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CLOSE THIS BOOKWorld Energy Assessment - Energy and the Challenge of Sustainability (UNDESA - UNDP - WEA - WEC, 2000, 517 p.)
PART II. ENERGY RESOURCES AND TECHNOLOGY OPTIONS
Chapter 5. Energy Resources
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTDefinitions and units
Oil reserves and resources
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTUltimately recoverable resources - the static or geologists’ view
VIEW THE DOCUMENTAvailable resources - the dynamic or economists’ view
VIEW THE DOCUMENTReconciling the two views
Gas reserves and resources
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTConventional gas
VIEW THE DOCUMENTUnconventional gas
Coal reserves and resources
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTCurrent resources and reserves
VIEW THE DOCUMENTAdditional resources
VIEW THE DOCUMENTSummary of fossil resources
Reserves and resources of fissile materials
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTUranium reserves
VIEW THE DOCUMENTUranium resources
VIEW THE DOCUMENTThorium reserves and resources
Hydroelectric resources
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTTheoretical potential
VIEW THE DOCUMENTTechnical potential
VIEW THE DOCUMENTEconomic potential
VIEW THE DOCUMENTMajor constraints to hydroelectricity expansion
Biomass resources
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTSources
VIEW THE DOCUMENTPerceptions and problems
VIEW THE DOCUMENTTechnical potential of biomass energy plantations
VIEW THE DOCUMENTEnergy balances and biomass productivity
VIEW THE DOCUMENTAgricultural and forestry residues and municipal waste
VIEW THE DOCUMENTEnvironmental implications of biomass production
VIEW THE DOCUMENTEnvironmentally motivated responses to biomass production
VIEW THE DOCUMENTEconomics
VIEW THE DOCUMENTSolar energy resources
VIEW THE DOCUMENTWind energy resources
VIEW THE DOCUMENTGeothermal energy resources
VIEW THE DOCUMENTOcean energy resources
VIEW THE DOCUMENTConclusion
Chapter 6. Energy End-Use Efficiency
VIEW THE DOCUMENT(introduction...)
Recent trends in energy intensity in countries and regions
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTOECD countries
VIEW THE DOCUMENTEastern Europe and the Commonwealth of Independent States
VIEW THE DOCUMENTDeveloping Asia, Africa, and Latin America
Potential benefits of technology transfer
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTTransition economies
VIEW THE DOCUMENTDeveloping countries
VIEW THE DOCUMENTTypes of potential for increased energy efficiency
The economic potential of energy efficiency by region and sector
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTWestern Europe
VIEW THE DOCUMENTNorth America
VIEW THE DOCUMENTJapan and Southeast Asia
VIEW THE DOCUMENTEastern Europe
VIEW THE DOCUMENTRussia and other members of the Commonwealth of Independent States
VIEW THE DOCUMENTIndia
VIEW THE DOCUMENTChina
VIEW THE DOCUMENTLatin America
VIEW THE DOCUMENTAfrica
VIEW THE DOCUMENTThe economic potential of energy efficiency - a systemic perspective
VIEW THE DOCUMENTTechnical and theoretical potentials for rational energy use after 2020
Obstacles, market imperfections, and disincentives for efficient energy use
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTGeneral obstacles
VIEW THE DOCUMENTTarget group-specific and technology-specific obstacles
National and international policies to exploit the economic potential of energy efficiency in end-use sectors
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTGeneral policy measures
VIEW THE DOCUMENTSector- and technology-specific policy measures
VIEW THE DOCUMENTInternational policy measures
VIEW THE DOCUMENTConclusion
Chapter 7. Renewable Energy Technologies
VIEW THE DOCUMENT(introduction...)
Biomass energy
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTThe potential of biomass energy
VIEW THE DOCUMENTBiomass energy conversion technologies
VIEW THE DOCUMENTEnvironmental impacts of biomass energy systems
VIEW THE DOCUMENTEconomics of biomass energy systems
VIEW THE DOCUMENTImplementation issues
VIEW THE DOCUMENTConclusion
Wind energy
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTThe potential of wind energy
VIEW THE DOCUMENTDevelopment of installed wind power
VIEW THE DOCUMENTTechnology developments
VIEW THE DOCUMENTSystem aspects
VIEW THE DOCUMENTEnvironmental aspects
VIEW THE DOCUMENTEconomic aspects
VIEW THE DOCUMENTImplementation issues
VIEW THE DOCUMENTConclusion
Photovoltaic solar energy
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTCharacteristics of the source
VIEW THE DOCUMENTThe potential of photovoltaic solar energy
VIEW THE DOCUMENTPhotovoltaic market developments
VIEW THE DOCUMENTCurrent status and future development of photovoltaic solar cells and modules
VIEW THE DOCUMENTSystem aspects
VIEW THE DOCUMENTEnvironmental aspects
VIEW THE DOCUMENTEconomic aspects
VIEW THE DOCUMENTImplementation issues
VIEW THE DOCUMENTSpace-based solar energy
VIEW THE DOCUMENTConclusion
Solar thermal electricity
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTThe potential of solar thermal electricity
VIEW THE DOCUMENTSolar thermal electricity market developments
VIEW THE DOCUMENTSolar thermal electricity technologies
VIEW THE DOCUMENTEconomic aspects
VIEW THE DOCUMENTEnvironmental and social aspects
VIEW THE DOCUMENTConclusion
Low-temperature solar energy
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTLow-temperature solar energy potential and market developments
VIEW THE DOCUMENTLow-temperature solar energy technologies and systems
VIEW THE DOCUMENTImplementation issues
VIEW THE DOCUMENTConclusion
Hydroelectricity
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTThe potential of hydroelectricity
VIEW THE DOCUMENTHydroelectric technology development
VIEW THE DOCUMENTSystem aspects
VIEW THE DOCUMENTEnvironmental and social impacts
VIEW THE DOCUMENTEconomic and financial aspects
VIEW THE DOCUMENTConclusion
Geothermal energy
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTThe potential of geothermal energy
VIEW THE DOCUMENTRecent developments
VIEW THE DOCUMENTPotential market developments
VIEW THE DOCUMENTEnvironmental aspects
VIEW THE DOCUMENTConclusion
Marine energy technologies
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTThe potential and technology of marine energy
VIEW THE DOCUMENTEconomic aspects
VIEW THE DOCUMENTEnvironmental aspects
VIEW THE DOCUMENTImplementation issues
VIEW THE DOCUMENTConclusion
System aspects
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTTrends in the energy sector
VIEW THE DOCUMENTCharacteristics of renewable energy systems
VIEW THE DOCUMENTElectrical system design
VIEW THE DOCUMENTGrid integration of intermittent renewables
VIEW THE DOCUMENTIntermittent renewables and energy storage
VIEW THE DOCUMENTValue of renewables
VIEW THE DOCUMENTConclusion
Policies and instruments
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTCost of competing conventional energy
VIEW THE DOCUMENTFinancing and fiscal policy
VIEW THE DOCUMENTRegulation
VIEW THE DOCUMENTGetting new technologies started
VIEW THE DOCUMENTConclusion
Chapter 8. Advanced Energy Supply Technologies
VIEW THE DOCUMENT(introduction...)
Advanced fossil energy technologies
VIEW THE DOCUMENTFossil fuel supply considerations as a context for fossil energy innovation
VIEW THE DOCUMENTSetting goals for advanced fossil energy technologies
VIEW THE DOCUMENTTechnologies and strategies for moving towards near-zero emissions
VIEW THE DOCUMENTOther near-term advanced fossil energy technologies
VIEW THE DOCUMENTConclusion
Advanced nuclear energy technologies
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENTRationale for reconsidering the nuclear option
VIEW THE DOCUMENTThe need for advanced technologies
VIEW THE DOCUMENTAdvanced nuclear generating options for the immediate future
VIEW THE DOCUMENTNuclear energy for the long term
VIEW THE DOCUMENTThe outlook for addressing the challenges

World Energy Assessment - Energy and the Challenge of Sustainability (UNDESA - UNDP - WEA - WEC, 2000, 517 p.)

PART II. ENERGY RESOURCES AND TECHNOLOGY OPTIONS

Chapter 5. Energy Resources

Hans-Holger Rogner (Germany)

LEAD AUTHORS: Fritz Barthel (Germany), Maritess Cabrera (Philippines), Andre Faaij (Netherlands), Marc Giroux (France), David Hall (United Kingdom), Vladimir Kagramanian (Russian Federation), Serguei Kononov (Russian Federation), Thierry Lefevre (France), Roberto Moreira (Brazil), R. Ntstaller (Austria), Peter Odell (United Kingdom), and Martin Taylor (United States and United Kingdom)

ABSTRACT

A comprehensive account of the world’s energy resource endowment is essential for any long-term energy assessment. Energy resources exist in different forms - some exist as stocks and so are exhaustible, others exist as flows and are inexhaustible, and a third form is based on exhaustible stocks that can be leveraged to resemble renewables. Most important, energy resources evolve dynamically as a function of human engineering ingenuity, driven by the desire to supply affordable and convenient energy services. Although the term stocks suggests finiteness (which is ultimately correct), the accessible portion depends on technology and on the future demand for that resource. Resources not demanded by the market are ‘neutral stuff’. Demand plus advances in technology and knowledge turn neutral stuff into reserves that are replenished upon use by further advances in technology and knowledge, enabling humans to tap into resources previously beyond reach. But for stocks there will eventually be a limit. In contrast, resources based on annually recurring flows are distinctly different from stocks: harvested prudently, they are renewable. But resources are not an end in themselves, and their attractiveness must be seen in the context of societies’ energy service needs, of the technologies that convert resources into energy services, and of the economics associated with their use. This chapter assesses whether long-term energy resource availability could impede sustainable development and, based on a dynamic technology concept, provides a comprehensive account of the world’s energy resource endowment.

This chapter reviews fossil, nuclear, and renewable energy resources. The reserve and resource volumes presented here cover the ranges considered robust by most of the lead authors. The main controversy yet to be resolved concerns the different views on the roles of technology and demand in the long-term availability of a particular resource. Subject to debate is the extent to which reserves can be converted from additional conventional resources with lower geological assurance and from unconventional resources lacking economic attractiveness given current markets and technologies. Natural flows are immense for renewable resources, but the level of their future use will depend on the technological and economic performance of technologies feeding on these flows as well as on possible constraints on their use. The long-term availability of energy resources will likely become more an issue of the degree to which future societies want to balance environmental and economic tradeoffs, control greenhouse gas emissions, and internalise externalities, or of the technological and economic performance of different clean energy conversion technologies, than a question of resource existence.

This chapter examines long-term energy resource availability primarily from the perspectives of theoretical maximums, or ultimately recoverable resources. Admittedly, it can be argued that an analysis based on ultimately recoverable resources is irrelevant - hydrocarbon occurrences or natural flows become resources only if there is demand for them and appropriate technology has been developed for their conversion and use. Indeed, energy resources generally should not be scrutinised without reference to the chain extending from the extraction of resources to the supply of energy services - that is, along all the conversion steps to the point of what consumers really want: transportation, communication, air conditioning, and so on. But the assessment in this volume has been structured so that each link of the chain is explored separately. Energy conversion technologies are discussed in chapters 7 (renewable energy technologies) and 8 (advanced fossil and nuclear energy technologies), as well as in chapter 6 (energy efficiency).

Hydrocarbon occurrences
become resources only if there is
demand for them and appropriate
technology has been developed
for their conversion
and use.

Definitions and units

A variety of terms are used to describe energy reserves, and different authors and institutions have different meanings for the same terms. Meanings also vary for different energy sources. The World Energy Council defines resources as "the occurrences of material in recognisable form" (WEC, 1998). For oil, it is essentially the amount of oil in the ground. Reserves represent a portion of resources and is the term used by the extraction industry. British Petroleum notes that proven reserves of oil are "generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions" (BP, 1999). Other common terms include probable reserves, indicated reserves, and inferred reserves - that is, hydrocarbon occurrences that do not meet the criteria of proven reserves. Undiscovered resources are what remains and, by definition, one can only speculate on their existence. Ultimately recoverable resources are the sum of identified reserves and the possibly recoverable fraction of undiscovered resources and generally also include production to date. Then there is the difference between conventional and unconventional occurrences (oil shale, tar sands, coalbed methane, clathrates, uranium in black shale or dissolved in sea water), especially the rate at which unconventional resources can be converted into conventional reserves.


FIGURE 5.1. PRINCIPLES OF RESOURCE CLASSIFICATION

Source: Based on McKelvey, 1967.

To the extent possible, this chapter uses the McKelvey box, which presents resource categories in a matrix with increasing degrees of geological assurance and economic feasibility (figure 5.1). This scheme, developed by the U.S. Bureau of Mines and the U.S. Geological Survey (USGS, 1980), is to some extent also reflected in the international classification system recently proposed by the United Nations.

In this 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 geologic 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 geologic evidence. Identified resources are further subdivided into demonstrated (measured plus indicated) and inferred resources, to reflect varying degrees of geological assurance. Reserves are identified resources that are economically recoverable at the time of assessment (see the British Petroleum definition, above).

Undiscovered resources are quantities expected or postulated to exist under analogous geologic conditions. Other occurrences are materials that are too low-grade or for other reasons not considered technically or economically extractable. For the most part, unconventional resources are included in ‘other occurrences’.

The boundary between reserves, resources, and occurrences is current or expected profitability of exploitation, governed by the ratio of market price to cost of production. Production costs of reserves are usually supported by actual production experience and feasibility analyses, while cost estimates for resources are often inferred from current production experience adjusted for specific geological and geographic conditions.

Technological improvements
are continuously pushing resources
into the reserve category by
advancing knowledge and
lowering extraction costs.

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 into the reserve category and vice versa. The dynamic nature of the reserve-resource relationship is illustrated by the arrows in figure 5.1. 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.

In 1992 the United Nations Economic Commission on Europe (UNECE) launched an effort to define a generally applicable resource classification scheme with a higher resolution of technical and economic feasibility than the McKelvey box. By adding a third dimension - the level of actual feasibility of extraction based on geological engineering assessments - this new classification provides a more accurate picture of the accessibility of resources. In 1997 the United Nations International Framework Classification for Reserves/Resources - Solid Fuels and Mineral Commodities (UNFC) was completed and recommended by the Economic and Social Council (ECOSOC) for world-wide application. But it will take time for the UNFC to be universally adopted by public and private institutions and for fossil reserves and resources to be consistently reported in compliance with the UNFC.

For renewable energy sources, the concepts of reserves, resources, and occurrences need to be modified. Renewables represent annual flows available, in principle, on an indefinite sustainable basis. Fossil energy reserves and resources, although expanding over time, are fundamentally finite quantities. In this context the annual natural flows of solar, wind, hydro, and geothermal energy and quantities grown by nature in the form of biomass (often referred to as theoretical potentials) would correspond to occurrences. The concept of technical potentials can be used as a proxy for energy resources, while economic potentials correspond to reserves. The distinction between theoretical and technical potentials reflects the degree of use determined by thermodynamic or technological limitations without consideration of practical feasibility or costs. Thus the economic potential is the portion of the technical potential that could be used cost-effectively. In terms of reserves, resources, and occurrences of hydrocarbons, economic and technical potentials are dynamically moving targets in response to market conditions and technology availability and performance.

This chapter reports oil resources in gigatonnes (1 Gt = 109 tonnes) and exajoules (1 EJ = 1018 joules) using the energy equivalent of 42 gigajoules per tonne of oil equivalent (GJ per toe). Gas resources are reported in tera cubic metres (1 Tm3 = 1012 cubic metres) and converted to EJ using 37 gigajoules per 1,000 cubic metres (GJ per 1,000 m3). Coal resources are usually reported in natural units, although the energy content of coal may vary considerably within and between different coal categories. The Bundesanstalt fr Geowissenschaften und Rohstoffe (Federal Institute for Geosciences and Natural Resources, referred to here as the BGR) in Hannover (Germany) is the only institution that converts regional coal occurrences into tonnes of coal equivalent (1 tce = 29 gigajoules). Thus coal resource data come from the BGR. Uranium and other nuclear materials are usually reported in tonnes of metal. The thermal energy equivalent of 1 tonne of uranium in average once-through fuel cycles is about 589 terajoules (IPCC, 1996a).

Oil reserves and resources

Views on the long-term availability of oil and natural gas continue to spark controversy and debate. One school of thought believes that the best oil fields have already been discovered and that the amount of oil still to be discovered is somewhat limited. The other school regards oil reserves as a dynamic quantity, driven by demand and technological advances. The second school is more optimistic about future hydrocarbon availability.

Ultimately recoverable resources - the static or geologists’ view

For many years, world oil reserves have experienced small but steady increases, which implies that the discovery or delineation of new reserves has at least kept pace with production. But many geologists focus on the concept of a quasi-fixed stock of hydrocarbon occurrences that, once production commences, can only decrease. For oil, they argue that few new oil fields have been discovered since the mid-1970s, and that most reserve increases have come from revisions of previously underestimated existing reserves (Hatfield, 1997; Campbell and Laherrere, 1998) and improved recovery techniques. Peak production lags behind peak discovery (of the mid-1960s) by several decades. Larger and more obvious fields are found first, leading to an early peak in discovery and diminishing returns in exploration: the more that is found, the less is left to find. Fields that are smaller and harder to find and to exploit follow, but eventually the fixed stock will be exhausted. Some 90 percent of current global oil production comes from fields more than 20 years old.

TABLE 5.1. ESTIMATED OIL RESERVES

Region

Identified reserves (Masters and others, 1994)

Identified reserves plus 95%a (Masters and others, 1994)

Identified reserves plus modeb (Masters and others, 1994)

Identified reserves plus 5%c (Masters and others, 1994)

Proven recoverable reserves (WEC, 1998)

Proven reserves (BP, 1999)

Total resources from enhanced oil recoveryd


Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

North America

8.5

356

14.3

599

17.0

712

23.7

992

4.6

193

4.6

193

13.6

569

Latin America and Caribbean

17.3

724

22.6

946

26.2

1,097

41.6

1,742

19.2

804

19.9

833

23.8

996

Western Europe

5.6

234

6.8

285

7.7

322

11.2

469

2.5

105

2.5

105

3.9

163

Central and Eastern Europe

0.3

13

0.4

17

0.5

21

1.1

46

0.3

13

0.2

8

0.5

21

Former Soviet Union

17.0

712

25.1

1,051

30.6

1,281

49.9

2,089

8.0

335

9.1

381

11.2

469

Middle East and North Africa

87.6

3,668

97.0

4,061

104.6

4,379

126.4

5,292

99.6

4,170

96.8

4,053

59.2

2,479

Sub-Saharan Africa

4.0

167

5.9

247

7.3

306

12.3

515

4.0

167

4.5

188

3.3

138

Pacific Asia

3.1

130

4.1

172

4.8

201

7.3

306

1.5

63

1.5

63

2.1

88

South Asia

1.0

42

1.1

46

1.3

54

1.8

75

0.8

33

0.5

21

0.6

25

Centrally planned Asia

5.1

214

7.8

327

9.8

410

17.9

749

5.4

226

3.4

142

3.7

155

Pacific OECD

0.4

17

0.6

25

0.7

29

1.3

54

0.4

17

0.4

17

0.5

21

Totale

150

6,277

186

7,776

210

8,812

295

12,329

146

6,126

143

6,004

123

5,124

Note: Excludes cumulative production to the date of assessment. a. Identified reserves plus estimates of undiscovered resources with a 95 percent probability of discovery. b. Identified reserves plus estimates of undiscovered resources with a 50 percent probability of discovery. c. Identified reserves plus estimates of undiscovered resources with a 5 percent probability of discovery. d. Includes enhanced recovery of past and future oil production. e. Totals rounded.

Cumulative production is a good proxy for geological knowledge gained through exploration experience. All these facts leave no room for any conclusion other than that peak production is being approached rapidly. In the 1960s ultimately recoverable resources became a popular concept for quantifying the fixed stock of hydrocarbon occurrences. Ultimately recoverable resources include cumulative production, proven reserves at the time of estimation, and oil remaining to be discovered - in other words, the ultimate oil wealth available to humans. For the past 40 years most estimates of ultimately recoverable resources for conventional oil have ranged from 200 - 400 gigatonnes. More recently, Campbell and Laherrere (1998) put ultimately recoverable reserves at about 250 gigatonnes, Hiller (1999) at 350 gigatonnes, Edwards (1997) at 385 gigatonnes, Masters and others (1994) at 281 - 390 gigatonnes, and Odell (1997) at 410 gigatonnes. All these estimates include production to the date of estimation (96 - 110 gigatonnes).

The debate on the size of ultimately recoverable resources and the time horizon when the depletion midpoint will be reached includes only conventional oil occurrences. Shale oil, tar sands (natural bitumen), and heavy crude oil are considered unconventional oil resources, defined as occurrences that cannot be tapped with conventional production methods for technical or economic reasons or both (Rogner, 1997; Gregory and Rogner, 1998). These resources form a large part of the vast store of hydrocarbons in the Earth’s crust and, in the case of oil, have been assessed to be at least as large as conventional oil resources (see below). The existence of unconventional oil and gas is acknowledged by ‘fixed stock’ analysts, but they are less sanguine about the future technological potential for bringing these resources to market. Technological pessimism and an exclusive focus on conventional oil largely explain the geologists’ view that global oil production will reach its peak and mid-depletion point in the near future.

Conventional oil. Table 5.1 reports recent estimates, excluding cumulative production to date, of identified or proven oil reserves and natural gas liquids. All these estimates report reserves at around 1,000 billion barrels of oil (143 - 150 gigatonnes).

Masters and others (1994) estimate identified reserves on 1 January 1993 to be 150 gigatonnes (6,277 exajoules), only slightly higher than British Petroleum and World Energy Council estimates of proven reserves at the end of 1997.1 Masters and others also estimate undiscovered oil resources based on a modified Delphi technique and geological analogies. Their low estimate (95 percent probability of discovery) brings their total for recoverable conventional oil reserves to 186 gigatonnes (7,771 exajoules). If cumulative production until 1994 of 95 gigatonnes (3,990 exajoules) is added, the total for ultimately recoverable resources is 281 gigatonnes (11,800 exajoules). The medium (mode) estimate of undiscovered resources brings total recoverable oil reserves to 210 gigatonnes (8,812 exajoules) and ultimately recoverable resources to 305 gigatonnes (12,810 exajoules). The high (5 percent probability) estimate of undiscovered resources brings total recoverable oil reserves to 295 gigatonnes (12,329 exajoules) and ultimately recoverable resources to 390 gigatonnes (16,380 exajoules).

TABLE 5.2. ESTIMATED UNCONVENTIONAL OIL RESERVES AND RESOURCES

Region

Oil shale

Heavy crude oil

Tar sands (natural bitumen)


Identified resources(BGR, 1998)

Total resources(BGR, 1998)

Proven recoverable and estimated additional reserves(WEC, 1998)

Oil in place(BGR, 1998)

Reserves and resources(BGR, 1998)

Future potential recovery(Meyer, 1997)

Oil in place(BGR, 1998)

Reserves and resources(BGR, 1998)

Proven recoverable and estimated additional reserves(WEC, 1998)


Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

Gigatonnes

Exajoules

North America

1.1

48

351.6

14,767

217.0

9,114

15.7

659

2.3

96

2.0

82

233

9,786

40.7

1,710

51.7

2,173

Latin America and Caribbean

0.3

14

19.4

814

9.6

405

229.3

9,631

59.7

2,509

51.2

2,152

190

7,980

33.2

1,395

1.2

49

Western Europe

0.5

22

8.9

374

0.0

1

9.8

412

3.7

155

3.2

133

0

0

0.0

0

0.0

0

Central and Eastern Europe

1.1

45

2.8

116

0.0

0

0.1

4

0.1

5

0.1

5

0

0

0.0

0

0.0

0

Former Soviet Union

4.2

178

9.6

405

6.5

273

0.1

4

19.2

805

16.4

690

232

9,744

40.5

1,703

0.0

0

Middle East and North Africa

7.6

319

8.1

340

28.0

1,175

45.2

1,898

20.2

847

17.3

726

0

0

0.0

0

0.0

0

Sub-Saharan Africa

0.0

0

16.4

690

0.0

0

1.4

59

0.9

39

0.6

27

3

126

0.5

22

0.0

0

Pacific Asia

1.0

40

1.0

40

1.7

71

1.1

46

1.5

62

1.4

59

0

0

0.0

0

0.0

0

South Asia

0.0

0

0.0

0

0.0

0

1.0

42

0.0

2

0.0

1

0

0

0.0

0

0.0

0

Centrally planned Asia

0.6

25

20.0

840

0.0

0

10.8

454

2.6

111

2.3

95

0

0

0.0

0

0.0

0

Pacific OECD

3.8

160

44.5

1,870

36.0

1,513

0.0

0

0.0

1

0.0

1

0

0

0.0

0

0.0

0

Total

20.3

851

482.3

20,256

298.9

12,552

314.5

13,209

110.3

4,632

94.5

3,971

658

27,636

115.0

4,830

52.9

2,222

In its 1998 survey the World Energy Council reported proven recoverable oil reserves of 146 gigatonnes (6,126 exajoules) and estimates additional recoverable reserves (excluding speculative occurrences) of 28 gigatonnes (1,192 exajoules), for a total of 174 gigatonnes (7,318 exajoules). This compares well with the Masters and others estimate of identified reserves plus 95 percent probability of undiscovered resources of 186 gigatonnes. The oil reserve estimates in table 5.1 reflect the views of geologists on the availability of conventional oil and are consistent with the ultimately recoverable resource estimates presented earlier.

