Economic progress is thus defined by improved energy production and efficiency, not by increasing energy consumption per capita.
  • If History is a guide total energy demand will grow from 159,000 TWh in 2019 to around 190,000 TWh in 2037 when global population will reach 9 billion.
  • The latest energy paradigm in the making is a slow and progressive transition from geological energy to solar-derived energy (solar, wind and hydropower).
  • By 2037, solar and wind energy combined shall contribute with about 20,000 TWh to approximately 10% to total energy demand compared with only 1.36% in 2019.
  • With high oil prices being the cure for high oil prices the prospect for fossil energy demand to recover in the coming years shall not come as too big a surprise following the coronavirus pandemic and the 2020 oil price crash.
  • By 2037 fossil sources (gas, oil, coal) shall add about 11,000 TWh of additional energy production compared with their combined 2019 level of 137,000 TWh.
  • All geological energy sources combined shall still cover roughly three-quarter of the total energy demand by the mid of 21st century.

Global Energy Sources

Every energy stakeholder is familiar with the cumulative energy demand of the world showing the absolute dominance of fossil energy sources (Fig. 1). From an historical perspective the global energy demand has only gone up since the dawn of human civilizations to reach an all-time record of about 159,000 TWh in 2019.

Figure 1: Global energy demand – Source: Our World in Data

Sources of Energy

For the purpose of the present assessment, we are taking a somewhat different view on energy sources than the usual categorization (Fig. 2) by splitting them into the three categories: geological energy, vegetal biomass, and solar-derived energy.

Figure 2: Energy categories.

Geological Energy

Every type of energy sourced from the interior of the Earth that:

  • Has been existing since its creation 4.5 billion years ago, i.e. nuclear energy from radioactive materials.
  • Formed by conversion of carbon-based plant and animal materials through the movement of geological masses (subduction) combined with internal influences (high pressures and internal heat) such as oil, coal, and natural gas.
  • Is generated through the conversion of geological friction mediated by tidal forces originating in gravitational influences (through the relative and cyclical movements of the Moon, the Earth and the Sun) into thermal energy, i.e. geothermal energy, mostly in the form of hydrothermal energy.

Solar-Derived Energy (Actual Renewables)

Solar-derived energy sources consist in the direct capture of radiative solar energy that became commercial in the 1990s thanks to concentrated solar power or photovoltaic energy technologies, or through weaker kinetic energy derivatives from the movement of air and water masses such as wind and hydropower. Although employed earlier in human history such as for sailing or irrigation (Fig. 3), wind and hydropower only became commercially widespread at large scale during the most recent decades.

Figure 3: Irrigation in ancient times | Credit: icid.org

Vegetal Biomass

Since the dawn of times the main energy source humans have used has been either their own muscle power or in a most recent addition the power from animals such as draft animals used in agriculture since at least 5,000 years. Although significant from an evolutionary perspective, realizing that domesticated animals draw their power from plants, and humans draw theirs from both plants and plant-eating animals, muscle power has not been a decisive factor in the growth of energy use by human societies as it could not be leveraged by being limited to the locally available, low energy yielding food supply. On the contrary a critical contributor in the growth of energy employed has been the invention of fire to directly convert the vegetal biomass, essentially in the form of wood, into thermal energy, that may go as far back as 2.5 million years ago when hominids may have learned to at least maintain fire.

Figure 4: Homo erectus using fire to make tools | Credit: Christian Jegou/Public Photo Diffusion/SPL

It is a more recent development to convert plant biomass into biofuels, such as biodiesel or ethanol. The vegetal biomass is made of carbon-based materials used in combustible applications that is formed seasonally as a weak derivative of solar energy. We thus ascribe both wood and biofuels to one and the same category, vegetal biomass. We can now take a look at the global energy demand according to the individual sources of energy (Figure 5).

Wood, the Historical Fuel since Fire was Invented, has peaked

Biomass-derived energy – essentially consisting of wood burning – may finally have peaked at the turn of the 21st century with a peak usage at 12,403 TWh in 2008 and now apparently plateauing below that level, whereas the contribution from modern biofuels (such as bioethanol and biodiesel), that is essentially mandated and subsidized, and for that reason may be double-counted with crude oil in many instances, has not been sufficient to compensate for the longer term decline of energy from biomass as a relative share below 12% of the total energy demand.

