New Technologies & Energy Efficiency - A Continuing Saga.

The following are excerpts from a presentation to the 14th Annual APS Conference, Middle East strategy to the Year 2013, held in Nicosia on Oct. 9-11, 2000, by Antony Scanlan, of the British Institute of Energy Economics.

"This paper is not an econometrics paper. Neither is it solely concerned with sectoral analysis of each major energy user such as road transport, although these do figure in the text. Neither is it concerned with forecasting the efficacies of new technologies in the energy world.

"The aim is broader. It takes as its starting point the oil crisis of 1974 when energy efficiency moved from a subject of interest only to certain manufacturers to the top headlines of the world media and government agendas. Energy efficiency was seen as the only way to avoid the perceived shortage and six-fold price increase of the principal source of world energy - crude oil - from slowing down world economic growth. In the context of that time 'energy efficiency' included anything and everything that could relieve the stranglehold of oil supplies.

"To recall briefly what I refer to as the 'context of that time', 25 years ago, the world after the Second World War had enjoyed sustained economic growth rates - led by what became the OECD countries - of about 5% annually. Support for this was provided by the discovery and development of oil - mainly in the Middle East - which enabled oil to overtake coal by the mid-sixties as the major source of world energy. Energy grew at the same rate as the economy and this one-for-one relationship became accepted as the bedrock for post-war modern industrialisation.

"And every nation wanted to industrialise; the western powers in OECD and the communist powers saw industrialisation as their arena in which to demonstrate who had the best system. The ending of empires and the emergence eventually of 200 independent nations added to the competition to modernise and industrialise.

"The mood was one in which nobody looked over their shoulder to ask if this growth could continue. Not until the events of the early seventies in the world oil market, when the quadrupling of the oil price in 1973 resulted in a halving of world economic growth. At that time a deep depression set in, that the one-for-one energy relationship was now a shackle on the economic progress that had previously been taken for granted. Fear of unemployment and of inflation undermining the post-war recovery, threatening a return to recession, political instability and the rise of dictatorships experienced in the thirties, made governments reluctant to even admit that the rates of growth could fall so sharply. They had to maintain growth in the economy above the level at which political subversion might arise.

"So if oil supply could no longer meet the one-to one at 5% energy efficiency must be improved to break out of the one-to-one relationship and allow demand growth to resume growth.

"With hindsight, how successful was this break-out, is it still sustainable today and what can we expect in the next quarter of a century?

"The elements available in 1973 could be divided into (1) alternative supplies to oil, (2) more efficient use of energy, and (3) 'conservation'. While there is a conservation element inherent in greater efficiency, the separating out of conservation as an extra counter-crisis measure was aimed at changing society to develop life-styles which avoided the need for energy consumption altogether or in very large measure. These linked rapidly to the environmental or 'green' movement which was also arising at that time concerning the use of chemicals in agriculture, over nuclear issues and congestion in the urban environment.

"The structure of this paper is to look at the three factors over the past 25 years and compare them with expectations of the next generation. The question posed all the time is the 1973 question - can we adapt from over-dependence upon oil in order to maintain economic growth?

Firstly, therefore, the bare facts. The consumption of total energy in 1973 compared with last year,1999, was as follows:-

                    1973     1999
Oil                 2765     3465     + 700
Gas                 1065     2065     +1000
Solid Fuels         1740     2140      +400
Hydro                110      230      +120
Nuclear               20      650      +630
TOTAL               5700     8550     +2850

"The increase in oil is only one-quarter of the total at 400 million tons (8mbd). The previous growth of 8mbd in oil had only taken four years. Contrast that with the growth of over 2 billion tons of non-oil fuels in the last quarter of the 20th Century (in oil equivalent terms) - 70% above the 1973 level. In 1973 oil had been providing virtually all the energy growth: if this had continued to the end of the century world oil demand would have doubled after 1973, instead of rising by only one-third.

"Oil reserves have been more than maintained; from 635 billion barrels proven in 1973 to 1035 at the beginning of this year. Given that we have been consuming oil at about 25 billion barrels annually, virtually the entire volume of 1973 reserves has been exhausted; yet the R/P ratio has improved from 29 to 41 years. While the major oil provinces in the world have probably now been delineated, several of them remain at any early stage of development.

"Even more impressive has been the advance in recovery factors including the higher percentage of drilling success due to pre-drilling techniques and offshore engineering technology barely conceived of in 1973. BP always states that its proven reserves estimates are based on current economic and operating conditions and both of these, the cost and the techniques, especially the offshore capabilities, have made seminal advances. This has been good news for mature fields and frontier areas. We can expect more in future.