Today only about 35 percent of the oil in place is recovered by primary and secondary production methods. With enhanced oil recovery methods, this rate can be increased to as much as 65 percent of the original oil in place in a reservoir, though at higher extraction costs (BGR, 1995). Thus the application of enhanced oil recovery methods in abandoned fields and new developments increases conventional oil resources.

Table 5.1 shows the potential resources resulting from the use of enhanced oil recovery techniques. Resources are calculated based on an average recovery rate of 35 percent achieved in historical production and used in the delineation of proven recoverable reserves, and an enhanced oil recovery rate of 15 percent, for an overall recovery rate of 50 percent.

Unconventional oil. The vast amounts of unconventional oil occurrences include oil shale, heavy crude oil, and tar sands. Unconventional oil is already economic to exploit in some places, so some is defined as reserves. Further development may depend on higher oil prices, technological developments, and long-term demand for liquid fuels. According to BGR (1998), reserves of unconventional oil could be as high as 245 gigatonnes, substantially exceeding proven reserves of conventional oil (table 5.2).

Oil shale is a sedimentary rock rich in organic matter containing more than 10 percent kerogen. It can be used directly as a fuel in power plants or processed to produce synthetic petroleum products. The kerogen content of oil shale varies widely. According to BGR (1995), only about 1 percent of world resources contains more than 100 litres of oil per cubic metre rock, while 85 percent have less than 40 litres per cubic metre.

Data on oil shale resources are presented in table 5.2. The most recent BGR (1998) estimate of oil shale resources is 482 gigatonnes, down from 920 gigatonnes in the 1995 estimate. WEC (1998) estimates recoverable and estimated additional reserves at 299 gigatonnes. Major oil shale resources are in China, Estonia, the United States, Australia, and Jordan. The large regional differences between the BGR and WEC estimates are likely the result of different definitions.

Because of the high costs of mining and processing, oil shale is produced only in small quantities in China and Estonia. Estonia is the only country with an economy dominated by oil shale as a source of energy and for more than 70 years has been the largest user of oil shale in power generation. Recent production totalled 20 million tonnes of oil shale a year (Hobbs, 1995).

Heavy crude oil is defined as high-viscosity crude oil with a density equal to or less than 20° API (934 kilograms per cubic metre). Extra heavy oil is crude oil with a density equal to or less than 10° API (1,000 kilograms per cubic metre). Unlike tar sands, the viscosity of these hydrocarbons is below 10,000 millipoise (see below). Heavy oil is formed by the degradation of conventional oil in shallow reservoirs.

Recent estimates of heavy oil resources are summarised in table 5.2. BGR (1995) estimates oil in place to be 315 gigatonnes. In BGR (1998), 33 of these are considered reserves and 77 are considered resources, for a total of 110 gigatonnes - well within the range of future potential recovery given by Meyer (1997). About half of heavy oil resources are in Venezuela; the former Soviet Union, Kuwait, Iraq, Mexico, and China account for most of the rest.

Meyer (1997) uses the term unproved reserves because his estimates include some probable and possible reserves. Quantities stated under undiscovered potential recovery include all resources based on geological and engineering judgement, using a recovery factor of 10 percent.

Some 8 percent of world oil production come from heavy oil reservoirs, with Venezuela, the United States, Canada, Iraq, Mexico, and the former Soviet Union being major producers (BGR, 1998). Due to the nature of heavy oil, enhanced oil recovery methods such as steam flooding and hot water, polymer, and carbon dioxide injection are generally required for its extraction.

Tar sands (natural bitumen) and extra heavy oil are sands or sandstones that contain a large portion of tarry hydrocarbons with a viscosity exceeding 10,000 millipoise. They are formed by thermal metamorphism and biodegradation of conventional oil deposits. The high viscosity of these hydrocarbons requires unconventional extraction methods such as mining with bucket-wheel excavators or in truck and shovel operations. Natural bitumen typically contains large portions of sulphur and trace elements, including vanadium and nickel.

BGR (1998) estimates that 115 of the 658 gigatonnes of tar sands qualify as possible reserves (see table 5.2). Commercial production is limited to the Athabasca tar sand deposits of Alberta (Canada), with a volume of 25 million tonnes in 1998 (WEC, 1998). To reduce the environmental disturbance caused by surface mining, in situ techniques are increasingly used (box 5.1). In addition, new extraction technologies, such as steam-assisted gravity drainage, are being developed to reduce oil viscosity through steam injection (George, 1998). The use of extra heavy oil has commenced in the Orinoco oil belt of Venezuela (BGR, 1998).

Available resources - the dynamic or economists’ view

Unlike geologists, who tend to treat resources as an innate component of the physical world, economists view what exists in the Earth’s crust as ‘neutral stuff’ (Odell, 1998) that becomes a resource only if there is a market demand for it. Put differently, "there are huge amounts of hydrocarbons in the earth’s crust (Adelman and Lynch, 1997), and "estimates of declining reserves and production are incurably wrong because they treat as a quantity what is really a dynamic process driven by growing knowledge" (Nehring, 1998). Improvements in technology - such as three-dimensional seismic surveys and extended-reach drilling - have allowed higher recovery rates from existing reservoirs and the profitable development of fields once considered uneconomic or technically beyond reach, expanding the boundary of reserves and shifting resources into the reserve category.

BOX 5.1. ENVIRONMENTAL OBSTACLES TO EXTRACTING UNCONVENTIONAL OIL

The production of unconventional oil and the necessary upgrade to marketable fuels can hurt local environments. Mining, conversion, and upgrading to synthetic crude oil can produce toxic heavy metals and large quantities of solid and acidic liquid and gaseous wastes that need to be contained, cleaned, and disposed ofin an environmentally benign manner. This may require stringent environmental controls and new policies for toxic waste disposal. Extracting hydrocarbons from unconventional oils such as tar sands, heavy oils, and oil shale involves very large surface (open-pit or strip) mining and underground mining (room and pillar technique), steam soaking, steam flooding, or in situ combustion. Here the production of tar sand and its upgrading to synthetic crude oil are used to show the potential environmental constraints of large-scale unconventional oil production.

The production of synthetic crude oil from Alberta, Canada’s tar sand deposits involves open-pit mining and handling of 5 tonnes of tar sands and overburden per barrel of oil produced (Penner and others, 1982), milling to separate the bitumen from the sand, and upgrading it to commercial quality. Syncrude, a Canadian company, processes 510,000 tonnes of tar sands a day and recovers about one barrel of heavy oil for every 2 tonnes of tar sands processed (Stosur and others, 1998). A hot water process is the most common for extracting oil from the sand. The process is energy-intensive and requires large quantities of hot water. Syncrude operations require 1,400 tonnes an hour of water heated to nearly 500 degrees Celsius. Water is recycled to the maximum extent (90 percent). The remaining materials (tailings) after the bitumen has been extracted (extraction rate some 90 percent)are liquids and sand. Most of the tailings are the excavated overburden rock and rejected sand; both can be stockpiled and used as backfill with little threat to the environment (Stosur and others, 1998).

Things are different for the liquid tailings, which are contaminated with organic and inorganic compounds (sulphur, porphyrins, salts of organic acids) and can seriously damage nearby aquatic ecosystems. The liquid is stored in settling ponds, allowing water to clarify before it is recycled. These ponds are designed as ‘zero discharge’ basins, and no process-affected water is discharged in running waters. But while tailings sand settles out quickly, the fine-grained materials (silts and clays) and residual bitumen consolidate slowly and can pose a long-term problem and liability. Tailings ponds must be constructed to last several decades and must be guarded against erosion, breaching, and foundation creep until better disposal practices become available (Stosur and others, 1998). New processes such as dry retorting - which generates dry tailings - are expected to minimise the risk of acid drainage from tar sand tailings. Other methods include faster consolidation of fine tailings, detoxification of tailing pond water, and reprocessing of fine tailings (including co-production of minerals and metals).

Spent tar sand (mainly sand, silt, and clay contaminated with the remaining bitumen and caustic compounds) is put in specially designed storage areas to avoid acid drainage or used as fill material in mine reclamation efforts. While the disrupted land area can be considerable, land reclamation is usually imposed on mine operators to limit permanent environmental damage and to return land to a stable, biologically self-sustaining state.

Upgrading operations are the primary source of airborne emissions. Sulphur dioxide, particulates, hydrocarbons, vanadium, and nickel were originally of major concern. In addition, bitumen contains several carcinogenic polycyclic aromatic hydrocarbons (WHO, 1982). Hydrotreaters remove sulphur and nitrogen and produce elemental sulphur as a by-product. Nitrogen is removed as ammonia and used as an under-boiler fuel or for chemical feedstock. Hydrogen sulphide is removed from the by-product fuel gas that fuels parts of the upgrading operations. The synthetic crude oil produced from Alberta’s tar sand deposits is 32 - 33o API with 0.1 - 0.2 percent sulphur. It contains no residue, while typical conventional crudes have about 8 percent residue.

Stosur and others (1998) estimate that only 15 percent of tar sand resources are suitable for surface mining. The rest would have to be extracted by in situ methods, which minimise land disturbance through multiwell pads and horizontal drilling (Sadler and Houlihan, 1998). To reduce odour and greenhouse gas emissions, care must be taken to collect and reuse or flare the gases generated by the process.

Alberta’s tar sand operations indicate that environmental protection is the result of effective environmental regulation and controls, including a balance of resource development and resource conservation and of environmental and socioeconomic policies.

In addition, economists argue, a distinction between conventional and unconventional occurrences is irrelevant. Today most unconventional occurrences are neutral stuff and will become resources and reserves if there is sufficient demand. In fact, certain unconventional occurrences - heavy oil, tar sands, coalbed methane and gas from aquifers - have already started to ‘come in from the margin’. Conventional discoveries previously regarded as uneconomic can now be developed profitably, and recoverable reserves can be increased in fields being developed or under production. In short, economists view oil and gas reserves as a portion of the total hydrocarbon occurrences contained in the Earth’s crust, where volumes depend on exploration know-how to locate and evaluate a play (delineated deposit) and on the capability of technology to extract it at an acceptable cost given sufficient demand.

The question of long-term hydrocarbon resource availability, then, is viewed from the perspective of anticipated demand in competitive markets - taking into account technological change and growing knowledge. In the presence of sufficiently large conventional oil reserves there is, at present, no demand for the large-scale use of abundant unconventional oil occurrences (see above). This explains the absence of any significant motivation for a comprehensive and systematic evaluation of these resources or for the development of technology for their economic and environmentally acceptable recovery.

Economists take proven conventional oil reserves of 150 gigatonnes as a point of departure that, based on their definition, can be brought to the market at post-1986 price levels. In addition, economists point to industry expectations that proven reserves will grow 50-70 gigatonnes by 2020 (Shell, 1996). They point out that the oil industry has historically responded to demand by finding and developing reserves, even given the long lead time for this process: since World War II it has taken more than 40 years to move from identifying reserves to producing resources. This is seen as a clear indication that the process of stock replenishment is working effectively.

A bigger role for unconventional oil. Economists also argue that unconventional oil should be viewed as an important element of the oil resource base - and after 2030 it will be a critical complement to conventional oil production in keeping the oil supply curve moving upwards. This long process of the changing supply pattern will be seamless from the viewpoint of oil producers. From the point of view of users the process will be unimportant, because no essential difference will arise for them merely because of the changing nature of exploitation of oil habitats in the Earth’s surface. In precisely the same way, today’s oil consumers do not need to consider whether their supply is from shallow or deep horizons, or from onshore or offshore locations.

The oil industry has historically
responded to demand by finding
and developing reserves, even
given the long lead time
for this process.

The ultimate resource base of unconventional oil is irrelevant to the 21st century’s energy supply. Occurrences of such oil that are already known and under exploitation can provide the global supply likely to be required in the 21st century. On the other hand, economic or environmental considerations - or both - could convert unconventional resources back to neutral stuff, as has occurred in recent decades with previously designated coal resources.

Costs and technological developments. New technologies for exploring and extracting oil have lowered exploration, development, and production costs while expanding the oil resource base. Further advances in technology must also be expected, resulting in additional reductions in cost. Part of these productivity gains will be offset by the use of more remote, harder-to-access, and smaller deposits. Still, it appears plausible that technological progress will continue to keep production costs in check.2 The technology learning curve for synthetic crude oil production from tar sands in Alberta is a good example of the impact of technology on production costs. In 1978 a barrel of synthetic crude oil cost about $26 a barrel. By 1996 breakthroughs in the technology for producing and refining bitumen as well as better operating procedures had lowered these costs to $9.60 a barrel (Polikar and Cyr, 1998).

Two developments will likely put upward pressure on prices. The first is the increasing volume of energy that will be demanded in the first half of the 21st century. The second is the significantly increased cash flows required by the international oil industry to sustain enhanced investment in the initial large-scale exploitation of rapidly increasing volumes of unconventional oil and gas. In the 1950s the ability of consumers to secure large volumes of international oil depended on the super-normal profits that the industry was able to generate. More recent breakthroughs for gas in Europe and elsewhere were likewise achieved because of super-normal profitability in the industry. After 2030, following the introduction to global markets of large-scale unconventional hydrocarbons, prices should fall back as the long-run supply prices of the two commodities once again start to decline under conditions of advancing technology and increasing economies of scale (Odell, 1998).

Reconciling the two views

The differences between geologists’ (static) and economists’ (dynamic) views of oil resources can be partly explained by the way the different schools view unconventional oil. Geologists draw a strict line between conventional oil (the oil they look for) and unconventional oil (the oil that does not fit their template). Although some unconventional oil is being exploited economically, geologists take a conservative view of its long-term commercial viability. In contrast, economists consider irrelevant the dividing line between conventional and unconventional oil. They anticipate a seamless transition from one to the other as long as demand and market prices allow for a profitable return on investment. In that case, unconventional occurrences estimated to exist in the Earth’s crust (see table 5.2) would extend the oil age well beyond the mid-21st century. Without demand, the issue of resource availability becomes meaningless and unconventional oil occurrences remain neutral stuff.

A historical review of the most popular guideline for the industry, the ratio of reserves to production, puts into perspective the two schools of thought. This ratio compares known reserves and current production and so measures the temporal reach of exhaustible energy reserves. These ratios typically fluctuate between 20 and 40 years.

But the notion of a reserve-to-production ratio is seriously flawed and, in the past, has led to aberrant conclusions (MacKenzie, 1996). The most erroneous conclusion is that the world will be running out of reserves by the time suggested by the ratio.3 For oil, ratios of 20 - 40 years have existed since the early 20th century (figure 5.2). According to this ratio, the world should have run out of oil a long time ago. Instead, driven by economics (in essence, demand for oil), advances in geoscience, and technological progress in upstream production, reserves have been continuously replenished from previously unknown sources (new discoveries) or technologically or economically inaccessible occurrences. Although reserve additions have shifted to more difficult and potentially more costly locations, technological progress has outbalanced potentially diminishing returns.


FIGURE 5.2. RATIO OF RESERVES TO PRODUCTION FOR CONVENTIONAL CRUDE OIL, 1900 - 98

Source: Adapted from BP, 1998.

New technologies for exploring and
extracting oil have lowered exploration,
development, and production
costs while expanding the
oil resource base.

Gas reserves and resources

Unlike oil, gas is not subject to controversy on estimates of ultimately recoverable reserves. Proven reserves are comparable to those of oil but high relative to current and cumulative production. Still, natural gas is often viewed as the poor stepsister of oil. The development of natural gas fields requires large investments in transmission and distribution infrastructure.4 As a result gas discoveries, especially in developing countries, are often not reported. But this does not imply a lack of gas occurrence - in fact, over the 21st century there is enormous potential for major gas discoveries.

Conventional gas

The most recent estimates of conventional gas reserves come from WEC (1998) for the end of 1996 and BP (1998) for the end of 1998. WEC gives total reserves as 177 Tm3 (6,534 exajoules) at the end of 1996, 147 Tm3 (5,450 exajoules) of which were proven recoverable reserves (table 5.3). The rest were additional recoverable reserves. The International Gas Union (IGU, 2000) reports total potentially recoverable reserves as high as 502 Tm3 (18,390 exajoules).

Reserves have generally increased from survey to survey, reflecting dramatic changes in the economics of gas exploration and recovery. Reservoirs are being added in areas previously thought to have been exhausted, and new reservoirs that were previously overlooked or ignored are now being developed. Over the past 10 years reserve additions averaged 3.7 Tm3 (134 exajoules) a year, much higher than the 1997 production of 2.2 Tm3. Ivanhoe and Leckie (1993) note that fewer gas than oil fields are reported in developing regions, probably because gas has a lower economic and utility value, not because there are fewer gas fields.

Enhanced gas recovery using advanced recovery methods - notably hydraulic fracturing aimed at improving the permeability of reservoir rock - can substantially increase natural gas recovery in abandoned fields and newly developed reservoirs. Another, more innovative technique, horizontal air drilling, can also increase gas recovery in depleted gas zones (Elrod, 1997).

Estimates of potential reserves of natural gas resulting from enhanced gas recovery are based on a historical average gas recovery rate of 50 percent and an enhanced recovery rate of 30 percent, for a total recovery factor of 80 percent. Schollnberger (1998) uses similar assumptions in an assessment of possible reserve development through 2100. Global cumulative natural gas production through 1998 totalled 62 Tm3 (2,276 exajoules). Applying an average recovery factor of 50 percent leads to an original amount of 124 Tm3. Enhanced gas recovery of 30 percent then enlarges reserves by 37 Tm3. Likewise, enhanced gas recovery reserves from future production are estimated at 106 Tm3 using WEC (1998) total recoverable reserves of 177 Tm3 (see table 5.3). Thus total potential natural gas reserves available from enhanced oil recovery methods are estimated at 143 Tm3 (5,290 exajoules), an amount only slightly lower than proven natural gas reserves and almost identical to the potential crude oil reserves expected from enhanced recovery methods.

Unconventional gas

BGR (1995) defines unconventional gas as natural gas derived from reservoirs not exploitable by conventional recovery techniques. Unconventional gas types include coalbed methane, tight formation gas, gas hydrates (clathrates), and aquifer (geopressured) gas. Regional estimates of unconventional gas occurrences in place are provided in table 5.4. The total resource potential exceeds 25,000 Tm3 (960,000 exajoules).

Coalbed methane. Coalbed methane is a natural gas mixture containing more than 90 percent methane. It occurs primarily in high-rank coal seams from where it can migrate into the surrounding rock strata. Methane contents in coal seams can range from traces to 25 cubic metres per tonne of coal (Davidson, 1995). Regional resources of coalbed methane are genetically associated with the geographic distribution of bituminous coal and anthracite deposits. The former Soviet Union accounts for nearly 50 percent of recoverable resources, centrally planned Asia (including China) has about 20 percent, and North America has 15 percent.

Coalbed methane can be a by-product of underground coal mining or be produced for the methane exclusively. In fact, coalbed methane is an explosive hazard in underground mining operations and for safety reasons has traditionally been vented with mines’ fresh air circulation. Since the 1970s methane captured from underground mining has increasingly been used to supplement local gas supplies. Thus methane capture and use can significantly mitigate greenhouse gas emissions because it avoids the release of methane - a potent greenhouse gas - and may replace fossil fuels with a higher carbon content. For long-term and stable methane supplies from coalbeds, however, dedicated drilling in coalbeds is more important than the methane from active underground coal mines.

Commercial coalbed methane production occurs only in the United States, contributing about 5 percent to natural gas production (BGR, 1998). But pilot projects are under way in a number of other countries, including Australia, China, India, Poland, Russia, Ukraine, and the United Kingdom. Estimates of methane resources range from 85 - 262 Tm3 (BGR, 1995, 1998; Rice, Law, and Clayton, 1993). This assessment uses the BGR (1995) estimate of 233 Tm3 (see table 5.4).

Tight formation gas. Tight formation gas is natural gas trapped in low-permeability reservoirs with in situ permeability of less than 0.1 millidarcy (mD), regardless of the type of the reservoir rock (Law and Spencer, 1993). Production of tight gas requires artificial stimulation techniques - such as massive hydraulic fracturing - to improve reservoir permeability. An advanced technique is horizontal drilling to develop tight gas formations, often in combination with massive hydraulic fracturing. These stimulation methods can achieve gas flow rates two to three times those of conventional vertical wells. In recent years about 3 percent of natural gas production has come from tight gas reservoirs.

TABLE 5.3. ESTIMATED NATURAL GAS RESERVES

Region

Proven recoverable reserves(WEC, 1998)

Total recoverable reserves(WEC, 1998)

Proven and additional reserves(IGU, 2000)

Proven reserves(BP, 1999)

Enhanced gas recovery


Exajoules

Tm3

Exajoules

Tm3

Exajoules

Tm3

Exajoules

Tm3

Exajoules

Tm3

North America

252

6.8

389

10.5

2,307

63.0

244

6.6

884

23.9

Latin America and Caribbean

303

8.2

426

11.5

1,556

42.5

298

8.0

306

8.3

Western Europe

181

4.9

300

8.1

436

11.9

177

4.8

306

8.3

Central and Eastern Europe

26

0.7

26

0.7

77

2.1

17

0.5

45

1.2

Former Soviet Union

2,087

56.4

2,583

69.8

5,767

157.5

2,112

56.7

1,923

52.0

Middle East and North Africa

2,076

56.1

2,250

60.8

5,343

149.5

2,065

55.4

1,421

38.4

Sub-Saharan Africa

155

4.2

155

4.2

238

6.5

161

4.3

93

2.5

Pacific Asia

207

5.6

207

5.6

798

21.8

196

5.3

158

4.3

South Asia

63

1.7

63

1.7

377

10.3

54

1.5

50

1.4

Centrally planned Asia

48

1.3

48

1.3

641

17.5

82

2.2

41

1.1

Pacific OECD

56

1.5

89

2.4

850

23.2

47

1.3

62

1.7

Total

5,450

147.3

6,534

176.6

18,390

502.2

5,454

146.4

5,290

143.0

TABLE 5.4. ESTIMATED UNCONVENTIONAL NATURAL GAS RESOURCE POTENTIAL IN PLACE

Region

Coalbed methane

Tight formation gas

Gas hydrates

Geopressured gas

Total unconventional gas

Exajoules

Tm3

Exajoules

Tm3

Exajoules

Tm3

Exajoules

Tm3

Exajoules

Tm3

North America

2,898

78

518

14

80,575

2,178

109,964

2,972

193,955

5,242

Latin America and Caribbean

0

0

222

6

57,331

1,549

103,341

2,793

160,894

4,348

Western Europe

168

5

222

6

19,806

535

27,861

753

48,057

1,299

Central and Eastern Europe

126

3

37

1

0

0

6,623

179

6,786

183

Former Soviet Union

2,646

72

1,665

45

151,533

4,095

73,667

1,991

229,511

6,203

Middle East and North Africa

0

0

925

25

4,788

129

67,784

1,832

73,497

1,986

Sub-Saharan Africa

42

1

111

3

4,788

129

63,677

1,721

68,618

1,854

Pacific Asia

210

6

148

4

0

0

45,103

1,219

45,461

1,229

South Asia

42

1

37

1

4,788

129

17,427

471

22,294

602

Centrally planned Asia

2,058

56

333

9

0

0

27,824

752

30,215

817

Pacific OECD

420

11

37

1

23,857

645

56,166

1,518

80,480

2,175

Total

8,610

233

4,255

114

347,467

9,391

599,437

16,201

959,769

25,940

Source: BGR, 1995, 1998; Rogner, 1997.