Figure 5: Energy demand by the type of energy source.

Fossil Energy Crushing Energy Demand

We observe that coal usage became the dominant source of energy during the industrial revolution when passing the 6,000 TWh mark, taking over from traditional biofuels at the turn of the 20th century. Coal demand may have peaked in 2013 at 44,954 TWh.

This is in contrast with the continuous increase in oil demand for energy following crude oil displacing coal as the main source of energy when passing the 16,000 TWh level of demand in the mid 1960s and holding firmly to its uncontested leadership role with a demand rising up to 53,620 TWh in 2019.

Natural gas has been playing catch up with its fossil peers demonstrated an unabated growth reaching almost 40,000 TWh in 2019. The pairing of hydraulic fracking with horizontal drilling that started a massive increase of natural gas production, only fifteen years back and essentially in the USA, is one of the main reasons for the globally shrinking demand in coal for energy worldwide, another explanation being China attempting to reign into massive hazardous air pollution, the trend to coal replacement being accelerated by its physical properties making it a poorer source of energy compared with oil, gas, and presumably renewable sources of energy as well.

Geological sources of energy are visibly crushing everything else but with nuclear energy being a special case since it appears to have peaked at 2,803 TWh in 2006 but now coming close to passing that level with a demand of 2,796 TWh in 2019.

By contrast the contribution of hydrothermal power is comparatively small with 652 TWh in 2019 but with a significant growth rate averaging above 6% per year since more than 20 years. Improving geothermal energy capture technologies such as geothermal heat pumps may be the reason for this robust growth.

Figure 6: A geothermal plant in Iceland | Universal Images Group via Getty Images.

Solar-derived renewables (direct solar, wind and hydropower as defined above) are cumulatively the fastest developing energy contributors growing in the aggregate at an average annual growth rate (AAGR) of 6% over the last decade, satisfying a demand of 6,376 TWh at the global level in 2019.

Energy Demand from Crude Oil has Peaked, Relatively Speaking

It is remarkable to observe that coal demand peaked as early as 1913 at a relative ratio of about 55% (down pointing black arrow on Fig. 7) and approximately 50 years before being dethroned by crude oil in absolute terms when both the oil and coal relative shares of the total energy demand crossed at 33% in the early 1960ies. In its turn crude oil appears to have peaked significantly lower than coal in relative demand terms, which happened 44 years ago in 1973, precisely the year of the oil embargo, and has since then declined from its 43.9% peak relative demand to exactly 33.8% by 2019 corresponding to an actual 23% reduction in its market share. Notably, it took 50 years for the crude oil market share to move down to the exact same level as when it took over market share leadership from coal.

Figure 7: Relative energy demand from wood, coal, oil, natural gas, nuclear & renewables.

Sluggish Oil Demand Growth, for Now

Crude oil still remains by far the predominant energy source to the world and nothing seems to be able to derail demand for oil from its growth trajectory in absolute terms, but the relative perspective presented in Fig. 7 tells a different story. In Fig. 8 (left) we compare the inflation-adjusted oil price with the oil demand annual growth rate (AGR) and its computed 10-year AAGR revealing that over the last twenty years the oil demand 10-Year AAGR has been around 1% (highlighted in yellow).

High oil prices appear to be a cure for high oil prices with soaring oil prices seeing the demand growth to plummet as a consequence and leading to lower oil prices. This correlation, although not perfect, is clearly identified when plotting the inflation-adjusted oil price against demand growth in a specific year.

With oil prices heading lower in a pandemic year and possibly remaining lower for longer, the prospect for the fossil energy demand to recover in the coming years shall not come as too big a surprise in contrary to the general policy-maker expectations and sustainability predictions of international agencies. Inflation-adjusted oil price is below $40 for the thirst three months of 2020 and although we cannot presume where it will end at year’s end the stage is set for a demand upswing once the dust of the economic crises has settled.

Energy Transitions are Accelerating

Each individual energy paradigm can be traced back from the time of its first commercial use to the time of its peak relative demand.