"In the second category, alternative sources to fossil fuels, progress has been slower and nuclear controversy and costs remain problematical. Hydropower is fully developed in many key regions and renewables have yet to make the big time.

"Nevertheless, in terms of the basic premise, the world has continued without the previous level of dependence on oil; oil reserves and oil prices have been maintained at better economic levels than ever, the world has grown in population from less than 4 billion in 1973 to 6 billion by October 1999 and living standards per country and per capita have increased so that the world has doubled its economic wealth by most measures.

"And yet, at the end of the day, the two key sets of numbers have stayed in the one-to-one correlation. Between 1973 and 1999 both world population and world energy use rose by 50%. For each unit of population, each human being still brings one extra unit of energy demand with him/her.

"Why is this? Does it mean that there have been no technological improvements in industrial motors' energy efficiency, or more energy efficient buildings. We know that there have been - but rising population and rising living standards, while a marvellous achievement for the extra two billion now added to the 1973 level of world population, come at an energy price.

"At first the higher prices acted as a deterrent to wasteful uses of energy but, as the new situation became more commonplace, old habits crept back. The USA car market, while it did largely get rid of the 'gas guzzler' is still fond of larger vehicles than any other part of the world finds necessary. But if the price of gasoline per gallon is no more than the cost per litre elsewhere this is not surprising. The petrol economy of Volkswagen new cars - the Formel E range - was the banner headline for selling new models in Europe about 1980.

"Now in Europe no manufacturer or customer pays much attention to the fuel economy aspect when considering how to promote a new car. And we read of new supermini vehicles that will achieve up to 100 kilometres per gallon but we then spend most of the time in them in congested city streets: in London the horse cabs at the beginning of the century could cross the metropolis quicker than the motorised taxicabs today. Even on the open road we drive with the windows or roof open unlike the streamlined test prototypes.

"It is true that in aircraft manufacture one of the problems for Russian aviation sales is that their legacy of cheap energy in Soviet days makes them up to twice as expensive per passenger to fuel than US or Western European designs. I attended a presentation by Lufthansa not long ago in which they showed how much more fuel efficient their airfleet is now compared with a decade ago; and then showed the actual performance records. All the technical efficiency was offset by stacking delays over congested airports.

"Regulation and building standards have been a more permanent method to introduce energy efficiency into the construction sector than reliance upon price as a short-term deterrent. But to retrofit or rebuild our major urban areas now that the whole world has followed the trend to live in cities and not on the land is a very slow process indeed, and it is not dictated by energy efficiency when it is implemented but primarily by other factors - clearance for new transport throughways for example- The violent dislike of high rise apartment blocks means that these, rather than older stock housing, will be priority for replacement.

"Ocean freight and railways have been one aspect where modern vehicles have become much more energy efficient as diesel replaced earlier models. But the total energy used is not a major sector.

"Electricity is a much more significant user and here there has been substantial advance with the move away from oil and to some extent from coal to the new gas combined cycle technology, with efficiency improvements of over one third and the ability to move downmarket in smaller generating units with less transmission losses. This and the wider availability of natural gas is a major success.

"The freedom from state dominated systems to even allow major users in the industrial or urban complex to generate their own power and/or buy on the open market rather than tied to long term monopoly suppliers have all added to the growing ability to use the gas and electricity markets to emulate the oil market by giving it its freedom. There are countries where much remains to be done but the example from those leading the way is unavoidable.

"This mention of the CCGT technology arriving and coupled with new market freedoms gives me a bridgehead to the third category of energy efficiency that I referred to at the beginning as 'conservation'. The difficulty with the second category 'energy efficiency' in the sense of technological improvement, is that it is generally all supply-side generated; new efficient cars, power stations, buildings, aircraft, industrial boilers, but at the end of each restocking of the world market - let us take for example the new efficient breed of small cars - rising population and living standards/purchasing power means that the greater demand makes it difficult to phase out the old ones from the resale market (aircraft are a good example here).

"Moreover, at the (notional) point where the new car has completely taken over, the next model sold will be back once more to the one-to-one relationship - end of fuel saving correlation improvement. The same with houses and every energy use.

"Conservation, however does not work on price or technical modernisation at the micro-economic level. Or more correctly it may do, but the novel feature here is that it works from a principle - sometimes cynically described as saving the planet - but it is a social or policy structural shift that can have major consequences for the way we draw together the essentials of life in a way that avoids traditional energy use and therefore can break the mould of the one-to-one relationship instead of just chipping away at the growth (essential as that is).

"I am not advocating withdrawing to a vegan life of meditation in order to do this because admirable though that may be for the individual I do not see a major part of society being willing to take it on as a lifestyle: and we need major shifts if the global energy balance is to be shifted or decoupled significantly.