Although tight gas reservoirs exist in many regions, only the tight gas resources in the United States have been assessed. The U.S. potential of tight gas resources from tight sandstone and Devonian shale reservoirs is 13.4 Tm3 (BGR, 1995). BGR (1998) applies these U.S. estimates to extrapolate tight gas resource potential for other countries and regions, arriving at a global potential of 114 Tm3 (see table 5.4).

Gas hydrates. IGU (1997) includes some unconventional gas in its definition of additional recoverable reserves - those that are at least of foreseeable economic interest and that may prove technically and economically recoverable with a reasonable level of confidence. This definition appears to exclude gas hydrates (clathrates). IGU (1997) notes that:

Current scientific inquiries around the world are considering gas hydrates as a potential future supply of natural gas. The hydrates are frozen ice-like deposits that probably cover a significant portion of the ocean floor. The extent of their coverage and the high methane content of gas hydrates motivate speculation about the gigantic quantities of methane that could become available. At the present time there has been no attractive proposal for a technique to allow this methane to be recovered. Nor has there been any scientific confirmation of the quantities of methane that might be involved. Nevertheless, such investigations might bear fruit at some stage and radically alter current ideas regarding natural gas availability.

The existence of gas hydrates has been confirmed by direct evidence through sampling and by indirect evidence through geochemical and geophysical investigations. Samples have been recovered in 14 parts of the world; indirect evidence has been found in 30 others. Many oceanic occurrences have been inferred based on a special geophysical exploration technique - bottom-stimulating reflection. Resource estimates for gas hydrates are highly uncertain. BGR (1998) reports global clathrate occurrences of more than 9,000 Tm3 (see table 5.4). Other estimates report clathrates as high as 20,000 Tm3 (MacDonald, 1990a, b; Collet, 1993).

There are no economically attractive technological proposals for recovering methane hydrates (box 5.2). But given their enormous resource potential, it is plausible to expect that extraction methods will eventually be developed if long-term global gas demand warrants clathrate recovery. Research projects are under way in India, Japan, and the United States to examine the viability of gas hydrate recovery (Collet and Kuuskraa, 1998; BGR, 1998).

Aquifer (geopressured) gas. In many parts of the world, natural gas is found dissolved in aquifers under normal hydrostatic pressure, primarily in the form of methane (Marsden, 1993). This unconventional gas is also referred to as hydropressured gas or brine gas. The amount of gas dissolved in underground liquids increases substantially with depth. At depths up to 4,000 metres, 0.5 - 1.5 cubic metre of gas is dissolved per metre of water in aquifers. This gas factor jumps to 7 - 20 at depths of 7,000 - 8,000 metres (BGR, 1995).

Aquifer gas is expected to occur in nearly all sedimentary basins (Marsden, 1993). While no detailed assessment of aquifer gas resources is available, BGR (1998) derives potential aquifer gas in place from the groundwater volume contained in high-permeability sand stones in the hydrosphere. This approach leads to an estimate of 2,400 - 30,000 Tm3 of geopressured gas in place, with a mean estimate of 16,200 Tm3. In the absence of a more detailed assessment, a practical approach had to be taken in delineating regional resource quantities. The regional breakdown in table 5.4 was obtained by weighting the global mean estimate of gas occurrence in place with regional shares of total sedimentary area.

While these estimates of aquifer gas occurrences are highly speculative, the potential quantities are staggering. Even a future recovery factor of 5 percent implies a resource volume five times the conventional reserves estimates of BP. Aquifer gas is already produced in small quantities from shallow reservoirs in Italy, Japan, and the United States. But in all cases aquifer gas recovery has been motivated by the production of trace elements (such as iodine) rather than by the gas itself.

Coal reserves and resources

Coal deposits can be found in sedimentary basins of various geological ages. Mineable coal deposits require a minimum seam thickness over a sufficiently large area. Coal production occurs in open-pit extraction or underground mining. Coal resource estimates are generally based on drill-hole tests and geological observations. Coal is subdivided into several broadly defined types according to their caloric values. Generally, the types are bituminous coal (including anthracite), sub-bituminous coal, and lignite. For practical purposes, the subdivision is based on energy content, with the value of 16,500 kilojoules per kilogram as demarcation between hard coal (bituminous and high-energy sub-bituminous coals) and soft brown coal (lignite and low-energy sub-bituminous coals).

For almost 200 years coal has provided the basis for energy production as well as iron and steel manufacturing. It also fuelled the industrial revolution of the 19th century. In the 20th century - mainly after World War II - coal lost its leading position to crude oil. But the welfare and economic development of many countries continue to be based on coal. Coal provides about 22 percent of the world energy supply and is the most important fuel for electricity generation. About 40 percent of global electricity is produced in coal-fuelled power stations.

The differences between static and
dynamic views of oil resources can be
partly explained by the way the
different schools view
unconventional oil.

Coal will likely contribute substantially to the future world energy supply. Assuming no intervention policies targeted at preventing climate change, projections by IEA (1998c) and Nakicenovic, Grbler, and McDonald (1998) show global coal production increasing from 2.4 gigatonnes of oil equivalent (Gtoe) in 1995 to 4.0 Gtoe by 2020. Given its enormous proven reserves, the current rate of coal production could continue well into the future.

The size of coal resources is not a restraining factor to its use throughout the 21st century. Rather, continued coal use will depend on the timely development of production facilities and related infrastructure, given lead times of up to five years for open-cast operations and drift mines. Nevertheless, there is considerable potential for a significant increase in coal production capacity in the short to medium term. Although environmental considerations may limit coal use with current combustion technologies, advanced conversion technology - with carbon abatement and disposal - may create new market opportunities (see chapter 8).

Current resources and reserves

World coal resources in place are estimated at more than 7,400 billion tonnes of coal, or about 4,470 Gtoe (WEC 1998). The recoverable portion is estimated at roughly 500 Gtoe, which corresponds to the amount generally labelled reserves. About 85 percent of the resources in place are classified as bituminous or sub-bituminous (hard) coal; the rest is lignite (soft brown) coal. (Similar proportions apply to reserves.)

BOX 5.2. ARE GAS HYDRATES AN EXPLOITABLE ENERGY RESOURCE?

A gas hydrate is a crystalline cage of water molecules that can trap various gases. Hydrates can form under conditions of high pressure and low temperatures. Methane hydrates exist in polar permafrost and in sediments below the ocean floor where conditions are appropriate. Hydrates will not exist below a depth where the reservoir temperature is too high for their stability. But solid hydrate layers can provide top seals for reservoirs of free methane that can accumulate beneath. Offshore methane hydrate deposits have been identified near the coasts of many countries - including countries (such as Japan) otherwise poor in fossil fuels.

The amount of methane associated with hydrates is highly uncertain, but the quantities are probably far greater than conventional oil and gas resources combined. Estimates of global methane hydrate resources range from 0.1 - 300 million exajoules (Collet and Kuuskraa, 1998; Max, Pellanbarg, and Hurdle, 1997). How much can be practically and affordably recovered is also highly uncertain (USDOE, 1998). An emerging view is that free gas trapped beneath solid hydrate layers will be easier to recover than gas in hydrates (Max, Pellanbarg, and Hurdle, 1997). Free gas recovery would depressurise the reservoir, leading to hydrate melting at the hydrate - free gas interface and thus to free gas replenishment. The process could continue as long as the hydrate layer remains thick enough to cap the free gas below. Preliminary (though dated) estimates for recovering methane at favourable sites suggest that it might not be significantly more costly than recovering conventional natural gas (Holder, Kamath, and Godbole, 1984). But even if this proves accurate, getting the gas to major markets could often be quite costly because of high transport costs, since hydrate deposits are often far from such markets.

Three-quarters of global coal reserves are in Australia, China, India, South Africa, and the United States. Among regions, North America has the largest coal reserves (table 5.5). Substantial reserves are also available in the former Soviet Union and in South Asia. The European share has to be viewed with caution because reserves may soon be declassified to resources (neutral stuff) as production subsidies are eliminated and industry begins to close unprofitable operations.

In 1997 global coal production totalled 2,310 Gtoe, 91 percent of which was hard coal. China was the largest producer of hard coal (31 percent of the world total), followed by the United States (26 percent), India (7 percent), Australia (6 percent), and South Africa (6 percent). All other producers hold shares of less than 5 percent.

Almost 90 percent of world coal production is used domestically. In 1997 the 10 largest coal exporters traded about 500 million tonnes of hard coal. The largest exporter was Australia with a traded share of about 30 percent, followed by the United States with 15 percent.

TABLE 5.5. ESTIMATED COAL RESERVES (MILLIONS OF TONNES)

Region

Bituminous (incl. anthracite)

Sub-bituminous

Lignite

Total (exajoules)

North America

115,600

103,300

36,200

6,065

Latin America and Caribbean

8,700

13,900

200

533

Western Europe

26,300

600

47,700

1,178

Central and Eastern Europe

15,400

5,500

10,700

744

Former Soviet Union

97,500

113,500

36,700

4,981

Middle East and North Africa

200

20

0

6

Sub-Saharan Africa

61,000

200

< 100

1,465

Pacific Asia

900

1,600

5,100

10

South Asia

72,800

3,000

2,000

1,611

Centrally planned Asia

62,700

34,000

18,600

2,344

Pacific OECD

48,100

2,000

41,600

1,729

Total

509,200

277,600

198,900

20,666

Source: WEC, 1998.

Projections show
global coal production
increasing from 2.4 Gtoe
in 1995 to 4.0 Gtoe
by 2020.

Additional resources

WEC (1998) also provides information on coal resources by type. But because of incomplete country coverage, no regional or global aggregates are given. BGR (1995) estimated global coal resources at 5,000 Gtoe, of which 4,600 Gtoe are hard coal. In a 1998 update, BGR revised the estimate for additional coal resources in place to 4,300 Gtoe billion, of which about 3,500 Gtoe are additional hard coal resources. The Russian Federation has the largest share - about 2,100 Gtoe of hard coal. About 80 percent of the additional resources in the Russian Federation are in remote areas of Siberia. Large investments for infrastructure and development limit the conversion of these resources into reserves. Because of the large reserves, there is no immediate need for additional investigation of the resource potential world-wide. Estimates of the regional distribution of world total resources (including reserves) are shown in table 5.6.

Summary of fossil resources

Fossil fuel reserves, resources, and additional occurrences are shown relative to cumulative consumption and current (1998) use in table 5.7. For an analysis that extends well into the 21st century and explores the long-term availability of fossil resources, the fossil resource base is the relevant yardstick. The resource base for conventional and unconventional oil and gas is large enough to last comfortably for another 50 - 100 years - and possibly much longer - essentially at prices not much different from today. This projection assumes that past hydrocarbon productivity gains in the upstream sector can be maintained and that these resources remain in demand.

Tapping into the vast fossil resource base may eventually become a transportation challenge. For one thing, fossil resources are not evenly distributed around the globe. For another, the location of many unconventional oil and, more important, gas occurrences is far from the centres of energy demand. In China and India coal delivery costs (for rail transport) already approach production costs. Transportation logistics and costs may affect the economic attractiveness of remote resource sites. Long-distance and trans-boundary energy transport raises concerns about the security of energy supply (see chapter 4).

The fossil resource data in table 5.7 are also shown in terms of their carbon content. Since the onset of the industrial revolution, 296 gigatonnes of carbon contained in fossil fuels have been oxidised and released to the atmosphere. The resource base represents a carbon volume of some 6,500 gigatonnes of carbon. The 296 gigatonnes of carbon emitted to the atmosphere already raise concerns about climate stability - and humankind has the means to add several times that amount during the 21st century. Fossil resource scarcity will not come to the rescue. Nakicenovic, Grbler, and McDonald (1998) indicate that between 1990 and 2100 emissions under the A2 scenario (see chapter 9) of some 1,600 gigatonnes of carbon - roughly the carbon content of conventional fossil reserves (see table 5.7) - could raise the atmospheric concentration of carbon dioxide to 750 parts per million by volume (ppmv). (Before the industrial revolution, carbon dioxide concentrations were 280 ppmv; today they are 360 ppmv.) The corresponding increase in global mean temperature could be 2.0-4.5 Kelvin.5

Since 1973 the tradable price of oil (the ‘marker’ for competing fuels) has been much higher than the marginal cost of the highest-cost producer, reflecting geopolitics and a lack of competing fuels. Today the highest marginal cost of production is less than $10 a barrel - and in the Gulf it is just $2-3 a barrel (Rogner, 1997; Odell, 1998). Economic rent accounts for the rest of the tradable price. This rent could be reduced if competing fuels - unconventional oil, synliquids from gas or coal, renewable or nuclear energy - could equal the marginal cost of production. Thus the true cost of oil for the entrance of competitors is less than $10 a barrel. This cost level has already been achieved by some producers of unconventional oil and gas - tar sands in Alberta (Chadwick, 1998), heavy oil in Venezuela (Aalund, 1998), coalbed methane in the United States (BGR, 1998). The question then is, can technological advances balance the higher costs of more difficult production? Experience suggests that the answer is probably yes in the long run. But in the Gulf, marginal costs are unlikely to exceed $5 - $10 a barrel even in the long term.

One question of interest to many upstream investment planners is, when will the call on unconventional fossil occurrences commence? To some extent it is already here. Alberta’s tar sand production started more than 30 years ago and, after some difficulties in the wake of the oil price collapse of 1986, it is now competitive in today’s markets. Venezuela’s heavy oil has also been produced for many years. Still, the share of unconventional oil - and, for that matter, natural gas - is only about 6 percent of world production.

The future production profile of unconventional oil will be a function of the demand for oil products, the price and availability of conventional oil, and the cost and availability of oil substitutes. So what are the prospects for future conventional oil production? The answer is by no means conclusive. The February 1998 issue of the Explorer, the journal of the American Association of Petroleum Geologists, writes that "it is not comforting that experts disagree on almost every aspect of the world outlook, from annual production to current reserves to projected energy demand...One majority opinion emerges: Sometime in the coming century, world-wide production of petroleum liquids will reach a peak and then begin to decline...[but] there is little agreement about when this will happen, and how steep or gradual the decline will be".

TABLE 5.6. ESTIMATED COAL RESOURCES (BILLIONS OF TONNES OF COAL EQUIVALENT)

Region

Hard coal

Soft coal/ lignite

Total (exajoules)

North America

674

201

25,638

Latin America and Caribbean

37

2

1,143

Western Europe

337

11

10,196

Central and Eastern Europe

106

14

3,516

Former Soviet Union

3,025

751

110,637

Middle East and North Africa

1

1

58

Sub-Saharan Africa

181

< 1

5,303

Pacific Asia

7

5

352

South Asia

84

1

2,491

Centrally planned Asia

429

35

13,595

Pacific OECD

139

67

6,030

Total

5,021

1,089

178,959

Note: Includes reserves.

Source: BGR, 1998.

TABLE 5.7. AGGREGATE FOSSIL ENERGY OCCURRENCES

Type

Consumption

Reserves

Resourcesa

Resource baseb

Additional occurrences


1860 - 1998

1998






Exajoules

Gigatonnes of carbon

Exajoules

Gigatonnes of carbon

Exajoules

Gigatonnes of carbon

Exajoules

Gigatonnes of carbon

Exajoules

Gigatonnes of carbon

Exajoules

Gigatonnes of carbon

Oil














Conventional

4,854

97

132.7

2.65

6,004

120

6,071

121

12,074

241




Unconventional

285

6

9.2

0.18

5,108

102

15,240

305

20,348

407

45,000

914

Natural gasc














Conventional

2,346

36

80.2

1.23

5,454

83

11,113

170

16,567

253




Unconventional

33

1

4.2

0.06

9,424

144

23,814

364

33,238

509

930,000

14,176

Coal

5,990

155

92.2

2.40

20,666

533

179,000

4,618

199,666

5,151

n.a.


Total

13,508

294

319.3

6.53

46,655

983

235,238

5,579

281,893

6,562

975,000

15,090

a. Reserves to be discovered or resources to be developed as reserves. b. The sum of reserves and resources. c. Includes natural gas liquids.

Source: Compiled by author from tables 5.1 - 5.6.

Assuming ultimately recoverable conventional oil resources of, say, 400 gigatonnes and a demand development of about 1.5 percent a year, conventional oil production will peak around 2030 (reach the depletion mid-point) with an annual production of 4.4 gigatonnes, up from 3.5 gigatonnes in 1998. Total oil demand, however, would run at 5.8 gigatonnes - implying that unconventional oil will account for 1.4 gigatonnes (Odell, 1998). In other words, unconventional sources will have to be tapped speedily during the first decade of the 21st century. But experience with unconventional oil production shows a long gestation period and high threshold costs of up to $30 a barrel. Most oil price projections for 2010 (which have an extremely poor track record) expect oil prices of $13 - $29 a barrel.

Thus accelerated expansion of unconventional oil production (primarily tar sands in Alberta and extra heavy oil in Venezuela and Russia) hinges on:

· Short-term developments in oil prices.
· Actual developments in demand.
· Technological progress in field growth for conventional occurrences.
· Technological advances in the production of unconventional occurrences.
· The risk attitude of investors in unconventional production capacity.

TABLE 5.8. REASONABLY ASSURED URANIUM RESOURCES RECOVERABLE AT LESS THAN $80 A KILOGRAM (RESERVES) AND AT $80 - 130 A KILOGRAM (TONNES OF URANIUM)

Region

< $80 a kilograma

$80 - 130 a kilogram

Total

North America

420,000

251,000

671,000

Latin America and Caribbean

136,400

5,600

142,000

Western Europe

37,300

53,500

90,800

Central and Eastern Europe

14,000

25,800

39,800

Former Soviet Union

564,300

210,200

774,500

Middle East and North Africa

21,000

8,400

29,400

Sub-Saharan Africa

453,600

96,000

549,600

Pacific Asia

0

16,800

16,800

South Asia

5,000

52,000

57,000

Centrally planned Asia

49,300

65,300

114,600

Pacific OECD

615,000

99,600

714,600

Total

2,315,900

884,200

3,200,100

a. Adjusted for mining and milling losses and production of 1997.

Source: NEA and IAEA, 1997.

Sometime in the coming century,
world-wide production of
petroleum liquids will reach
a peak and then begin
to decline.

Current market prospects for unconventional oil production remain modest at best. But this may change drastically - for example, changing geopolitics could raise oil prices high enough to facilitate investments in unconventional oil. In general, most oil market outlooks project a steady increase in OPEC’s share in global oil production.

Reserves and resources of fissile materials

Naturally occurring fissile materials - natural uranium and thorium - can be found in various types of geological deposits. Although they may occur jointly, most uranium and thorium reside in separate deposits. Like fossil occurrences, uranium and thorium are finite in the Earth’s crust, and recoverable quantities depend on demand and market conditions, type of deposit, and technology.

During the 1970s, when large increases in uranium demand before the turn of the century were expected, the recovery of low-concentration uranium from seawater was investigated. Although technically feasible, estimated production costs appeared prohibitively high relative to alternatives. More recent research and development indicate that the costs of recovering uranium from seawater have fallen considerably, but are still too high given current and expected market prices for uranium. With the declining demand for uranium, recovery is concentrated on terrestrial deposits where uranium availability is estimated according to different production cost categories - such as recoverable at less than $40 a kilogram, less than $80 a kilogram, and less than $130 a kilogram.

Due to the limited development of thorium-fuelled reactors, little effort has been made to explore and delineate thorium. But reserves and resources are known to exist in substantial quantities.

The resource outlook presented below is based on a ‘once-through fuel cycle’ of uranium in normal power reactors - that is, ‘burner’ reactors. But the supply of raw material for reactor fuel is determined not only by uranium presently mined but also by fissile material initially produced for military purposes, which since the mid-1990s has become available for civil use. Reprocessed uranium and plutonium are additional supply sources with the capacity to displace up to 30 percent of the initial demand through recycling.

Uranium reserves

Uranium reserves are periodically estimated by the Organisation for Economic Co-operation and Development’s Nuclear Energy Agency (NEA) together with the International Atomic Energy Agency (IAEA), Uranium Institute (UI), World Energy Council (WEC), and numerous national geological institutions. Although these organisations use different reserve and resource definitions, the differences between their estimates are usually insignificant.

Because NEA-IAEA estimates have the widest coverage, the reserves reported in their latest survey are reported here (NEA-IAEA, 1997). The two organisations define as reserves those deposits that could be produced competitively in an expanding market. This category is called reasonably assured resources and includes uranium occurrences that are recoverable at less than $80 a kilogram. (Because of declining market prospects, a number of countries have begun to report estimates of reasonably assured uranium resources at less than $40 a kilogram.6) Uranium reserves are estimated at 2.3 million tonnes (table 5.8). These reserves are sufficient to meet the demand of existing and planned nuclear power plants well into the 21st century.

The fission of 1 kilogram of natural uranium produces about 573 gigajoules of thermal energy - some 14,000 times as much as in 1 kilogram of oil. But this is still only a small fraction of the energy potentially available from the uranium; up to 100 times this amount can be derived in a fast neutron reactor (a technology that is well developed but not commercially viable). In today's plants, 22 tonnes of uranium are typically needed to produce 1 terawatt-hour of electricity.

Uranium resources

Uranium resources are classified according to the degree of their geological assurance and the economic feasibility of their recovery. Resources that cost less than $80 a kilogram to recover (that is, reasonably assured resources) are considered reserves. Under higher market price assumptions, reasonably assured resources recoverable at less than $130 a kilogram would also qualify as reserves. Resources beyond these categories have been estimated, but with a lower degree of geological assurance. NEA-IAEA (1997) define two categories of estimated additional resources, EAR-I and EAR-II.7 Another resource category, speculative resources, is also applied. While reasonably assured resources and EAR-I include known or delineated resources, EAR-II and speculative resources have yet to be discovered (table 5.9). Global conventional uranium reserves and resources total about 20 million tonnes.

In addition, vast quantities of unconventional uranium resources exist, essentially low-concentration occurrences that were of temporary interest when medium-term demand expectations for uranium were thought to exceed known conventional resources. Such unconventional resources include phosphate deposits with uranium concentrations of 100 - 200 parts per million in sedimentary rocks, and in exceptional conditions more than 1,000 parts per million in igneous rocks. The uranium content of the world’s sedimentary phosphates is estimated at nearly 15 million tonnes, more than half of them in Morocco. To date the only way to extract uranium on an industrial basis, demonstrated mainly in the United States, is through recovery from phosphoric acid. This liquid-liquid separation process uses solvent to extract uranium, allowing for the recovery of up to 70 percent of the uranium contained in the ore. Globally, phosphoric acid plants have a theoretical capacity of supplying about 10,000 tonnes of uranium a year, provided economic conditions can be met.

TABLE 5.9. ESTIMATED ADDITIONAL AMOUNTS AND SPECULATIVE RESOURCES OF URANIUM (TONNES OF URANIUM)

Region

Estimated additional amounta

Speculative resources

North America

2,559,000

2,040,000

Latin America and Caribbean

277,300

920,000

Western Europe

66,900

158,000

Central and Eastern Europe

90,900

198,000

Former Soviet Union

914,000

1,833,000

Middle East and North Africa

12,000

40,000

Sub-Saharan Africa

852,800

1,138,000

Pacific Asia

5,000

0

South Asia

46,000

17,000

Centrally planned Asia

96,500

3,183,000

Pacific OECD

180,000

2,600,00

Total

5,100,400

12,127,000

a. Includes reasonably assured resources at extraction costs of $130 - 260 a kilogram as well as estimated additional resource categories I and II at less than $260 a kilogram.

Source: NEA and IAEA, 1997.