  • Thus, it is possible to envision that wood became traded early in the history of human civilization as soon as the division of labor and tasks specialization developed, probably several tens of thousands of years ago at least and it remained practically the exclusive source of energy until coal started to be used commercially, which can be traced back to the year 1750.
  • Relative energy demand from coal peaked in its turnaround 1913 (Fig. 7).
  • Crude oil became exploited commercially for energy for the first time in 1856 before peaking in relative terms in 1973 as we have seen.
  • Natural gas, although used earlier at smaller scale and locally, became a traded commodity when long-distance gas transmission became practical from 1927 on because of advances in pipeline technology. In 2019 natural gas relative share of energy demand was still growing but with the sharp coronavirus pandemic-induced demand drop of 2020 the question arises if this may have sealed the fate of the natural gas relative share of total energy demand or if the sector may become re-energized in the coming years, with natural gas demand growth expected to pass its 2019 peak demand (in absolute terms though) as early as 2021 according to the IEA June 2020 revised-forecast (Fig. 10).
Figure 10: IEA June-2020 Revised Natural Gas Demand Forecast to 2025

Therefore, an energy paradigm duration get shorter with time:

  • Biomass: tens of thousands of years to 1750
  • Coal: 163 years, from 1750 to 1913
  • Oil: 117 years, from 1856 to 1973
  • Gas: ongoing for 93 years since 1927

Fossil Energy Transitions

The comparative duration of an energy paradigm now makes clear that the global demand for primary energy proceeds via a series of successive technology-driven energy transitions. Total energy demand plotted on a semi-logarithmic scale as depicted in Fig. 11 now emphasizes the succession of bumps occurring at every transition period, from wood to coal, and from coal to oil, with the present day situation now having the look of another energy transition, a major structural shift in energy sourcing in the making.

Figure 11: The energy paradigm conundrum.

As global energy demand starts being reported on an annual basis from 1965 on episodes of demand drop intervening in the longer term uptrend become visible. Following the oil embargo of 1973 total energy demand practically stalled in 1974 but to rapidly resume its growth, then it actually declined after the oil price peak in 1980 but to recover and resume growth only three years later. The peaks and troughs of energy demand during the chaotic and stagflationary decade from 1973 to 1983 are coincident with the oil paradigm.

Annual declines in global energy demand are rare events running against the continuously rising energy demand on the longer timescale from the dawn of civilization and its acceleration over the last few centuries. The decline in energy demand during the 2020 coronavirus pandemic and global economic crisis shall become identified as another major event precluding to yet another energy paradigm.

The Geological Energy Paradigm

It is our expectation that the sum of geological energy (nuclear, coal, oil, natural gas and hydrothermal power) has now passed its peak share of total demand in 2012 at 88.7% of total energy demand, with biomass-derived energy still in decline despite biofuel developments and that may never pick up again, and the sum of renewable energy (wind, solar and hydropower) progressively but slowly displacing the historical fossil champions in the energy mix from their present 4% share of the total (with hydropower at 2.7% still the main renewable energy component).

Figure 12: The geological energy paradigm.

Although the shape of this transition remains highly speculative and the speed at which the crocodile may close its gapping mouth may not be as fast as generally envisioned provided the unfavourable starting conditions of the renewable energy share. The initial condition of renewable energy is in fact eerily like coal in 1830 with in both case a 4% share of the total. The coming transition may in fact very much resemble the displacement of wood with coal in the early ninetieth century and take many decades to unwind.

Exponential Trends

Technology transitions are typically made of a succession of individual S-curves adding up into a long term exponential curve, which is a typical characteristic of a longer term “exponential” growth trend.

Figure 13: S-Curves & exponential trend | Source: Singularityhub.com | Examples: our own

It should also be noticed that older technologies do not necessarily disappear but may instead simple lose significance or progressively become marginalized. Such is the case with wood burning, the oldest form of primary energy, and horse riding, the oldest travel mode, that we cannot fail to observe are still in use today.

How to Resolve the Modern Energy Paradigm Conundrum?

This is where we come to realize that the global energy demand trend shares a lot of similarities with other exponential trends of technological progress with successive shifts of paradigm stacking upon each other and with former champions still fighting in minor leagues.