Other unconventional uranium resources that have been explored are black shale deposits and granite rocks with elevated uranium concentrations. Although their estimated theoretical resource potential is substantial, exploration and extraction have been limited to experimental scales. The low uranium content and potential environmental challenges associated with the production of these occurrences have led to the termination of all efforts. Another low-concentration source of uranium is the vast amount contained in seawater - about 4.5 billion tonnes at 3 parts per billion, often seen as an eventual ‘back-stop’ uranium resource (box 5.3).

BOX 5.3 URANIUM FROM SEAWATER

Seawater contains a low concentration of uranium - less than 3 parts per billion. But the quantity of contained uranium is vast - some 4.5 billion tonnes, or 700 times known terrestrial resources recoverable at less than $130 a kilogram. It might be possible to extract uranium from seawater at low cost. Early research in Japan suggested that it might be feasible to recover uranium from seawater at a cost of $300 a kilogram of uranium (Nobukawa and others, 1994). More recent work in France and Japan suggests that costs might be as low as $80 - 100 a kilogram (Charpak and Garwin, 1998; Garwin, 1999). But these estimates are based on methods used to recover gram quantities of uranium, and unforeseen difficulties may arise in scaling up these methods a million-fold or more. The implications of developing this uranium recovery technology are discussed in chapter 8.

Thorium reserves and resources

Thorium-fuelled burner and breeder reactors were developed in the 1960s and 1970s but fell behind thereafter due to lower than expected market penetration of nuclear power and to a focus on advancing uranium-fuelled nuclear power technologies. Moreover, thorium is not readily useable in a nuclear reactor because the number of neutrons released in each fission makes it difficult to sustain the chain reaction. India has far more thorium than uranium resources, and is attempting to develop the thorium fuel cycle. Important commercial developments of reactors using thorium have not materialised elsewhere. But high-temperature, gas-cooled reactors, like the one in South Africa, could also use a thorium-based fuel cycle. Thorium resources are widely available and could support a large-scale thorium fuel cycle. But given the global availability of inexpensive uranium, thorium-fuelled reactors are unlikely to be significant in resource terms in the next 50 years.

Monazite, a rare-earth and thorium phosphate mineral, is the primary source of thorium. In the absence of demand for rare-earth elements, monazite would probably not be recovered for its thorium content. Other ore minerals with higher thorium contents, such as thorite, would be more likely sources if demand increased significantly. But no thorium demand is expected. In addition, world-wide demand for thorium-bearing rare-earth ores remains low. Thorium disposal is the primary concern in obtaining mining permits for thorium-containing ores. Reserves exist primarily in recent and ancient placer deposits. Lesser quantities of thorium-bearing monazite reserves occur in vein deposits and carbonatites.

TABLE 5.10. ESTIMATED THORIUM RESERVES AND ADDITIONAL RESOURCES (TONNES OF THORIUM)

Region

Reserves

Additional resources

North America

258,000

402,000

Latin America and Caribbean

608,000

702,000

Western Europe

600,000

724,000

Central and Eastern Europe

n.a.

n.a.

Former Soviet Union

n.a.

n.a.

Middle East and North Africa

15,000

310,000

Sub-Saharan Africa

38,000

146,000

Pacific Asia

24,000

26,000

South Asia

319,000

4,000

Centrally planned Asia

n.a.

n.a.

Pacific OECD

300,000

40,000

Total

2,162,000

2,354,000

n.a. Not available.

Source: BGR Data Bank.

Hydro energy
is not evenly accessible,
and sizeable hydro
resources are often
remotely located.

Thorium resources occur in provinces similar to those of reserves. The largest share is contained in placer deposits. Resources of more than 500,000 tonnes are contained in placer, vein, and carbonatite deposits.

Global thorium reserves and resources outside the former Soviet Union and China are estimated at 4.5 million tonnes, of which about 2.2 million tonnes are reserves (table 5.10). Large thorium deposits are found in Australia, Brazil, Canada, Greenland, India, the Middle East and North Africa, South Africa, and the United States. Disseminated deposits in other alkaline igneous rocks contain additional resources of more than 2 million tonnes.

Hydroelectric resources

Hydroelectricity, which depends on the natural evaporation of water by solar energy, is by far the largest renewable resource used for electricity generation. In 1997 hydroelectricity generation totalled 2,566 terawatt-hours (IEA, 1999). Water evaporation per unit of surface area is larger for oceans than for land and, assisted by wind, is the principal cause of the continuous transfer of water vapour from oceans to land through precipitation. The maintenance of a global water balance requires that the water precipitated on land eventually returns to the oceans as runoff through rivers.

As with all renewable resources, the amount of water runoff is finite for a defined amount of time but, all else being equal, this finite amount is forever available. By applying knowledge of the hydrological cycle, the world-wide amount of runoff water can be assessed quite accurately. Hydroelectricity is obtained by mechanical conversion of the potential energy of water. An assessment of its energy potential requires detailed information on the locational and geographical factors of runoff water (available head, flow volumeper unit of time, and so on).

Because rainfall varies by region and even country, hydro energy is not evenly accessible. Moreover, sizeable hydro resources are often remotely located. As a result of advances in transmission technology and significant capital spending, electricity is being delivered to places far from the generation stations, making energy from water more affordable to more people. Projects considering the connection of electric grids between countries, regions, and even continents have been implemented or are planned (Moreira and Poole, 1993).

Although hydroelectricity is generally considered a clean energy source, it is not totally devoid of greenhouse gas emissions, ecosystem burdens, or adverse socioeconomic impacts (see chapter 3). For comparable electricity outputs, greenhouse gas emissions associated with hydropower are one or two orders of magnitude lower than those from fossil-generated electricity. Ecosystem impacts usually occur downstream and range from changes in fish biodiversity and in the sediment load of the river to coastal erosion and pollution (McCulley, 1996). Potentially adverse socio-economic aspects of hydroelectricity include its capital intensity and social and environmental impacts (McCulley, 1996). Capital-intensive projects with long construction and amortisation periods become less attractive in privatising markets. Higher education levels and increasing population densities along river beds substantially raise the socioeconomic costs of relocation. Local environmental issues require more thorough management than before because modern communications and determined citizen groups can easily turn a remote or local problem into a global issue that can influence international capital and financing markets. Large hydropower projects increasingly encounter public resistance and, as a result, face higher costs.

Integration aspects may increase the competitiveness of hydroelectricity because of its quick response to fluctuations in demand. When hydropower provides spinning reserve and peak supply, this ability allows thermal electric plants to operate closer to their optimal efficiency, lowering fuel costs and reducing emissions from burning fossil fuels. Pump storage might absorb off-peak power or power from intermittent supplies for peak use at a later point.

Theoretical potential

The world’s annual water balance is shown in table 5.11. Of the 577,000 cubic kilometres of water evaporating from ocean and land surfaces, 119,000 cubic kilometres precipitate on land. About two-thirds is absorbed in about equal parts by vegetation and soil; the remaining third becomes runoff water. Most of the fraction absorbed by vegetation and soil evaporates again and amounts to 72,000 cubic kilometres. The difference of 47,000 cubic kilometres is, in principle, available for energy purposes.

The amount of inland precipitation varies slightly by continent, from 740 - 800 millimetres a year. The two exceptions are South America (1,600 millimetres a year) and Antarctica (165 millimetres). Thus runoff water per unit of land area in South America is at least two times that elsewhere.

Convolution of runoff water volumes with average altitudes allows for the evaluation of theoretical hydropower potential by region (table 5.12). Asia (including Pacific Asia, South Asia, and centrally planned Asia) has the largest potential, because its average altitude of 950 metres is the highest of all continents (except Antarctica, which has an average altitude of 2,040 metres). But average altitudes are insufficient for calculating theoretical hydropower potential - runoff is not evenly distributed across a continent. In addition, seasonal variations in runoff influence theoretical potentials. Estimates of the global theoretical hydroelectricity potential range from 36,000 - 44,000 terawatt-hours a year (Raabe, 1985; Boiteux, 1989; Bloss and others, 1980; World Atlas and Industry Guide, 1998).

The global water balance and regional precipitation patterns may change as a result of climate change. Current models suggest that global precipitation will increase but that regional precipitation patterns will shift. These changes will affect global hydropower potential.

Technical potential

Appraisals of technical potential are based on simplified engineering criteria with few, if any, environmental considerations. Although the technical potential should exclude economic aspects, these appear to be inherent in such appraisals. Evaluation criteria may differ substantially by country and, especially in developing countries, may be quite unsophisticated. Reported technical potentials could be inflated or, because of incomplete assessments, seriously underestimated (Bloss and others, 1980; International Water Power and Dam Construction, 1989; World Atlas and Industry Guide, 1998).

TABLE 5.11. ANNUAL WORLD WATER BALANCE

Region

Surface area 106 km2

Precipitation

Evaporation

Runoffa



Millimetres

Thousands of cubic kilometres

Millimetres

Thousands of cubic kilometres

Millimetres

Thousands of cubic kilometres

Europe

10.5

790

8.3

507

5.3

283

3.0

Asia

43.5

740

32.2

416

18.1

324

14.1

Africa

30.1

740

22.3

587

17.7

153

4.6

North America

24.2

756

18.3

418

10.1

339

8.2

South America

17.8

1,600

28.4

910

16.2

685

12.2

Australia and Oceania

8.9

791

7.1

511

4.6

280

2.5

Antarctica

14.0

165

2.3

0

0.0

165

2.3

Total/average)

149

800

119

485

72

315

47.0

Pacific Ocean

178.7

1,460

260.0

1,510

269.7

-83

-14.8

Atlantic Ocean

91.7

1,010

92.7

1,360

124.4

-226

-20.8

Indian Ocean

76.2

1,320

100.4

1,420

108.0

-81

-6.1

Arctic Ocean

14.7

361

5.3

220

8.2

-355

-5.2

Total/average

361

1,270

458

1,400

505

-130

-47.0

Globe

510

1,130

577

1,130

577

0

0

a. Outflow of water from continents into oceans.

Source: UNESC, 1997.

Most significant are the differences in theoretical, technical, and economic potential by region, especially for Africa, North America, and the former Soviet Union (figure 5.3).8 In general, total technical potential has not been fully measured for most developing countries. In Brazil, for example, hydroelectricity is responsible for 96 percent of electricity generation. Of the 260 gigawatts of technical hydropower potential, more than one-third is accounted as estimated. Of that, 32 gigawatts have never been individually analysed (ANEEL, 1999).

Technological advances tend to increase the technical potential and so broaden the prospects for hydropower meeting future electricity requirements. Improvements in the efficiency and utility of turbines for low-head and small hydro sites permit more effective use of a larger number of sites in a less environmentally intrusive manner. Advances in adjustable-speed generation and new large turbines enable the rehabilitation and expansion of existing capacities (Churchill, 1997). Refurbishment of plants has shown that advanced technologies can significantly increase the energy output at essentially unchanged primary water flows (International Water Power and Dam Construction, 1989; Taylor, 1989). In addition, technological improvements enable the use of previously uneconomical potentials and new sites.

Large hydropower
projects increasingly
encounter public resistance
and, as a result, face
higher costs.

But hydroelectric generation is a mature technology for which most components are nearing their practically achievable maximum. As a result further improvements in performance are expected to be modest. Average efficiencies of existing plants are about 85 percent; a 10 percentage point increase would be a major accomplishment.

Economic potential

The economic potential of hydropower is based on detailed economic, social, environmental, geological, and technical evaluations.9 It is by far the most difficult potential to establish because the financial, environmental, and social parameters that determine it are driven by societal preferences that are inherently difficult to project.

One approach is to use the historically observed fraction of the technical potential used in industrialised countries with extensive hydropower developments. Western Europe has developed 65 percent of its technical hydropower potential, and the United States has developed 76 percent (World Atlas and Industry Guide, 1998). A utilisation rate of 40 - 60 percent of a region’s technical potential is a reasonable assumption and leads to a global economic hydroelectricity potential of 6,000 - 9,000 terawatt-hours a year. More detailed analysis based on current technological and economic puts the global economic potential at 8,100 terawatt-hours a year (see table 5.12).

TABLE 5.12. THEORETICAL, TECHNICAL, AND ECONOMIC HYDROELECTRIC POTENTIALS, INSTALLED CAPACITIES, AND CAPACITIES UNDER CONSTRUCTION, 1997 (TERAWATT-HOURS UNLESS OTHERWISE INDICATED)

Region

Gross theoretical potential

Technical potential

Economic potential

Installed hydro capacity (gigawatts)

Hydropower production

Hydro capacity under construction (megawatts)

North America

5,817

1,509

912

141

697

882

Latin America and Caribbean

7,533

2,868

1,199

114

519

18,331

Western Europe

3,294

1,822

809

16

48

2,464

Central and Eastern Europe

195

216

128

9

27

7,749

Former Soviet Union

3,258

1,235

770

147

498

6,707

Middle East and North Africa

304

171

128

21

66

1,211

Sub-Saharan Africa

3,583

1,992

1,288

66

225

16,613

Pacific Asiaa

5,520

814

142

14

41

4,688

South Asiaa

3,635

948

103

28

105

13,003

Centrally planned Asia

6,511

2,159

1,302

64

226

51,672

Pacific OECD

1,134

211

184

34

129

841

Total

40,784

13,945

6,964

655

2,582

124,161

Totalb

40,500

14,320

8,100

660

2,600

126,000

a. Several countries in Pacific Asia and South Asia do not publicise their economic potential. As a result the reported economic potentials for the regions are too low - and in South Asia the economic potential is even lower than the electricity generated. b. These are the values listed in the source. They differ from the total in the previous row due to typographical errors and due to the inclusion of estimations for countries for which data are not available.

Source: World Atlas and Industry Guide, 1998.


FIGURE 5.3 GLOBAL THEORETICAL, TECHNICAL, AND ECONOMIC HYDROELECTRIC POTENTIALS (TERAWATT-HOURS A YEAR)

Source: World Atlas and Industry Guide, 1998.

Major constraints to hydroelectricity expansion

Physical constraints. Global water runoff is 47,000 cubic kilometres a year, 28,000 cubic kilometres of which is surface runoff and 13,000 of which is stable underground flow into rivers (L’vovich, 1987). Only about three-quarters of the stable underground flow (9,000 cubic kilometres) is easily accessible and economically usable (WRI, 1998). In addition, 3,000 cubic kilometres of useful capacity is available in form of human-made lakes and reservoirs (L’vovich, 1987). Global anthropogenic water withdrawals are about 27 percent of total availability, or 3,250 cubic kilometres a year. Agriculture accounts for 65 percent of the diverted water, industries for 24 percent, and households and other municipal users for 7 percent, while 4 percent is evaporated from reservoirs (Shiklomanov, 1993).

Water use in agriculture totals 2,300 cubic kilometres a year and is expected to increase with growing food demand. The United Nations projects a 50 - 100 percent increase in irrigation water by 2025 (Raskin and others, 1997). Most of the projected increase in water demand will occur in developing countries because of rapid growth in population, industry, and agriculture. Water pollution adds enormously to local and regional water scarcity by eliminating large volumes from the available supply. Many developing countries undergoing rapid industrialisation face the full range of modern toxic pollution problems - eutrophication, heavy metals, acidification, and persistent organic pollutants (WHO, 1997).

Globally, water supplies are abundant. But they are unevenly distributed among and within countries. In some areas water withdrawal has reached such dimensions that surface water supplies are shrinking and groundwater reserves are being depleted faster than they can be replenished by precipitation (WHO, 1997). One-third of the world’s people live in countries experiencing moderate to high water stress, and that share could rise to two-thirds by 2025 (WRI, 1998). Since 1940 the amount of freshwater used by humans has roughly quadrupled as the world population has doubled (Population Action International, 1997). Another doubling of the world population by 2100 cannot be ruled out. Assuming an upper limit of usable renewable freshwater of 9,000 - 14,000 cubic kilometres a year, a second quadrupling of world water use appears highly improbable.

In connection with the physical constraints to the use of water for power generation listed above, it should be noted that electricity generation - unlike, say, irrigation and domestic and industrial uses - is a non-consumptive use of water. Under otherwise favourable conditions, such as irrigation at low altitudes, water can be used first to generate power and then for other purposes.

A physical factor needed to develop hydropower economically is the availability of a suitable head. This limitation does not apply to other water uses. This factor is critical in many water-rich but low-lying regions.

Environmental and social constraints. More than 400,000 cubic kilometres of land have been inundated by the construction of dams (Shiklomanov, 1993). These dams generate 2,600 terawatt-hours a year of electricity. Assuming that all flooded areas are used for hydroelectricity, the energy density is 62 megawatt-hours a hectare per year. But hydroelectric plants vary widely in this respect. Goodland (1996) reports on installed capacity, flooded land, and relocated persons for 34 hydroelectric plants, mostly in developing countries. These plants have an average energy density of 135 megawatt-hours a hectare per year. The most land-intensive of them yields 3.5 megawatt-hours a year per hectare of flooded land, but the least land-intensive yields 1.48 million megawatt-hours a year per hectare.

Eleven of the thirty-four plants yield more than 1,800 megawatt-hours a hectare per year (0.205 kilowatt-years per year), the standard for a fixed array photovoltaic plant in sunny areas (see below). Biomass from forests (15 oven dry tonnes a hectare per year) and from crop plantation (10,000 litres of ethanol a hectare per year using sugarcane) have energy densities of about 20 megawatt-hours a hectare per year. Thus hydroelectricity is land-intensive - more so than photovoltaics but less so than biomass plantations.

Hydroelectricity has sparked controversy when large dams with energy densities as low as 0.2 megawatt-hours a hectare per year require large-scale flooding and displace people. Some large dams involve the resettlement of more than 100,000 people (Goodland, 1997). Mandatory resettlement and the boom and bust effects of dam construction on local economies have become contentious social and environmental issues. In the past, resettlement was the responsibility of governments and public utilities involved in the project. Despite enormous financial expenditures and compensation packages, resettlement efforts have had modest success. If private utilities are to finance hydro projects, they will have to take responsibility for dealing with resettlement issues.

Biomass-derived fuels can substitute
for fossil fuels in existing energy
supply infrastructure without
contributing to the build-up of
greenhouse gases.

National and international cooperation on the development of environmental best practices (such as through working groups on hydropower and the environment in partnership with nongovernmental organisations) may foster public acceptance of hydropower projects. For example, the World Commission on Dams, an independent international commission established in 1998, is reviewing the development effectiveness of large dams and developing internationally acceptable criteria for future decision-making on dams.

Biomass resources

The world derives about 11 percent of its energy from biomass (IEA, 1998b). In developing countries biomass is the most important energy source, accounting for about 35 percent of the total (WEC, 1994). (In the largest developing countries, China and India, biomass accounts for 19 percent and 42 percent of the primary energy supply mix.) But in the world's poorest countries, biomass accounts for up to 90 percent of the energy supply, mostly in traditional or noncommercial forms.10 This explains why biomass is often perceived as a fuel of the past - one that will be left behind as countries industrialise and their technological base develops.

But biomass resources are abundant in most parts of the world, and various commercially available conversion technologies could transform current traditional and low-tech uses of biomass to modern energy. If dedicated energy crops and advanced conversion technologies are introduced extensively (see chapter 7), biomass could make a substantial contribution to the global energy mix by 2100. Although most biomass is used in traditional ways (as fuel for households and small industries) and not necessarily in a sustainable manner, modern industrial-scale biomass applications have increasingly become commercially available. In 1996 estimates of biomass consumption ranged from 33 - 55 exajoules (WEC, 1998; IEA, 1998a; Hall, 1997).

Sources

Biomass can be classified as plant biomass (woody, non-woody, processed waste, or processed fuel; table 5.13) or animal biomass. Most woody biomass is supplied by forestry plantations, natural forests, and natural woodlands. Non-woody biomass and processed waste are products or by-products of agroindustrial activities. Animal manure can be used as cooking fuel or as feedstock for biogas generation. Municipal solid waste is also considered a biomass resource.

The annual global primary production of biomatter totals 220 billion oven dry tonnes, or 4,500 exajoules. The theoretically harvestable bioenergy potential is estimated to be 2,900 exajoules, of which 270 exajoules could be considered technically available on a sustainable basis (Hall and Rosillo-Calle, 1998). Hall and Rao (1994) conclude that the biomass challenge is not availability but sustainable management, conversion, and delivery to the market in the form of modern and affordable energy services. Biomass resources can be converted to chemical fuels or electricity through several routes (see chapter 7).

Two major studies have recently acknowledged the benefits of sustainably produced biomass energy in future energy scenarios. The first is by Shell International Petroleum Company (Shell, 1996), which assessed potential major new sources of energy after 2020, when renewable energies are expected to become competitive with fossil fuels. The Intergovernmental Panel on Climate Change (IPCC, 1996a) has considered a range of options for mitigating climate change, and increased use of biomass for energy features in all its scenarios.

The expected role of biomass in the future energy supply of industrialised countries is based on two main considerations:

· The development of competitive biomass production, collection, and conversion systems to create biomass-derived fuels that can substitute for fossil fuels in existing energy supply infrastructure without contributing to the build-up of greenhouse gases in the atmosphere. Intermittent renewables, such as wind and solar energy, are more challenging to fit into existing distribution and consumption schemes.

· The potential resource base is generally considered substantial given the existence of land not needed or unsuitable for food production, as well as agricultural food yields that continue to rise faster than population growth.

In developing countries an assessment of potential bioenergy development must first address issues ranging from land-use conflicts with food production to health and environmental problems.

Perceptions and problems

Biomass is often perceived as a fuel of the past because of its low efficiency, high pollution, and associations with poverty.

· Biomass is the fuel most closely associated with energy-related health problems in developing countries. Exposure to particulates from biomass or coal burning causes respiratory infections in children, and carbon monoxide is implicated in problems in pregnancy (see chapter 3).

· Biomass fuels are bulky and may have a high water content. Fuel quality may be unpredictable, and physical handling of the material can be challenging. But technologies for biomass fuel upgrading (into pellets or briquettes, for example) are advancing, and the development of dedicated energy crops will also improve fuel standardisation.

· For biomass to become a major fuel, energy crops and plantations will have to become a significant land-use category. Land requirements will depend on energy crop yields, water availability, and the efficiency of biomass conversion to usable fuels. Assuming a 45 percent conversion efficiency to electricity and yields of 15 ovendry tonnes a hectare per year, 2 square kilometres of plantation would be needed per megawatt of electricity of installed capacity running 4,000 hours a year.

· The energy balance is not always favourable. While woody biomass energy output is 10 - 30 times greater than the energy input, the issue is less clear for liquid fuels derived from biomass (Shapouri, Duffield, and Graboski, 1995). Nevertheless, the use of sugarcane as a source of ethanol yields a very positive balance and is responsible for a net abatement of 9 million tonnes of carbon a year in Brazil (Moreira and Goldemberg, 1999). With the promising development of enzymatic hydrolysis, cellulose can be transformed into ethanol with a very favourable energy balance (PCAST, 1997).

· Large-scale production of biomass can have considerable negative impacts on soil fertility, water and agrochemical use, leaching of nutrients, and biodiversity and landscape. The collection and transport of biomass will increase vehicle and infrastructure use and air-borne emissions.

Technical potential of biomass energy plantations

To estimate future technical biomass potentials, it is necessary to know:

· The amount of land available for biomass plantation.
· The regional distribution of this land and distances to consumption centres.
· The productivity of the land for biomass production, including water availability.
· The environmental implications of biomass production.
· The technical and economic performance of conversion technologies and net energy balance.

TABLE 5.13. TYPES AND EXAMPLES OF PLANT BIOMASS

Woody biomass

Non-woody biomass

Processed waste

Processed fuels

· Trees
· Shrubs and scrub
· Bushes such as coffee and tea
· Sweepings from forest floor
· Bamboo
· Palms

· Energy crops such as sugarcane
· Cereal straw
· Cotton, cassava, tobacco stems and roots (partly woody)
· Grass
· Bananas, plantains, and the like
· Soft stems such as pulses and potatoes
· Swamp and water plants

· Cereal husks and cobs
· Bagasse
· Wastes from pineapple and other fruits
· Nut shells, flesh, and the like
· Plant oil cake
· Sawmill wastes
· Industrial wood bark and logging wastes
· Black liquor from pulp mills
· Municipal waste

· Charcoal (wood and residues)
· Briquette/densified biomass
· Methanol/ethanol (wood alcohol)
· Plant oils from palm, rape, sunflower, and the like
· Producer gas
· Biogas

Source: Adapted from IEA, 1998a.

TABLE 5.14. CURRENT GLOBAL LAND-USE PATTERN

Cropland (arableland and permanent crops)

Forests and woodland

Permanent pastures

Other land




Total other land

Land with rainfed cultivation potential

Gha

% of total

Gha

% of total

Gha

% of total

Gha

% of total

Gha

1.5

11

4.2

21

3.4

26

4.0

31

1.6 - 1.8

Note: Gha stands for billions of hectares. Total land availability is 13.1 billion hectares.

Source: FAO, 1993, 1999; Fischer and Heilig, 1998; WRI, 1998.

TABLE 5.15. PROJECTED BIOMASS ENERGY POTENTIAL, 2050 (BILLIONS OF HECTARES UNLESS OTHERWISE INDICATED)

1

2

3

4

5

6a

7b

7c

Region

Population in 2050 (billions)

Land with crop production potential in 1990

Cultivated land in 1990

Additional cultivated land required in 2050

Maximum additional area for biomass production

Maximum additional amount of energy from biomass (exajoules)

Industrialised countriesd

-

-

0.670

0.050

0.100

17

30

Latin America








Central and Caribbean

0.286

0.087

0.037

0.015

0.035

6

11

South America

0.524

0.865

0.153

0.082

0.630

107

189

Africa








East

0.698

0.251

0.063

0.068

0.120

20

36

Central

0.284

0.383

0.043

0.052

0.288

49

86

North

0.317

0.104

0.040

0.014

0.050

9

15

Southern

0.106

0.044

0.016

0.012

0.016

3

5

West

0.639

0.196

0.090

0.096

0.010

2

3

Asia (excl. China)








Western

0.387

0.042

0.037

0.010

-0.005

0

0

South-central

2.521

0.200

0.205

0.021

-0.026

0

0

East

1.722

0.175

0.131

0.008

0.036

6

11

South-east

0.812

0.148

0.082

0.038

0.028

5

8

China

-

-

-

-

-

2e

2e

Totalf

8.296

2.495

0.897

0.416

1.28

226

396

Global biomass energy potential

276g

446g

a. (6) = (3) - (4) - (5). b. (7) = (6) x 8.5 [oven dry tonnes a hectare per year] x 20 [GJ per oven dry tonne] based on higher heating value (18 GJ per oven dry tonne for lower heating value). The assumptions for biomass productivity may appear on the high side, but they represent technically achievable yields given dedicated research, development, and dissemination. c. (7) = (6) ×15 [oven dry tonnes a hectare per year] ×20 [GJ per oven dry tonne] based on higher heating value (18 GJ per oven dry tonne for lower heating value). d. OECD, Central and Eastern Europe, newly independent states of the former Soviet Union. e. Data are projected values from d’Apote (1998), not maximum estimates. f. Totals in (2), (3), (4), and (5) exclude industrialised countries. g. Includes 50 EJ of current biomass energy generation.

Source: Derived from Fischer and Heilig, 1998; d’Apote, 1998; Nakicenovic, Grbler, and McDonald, 1998.

Current land-use patterns are shown in table 5.14. Land use is split into cropland, forests and woodland, permanent pastures, and other land. ‘Other land’ includes uncultivated land, grassland not used for pasture, built-on areas, wastelands, wetlands, roads, barren land, and protected forests. Less than a half of this land (1.6 - 1.8 billion hectares) can be used for rainfed cultivation, including biomass production (FAO, 1993; Fischer and Heilig, 1998).

Because energy plantations will likely account for 80 - 100 percent of biomass supply, large-scale use of biomass may compete with land for agriculture and food production. But biomass production for energy purposes should not infringe on food production. By 2100 an additional 1,700 million hectares of land are expected to be needed for agriculture, while 690 - 1,350 million hectares of additional land would be needed to support biomass energy requirements under a high-growth biomass energy scenario. Hence land-use conflicts could arise.

Land availability. Considerable areas are potentially available for large-scale production of biomass. In tropical countries large areas of deforested and degraded lands could benefit from the establishment of bioenergy plantations. While the theoretical potential of biomass production is one order of magnitude larger than current global energy use, the technical and economic potentials are much smaller. Technical and economic potentials will be determined by numerous factors ranging from current uses of degraded land (which in developing countries is often used by the poor to graze livestock) and land productivity to the economic reach of the land with respect to centres of energy demand.

The United Nations Food and Agriculture Organization’s "World Agriculture towards 2010 study (Alexandratos, 1995) assesses potential cropland resources in more than 90 developing countries. In 2025 developing countries will be using only 40 percent of their potential cropland, but with large regional variations. Asia (excluding China, for which data were unavailable) will have a deficit of 47 million hectares, but yields of most food crops are low, and there is great potential for improvement using better genetic strains and management techniques. Modern agricultural technologies have not reached many rural farmers and could boost yields by as much as 50 percent. Whether future productivity gains can avoid a food deficit remains to be seen. Africa currently only uses 20 percent of its potential cropland and would still have 75 percent remaining in 2025. Latin America, currently using only 15 percent of its potential cropland, would have 77 percent left in 2025 - land capable of producing nearly eight times its present energy consumption.

Large areas of surplus agricultural land in North America and Europe could become significant biomass production areas. U.S. farmers are paid not to farm about 10 percent of their land, and in the European Union 15 percent of arable farmland can be set aside (amounting to 15 - 20 million hectares by 2010, and possibly more than 50 million hectares later in the 21st century). In addition to more than 30 million hectares of cropland already set aside in the United States to reduce production or conserve land, another 43 million hectares of cropland have high erosion rates. Another 43 million hectares have wetness problems that could be eased with a shift to perennial energy crops. The U.S. Department of Agriculture estimates that a further 60 million hectares may be idled over the next 25 years.

A projection of these parameters for 2050 is shown in table 5.15. The theoretical and technical potential for biomass energy is about ten times current use (445 exajoules relative to 45 exajoules) and close to current global primary energy use of 402 exajoules a year. But the extent to which this potential can be achieved will depend on numerous factors. These include the share of land allocated to other uses (for example, plantations for timber and pulp), actually achievable specific biomass productivity, technologies for converting biomass to convenient energy services, transport distances, water availability, biodiversity, and the need for fertilisers.

Water resources. The supply of freshwater may become a limiting factor for both food and bioenergy production. Several studies have addressed water issues related to agriculture (FAO, 1999; Fischer and Heilig, 1998; WRI, 1998; Seckler and others, 1998, Falkenmark, 1997). But water availability for biomass production has not been addressed in great detail. The common view is that "the food needs of the world’s rapidly growing population will introduce severe problems, either because the rate of growth will be too rapid for the additional water mobilisation to be met, or because the overall water demands will grow unrealistically high so that they cannot be met" (Falkenmark, 1997, p. 74).

Current and projected water resources, by region, are shown in table 5.16. Two levels of water requirements can be used to estimate water sufficiency. The lowest level of sufficiency is generally considered to be 1,000 cubic metres per capita a year, while the availability of more than 2,000 cubic metres per capita a year makes for a small probability of water shortages (Seckler and others, 1998, Falkenmark, 1997). In addition, a recent study commissioned by the United Nations Commission on Sustainable Development (Raskin and others, 1997) puts the upper limit of sustainable water consumption at 40 percent of available resources.

Even without considering water requirements for biomass production, water shortages (supply below 2,000 cubic metres per capita a year) are possible for about half the world’s population as early as 2025. Thus the water constraint for extended biomass production will likely be of importance, especially in the long term (see also the section on physical constraints to hydroelectricity expansion, above).

TABLE 5.16. SUFFICIENCY OF WATER RESOURCES, 1990 AND 2025

Region

Population in 1990 (millions)

Water resources per capita in 1990 (cubic metres)

Water resources per capita in 2025 (cubic metres)

Supply in 2025 as percentage of available water resources

North America

278

19,370

36,200

6,065

Latin America and Caribbean

433

30,920

200

533

Western Europe

459

10,604

47,700

1,178

Central and Eastern Europe

277

1,902

10,700

744

Former Soviet Union

428

4,561

36,700

4,981

Middle East and North Africa

n.a.

n.a.

0

6

Sub-Saharan Africa

n.a.

n.a.

< 100

1,465

Pacific Asia

405

11,463

5,100

10

South Asia

1,133

4,537

2,000

1,611

Centrally planned Asia

1,252

2,987

18,600

2,344

Pacific OECD

144

8,463

41,600

1,729

Total

4,809

8,497

198,900

20,666

n.a. Not available.

Source: Seckler and others, 1998.

TABLE 5.17. CURRENT AND FEASIBLE BIOMASS PRODUCTIVITY, ENERGY RATIOS, AND ENERGY YIELDS FOR VARIOUS CROPS AND CONDITIONS

Crop and conditions

Yield (dry tonnes a hectare per year)

Energy ratio

Net energy yield (gigajoules a hectare per year)

Short rotation crops(willow, hybrid poplar; United States, Europe)




· Short term

10-12

10:1

180-200

· Longer term

12-15

20:1

220-260

Tropical plantations(such as eucalyptus)




· No genetic improvement, fertiliser use, and irrigation

2-10

10:1

30-180

· Genetic improvement and fertiliser use

6-30

20:1

100-550

· Genetic improvement, fertiliser and water added

20-30


340-550

Miscanthus/switchgrass




· Short term

10-12

12:1

180-200

· Longer term

12-15

20:1

220-260

Sugarcane (Brazil, Zambia)

15-20

18:1a

400-500

Wood (commercial forestry)

1- 4

20/30:1

30- 80

Sugar beet(northwest Europe)




· Short term

10-16

10:1

30-100

· Longer term

16-21

20:1

140-200

Rapeseed (including straw yields; northwest Europe)




· Short term

4- 7

4:1

50- 90

· Longer term

7-10

10:1

100-170

a. The value in Moreira and Goldemberg (1999) - 7.9:1 - includes spending on transportation and processing of sugarcane to the final product ethanol.

Source: Biewinga and. van der Bijl, 1996; Hall and Scrase, 1998; IEA, 1994; Kaltschmitt, Reinhardt, and Stelzer, 1996; de Jager, Faaij, and Troelstra, 1998; IPCC, 1996a; Ravindranath and Hall, 1996.

Energy balances and biomass productivity

The energy production per hectare of various crops depends on climatic, soil, and management conditions. Examples of net energy yields - output minus energy inputs for agricultural operations, fertiliser, harvest, and the like - are given in table 5.17. Generally, perennial crops (woody biomass such as willow, eucalyptus, hybrid poplar, miscanthus or switchgrass grasses, sugarcane) perform better than annual crops (which are planted and harvested each year; examples include sorghum and hemp). This is because perennial crops have lower inputs and thus lower production costs as well as lower ecological impacts. Different management situations - irrigation, fertiliser application, genetic plant improvements, or some combination of the three - can also increase biomass productivity, by a factor of up to 10.

In addition to production and harvesting, biomass requires transportation to a conversion facility. The energy used to transport biomass over land averages about 0.5 megajoules per tonne-kilometre, depending on infrastructure and vehicle type (Borjesson, 1996). This means that land transport of biomass can become a significant energy penalty for distances of more than 100 kilometres. But such a radius covers a surface of hundreds of thousands of hectares, and is sufficient to supply enough biomass for conversion facilities of hundreds of megawatts of thermal power.

Transporting biomass by sea is also an option. Sea transport from Latin America to Europe, for example, would require less than 10 percent of the energy input of the biomass (Agterberg and Faaij, 1998). International transport of biomass (or rather, energy forms derived from biomass) is feasible from an energy (and cost) point of view. Sea transport of biomass is already practised: large paper and pulp complexes import wood from all over the world.

Agricultural and forestry residues and municipal waste

Agricultural and forestry residues are the organic by-products from food, fibre, and forest-product industries. Hall and others (1993) estimate the energy contents of these residues at more than one-third of global commercial energy use, of which about 30 percent is recoverable. Limitations arise from the impracticality of recovering all residues and from the need to leave some residues at the site (for fertilisation, for example) to ensure sustainable production of the main product.

Forestry residues obtained from sound forest management do not deplete the resource base. Under sustainable management, trees are replanted, the forest is managed for regeneration to enhance its health and future productivity, or both steps are taken. Energy is just one of the many outputs of forests. One of the difficulties is accurately estimating the potential of residues that can be available for energy use on a national or regional scale.

Municipal solid waste and industrial residues are indirect parts of the biomass resource base. Industrialised countries generate 0.9 - 1.9 kilograms per capita of municipal solid waste every day. Energy contents range from 4 - 13 megajoules per kilogram (IPPC, 1996a). Johansson and others (1993) report heating values as high as 15.9 megajoules per kilogram in Canada and the United States. Waste incineration, thermochemical gasification, and biodigestion convert municipal solid waste into electricity, heat, or even gaseous and liquid fuels. Because landfill disposal of municipal solid waste in densely populated areas is increasingly constrained and associated with rising tipping fees, such energy conversion can be profitable. Separating and recycling non-combustible contents.

Municipal solid waste incineration requires tight air pollution abatement due to the generation of complex compounds, some of which - such as dioxins - are carcinogenic (WEC, 1994). Advanced pollution abatement equipment essentially eliminates harmful pollutant emissions (Chen, 1995).

Johansson and others (1993) project that in industrialised countries energy production from urban refuse will reach about 3 exajoules a year by 2025.11 Data on municipal solid waste in developing countries could not be found, but with rising living standards these same as those in low-income OECD countries. Globally, this could double the potential energy supply from municipal solid waste to 6 exajoules.

Environmental implications of biomass production

Forest energy plantations consist of intensively managed crops of predominantly coppiced hardwoods, grown on cutting cycles of three to five years and harvested solely for use as a source of energy. The site, local, regional, and global impacts of these crops need to be considered. For example, if short-rotation energy crops replace natural forests, the main negative effects include increased risks of erosion, sediment loading, soil compaction, soil organic matter depletion, and reduced long-term site productivity. Water pollution from intensively managed sites usually results from sediment loading, enhanced nutrient concentrations, and chemical residues from herbicides. In contrast, if short-rotation crops replace unused or degraded agricultural land, this reduces erosion, nutrient leaching, and so on.

Developing new crops is a slow and costly process involving many technical and non-technical obstacles (Rosillo-Calle and others, 1996). Farmers have been slow to adopt new crops because of the long-term (more than 15 years) commitment needed. But research and development in Sweden and the United Kingdom have found frost- and pest-resistant clones and generated high yields by using mixed-clone planting and other management practices (Hall and Scrase, 1998).

Soil and nutrients. The abundant use of fertilisers and manure in agriculture has led to considerable environmental problems in various regions. These problems include nitrification of groundwater, saturation of soils with phosphate (leading to eutrophication), and difficulties meeting drinking water standards. In addition, the application of phosphates has increased heavy metal flux to the soil.

The agricultural use of pesticides can affect the health of people as well as the quality of groundwater and surface water - and, consequently, plants and animals. Specific effects depend on the type of chemical, the quantities used, and the method of application. Experience with perennial crops (willow, poplar, eucalyptus) suggests that they meet strict environmental standards. Agrochemical applications per hectare are 5 - 20 times lower for perennial energy crops than for food crops like cereals (Hall, 1997).

Limited evidence on the soil effects of energy forestry indicates that our understanding of this area is still relatively poor. Current evidence indicates that, with proper practices, forest soil management need not negatively affect physical, chemical, and biological soil parameters. Soil organic matter can improve soil fertility, biology, and physical properties (such as bulk density and water relations).12 Relative to arable agriculture, energy plantations can improve the physical properties of soil because heavy machinery is used less often and soil disturbances are fewer. Soil solution nitrate can also be significantly reduced in soils planted with fast-growing trees, as long as nitrogen fertilisers are applied in accordance with the nutrient demands of the trees.

In tropical countries
large areas of deforested and
degraded lands could benefit
from the establishment of
bioenergy plantations.

Biological fertilisers may replace chemical nitrogen fertilisers in energy forestry and crops.

Biological fertilisation may include:

· Direct planting of nitrogen-fixing woody species and interplanting with nitrogen-fixing trees or ley crops.

· Soil amendments with various forms of organic matter (sewage sludge, wastewater, contaminated groundwater, farmyard manure, green manure).

· Stimulation or introduction of rhizosphere micro-organisms that improve plant nutrient uptake.

· Biological fallow.

Overall, from a nutritional point of view, there is no reason to believe that energy forest plantations will have significant environmental and ecological impacts when proper management practices are applied (Ericson, 1994).

Erosion. Erosion is related to the cultivation of many annual crops in many regions and is a concern with woody energy crops during their establishment phase. Little field data are available for comparison with arable crops. One of the most crucial erosion issues relates to the additional soil stabilisation measures required during the establishment of energy plantations. Growing ground-cover vegetation strips between rows of trees can mitigate erosion as long as competition does not occur.

Changing land use from agricultural production to an energy forest plantation reduces precipitation excess (groundwater recharges) and nutrient leaching. Nitrogen leaching decreases with energy plantations because the standard nutrient supply and the use of animal slurries lead to good uptake efficiencies relative to agricultural production systems. Nitrogen uptake efficiency for arable crops is about 50 percent, for grass 60 percent, and for forest plantations about 75 percent. The losses in these systems are mainly due to leaching and de-nitrification (Rijtman and Vries, 1994).

Another concern relates to possible soil compaction caused by heavy harvesting machinery. But these effects tend to be small to moderate due to the infrequency of forest harvesting (Smith, 1995). Overall, these impacts can be significantly lower than for conventional agriculture. When harvesting perennials, soil erosion can be kept to an absolute minimum because the roots remain in the soil. In the United States millions of hectares covered by grasses that fall under the soil conservation programme could provide a promising biomass production area, since biomass production can be combined with soil protection. Another benefit of perennial crops relative to annual crops is that their extensive root system adds to the organic matter content of the soil. Generally, diseases (such as eels) are prevented and the soil gets a better structure.

Many of the environmental and ecological impacts noted thus far can be alleviated with compensating measures. Energy crops are generally more environmentally acceptable than intensive agriculture because chemical inputs are lower and the soil undergoes less disturbance and compaction.

Biodiversity and landscape. Biomass plantations may be criticised because the range of biological species they support is much narrower than is found in natural ecosystems, such as forests. While this is generally true, it is not always relevant. Where plantations are established on degraded or excess agricultural lands, the restored lands are likely to support a more diverse ecology than before. Moreover, degraded land areas are plentiful: in developing countries about 0.5 billion hectares of degraded land are available (Bekkering, 1992). In any case, it is desirable to restore such land surfaces for water retention, erosion prevention, and microclimate control.

A good plantation design - including set-aside areas for native plants and animals situated in the landscape in a natural way - can avoid problems normally associated with monocultures. The presence of natural predators (such as insects) can also prevent the outbreak of pests and diseases. Altogether, more research and insights on plantations are needed, taking into account local conditions, species, and cultural aspects.

Environmentally motivated responses to biomass production

Management practices are a key factor in the sustainable production and use of biomass. Yet very little is known about managing large-scale energy forest plantations or even agricultural and forestry residues for energy use.13 The potential adverse environmental effects of large-scale dedicated energy crops and forestry plantations have raised concerns. Considerable effort has gone into investigatingthese concerns, and much knowledge has been gained (see Tolbert, 1998 and Lowe and Smith, 1997).

As a result good practice guidelines are being developed for the production and use of biomass for energy in Austria, Sweden, the United Kingdom, and the United States, as well as across Europe.

TABLE 5.18 ANNUAL SOLAR ENERGY RECEIVED BY THE EARTH

Parameter

Energy

Solar energy intercepted by the Earth at ~1.37 kilowatts per square metre

5.5×106

Solar energy reflected by the atmosphere back to space at ~0.3 kilowatts per square metre)

1.6×106

Solar energy potentially usable at ~1.0 kilowatts per square metre

3.9×106

Ratio of potentially usable solar energy to current primary energy consumption (402 exajoules)

~9,000

Source: Author’s calculations.

Very little is known about
managing large-scale energy forest
plantations or even agricultural
and forestry residues
for energy use.

These guidelines focus on short-rotation coppice and recognise the central importance of site-specific factors and the breadth of social and environmental issues that should be taken into consideration. But given that residues may remain more widely used than energy crops for quite some time, guidelines are urgently needed on when it is appropriate to use residues for energy, what fraction can be used, and how potential environmental advantages can be maximised.

A key message of these guidelines is that site and crop selection must be made carefully, and the crop must be managed sensitively. Energy crops should not displace land uses of high agricultural and ecological value. Consideration needs to be given to the landscape and visibility, soil type, water use, vehicle access, nature conservation, pests and diseases, and public access (ETSU, 1996; Hall and Scrase, 1998). The guidelines also stress the importance of consulting with local people at the early planning stage, and of ongoing community involvement in the development stages. Issues such as changes to the landscape, increased traffic movements, or new employment opportunities in rural areas may prove very significant to local people.

Economics

The production costs of plantation biomass are already favourable in some developing countries. Eucalyptus plantations in Brazil supply wood chips for $1.5 - 2.0 a gigajoule (Carpentieri, Larson, and Woods, 1993). Based on this commercial experience, Carpentieri, Larson, and Woods (1993) project future biomass (wood chip) production of 13 exajoules a year on 50 million hectares of land. Costs are much higher in industrialised countries (with top values of around $4 a gigajoule in parts of Europe). But in the longer run, by about 2020, better crops and production systems are expected to cut biomass production costs in the United States to $1.5 - 2.0 a gigajoule for substantial land surfaces (Graham and others, 1995; Turnure and others, 1995).

Biomass costs are influenced by yield, land rent, and labour costs. Thus increases in productivity are essential to reducing biomass production costs. Yields can be improved through crop development, production integration (multiproduct plantation), and mechanisation. Competition for land use should be avoided to minimise inflated land rental rates. Labour costs can be lowered through mechanisation.

Solar energy resources

Solar energy has immense theoretical potential. The amount of solar radiation intercepted by Earth is more than three orders of magnitude higher than annual global energy use (table 5.18). But for several reasons the actual potential of solar energy is somewhat lower:

· Time variation. The amount of solar energy available at a given point is subject to daily and seasonal variations. So, while the maximum solar flux at the surface is about 1 kilowatt per square meter, the annual average for a given point can be as low as 0.1 - 0.3 kilowatts per square meter, depending on location. For large-scale application of solar energy - more than 5 - 10 percent of the capacity of an integrated electricity system - the variability of insolation necessitates energy storage or backup systems to achieve a reliable energy supply.

· Geographic variation. The availability of solar energy also depends on latitude. Areas near the equator receive more solar radiation than subpolar regions. But geographic variation can be significantly reduced by using collectors capable of following the position of the sun. Polar regions show a notable increase in irradiance due to light reflection from snow.

· Weather conditions. Weather is another, even stronger, factor influencing the availability of solar energy. Annual average sky clearness may vary by 80 - 90 percent in locations such as Khartoum (Sudan), Dakar (Bangladesh), Kuwait, Baghdad (Iraq), Salt Lake City (Utah), and by 40 - 50 percent in Tokyo (Japan) and Bonn (Germany; WEC, 1994). Solar irradiance is often quite diffuse, leading to lower average power densities. Thus large-scale generation of solar energy can require significant land.

· Siting options. While building structures provide interesting local siting possibilities,14 large-scale solar collectors can be located on land that is not being used - which amounts to about 4 billion hectares (FAO, 1999). Assuming 10 percent of this unused land is allocated for habitation (cities, towns, villages) and infrastructure (roads, ports, railways), some 3.6 billion hectares are available for solar energy.

Large-scale availability of solar energy will thus depend on a region’s geographic position, typical weather conditions, and land availability. Using rough estimates of these factors, solar energy potential is shown in table 5.19. This assessment is made in terms of primary energy - that is, energy before the conversion to secondary or final energy is estimated. The amount of final energy will depend on the efficiency of the conversion device used (such as the photovoltaic cell applied). Issues related to energy conversion and its impact on the amount of energy delivered are considered in chapter 7.