As a consequence, therein lies the expectation for energy demand to pick up again after a transition period during which a relative slowdown of the growth rate may be observed over the next few years. This is very well explained by the cost improvements brought about by every new technology transition that accelerates the adoption of an emerging technology that subsequently grows to a larger scale than more expensive, previous technology generations.

Figure 14: The latest energy paradigm iteration means that energy demand growth shall pick up again.

Population Size Matters

Energy demand is intrinsically related to population size that is expected to grow to 9 billion by 2037 and 10 billion by 2055 (Fig. 15) by combining data from Our World in Data and from the UN Department of Economic and Social Affairs.

Figure 15: Historical and predicted world population.

In Fig. 16 it appears that the apparent exponential growth in energy demand is actually an artifact finding its origin is the linear correlation between population size and global energy demand. From the onset of the fossil fuels era it is observed that from 1920 to 2010 the global demand for primary energy rose from 20,000 to 140,000 TWh while the world population grew from 2 to 7 billion (Fig. 16), meaning that for every billion of population an average of 24,000 TWh of energy consumption were added.

Figure 16: Energy demand is growing linearly with population size for 100 years.

Thus, we have to admit that for 100 years mankind is NOT increasing its average per capita consumption of energy but rather that economic progress is the consequence of improved energy usage. Continuous technological progress in the energy landscape and ameliorated energy efficiencies will not result in less energy consumption as commonly predicated but to continued growth of the energy sector in lock steps with the global population increase. If History is a guide, then we should expect the average energy demand of the World to reach approximately 190,000 TWh when the population count of 9 billion is reached by 2037.

The Next Energy Challenger

If crude oil is going to be challenged then energy sources displaying exponential growth characteristics should be considered to potentially become a future energy champion (or champions). This is now represented in Fig. 17.

Figure 17:  Identifying relative energy growth trends.

Geological Energy Candidates

Nuclear energy may turn out to be a false challenger as it never exceeded 2.34% of the global demand for primary energy, continuously lost energy market share over the ensuing years, and is now back at 1.76%. Not only very long nuclear projects lead time, the largest project expenditures, and the timescale for their deployment, but also public fears and their corollary, institutional barriers, have hampered the development of nuclear energy technology despite being one of the most reliable source of energy over the long lifetime of nuclear plants approaching 40 years and that could probably be extended to 40 more years. With the share of nuclear energy virtually flat (Fig. 17) in the energy mix it remains to be seen if it could regain strength on a longer timescale.

Figure 18: Hinkley Point C (HPC) is the first nuclear power station to be built in the UK for a generation | Source: laingorourke.com

Natural gas has been growing at an AAGR of 3% over the last decade – almost three times higher than the growth rate of oil (for energy). Although the sheer size of natural gas production capacity additions in excess of 10,000 TWh from 2009 to 2019 will be reminded as the major event of the past decade in the energy landscape, its growth has been barely incremental as the result of progressive process improvements and technological optimizations. Since natural gas demand has been badly hurt by the 2020 economic crisis there will be little leeway for a re-acceleration above the rate of the 2010s, and we shall expect its share of total energy demand to plateau in the years ahead.

Hydrothermal power is growing linearly since 1970 with its share of total demand doubling approximately every 14 years. With a share of 0.41% in 2019, it is not going to have any major impact for decades to come.

Renewable Energy Candidates

Among renewable sources of energy, hydropower is surprisingly the largest contributor of total energy demand with an almost 3% share of the total whereby solar is standing at 0.456% and wind at 0.9% respectively. The striking difference is that hydropower displays a low growth rate and a flattening share of total energy demand by remaining stuck below 3% after passing the 2% mark 30 years ago.

Figure 19: Three Gorges Dam, Yangtze River, China | Via industrytap.com

By contrast, solar and wind are the two most dynamically growing energy sources with their respective share of the total energy demand rising steeply since they became commercial by the start of the 1990s with hockey stick-like growth curves although none of them has crossed the 1% mark by 2019 with solar standing at 0.456% and wind at 0.9% of the total demand respectively.