This assessment also reflects the physical potential of solar energy. Thus it does not take into account possible technological, economic, and social constraints on the penetration of solar energy except for two different assumptions on available land. The consideration of such constraints is likely to result in much lower estimates - as in WEC (1994), where global solar energy potential in 2020 ranges from 5 - 230 exajoules a year.

The solar energy potential in table 5.19 is more than sufficient to meet current and projected energy uses well beyond 2100. Thus the contribution of solar energy to global energy supplies will not be limited by resource availability. Rather, three factors will determine the extent to which solar energy is used in the longer run: the availability of efficient and low-cost technologies to convert solar energy into electricity and eventually hydrogen, of effective energy storage technologies for electricity and hydrogen, and of high-efficiency end-use technologies fuelled by electricity and hydrogen.

TABLE 5.19. ANNUAL SOLAR ENERGY POTENTIAL (EXAJOULES)

Region

Minimum

Maximum

North America

181.1

7,410

Latin America and Caribbean

112.6

3,385

Western Europe

25.1

914

Central and Eastern Europe

4.5

154

Former Soviet Union

199.3

8,655

Middle East and North Africa

412.4

11,060

Sub-Saharan Africa

371.9

9,528

Pacific Asia

41.0

994

South Asia

38.8

1,339

Centrally planned Asia

115.5

4,135

Pacific OECD

72.6

2,263

Total

1,575.0

49,837

Ratio to current primary energy consumption (402 exajoules)

3.9

124

Ratio to projected primary energy consumption in 2050 (590 - 1,050 exajoules)

2.7 - 1.5

84 - 47

Ratio to the projected primary energy consumption in 2100 (880 - 1,900 exajoules)

1.8 - 0.8

57 - 26

Note: The minimum and maximum reflect different assumptions on annual clear sky irradiance, annual average sky clearance, and available land area.

Source: IEA, 1998c; Nakicenovic, Grbler, and McDonald, 1998.

Wind energy resources

Winds develop when solar radiation reaches the Earth’s highly varied surface unevenly, creating temperature, density, and pressure differences. Tropical regions have a net gain of heat due to solar radiation, while polar regions are subject to a net loss. This means that the Earth’s atmosphere has to circulate to transport heat from the tropics towards the poles. The Earth’s rotation further contributes to semipermanent, planetary-scale circulation patterns in the atmosphere. Topographical features and local temperature gradients also alter wind energy distribution.

A region’s mean wind speed and its frequency distribution have to be taken into account to calculate the amount of electricity that can be produced by wind turbines. Wind resources can be exploited in areas where wind power density is at least 400 watts per square metre at 30 metres above the ground (or 500 watts per square metre at 50 metres). Moreover, technical advances are expected to open new areas to development. The following assessment includes regions where the average annual wind power density exceeds 250 - 300 watts per square metre at 50 metres - corresponding to class 3 or higher in the widely used U.S. classification of wind resources.

TABLE 5.20. ANNUAL WIND ENERGY POTENTIAL

Region

Percentage of land area

Population density (people per square kilometre)

Gross electric potential (thousands of terawatt- hours)

Assessed wind energy potential (exajoules)

Estimated second-order potential (thousands of terawatt- hours)

Assessed wind energy potential, (exajoules)

Africa

24

20

106

1,272

10.6

127

Australia

17

2

30

360

3

36

North America

35

15

139

1,670

14

168

Latin America

18

15

54

648

5.4

65

Western Europe

42

102

31

377

4.8

58

Eastern Europe and former Soviet Union

29

13

106

1,272

10.6

127

Asia (excl. former Soviet Union)

9

100

32

384

4.9

59

Total

23


500

6,000

53

640

Note: Refers to wind energy with average annual power density of more than 250 - 300 watts per square metre at 50 metres (resources class 3 and higher in the U.S. classification of wind resources). The energy equivalent in exajoules is calculated based on the electricity generation potential of the referenced sources by dividing the electricity generation potential by a factor of 0.3 (a representative value for the efficiency of wind turbines, including transmission losses), resulting in a primary energy estimate. Totals are rounded.

Source: Grubb and Meyer, 1993.

TABLE 5.21. ESTIMATED ANNUAL WIND ENERGY RESOURCES

Region

Land surface with wind class 3 - 7

Wind energy resources without land restriction

Wind energy resources if less than 4 percent of land is used

Percent

Thousands of square kilometres

Thousands of terawatt- hours

Exajoules

Thousands of terawatt- hours

Exajoules

North America

41

7,876

126

1,512

5.0

60

Latin America and Caribbean

18

3,310

53

636

2.1

25

Western Europe

42

1,968

31

372

1.3

16

Eastern Europe and former Soviet Union

29

6,783

109

1,308

4.3

52

Middle East and North Africa

32

2,566

41

492

1.6

19

Sub-Saharan Africa

30

2,209

35

420

1.4

17

Pacific Asia

20

4,188

67

804

2.7

32

China

11

1,056

17

204

0.7

8

Central and South Asia

6

243

4

48

0.2

2

Totala

27

30,200

483

5,800

18.7

231

Note: The energy equivalent in exajoules is calculated based on the electricity generation potential of the referenced sources by dividing the electricity generation potential by a factor of 0.3 (a representative value for the efficiency of wind turbines, including transmission losses), resulting in a primary energy estimate. a. Excludes China.

Source: WEC, 1994.

Several studies have analysed the global potential of power production using wind. To define technical wind power potential, one needs take into account siting constraints. First-order exclusions may include definite constraints such as cities, forests, difficult terrain, and inaccessible mountain areas. The most important limitations arise from social, environmental, and land-use constraints, including visual and noise impacts, all of which depend on political and social judgements and traditions and may vary by region. Regional estimates of wind electricity potentials (class 3 and above) are summarised in table 5.20.

Grubb and Meyer (1993) estimate the theoretical electricity generation potential of global wind energy resources (class 3 and above) to be 500,000 terawatt-hours a year (see table 5.20). Only about 10 percent of this theoretical potential may be realistically harvested.

WEC (1994) places the global theoretical wind potential at 483,000 terawatt-hours a year (table 5.21). This estimate is based on the assumption that 27 percent of the Earth’s land surface is exposed to an annual mean wind speed higher than 5.1 metres per second at 10 metres above ground (class 3 and above), and that this entire area could be used for wind farms. WEC also suggests a more conservative estimate of 19,000 terawatt-hours a year, assuming for practical reasons that just 4 percent of the area exposed to this wind speed can be used for wind farms. (The 4 percent estimate comes from detailed studies of wind power potential in the Netherlands and the United States.)

Geothermal energy resources

Geothermal energy is generally defined as heat stored within the Earth. The Earth’s temperature increases by about 3 degrees Celsius for every 100 metres in depth, though this value is highly variable. Heat originates from the Earth’s molten interior and from the decay of radioactive materials.

Four types of geothermal energy are usually distinguished:

· Hydrothermal - hot water or steam at moderate depths (100 - 4,500 metres).

· Geopressed - hot-water aquifers containing dissolved methane under high pressure at depths of 3 - 6 kilometres.

· Hot dry rock - abnormally hot geologic formations with little or no water.

· Magma - molten rock at temperatures of 700 - 1,200 degrees Celsius.

Today only hydrothermal resources are used on a commercial scale for electricity generation (some 44 terawatt-hours of electricity in 1997) and as a direct heat source (38 terawatt-hours of heat; Bjrnsson and others, 1998).

The global potential of geothermal energy is on the order of 140,000,000 exajoules. But a much smaller amount can be classified as resources and reserves (table 5.22). Still, geothermal energy has enormous potential. Even the most accessible part, classified as reserves (about 434 exajoules), exceeds current annual consumption of primary energy. But like other renewable resources (solar energy, wind energy), geothermal energy is widely dispersed. Thus the technological ability to use geothermal energy, not its quantity, will determine its future share. The regional distribution of geothermal energy potential is shown in table 5.23.

Environmental aspects of geothermal energy use relate primarily to gas admixtures to the geothermal fluids such as carbon dioxide, nitrogen, hydrogen sulphides or ammonia and heavy metals such as mercury. The quantities vary considerably with location and temperatures of the feed fluid but are generally low compared to those associated with fossil fuel use. Because the chemicals are dissolved in the feed water which is usually re-injected into the drill holes, releases are minimal.

Ocean energy resources

Four types of ocean energy are known:

· Tidal energy - energy transferred to oceans from the Earth’s rotation through gravity of the sun and moon.

· Wave energy - mechanical energy from wind retained by waves.

· Ocean thermal energy - energy stored in warm surface waters that can be made available using the temperature difference with water in ocean depths.

· Salt gradient energy - the energy coming from salinity differences between freshwater discharges into oceans and ocean water.

Tidal energy is the most advanced in terms of current use, with a number of commercial plants in operation. Despite notable progress in recent years, the other ocean energy resources are generally not considered mature enough for commercial applications.

TABLE 5.22. ANNUAL GEOTHERMAL POTENTIAL (EXAJOULES)

Resource category

Energy

Accessible resource base (amount of heat that could theoretically be tapped within a depth of 5 kilometres)

140,000,000

Useful accessible resource base

600,000

Resources (portion of the accessible resource base expected to become economical within 40 - 50 years)

5,000

Reserves (portion of the accessible resource base expected to become economical within 10 - 20 years)

500

Source: Palmerini, 1993; Bjrnsson and others, 1998.

TABLE 5.23. ANNUAL GEOTHERMAL POTENTIAL BY REGION (EXAJOULES)

Resource category

Energy

North America

26,000,000·(18.9)

Latin America and Caribbean

26,000,000·(18.6)

Western Europe

7,000,000·(5.0)

Eastern Europe and former Soviet Union

23,000,000·(16.7)

Middle East and North Africa

6,000,000·(4.5)

Sub-Saharan Africa

17,000,000·(11.9)

Pacific Asia (excl. China)

11,000,000·(8.1)

China

11,000,000·(7.8)

Central and South Asia

13,000,000·(9.4)

Total

140,000,000

Note: Numbers in parentheses are shares of world total.

Source: WEC, 1994; EPRI, 1978.

TABLE 5.24. ANNUAL OCEAN ENERGY POTENTIAL

Resource category

Terawatt-hours

Exajoules

Tidal energy

22,000

79

Wave energy

18,000

65

Ocean thermal energya

2,000,000

7,200

Salt gradient energyb

23,000

83

Total

2,063,000

7,400

a. The potential of ocean thermal energy is difficult to assess but is known to be much larger than for the other types of ocean energy. The estimate used here assumes that the potential for ocean thermal energy is two orders of magnitude higher than for tidal, wave, or salt gradient energy. b. Assumes the use of all the world’s rivers with devices of perfect efficiency.

Source: WEC, 1994, 1998; Cavanagh, Clarke, and Price, 1993.

The theoretical potential of each type of ocean energy is quite large (table 5.24). But like other renewables, these energy resources are diffuse, which makes it difficult to use the energy. The difficulties are specific to each type of ocean energy, so technical approaches and progress differ as well.

Conclusion

Globally, energy resources are plentiful and are unlikely to constrain sustainable development even beyond the 21st century (tables 5.25 and 5.26). If historical observations are any indication, possible intergenerational equity conflicts on resource availability and costs will most likely be equilibrated by technological progress. The fossil resource base is at least 600 times current fossil fuel use, or 16 times cumulative fossil fuel consumption between 1860 and 1998. (The resource base does not include methane clathrates and other oil, gas, and coal occurrences, the inclusion of which could quadruple the resource base.)

While the availability and costs of fossil fuels are unlikely to impede sustainable development, current practices for their use and waste disposal are not sustainable (UNCED, 1993). In their natural states, energy resources are environmentally inert (from the perspective of sustainable development). Even mining and production of fossil resources interfere little with sustainable development relative to current pollution emissions and wastes associated with their combustion for the provision of energy services. Thus the economic and environmental performance of fossil, nuclear, and renewable conversion technologies - from resource extraction to waste disposal - will determine the extent to which an energy resource can be considered sustainable.

Relative economic and environmental aspects make up the demand pull for the development of future energy resources. Sociopolitical preferences and policies can appreciably amplify or weaken the demand pull. In many countries, especially transition economies but also several energy-exporting developing countries, the domestic fossil energy resource endowment has yet to be evaluated using market-based criteria. Such evaluations may lead to a substantial revision of readily available reserve volumes and point to unforeseen investments in up-stream operations to raise productivity to international standards.

Energy resources are not evenly distributed across the globe. Although renewables are more evenly distributed and accessible than fossil and nuclear resources, their economic potential is affected by land-use constraints, variation of availability as a function of latitude (solar power) and location (wind power and hydroelectricity), solar irradiation, and water and soil quality (biomass). Still, renewable energy flows are three orders of magnitude larger than current global energy use (figure 5.4). Their use will depend primarily on the commercialisation of conversion technologies. Similarly, uranium and thorium resources are plentiful and do not pose a constraint to the long-term deployment of nuclear power.

TABLE 5.25. SUMMARY OF GLOBAL FOSSILE AND FISSILE RESOURSES (THOUSANDS OF EXAJOULES)

Resource

Consumed by end 1998

Consumed in 1998

Reserves

Resources

Resource basea

Additional occurrences

Oil

5.14

0.14

11.11

21.31

32.42

45


Conventional

4.85

0.13

6.00

6.07

12.08



Unconventional

0.29

0.01

5.11

15.24

20.35

45

Gas

2.38

0.08

14.88

34.93

49.81

930


Conventional

2.35

0.08

5.45

11.11

16.57



Unconventional

0.03

0.00

9.42

23.81

33.24

930

Coal

5.99

0.09

20.67

179.00

199.67


Fossile total

13.51

0.32

46.66

235.24

281.89

975

Uranium








Open cycle in thermal reactorsb

n.e.

0.04

1.89

3.52

5.41

7.1c


Closed cycle with fast reactorsd

-

-

113

211

325

426b

Fossile and fissile totale

n.e.

0.36

48

446

575

1,400

n.e. Not estimated. - Negligible. a. Sum of reserves and resources. b. Calculated from the amount in tonnes of uranium, assuming 1 tonne = 589 terajoules (IPCC, 1996a). c. Does not include uranium from seawater or other fissile materials. d. Calculated assuming a 60-fold increase relative to the open cycle, with 1 tonne = 35,340 terajoules. e. All totals are rounded.

Source: Author’s calculations from previous chapter tables.


FIGURE 5.4. GLOBAL ENERGY BALANCE AND FLOWS WITHOUT ANTHROPOGENIC INTERFERENCE

Note: Energy flows are in thousands of exajoules a year. Numbers in parentheses are uncertain or rounded.

Source: Srensen, 1979.

Most long-term energy demand and supply scenarios involve increasing global energy trade, irrespective of the underlying assumptions of energy resource and technology development. Supply security considerations may tilt the balance in favour of one energy resource or set of resources. Supply security improves with the share of energy supplies from national sources. A thorough evaluation of a nation’s energy resource endowment based on market criteria is an important step towards supply security.

The world energy system’s current dependence on fossil fuel conversion is considered unsustainable by the United Nations (UNDP, 1997). It has often been assumed that fossil resource limitations or the "running out of resources" phenomenon (Meadows and others, 1972) would wean the energy system off fossil sources and bring about the necessary course correction towards sustainable energy development. Based on long-term global energy demand expectations, current understanding of the world’s fossil resource endowment, and production economics, this is unlikely to happen before the end of the 21st century. Thus a transition to sustainable energy systems that continue to rely predominantly on fossil fuels will depend on the development and commercialisation of fossil technologies that do not close their fuel cycle through the atmosphere.15 Alternatively, the transition will likely require determined policies to move away from fossil fuels. Large increases in fossil fuel prices as a result of rapid resource depletion are unlikely to drive the transition.

TABLE 5.26. SUMMARY OF THE RENEWABLE RESOURCE BASE (EXAJOULES A YEAR)

Resource

Current usea

Technical potential

Theoretical potential

Hydropower

9

50

147

Biomass energy

50

>276

2,900

Solar energy

0.1

>1,575

3,900,000

Wind energy

0.12

640

6,000

Geothermal energy

0.6

5,000

140,000,000

Ocean energy

n.e.

n.e.

7,400

Total

56

> 7,600

> 144,000,000

n.e. Not estimated. a. The electricity part of current use is converted to primary energy with an average factor of 0.385.

Source: Author’s calculations from previous chapter tables.

Renewable energy
flows are three orders of
magnitude larger than
current global
energy use.

Transitions motivated by factors other than short-term economics usually invoke extra costs that have to be borne by contemporary societies for the benefit of future ones. In either case - making the use of fossil fuels sustainable or shifting to non-fossil energy sources - society must first recognise that the current energy system is unsustainable and that adequate policy measures need to be introduced. These measures may stimulate technological advances and development, change consumer preferences, or both. After all, the existence of enormous fossil, nuclear, and renewable resources is irrelevant unless there is a demand for them and unless technologies for their extraction and sustainable conversion to energy services are commercially available. Otherwise, resources remain ‘neutral stuff’.

Notes

1. However, Masters and others argue that most major oil-producing countries are reporting as proven reserves what the authors would define as identified reserves (proven plus probable plus possible).

2. Oil production costs and market prices may differ significantly, however. Oil is a highly political commodity with market prices that often have little relation to costs. While economic rationality suggests that the least-cost oil reserves are produced first, this has not been the case, at least since 1973. That gives low-cost and lowest-cost producers quite a bit of leverage in engineering market price instabilities or backing out of high-cost production.

3. The ratio of reserves to production assumes constant demand for a resource as well as constant production over the period suggested by the ratio. In essence, it implies that production will plummet from full output in one year to zero output in another. In reality, production peaks and then declines along a quasi-logistic curve, and supplies will last much longer, though at much lower volumes than suggested by the ratio.

4. Once an investment has been committed for gas export pipelines, it cannot easily be designated for other uses (whereas an oil tanker may be rerouted instantly by a single radio call). Disputes between trading partners may put the investment at risk and lead to disruptions in supply and off take.

5. Temperature increases as a function of high atmospheric carbon concentrations are highly uncertain. For example, the mean global temperature increase estimated for a doubling of carbon dioxide concentrations ranges from 1.5 - 4.5 Kelvin (IPCC, 1996b).

6. Uranium reserves as defined by the Uranium Institute are proven and probable reserves (labelled Reserve Class I) at production costs of less than $40 a kilogram, less than $60 a kilogram, and less than $80 a kilogram. WEC (1998) uses the term proven reserves for the NEA-IAEA category reasonably assure resources.

7. The Uranium Institute uses for the lesser-known category Reserve Class II. WEC (1998) defines its estimated additional amounts recoverable to correspond to NEA-IAEA EAR I.

8. A detailed and consistent compilation for all countries is not available, and country-specific information is often published without verification. The International Water Power and Dams Construction Yearbook (1998) and even the World Atlas and Industry Guide (1998) present a few inconsistencies. Nevertheless, a cross-check showed a similar world total for these two sources.

9. The consideration of social and environmental aspects suggests that this is the market potential. Because of inconsistencies in the definitions used in different appraisals, here the notion of economic potential is maintained.

10. Non-commercial biomass is difficult to account for accurately or goes unreported. For instance, biomass data for China and India are not included in the WEC statistics.

11. It is assumed that 75 percent of the energy in urban refuse can be recovered and that the waste generation rate per capita is constant over time. Estimates for Canada and the United States are based on a per capita waste generation rate of 330 kilograms a year and a heating value of 15.9 megajoules per kilogram (and a 50 percent recycling rate). Estimates for other OECD countries are based on a per capita waste generation rate of 300 kilograms a year and a heating value of 12.7 megajoules per kilogram.

12. A review of the literature indicates that over time there are few, if any, long-term losses of soil carbon after forest harvesting and reforestation. But substantial losses of soil carbon are reported for systems involving harvesting followed by intensive burning or mechanical site damage. Holistic, life-cycle approaches are required to estimate the contribution of intensive forest management and bioenergy systems to local and global carbon balances.

13. There are exceptions: a lot is known about eucalyptus for charcoal production and sugarcane for ethanol production in Brazil (which tend to follow traditional agricultural and forestry practices). Similarly, there is extensive knowledge about willows for heat power generation in Sweden, where the cultivation of about 16,000 hectares has also borrowed considerably from traditional forestry and agricultural activities.

14. For example, if the performance and costs of solar collectors integrated with buildings are improved, commercial buildings could become local energy production centres. Such integration would enlarge the space available for solar collection and allow buildings to contribute to their energy use.

15. Decarbonisation of fuels (before use) or greenhouse gas abatement (after fuel production or use) and subsequent carbon dioxide disposal could eventually avoid closing the carbon fuel cycle through the atmosphere (see chapters 8 and 11).

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Chapter 6. Energy End-Use Efficiency

Eberhard Jochem (Germany)

LEAD AUTHORS: Anthony Adegbulugbe (Nigeria), Bernard Aebischer (Switzerland), Somnath Bhattacharjee (India), Inna Gritsevich (Russia), Gilberto Jannuzzi (Brazil), Tamas Jaszay (Hungary), Bidyut Baran Saha (Japan), Ernst Worrell (United States), and Zhou Fengqi (China)

CONTRIBUTING AUTHORS: Mohamed Taoufik Adyel (Morocco), John Akinbami (Nigeria), David Bonilla (Japan), Allen Chen (United States), Alexander Kolesov (Russia), Hans Florentin Krause (United States), Wilhelm Mannsbart (Germany), Tim McIntosch (Canada), Louise Metivier (Canada), Folasade Oketola (Nigeria), David Pelemo (Nigeria), Jean Pierre Des Rosiers (France), Lee Schipper (United States), and XiuJian Hu (China)

ABSTRACT

Since the 1970s more efficient energy use in OECD countries has weakened or eliminated the link between economic growth and energy use. At the global level just 37 percent of primary energy is converted to useful energy - meaning that nearly two-thirds is lost. The next 20 years will likely see energy efficiency gains of 25-35 percent in most industrialised countries and more than 40 percent in transition economies. Dematerialization and recycling will further reduce energy intensity. Thus energy efficiency is one of the main technological drivers of sustainable development world-wide.

Energy policy has traditionally underestimated the benefits of end-use efficiency for society, the environment, and employment. Achievable levels of economic efficiency depend on a country’s industrialisation, motorization, electrification, human capital, and policies. But their realisation can be slowed by sector - and technology-specific obstacles - including lack of knowledge, legal and administrative obstacles, and the market power of energy industries. Governments and companies should recognise innovations that can lower these obstacles. The external costs of energy use can be covered by energy taxes, environmental legislation, and greenhouse gas emissions trading. There is also an important role for international harmonisation of regulations for efficiency of traded products. Rapid growth in demand provides especially favourable conditions for innovations in developing countries - enabling these countries to leapfrog stages of development if market reforms are also in place.

The economic potentials of more efficient energy use will continue to grow with new technologies and with cost reductions resulting from economies of scale and learning effects. Considerations of the second law of thermodynamics at all levels of energy conversion and technological improvements at the level of useful energy suggest further potential for technical efficiency of almost one order of magnitude that may become available during this century. Finally, structural changes in industrialised and transition economies - moving to less energy-intensive production and consumption - will likely contribute to stagnant or lower energy demand per capita in these countries.

Today more than 400,000 petajoules a year of primary energy deliver almost 300,000 petajoules of final energy to customers, resulting in an estimated 150,000 petajoules of useful energy after conversion in end-use devices. Thus 250,000 petajoules are lost, mostly as low- and medium-temperature heat. Globally, then, the energy efficiency of converting primary to useful energy is estimated at 37 percent. Moreover, considering the capacity to work (that is, the exergy) of primary energy relative to the exergy needed by useful energy according to the second law of thermodynamics, the efficiency of today’s energy systems in industrialised countries is less than 15 percent. But energy efficiency can be improved - and energy losses avoided - during the often overlooked step between useful energy and energy services (figure 6.1).

One main goal of energy analysis in the context of sustainable development is to explore ways to reduce the amount of energy used to produce a service or a unit of economic output - and, indirectly, to reduce related emissions. Two questions are key: How tight is the link between final energy use and the energy service in a given end use? And what is the potential for technological and organisational changes to weaken that link in the next 10-20 years? Because the technologies used in different regions differ substantially, the potential for economic efficiency varies. Still, more efficient energy use is one of the main options for achieving global sustainable development in the 21st century.

This chapter focuses on end-use energy efficiency - that is, more efficient use of final energy or useful energy in industry, services, agriculture, households, transportation, and other areas (see figure 6.1). Supply-side energy efficiency (energy extraction, conversion, transportation, and distribution) is treated in chapters 5 and 8. Supply-side efficiency has been the focus of energy investment and research and development since the early 20th century. End-use efficiency has received similar attention only since the mid-1970s, having been proven cheaper in many cases but often more difficult to achieve for reasons discussed below.

Energy efficiency - and indirectly, improved material efficiency - alleviates the conflicting objectives of energy policy. Competitive and low (but full-cost) energy prices support economic development. But they increase the environmental burden of energy use. They also increase net imports of conventional energies and so tend to decrease the diversity of supply. Using less energy for the same service is one way to avoid this conflict. The other way is to increase the use of renewable energies (chapter 7).

Recent trends in energy intensity in countries and regions

A sector’s energy use, divided by gross domestic product (GDP), is the starting point for understanding differences in the efficient use of final energy by sector, country, or period. With few exceptions, such analyses have been carried out over long periods only in OECD countries (IEA, 1997a; Morovic and others, 1989; Diekmann and others, 1999). These ratios are instructive for what they say about energy use in different economies at a given point in time. They can also be used to measure changes in energy efficiency and other components of energy use - such as changes in the structure and consumption of a given sector or subsector. Changes in energy efficiency are driven by higher prices, technical improvements, new technologies, cost competition, and energy conservation programmes.

More efficient energy use
is one of the main options for
achieving global sustainable
development in the
21st century.

OECD countries

Over the past 30 years every OECD country and region saw a sharp decline in ratios of energy to GDP (figure 6.2; box 6.1).1 Changes in energy use were distributed unevenly among sectors, however, and only part of the decline was related to increased energy efficiency:

· Industry experienced the largest reductions in ratios of energy to GDP - between 20 and 50 percent. Energy efficiency (if structural change is excluded by holding constant the mix of output in 1990) increased by more than 1 percent a year through the late 1980s, after which lower fuel prices caused a slowdown in improvements (Diekmann and others, 1999). In Japan, the United States, and West Germany the absolute demand for energy by industry dropped about 10 percent because of changes in the mix of products. In other countries structural changes had little impact on energy use.

· Among households, energy requirements per unit of floor area fell modestly, led by space heating. Despite far more extensive indoor heating (with more central heating), in almost all OECD countries energy use was lower in the 1990s than in the early 1970s. (The only notable exception was Japan, where income-driven improvements in heating outweighed savings from added insulation in new buildings and from more efficient heating equipment.) In addition, in most countries the unit consumption of appliances (in kilowatt-hours per year) fell. Increased efficiency outpaced trends towards larger appliances. On the structural side, however, household size continued to shrink, raising per capita energy use. New homes had larger areas per capita and more appliances, continuing an income effect dating from the early 1950s.

· Space heating in the service sector also required less energy - in heat per square metre - in most OECD countries. Electricity use remained closely tied to service sector GDP, but showed little upward trend except where electric heating was important. This outcome may be surprising given the enormous importance of electrification and office automation in the service sector. Over time there is a close relationship between electricity use and floor area.

· In passenger transportation, energy use is dominated by cars and in a few countries (such as the United States) by light trucks. In Canada and the United States in the early 1990s fuel use per kilometre by light-duty vehicles was 30 percent below its 1973 level, though by 1995 reductions had ceased (figure 6.3). Reductions ceased relative to person-kilometres because there were only 1.5 people per car in the mid-1990s, compared with more than 2.0 in 1970. Europe saw only small (less than 15 percent) reductions in fuel use per kilometre by cars, almost all of which were offset by a similar drop in load factors. Taxes on gasoline and diesel seem to be the main influence on the average efficiency of the car fleet, with the lowest taxes in the United States (averaging $0.10 a litre) and the highest in France ($0.74 a litre). For air travel, most OECD countries experienced more than a 50 percent drop in fuel use per passenger-kilometre due to improved load factors and increased fuel efficiency. Higher mobility per capita and shifts from trains, buses, and local transport towards cars and air travel, however, counterbalanced the efficiency gains in most countries.

· Freight transport experienced rather small changes in energy use per tonne-kilometre. Improvements in fuel efficiency were offset by a shift towards trucking. This shift was driven by higher GDP, less shipping of bulk goods by rail and ship, and more lifting of high-value partially manufactured and final goods by trucks and aeroplanes.


FIGURE 6.1. ENERGY CONVERSION STEPS, TYPES OF ENERGY, AND ENERGY SERVICES: POTENTIALS FOR ENERGY EFFICIENCY

Potential improvements in energy efficiency are often discussed and focused on energy-converting technologies or between the level of final energy and useful energy. But one major potential of energy efficiency, often not strategically considered, is realised at the level of energy services by avoiding energy losses through new technologies. Such technologies include new building materials and window systems, membrane techniques instead of thermal separation, sheet casting instead of steel rolling, biotechnology applications, and vehicles made of lighter materials such as plastics and foamed metals. Energy storage and reuse of break energy, along with better designs and organisational measures, can also increase energy efficiency.

In most OECD countries energy intensities fell less rapidly in the 1990s than before. One clear reason - besides higher income - was lower energy prices since 1986 and lower electricity prices (due to the liberalisation of the electricity market in many OECD countries), which slowed the rate of energy efficiency improvement for new systems and technologies.

Eastern Europe and the Commonwealth of Independent States

Relative to OECD countries, the statistical basis for ratios of energy to GDP is somewhat limited in Eastern Europe and the Commonwealth of Independent States.3 Ratios of primary energy demand to GDP have risen in the Commonwealth of Independent States since 1970 (Dobozi, 1991) but began to decline in many Eastern European countries in the mid-1980s (table 6.1). General shortcomings of central planning, an abundance of energy resources in some countries, a large share of heavy industries, low energy prices, and a deceleration of technological progress have been the main reasons for limited progress (Radetzki, 1991; Dobozi, 1991; Sinyak, 1991; Gritsevich, 1993).


FIGURE 6.2. RATIOS OF ENERGY TO GDP IN OECD COUNTRIES BY END USE, 1973 AND 1994

Note: Measured using purchasing power parity.

Source: Schipper, 1997.

BOX 6.1. DRIVERS OF LOWER ENERGY DEMAND: DEMATERIALIZATION, MATERIAL SUBSTITUTION, SATURATION, AND CHANGING BEHAVIOUR

Like ratios of energy to GDP, the production of energy-intensive materials per unit of GDP is falling in almost all industrialised countries (with a few exceptions such as Australia, Iceland, and Russia). Changes in the production of basic materials may affect changes in ratios of energy to GDP. In many OECD countries declining production of steel and primary aluminium is supporting lower ratios of energy to GDP. But production of young, energy-intensive materials - such as polymers substituting for traditional steel or aluminium use - is increasing relative to GDP. In addition, ratios of energy-intensive materials to GDP are increasing slightly in developing countries, almost balancing out the declines in industrialised countries for steel and primary aluminium over the past 25 years.

Dematerialization has different definitions covering the absolute or relative reduction in the quantity of material used to produce a unit of economic output. In its relative definition of tonnes or volumes of material used per unit of GDP, dematerialization has occurred over several decades in many industrial countries. This shift has contributed to structural changes in industry - particularly in energy-intensive areas such as chemicals and construction materials (Carter, 1996; Jaenicke, 1998; Hinterberger, Luks, and Schmidt-Bleek, 1997).

A number of forces are driving dematerialization in industrialised countries (Ayres, 1996; Bernadini, 1993):

· As incomes rise, consumer preferences shift towards services with lower ratios of material content to price.

· As economies mature, there is less demand for new infrastructure (buildings, bridges, roads, railways, factories), reducing the need for steel, cement, non-ferrous metals, and other basic materials.

· Material use is more efficient - as with thinner car sheets, thinner tin cans, and lighter paper for print media.

· Cheaper, lighter, more durable, and sometimes more desirable materials are substituted - as with the substitution of plastics for metal and glass, and fibre optics for copper.

· Recycling of energy-intensive materials (steel, aluminium, glass, paper, plastics, asphalt) contributes to less energy-intensive production. Recycling may be supported by environmental regulation and taxes (Angerer, 1995).

· Reuse of products, longer lifetimes of products (Hiessl, Meyer-Krahmer, and Schn, 1995), and intensified use (leasing, renting, car sharing) decrease new material requirements per unit of service.

· Industrialised countries with high energy imports and energy prices tend to decrease their domestic production of bulk materials, whereas resource-rich developing countries try to integrate the first and second production steps of bulk materials into their domestic industries (Cleveland and Ruth, 1999).

But industrialised countries are also experiencing some of the drivers of increased material use per capita. Increasing urbanisation, mobility, and per capita incomes increase the demand for material-intensive infrastructure, buildings, and products. Smaller households, the increasing importance of suburban communities and shopping centres, and second homes create additional mobility. The move from repair to replacement of products and trends towards throwaway products and packaging work against higher material efficiencies - and, hence, against energy efficiency and sustainable development.


Steel production intensity in various countries, 1961-96


Primary aluminium production intensity in various countries, 1972-96


Polymer production intensity in various countries, 1966-97

Note: For the world, includes all plastics. For France, Germany, Japan, and the United States, includes only polyethylene, polypropylene, polystyrene, and polyvinylchloride.

Source: UN, 1999; German Federal Statistical Office; IEA 1998.

Ratios of primary energy to GDP have gone through two phases in these countries, separated by the onset of economic and political reform in the late 1980s and the 1990s. Whereas the ratio increased in Russia, it declined in Armenia, Belarus, Estonia, Kyrgyzstan, Latvia, and Tajikistan. Among the other members of the Commonwealth of Independent States the ratio fluctuated for reasons other than improvements in energy efficiency (IEA, 1997a, 1998). Since 1990 the ratio has declined in most Eastern European countries (see table 6.1).

· In industry, final energy consumption per unit of output fell less than 1 percent a year in Eastern Europe in 1990-97 but increased almost 7 percent a year in Russia (CENEf, 1998).

· Transportation saw few changes in energy use per passenger-kilometre or tonne-kilometre for the two main modes, cars and trucks.

· Among households, small gains in the thermal integrity of buildings could not overcome increasing demands for heating and comfort. Indeed, in the mid-1980s centrally heated Eastern European buildings required 50-100 percent more final energy per unit of area and per degree day (that is, using standardised winter outdoor temperatures) than similar buildings in Western Europe. Moreover, home appliances were often small and inefficient.

In the early 1990s economic reforms began to restructure production and consumption patterns and raise once-subsidised energy prices. In the Baltics, the Czech Republic, Hungary, and Poland this phase led to real declines in ratios of primary energy to GDP as efficiency increased and the structure of manufacturing changed (see table 6.1). Several transition economies also saw lower household fuel use for space and water heating. Such changes were often not related to efficiency, however, and were instead caused by energy shortages, higher energy prices, and related changes in heating behaviour.

Overall, transition economies showed a remarkable contraction in energy use by industry, mostly because of structural changes (Bashmakov, 1997a). But this trend has nearly been outweighed by rapid growth in road transportation and (in some countries) in electricity for appliances and services. Structural changes in industry, integration with global markets, and investments in new processes, buildings, and infrastructure are expected to improve energy efficiency considerably over the next 20 years. These trends will likely help stabilise energy demand despite rising incomes and GDP in these countries.


FIGURE 6.3. WEIGHTED AVERAGE OF ON-ROAD AUTOMOBILE GASOLINE AND DIESEL FUEL INTENSITIES IN OECD COUNTRIES, 1970-95

Source: Schipper, 1997.

Developing Asia, Africa, and Latin America

In many developing countries energy use will be driven by industrialisation, urbanisation, increasing road transportation, and increasing personal incomes.4 Indeed, per capita energy use in developing countries tends to be higher where per capita incomes are higher (in purchasing power parity terms), as in Latin America, India, and Southeast Asia. Wide income disparities in many developing countries are also reflected in energy consumption patterns. Often a small portion of the population accounts for most commercial energy demand. Data limitations hamper careful analysis in many developing countries, however.

Higher-income developing countries (per capita income above $1,200 in 1998 purchasing power parity terms). Energy demand in industry has fallen in most higher-income developing countries, both as a result of higher energy prices in the 1970s and 1980s and open borders to international competition. China has shown the most dramatic developments, but most Latin American and other Asian economies have also shown energy intensity improvements in this sector. In recent years many manufacturers in industrialised nations have moved energy-intensive industries to developing countries, often to take advantage of cheaper labour, less stringent environmental regulation, and lower overhead and transportation costs. Many of these countries (Brazil, China, India, Indonesia) also need their own basic product industries.

TABLE 6.1. RATIOS OF PRIMARY ENERGY TO GDP IN TRANSITION ECONOMIES, 1985-96

Region/country

Energy consumption per capita, 1996 (gigajoules)

Megajoules per unit of GDP (1990 purchasing power parity dollars)



1985

1990

1995

Commonwealth of Independent States

135

29.8

29.4

41.4


Belarus

100



20.5


Russia

170



36.8


Ukraine

127



45.2

Eastern Europe

89a

23.9

21.8

20.9


Bulgaria

120

36.0

29.7

31.8


Czech Republic

165

23.6

19.6

18.2


Hungary

108

18.3

16.5

16.3


Poland

117

26.5

21.6

19.2


Romania

84

28.5

31.8

25.1


Sloveniab

124


12.6

13.8


Former Yugoslavia

53a

12.6

14.7

21.4

a. Data are for 1995. b. Based on exchange rates.

Source: IEA, 1997a, Kos, 1999.

TABLE 6.2. RATIOS OF PRIMARY ENERGY TO GDP IN DEVELOPING COUNTRIES, 1975-95

Country or region

Energy consumption per capita, 1996 (gigajoules)

Megajoules per unit of GDP (1990 purchasing power parity dollars)



1975

1980

1985

1990

1995

China

36.3a

23.4

22.6

17.3

15.0

10.9

India

14.6a

7.5

7.8

8.3

8.7

9.2

Indonesia

18.4

3.3

4.2

4.6

5.4

5.4

Argentina

64.1

8.0

8.4

9.2

9.6

9.6

Brazil

61.0a,b

4.6

4.6

5.0

5.4

5.9

Mexico

61.4

7.2

8.2

8.5

8.7

8.7

Venezuela

94.0a

10.5

11.3

12.6

12.1

12.1

North Africac

29.2

5.4

6.3

7.9

8.8

9.4

Southern Africad

27.4

10.8

11.6

15.2

13.9

14.4

Rest of Africa

2.5

2.6

2.9

2.6

2.6

2.9

Middle East

80.4

8.4

10.9

17.6

20.9

22.6

a. Data are for 1996. b. Includes non-commercial energy. c. Ratios of energy to GDP are for Algeria, Egypt, Libya, Morocco, and Tunisia. d. Ratios of energy to GDP are for Nigeria, South Africa, Zambia, and Zimbabwe.

Source: EC, various years; IEA, 1998.

Household appliances, cookers, and water heaters have become more energy efficient in higher-income developing countries. But the rapid acquisition of household devices has far outpaced the impact of greater efficiency.

A similar trend has occurred in the service and public sectors. Buildings in warm higher-income developing countries have increasing rates of air conditioning. Higher lighting levels, increased office automation, and other developments have also contributed to rapidly rising electricity use in this sector (IEA, 1997b).

Transportation accounts for a rising share of energy use in higher-income developing countries. Growing numbers of vehicles, often rising at 1.5 times the rate of GDP growth, have dominated the transportation energy use picture. Many cars and light trucks sold in the developing world have become less fuel intensive. But increased urbanisation and traffic congestion and reduced occupancy have eaten up many of the improvements in vehicle technology.

Overall, more efficient manufacturing does not dominate the increase in ratios of primary energy to GDP in higher-income developing countries (Argentina, Brazil, India, Mexico). Increasing numbers of cars and trucks, electrification of rural areas, and increased energy use by households have played a bigger role (table 6.2). Such energy uses were hardly mature before the 1970s. Motor vehicles and household appliances were far more expensive, in real terms, than they are today. Today such items are less costly and, more important, are often made in developing countries. (China is an exception to this pattern. In 1978, when it initiated economic reform, China exploited economies of scale in manufacturing - such as steel-making - to realise high efficiency improvements in industry and energy.)

Lower-income developing countries (per capita income below $1,200 in 1998 purchasing power parity terms). The situation in lower-income developing countries is somewhat different.

· When disposable income increases, energy consumption by households in low-income developing countries shifts from traditional to commercial fuels. This trend has significant implications for energy efficiency in households. Since the technical efficiencies of cooking appliances using commercial fuels are higher than those of biomass, composite energy consumption per household tends to fall. A typical example is the move from a fuelwood stove with a technical efficiency of 12-18 percent to a kerosene stove with an efficiency of 48 percent, or to a liquefied petroleum gas stove with an efficiency of 60 percent. On the other hand, the substitution of commercial for traditional fuels raises ratios of energy to GDP, because traditional energy is typically not included when such ratios are calculated. In addition, electrification in rural areas and increasing income and mobility in urbanising areas increase energy use.

· Most of the technology used by industry in lower-income developing countries is imported from industrialised countries. Thus these industries should continue to benefit from technological improvements that promote rational energy use (see below). While this is expected to make energy demand fall, the use of obsolete and energy-inefficient technology imported from industrialised countries will drive the specific energy demand of industry.

· Similarly, the transportation sector should benefit from the global trend towards improving vehicle fuel efficiency. Because lower-income developing countries import vehicles from other countries, the energy intensity of road transport should decrease. But the large share of used vehicles imported by lower-income developing countries is helping to maintain a relatively old car stock with high specific fuel demand.

In many developing countries energy
use will be driven by industrialisation,
urbanisation, increasing road
transportation, and increasing
personal incomes.

Energy intensity in lower-income developing countries will largely depend on the interplay between these factors. Although available data (which are patchy at best) show that, for example, Africa’s ratio of energy to GDP increased by 1.8 percent a year in 1975-95, that trend may be substantially influenced by the substitution of commercial for non-commercial forms of energy.

Potential benefits of technology transfer

In many cases used factories, machines, and vehicles from industrialised countries are transferred to developing or transition economies, saddling them with inefficient equipment and vehicles for many years.5 The transfer of energy-efficient equipment and vehicles to developing and transition economies offers an important opportunity for leapfrogging the typical development curves of energy intensity and for achieving sustainable development while maximising know-how transfer and employment opportunities. The transfer of energy-efficient technology represents a win-win-situation for the technology provider and the recipient. Benefits on the receiving end include reduced energy imports, increased demand for skilled workers, job creation, reduced operating costs of facilities, and faster progress in improving energy efficiency. The scope for improving energy efficiency through technology transfer can be seen by comparing energy uses in various industries and countries (table 6.3).

TABLE 6.3. FINAL ENERGY USE IN SELECTED INDUSTRIES AND COUNTRIES, MID-1990S (GIGAJOULES PER TONNE)

Country

Steel

Cement

Pulp and paper

India

39.7

8.4

46.6

China

27.5-35.0

5.9


United States

25.4

4.0

40.6

Sweden

21.0

5.9

31.6

Japan

17.5

5.0


Source: Lead authors.

Used equipment and vehicles are traded for lack of capital, lack of life-cycle costing by investors, the investor-user dilemma (see below), and lack of public transportation in developing countries (President’s Committee of Advisors on Science and Technology, 1999, p. 4-3; IPCC, 1999b). Thus high efficiency standards for products, machinery, and vechicles in OECD countries will also affect standards in developing and transition economies, particularly for mass-produced and tradable products and for world-wide investments by global players. Opportunities for technology transfer among developing countries will also become more important and should be encouraged. Many of these countries already have well-established domestic expertise and produce goods, technologies, and services suitable for the conditions and climates of other developing countries.

Transition economies

About 40 percent of the fuel consumed in transition economies is used in low-temperature heat supply. Slightly less than half of that heat is directed by district heating systems to residential buildings, public services (schools, kindergartens, hospitals, government agencies), and commercial customers (shops and the like). District heating systems exist in many cities containing more than 20,000 people. In many transition economies a significant share of the building stock (about 20 percent in Hungary) was built using prefabricated concrete panels with poor heat insulation and air infiltration.

Advanced Western technology (automated heat distribution plants, balancing valves, heat mirrors, efficient taps, showerheads, heat-reflecting layers of windows) offers significant potential for more efficient heat use in buildings (Gritsevich, Dashevsky, and Zhuze, 1997). Such technology can save up to 30 percent of heat and hot water and increase indoor comfort. Among the main advantages of Western products are their reliability, efficiency, accuracy, design, and sometimes competitive prices. Some Western companies have launched joint ventures with Eastern European, Ukrainian, and Russian partners or created their own production lines using local workers. In many cases this seems to be a better option than imports, because underemployed factories and human capital may otherwise induce conflicts of interest.

Many transition economies have developed advanced energy-efficiency technology (powder metallurgy, variable-speed drives for super-powerful motors, fuel cells for space stations, plasmic technologies to strengthen working surfaces of turbine blades). Thus the greatest benefits can be gained when domestic technology and human capital and an understanding of local conditions are combined with the best Western technology and practices.

Developing countries

Many developing countries do not
have the infrastructure needed
to study and evaluate all the
technological options that
might suit their needs.

Despite the many positive implications of transferring energy-efficient technology, some major issues need to be addressed to fully exploit the potential benefits to developing countries (UNDP, 1999):

· Proper technology assessment and selection. The technology transfer process must help user enterprises evaluate their technological options in the context of their identified requirements (TERI, 1997a). Developing countries are at a great disadvantage in selecting technology through licensing. Companies develop technology mainly to suit their current markets; technology is not necessarily optimised for the conditions in recipient countries. Many developing countries do not have the infrastructure needed to study and evaluate all the technological options that might suit their needs. Moreover, an enterprise trying to sell a technology to a developing country will rarely give complete and unbiased advice. So, there is an urgent need to develop an information support system and institutional infrastructure to facilitate the selection of appropriate technologies. In India, for example, a Technology Development Board was established in 1996 to facilitate the assimilation and adaptation of imported technology (CMIE, 1997).

· Adaptation and absorption capability. Technology transfer is not a one-time phenomenon. The transferred technology needs to be updated from time to time, either indigenously or through periodic imports. Moreover, lack of local capability can result in the transferred technology seldom reaching the designed operational efficiency, and often deteriorating significantly. This raises the need for local capacity building to manage technological change. In a narrower sense, this could be facilitated by policies requiring foreign technology and investment to be accompanied by adequate training of local staff (President’s Committee of Advisors on Science and Technology, 1999).

· Access to state-of-the-art technology and to capital. In many cases transferred technology is not state of the art, for several reasons. First, enterprises in industrialised countries need to recover the costs of technology development before transferring the technology to other countries, introducing a time lag in the process. Second, in some developing countries there is a demand lag for the latest technology due to factors such as lack of capital or trained staff. Third, there are inappropriate technology transfers because of the higher costs of acquiring state-of-the-art technology. A lack of capital and strong desire to minimise investment costs have often led developing countries to import obsolete used plants and machinery.

· The problems of small and medium-sized enterprises. Small industrial enterprises account for a large share of energy and technology use in many developing countries. These enterprises may play an important role in the national economy but generally remain isolated from or ignorant of the benefits of technology upgrading. For such enterprises, where off-the-shelf solutions are seldom available, knock-down technology packages from industrialised countries are rarely possible. An important element of technology transfer for this group is proper competence pooling to arrive at appropriate technology solutions.

Again, the situation differs between higher- and lower-income developing countries. Several countries in Latin America and Southeast Asia are producing highly efficient technology and vehicles - electrical motors, refrigerator compressors, cars - through local companies or subsidiaries of multinational companies. Control systems, super-efficient windows, and new materials that improve the thermal insulation of buildings may offer further opportunities for technology transfer to higher-income developing countries (Hagler Bailley Services, 1997).