Solar and Wind Energy Growth Slowing

Most solar energy is generated with photovoltaic (PV) panels, producing 20 times more energy than Concentrated Solar Power (CSP) technology in 2013. We capture the growth of annually installed PV plotted on a semilog chart by cross-referencing capacity data from multiple sources such as the IEA and Powerweb to identify that PV panel installations have roughly been multiplied by ten every six years on average since the early 1990ies, which is typical of an exponential growth. The 170 GW figure for 2020 is averaged from multiple forecasts and the expectation of a robust growth rate over 2019 despite the economic environment with ITRPV estimating that there is more than 200 GW of solar module production capacity in first half of 2020.

Figure 20: Annual Installed PV Power from 1992 to 2019 and 2020 estimate.

Since 2010 new PV installations growth has shifted lower so that the initial long shaft of the hockey stick may have run its course with new installations now growing by a factor of ten every thirteen years instead of six initially meaning gradual erosion of new solar PV installation growth rates as they are deployed at higher scale.

If the growth curve depicted in Fig. 20 is confirmed, then the cumulative solar PV power shall be expected to increase according to the shape tentatively plotted in Fig. 21., crossing above 10,000 TWh by the mid 2030ies from around 800 TWh in 2020, an impressive expansion by any metrics.

Figure 21: Cumulative PV Power and forecast to 2040.

Solar and Wind, the Twin Brothers of Electrification

With wind slightly ahead of solar in terms of energy demand market share (0.9% vs 0.46%) and displaying a similar growth curve to solar but a lower growth rate both wind and solar energy combined have reached 1.36% share of global demand for primary energy by 2019, and they should add a significant portion of total energy demand in the decades ahead that we can tentatively plot as shown in Fig. 22.

Figure 22:  Solar + Wind Relative Share of Total Energy Demand

Very roughly their combined share of total energy demand should cross the 10% mark by the mid-1930s, which can be reconciled with our demand forecast of 190,000 TWh by 2037 with solar and wind combined energy production expected to reach about 20,000 TWh.

Another Energy Paradigm

Solar and wind became commercially ‘significant’ for the first time in 1993, which may mark the day the ‘Renewable Energy Paradigm’ was born and supported by the stunning drop in the cost of electrification with renewable energy, with solar energy now becoming the cheapest options in many parts of the world for electric power generation even when compared with gas-powered combined cycle power plants.

Figure 23: Renewable Energy & Battery Storage LCOEs | Source: Bloomberg NEF

The renewable energy paradigm that began in the 1990s will now probably run for many decades:

  • Biomass: tens of thousands of years to 1750
  • Coal: 163 years, from 1750 to 1913
  • Oil: 117 years, from 1856 to 1973
  • Gas: 93 years, from 1927 to 2020 (?)
  • Solar + Wind: 30 years, ongoing since the early 1990ies

Fossil Fuels Rivalry

With the World demand for primary energy expected to reach 190,000 TWh in 2037 from 159 TWh in 2019 there will still be a gap of roughly 11,000 TWh that only fossil energy sources could fill and while declining in relative terms, there will still be capacity additions from the fossil fuel industries that will by far remain the major source of energy the world relies upon with all geological sources still covering roughly three-quarter of the total demand by the mid of the century.

Conclusion

The cost reduction trends of wind and solar energy set the stage for the next major energy demand upswing that we expect to reach 190,000 TWh by 2037 – or 24,000 TWh per billion of population – and to make about 10% of the total. Geological energy sources will cumulatively continue to grow driven by natural gas, oil, and to lesser extent hydrothermal power, but with coal and nuclear power displaying subpar growth trends. In absolute terms geological energy generation will retain its absolute dominance for many decades but will see its market share being progressively eroded electrification from renewable energy generation. Biomass usage for energy production is in a longer term declining trend thus putting an end to hazardous wood burning that is plaguing the poorest populations with no access to modern energy sources, and with no sign that biofuels could stop and reverse this decline. Energy will become more abundant and cheaper within the next two decades with complementary efficiency improvements throughout all sectors accelerating the trend towards more aggregate consumption, not less.

The article was previously published by the Author on LinkedIn.


Spread the knowledge
  •  
  •  
  •  
  •