Types of potential for increased energy efficiency

As noted, the global energy efficiency of converting primary to useful energy is estimated to be 37 percent.6 But the useful energy needed for a desired energy service will likely fall. Estimated improvements are based on known technologies, expected costs, consumer behaviour, market penetration rates, and policy measures. When considering the potential for increased energy efficiency, it is essential to distinguish between several types of potential, each describing future technological achievements with different time horizons and boundary assumptions (as well as level of analysis in the case of economic potential). This report uses the following definitions (Enqute Commission, 1991; IEA; 1997a; figure 6.4):

· The theoretical potential represents achievable energy savings under theoretical considerations of thermodynamics where energy services (such as air conditioning and steel production) are kept constant but useful energy demand and energy losses can be minimised through process substitution, heat and material reuse, and avoided heat losses (see section below on theoretical potentials after 2020).

· The technical potential represents achievable energy savings that result from implementing the most energy-efficient commercial and near-commercial technology available at a given time, regardless of cost considerations and reinvestment cycles. This can be expressed as a phased-in potential that reflects the total replacement of existing energy-converting and -using capital stocks.

· The market trend potential - or expected potential - is the efficiency improvement that can be expected to be realised for a projected year and given set of boundary conditions (such as energy prices, consumer preferences, and energy policies). The market trend potential reflects obstacles and market imperfections that keep efficiency potentials from being fully realised (see the section below on obstacles).

· The economic potential is the energy savings that would result if during each year over the time horizon in question, all replacements, retrofits, and new investments were shifted to the most energy-efficient technologies that are still cost-effective at given energy market prices. It also includes all organisational measures such as maintenance, sensitive operation and control, and timely repairs. The economic potential has subdefinitions depending on the economic perspective being used: the business (or project) perspective, the macroeconomic perspective, or the societal (or welfare-based) perspective (box 6.2). The economic potential implies a well-functioning market, with competition between investments in energy supply and demand. It also assumes that the barriers to such competition have been corrected by energy policies. It is assumed that as a result of such policies, all users have easy access to reliable information about the cost-effectiveness and technical performance of existing and emerging options for energy efficiency. The transaction costs for individual investors, and the indirect costs of policies associated with implementing these options, are assumed to have been lowered to their irreducible minimum.

· The societal (or welfare-based) potential represents ‘cost-effective’ savings when externalities are taken into consideration. These include damage or avoided damage costs from health impacts, air pollution, global warming, and other ecological impacts, as well as energy-related occupational accidents that accrue to society. This wider definition of cost-effectiveness is the most important for a holistic energy policy that includes energy security and environmental quality (OTA, 1993).

· Finally, the policy-based achievable potential represents the energy savings that can be realised with various policy instruments or packages of policy instruments. Here field data are used to estimate participation rates and per participant savings in voluntary or standards-based technology programmes. The policy-based achievable potential lies between the market trend potential and the economic potential (which can be influenced by energy taxes).


FIGURE 6.4. THEORETICAL, TECHNICAL, ECONOMIC, AND MARKET TREND POTENTIALS OF ENERGY EFFICIENCY

Source: Enqute Commission, 1991.

BOX 6.2. DIFFERENT PERSPECTIVES ON THE ECONOMIC POTENTIAL OF ENERGY EFFICIENCY

In all definitions of the economic potential of energy efficiency, the core cost-effectiveness test is the life-cycle cost of providing a given level of energy services. Different definitions of the economic potential arise because of different cost-benefit perspectives. These perspectives influence how costs and financial parameters are defined and whether policy-dependent implementation costs or reductions in external costs are included.

The economic potential at the business level is calculated from the perspective of an individual investor based on engineering and economic life-cycle costs, using a financial perspective. In this narrowest of all definitions, total costs consist of the levelised capital costs of energy efficiency investments plus changes in annual energy and non-energy operation and maintenance costs. Neither the costs of large-scale policy implementation nor the cost savings from policy-induced feedback effects are attached to this potential. The discount rate for evaluating the cost-effectiveness of energy efficiency investments is typically set to reflect the costs of capital of particular sectors, industries, or households. After-tax energy efficiency investments are compared to after-tax average energy prices as projected for each sector or group of energy users.

The macroeconomic potential is based on a more comprehensive accounting of costs and on a different financial perspective. Here the administrative costs of implementing various required policies are included. In addition, energy efficiency investment costs and policy implementation costs are corrected in a forward-looking manner to account for changes in manufacturer pricing strategies, economies of scale, and learning effects.

Achieving two benefits of
increased energy efficiency - positive
economic effects and reduced
environmental burden - is called
a 'double dividend'.

This chapter focuses on the economic potential. The economic perspective underlying the potentials reported here, however, varies by study. Most current estimates are based on a business (financial) perspective, though there are also hybrids that use a macroeconomic perspective (see box 6.2). Quantitative comparisons between business and macroeconomic efficiency potentials suggest that microeconomic approaches underestimate the cost-effective savings potential (Krause, 1996). Similarly, macroeconomic approaches underestimate cost-effective savings potentials relative to a societal perspective.

The economic potential of energy efficiency by region and sector

Economic potentials of energy efficiency depend on current and foreseeable technology developments and on current and anticipated energy prices (box 6.3). In a world of low energy prices, the potential is relatively small. But high energy prices could be achieved through energy taxes at a national, regional, or global level. The economic potential presented below for each region is based on the energy prices assumed in the literature. Calculations of the economic potential of energy efficiency cover different technologies:

· The potential of mono-functional and concise energy-converting technology (boilers, heat exchangers, electrical motors) is usually determined by standard profitability calculations comparing the full costs of alternative and statistically relevant conversion technology.

· Process substitution and new building concepts or transportation systems include other changes in economic efficiency (capital, labour, and so on) and in product or service quality. Here it becomes difficult to talk about the profitability of the technology in the narrow sense of energy efficiency if the new, higher-efficiency technology is considered competitive in the broader sense (as with new catalysts in the production of petrochemicals, separation by membranes instead of energy-intensive distillation, or low-energy houses instead of conventional houses).

· Branch-specific but technology-clustered energy efficiency potentials of low energy-intensive sectors in industry or the commercial sector are estimated by trend extrapolation of statistical data or by generalisation of calculations made for representative or typified plants or factories. To avoid misinterpretation, data on branch-specific energy efficiency potentials should not include intrabranch structural changes (such as a shift of high value added but low energy-intensive pharmaceuticals to higher shares of total value added in the chemical industry).

These different cost assessments may help explain the differences in certainty about the economic potentials cited below. The data on economic potentials provide projections for 2010 and 2020. This means that where reinvestment cycles last more than 20 years (as with buildings, public transport, and plants of basic product industries), the economic potentials are only partly realised by 2020. The sectors and technological areas discussed in this section were chosen based on the relevance of the efficiency technology and the availability of the literature for the region or country considered.

Deviations from a given economic potential reflect changes in energy prices, economies of scale, or local differences. In many cases the life-cycle cost functions have rather broad minima (such as optimal insulation thickness), which means that there is little risk of overinvesting in energy efficiency or of overestimating the cited potentials.

Western Europe

Industry. Until the early 1990s industry was the largest consumer of final energy in Western Europe.8 But despite production growth of about 2 percent a year, the final energy demand of Western European industry has hovered near 11,500 petajoules for the past 20 years. Yet industry still holds substantial economic efficiency potential, even in energy-intensive sectors where investment has focused on efficiency improvements to lower high energy costs (Phylipsen, Blok, and Worrell, 1998).

· De Beer (1998, pp. 75-102) estimates that by 2020 paper mills operating with new pressing and drying techniques, latent heat recovery systems, and a number of minor improvements (closed water circulation, graduated heat recovery) will have 50 percent lower specific heat demand and that investment costs may be lower than for conventional paper-making (table 6.4). The economic efficiency potential of steel-making is less extraordinary, between 13 and 20 percent, and results from thin slab casting, more efficient blast furnaces, and minor improvements in the oxygen steel process by 2020 (Jochem and Bradke, 1996). Similar economic efficiency potential has been described for refineries (Refining Processes, 1998), petrochemical processes (Patel, 1999) and basic organic chemicals (Brewer and Lopez, 1998), construction materials (Rosemann and Ellerbrock, 1998; Ottoboni and others, 1998), glass production (ATLAS, 1997), and the food industry (Jochem and Bradke, 1996).

· For Dutch light industry, the economic efficiency improvements in 2000 (relative to 1990) are estimated at 30 percent (with a 5 percent discount rate) and 27 percent (with a 10 percent discount rate; Blok and others, 1996; Bde and others, 1999).

· Baumgartner and Muggli (1996) evaluated the efficiency improvements of cross-cutting technologies in Swiss industry. Savings of 15-35 percent were found for electrical and mechanical drives over the next 10-15 years (Almeida, Bertoldi, and Leonhard, 1997). Metering, controlling, and optimal regulation can lead to efficiency improvements of up to 15 percent in most industrial processes. Cogeneration in Western Europe still holds economic potential, particularly with the midterm effects of liberalising electricity supply and small cogeneration (ATLAS, 1997; EC, 1999).

Residential. The economic efficiency potential in heating of residential buildings depends - besides regional aspects - on the stock of boilers and their reinvestment cycles, the rate of constructing new buildings, and the rate of refurbishing existing buildings. Condensing boilers are about 10 percent more energy efficient than a new low-temperature boiler and 15-25 percent more efficient than existing boilers (Ziesing and others, 1999). Insulation of building elements, highly efficient window systems, and adequately thick insulation are economic within the cycle of refurbishment (ETSU, 1994).In new buildings, low-energy houses (those with annual heat demand of 50-100 kilowatt-hours per square metre) are now cost-effective due to better design and low-cost insulation techniques and window sytems (Altner and others, 1995).

BOX 6.3. ECONOMIC BENEFITS OF INCREASED ENERGY EFFICIENCY IN END USES - THE UNKNOWN DOUBLE DIVIDEND

Energy consumers benefit when profitable energy efficiency potentials are realised.7 But the economy also benefits, because saved energy costs can be reallocated, energy imports are replaced (in many countries) by domestically produced energy-efficient products and (energy) services, and labour-intensive branches can grow in industry, construction, and services (instead of capital-intensive energy supply), spurring innovation. Macroeconomic analyses for Germany and the United States show that policies to improve energy efficiency and to shift to advanced technology and less carbon-intensive fuels generate four important benefits for the national economy (Jochem and Hohmeyer, 1992; Laitner, Bernow, and DeCicco, 1998). Such policies:

· Spur economic growth to a small degree (by less than 1 percent of the absolute growth rate of GDP) due to the reallocation of saved energy costs.

· Generate jobs (including entrepreneurial jobs that foster resourceful, self-sufficient, and satisfied workers) for the reasons mentioned above. Net employment increases by 40-60 new jobs per petajoule saved each year.

· Increase exports of high-technology products. In 1976-92 exports of 12 energy-efficient products increased more than 50 percent faster than West Germany’s total exports.

· Reduce the environmental and social costs of energy use that were previously uncounted in market transactions for fuel. Such costs may be as high as $0.02 per kilowatt-hour of electricity (Friedrich and Krewitt, 1997) and almost $0.01 per kilowatt-hour of oil product used, not including the impacts of climate change (Hohmeyer, Ottinger, and Rennings, 1997).

Achieving two benefits of increased energy efficiency - positive economic effects and reduced environmental burden - is called a ‘double dividend’. Unlike many other employment effects of investment, the jobs created by efficiency investments are not evenly distributed over time. In most cases they are created during the initial period of investment - when wall insulation is installed or investments are made in condensing boilers or high-efficiency window systems. In addition, the regional distribution of net employment becomes more equitable. Employment in the energy supply sector is concentrated in urban and industrial areas, while efficiency involves planners, crafts, trade, and banking in the entire country.

TABLE 6.4. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN WESTERN EUROPE, 2010 AND 2020

Sector and technological area

Economic potential (percent)a

Energy price level assumed

Base year

Source


2010

2020




Industry







Iron and steel, coke ovens

9-15

13-20

1994

1995

Jochem and Bradke, 1996; Ameling and others, 1998


Construction materials

5-10

8-15

1997

1997



Glass production

10-15

15-25

1997

1997

ATLAS, 1997


Refineries

5-8

7-10

1995

1997

Refining Processes, 1998


Basic organic chemicals

5-10


1997

1996

Patel, 1999; Brewer and Lopez, 1998


Pulp and paper


50

1996

1997

De Beer, 1998


Investment and consumer goods

10-20

15-25

1994

1995

Jochem and Bradke, 1996; Bde and others, 1999


Food

10-15


1997

1997

Jochem and Bradke, 1996


Cogeneration in industry


10-20

1997

1997

ATLAS, 1997; EC, 1999

Residential







Existing buildings







Boilers and burners

15-20

20-25

today’s prices

1997

ETSU, 1994; Bde and others, 1999


Building envelopes

8-12

10-20

today’s prices

1995

Ziesing and others, 1999


New buildings


20-30

today’s prices

1995

Altner, Durr, Michelson, 1995


Electric appliances

20-30

35-45

1997

1997

GEA, 1995; ECODROME, 1999; Hennicke and others, 1998; Boardman and others, 1997

Commercial, public, and agriculture







Commercial buildings

10-20

30

8-13 cts/kWh

1995

Geiger and others, 1999


Electricity

10-25

20-37

4-10 cts/kWh

1997

ECODROME, 1998


Heat


15-25

today’s prices

1998

Zeising and others, 1999


Public buildings


30-40

7-15 cts/kWh

1992

Brechbhl, 1992


Agriculture and forestry


15-20

today’s prices


Neyer and Strebel, 1996


Horticulture


20-30

today’s prices


Arbeitsgemeinschaft, 1992


Decentralised cogeneration


20-30

today’s prices

1995

Ravel, 1994


Office equipment


40-50

1995

1995

Aebischer and others, 1996; MACEBUR, 1998; Hallenga and Kok, 1998

Transportation







Cars

25


today’s prices

1995

IPSEP, 1995


Door-to-door integration

4



1995

Zeising and others, 1999


Modal split of freight transport


3b


1995



Trains and railways


20

today’s prices

1999

Brunner and Gartner, 1999


Aircraft, logistics

15-20

25-30

today’s prices

1998

IPCC, 1999a

a. Assumes a constant structure or use of the sector or technology considered. b. Refers to the final energy use of the entire sector.

The economic efficiency potential of electric appliances in 2010 is best evaluated by comparing the equipment in use with the equipment available on the market. But the market is not homogeneous: a survey of washing machines, dryers, and dishwashers available in the European Union showed minimum:maximum ratios of specific consumption between 1:2.5 for washing machines and 1:4 for condenser tumble dryers (GEA, 1995). Initial costs are sometimes higher for efficient equipment, but life-cycle costs are generally lower. In France a detailed end-use study showed that electricity savings of 40 percent can be achieved by replacing average equipment with the most efficient appliances readily available on the market (Rath and others, 1997; ECODROME, 1998). These results are confirmed by Hennicke and others (1998) and Ziesing and others (1999). Given the relatively short lives of lights and appliances, savings of 33 percent could be achieved in the United Kingdom by 2010 with the widespread adoption of better lights and appliances using known technologies (Boardman and others, 1997).

Service and public sectors. In 1990 office equipment consumed just 3-4 percent of the electricity used in Western Europe’s service sector (Aebischer, Schwarz, and Spreng, 1996). But office equipment is the fastest-growing consumer of electricity. About two-thirds of this electricity is used in standby and off modes. Thus easy and cost-effective savings are possible for most equipment (Hallenga and Kok, 1998; MACEBUR, 1998). With the fast increase in the amount of office equipment and its short lives, these improvements could be realised by 2010. Hennicke and others (1998) reports that 27-35 percent of the electricity consumed by Germany’s service sector could be saved for $0.043-0.071 a kilowatt-hour.

The economic potential for reducing space and process heat demand in commercial buildings ranges from 15-25 percent (Ziesing and others, 1999; Aebischer and others, 1996). The efficiency of heat generation and distribution could be improved by 10-15 percent through reinvestmentsin boilers, burners, and insulation and control techniques, in some cases by direct process heat generation (avoiding steam and hot water systems), and by engine-driven cogeneration.

TABLE 6.5. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN NORTH AMERICA, 2010

Sector and area

Economic potential (percent)

Energy price level assumed

Base year

Source


United Statesa

Canada




Industry







Iron and steel

4-8

29

United States: scenario for price developmentsb

United States: 1995

United States: Interlab, 1997;


Aluminium (primary)

2-4




Brown and others, 1998;


Cement

4-8




Romm, 1999


Glass production

4-8



Canada: 1990



Refineries

4-8

23

Canada: price scenario by provincec


Canada: Jaccard and Willis, 1996;


Bulk chemicals

4-9

18



Bailie and others, 1998


Pulp and paper

4-8

9





Light manufacturing

10-18






Mining

n.a.

7





Industrial minerals

n.a.

9




Residential







Lighting

53


United States: scenario for price developments

United States: 1995

United States: Interlab, 1997;


Space heating

11-25




Brown and others, 1998;


Space cooling

16




OTA, 1992


Water heating

28-29



Canada: 1990



Appliances

10-33


Canada: price scenario


Canada: Bailie and others, 1998


Overall


13




Commercial and public







Space heating

48


United States: scenario for price developments

United States: 1995

United States: Interlab, 1997;


Space cooling

48




Brown and others, 1998


Lighting

25






Water heating

10-20



Canada: 1990

Canada: Bailie and others, 1998


Refrigeration

31


Canada: price scenario




Miscellaneous

10-33






Overall

n.a.

9




Transportation







Passenger cars

11-17


United States: scenario for price developments

United States: 1997

United States: Interlab, 1997;


Freight trucks

8-9




Brown and others, 1998


Railways

16-25






Aeroplanes

6-11



Canada: 1990

Canada: Bailie and others, 1998


Overall

10-14

3

Canada: price scenario



a. Industrial energy efficiency potentials in the United States reflect an estimated penetration potential under different conditions based on the Interlaboratory Working Group on Energy Efficient and Low-Carbon Technologies (1997). There are no separate estimates available for the economic potential. The economic potential under business-as-usual fuel price developments is estimated at 7 percent in energy-intensive industries and 16 percent in light industries. b. The Inter-Laboratory Working Group study (1997) used price scenarios for 1997-2010 to estimate the potential for energy efficiency improvement, based on the Annual Energy Outlook 1997 scenario (EIA, 1996). The scenario assumes a 1.2 percent annual increase in oil prices from 1997 levels. c. For comparison; in 2010 light fuel oil prices are $6-8 a gigajoule at the 1999 exchange rate (Jaccard and Willis Energy Services, 1996).

Transportation. Between 1990 and 2010 final energy use by transport may increase by 40 percent in Western Europe if no efficiency potentials are used. About 50 percent of this energy is used by passenger cars and almost 40 percent by road freight. A voluntary agreement concluded by the Association of European Car Manufacturers reflects the potential for energy-efficient car use: in 2008 new cars will be 25 percent more fuel efficient than in 1995. Using taxes and insurance to internalise the external costs of road transport, estimated at $20-70 billion, would increase efficiency by another 7-16 percent.

Relative to road transport, Western Europe’s rail transport is about 3 times less energy-intensive for passengers and up to 10 times less energy-intensive for goods. With lighter trains, reduced air drag, and better drive concepts, the specific electricity consumption of rail transport could drop almost 50 percent over the next 40 years (Brunner and Gartner, 1999). A 25 percent cut in railway freight tariffs due to increased productivity and cross-border harmonisation is expected to induce a shift from road to rail, allowing a 3 percent reduction in final energy use for the transport sector as a whole. Although aeroplanes and related logistics have substantial efficiency potential (IPCC, 1999a), it is not expected to compensate for the growth in air transport mileage.

North America

North America - defined here as Canada and the United States, but not Mexico - has higher energy consumption per capita than any other region.9 Canada and the United States share several characteristics (large size, low energy prices) but also differ substantially (climate). In both countries recent studies have assessed the potential for increased energy efficiency by 2010. In the United States the Interlaboratory Working Group on Energy-Efficient and Low-Carbon Technologies (1997) assessed the economic potential for efficiency improvement, while a recent follow-up study assesses the potential impact of policies. In Canada a study has assessed several industrial sectors in detail (Jaccard and Willis Energy Services, 1996), while others have assessed the economic potential of sets of technologies in all sectors (Bailie and others, 1998; Brown and others, 1998; Faruqui and others, 1990; OTA, 1991). Both countries are assessing policies to address climate change, and the results may vary from previous studies (table 6.5).

Under the business-as-usual scenario, energy growth in the United States through 2010 would increase energy demand by 26 percent relative to 1990. Two other scenarios address, with progressively stronger measures, the adoption of energy-efficient technologies. The first, the efficiency scenario, assumes that technology-based reductions in energy and carbon emissions become cost-effective and so attractive to the marketplace. The second, the high-efficiency/low-carbon scenario, assumes that the United States makes an even greater commitment to reducing carbon emissions through federal and state programs and policies, as well as active private sector involvement. The high-efficiency/low-carbon scenario assumes that the emission charge is $25 or $50 per tonne of carbon.

Industry. Because of the complexity of industrial processes, the Interlaboratory Working Group did not model from the bottom up using explicit estimates of changes in efficiency expected from the introduction of energy-efficient technologies. Instead, the group used existing models to estimate the potential for increased general investment in industrial energy efficiency, supplemented by examples of a few technologies that have potential throughout the industrial sector (for example, advanced gas turbines and efficient motors). The models single out seven energy-intensive industries that together account for 80 percent of manufacturing energy use. Light manufacturing is considered a separate category.

Under the business-as-usual scenario, manufacturing grows 2.1 percent a year through 2010, divided between energy-intensive industries (1.3 percent a year) and non-intensive industries (2.6 percent a year). Total energy intensity is projected to decline by 1.1 percent a year (Interlaboratory Working Group, 1997).

In the efficiency scenario, industrial energy consumption drops 6.6 percent relative to the business as usual scenario. In the high-efficiency/low-carbon scenario, consumption falls 12.5 percent. Energy efficiency improvements are larger in light industry than in heavy manufacturing because there are more opportunities to adopt energy-efficient-technologies. Energy is a smaller component of overall manufacturing costs, so there is less incentive to adopt new technology than in the past. A recent bottom-up study (Worrell, Martin, and Price, 1999) of energy efficiency potential in the U.S. iron and steel industry estimates the potential contribution of nearly 50 technologies, and suggests that the potential is twice as high as indicated by the Interlaboratory Working Group study.

Between 1990 and 2010 final
energy use by transport may increase
by 40 percent in Western Europe,
if no efficiency potentials
are used.

Bailie and others (1998) estimate at 8 percent the cost-effective potential for reducing carbon dioxide (CO2) emissions through increased energy efficiency in Canadian industry. The authors use high discount rates to reflect the market rates of time preference.10 Jaccard and Willis Energy Services (1996) estimate the economic and technical potential for increased energy efficiency in six major industrial sectors using the same model and a discount rate of 7 percent in assessing the macroeconomic potential (see box 6.2). They find technical potential in 2010 to vary by industry from 8 to 38 percent (relative to 1990), while economic potential varies from 7 to 29 percent. These findings are similar to those for Western Europe (see table 6.4).

Buildings. In the efficiency scenario, buildings use 36.0 exajoules of energy in 2010, compared with 38.0 exajoules in the business as usual scenario. The efficiency scenario assumes that by 2010 buildings will have achieved just over one-third of their cost-effective energy efficiency savings potential of 15 percent (Interlaboratory Working Group, 1997). Energy services cost $11 billion a year less than in the business-as-usual scenario. Costs are lower because the decrease in energy spending that results from installing more efficient technology is larger than the cost of purchasing and installing this technology in buildings. The high-efficiency/low-carbon scenario assumes that nearly two-thirds of the cost-effective energy efficiency savings are achieved by 2010. The result is a larger drop in energy use, to 33.3 exajoules - or by 13 percent relative to the business-as-usual scenario.

Bailie and others (1998) assume that energy efficiency measures are implemented in Canadian buildings. While households show moderate economic potential (13 percent), the economic potential for commercial buildings is limited (9 percent).11 Although the technical potential is high (Bailie and others, 1998), the assumed high costs and additional office automation lead to smaller economic potentials.

Transportation. The business as usual scenario for U.S. transportation assumes that the passenger car fuel efficiency rate (in litres per 100 kilometres) will improve from 8.55 in 1997 to 7.47 in 2010. But this represents a 1.4 percent annual increase in fuel economy, an improvement that has not been seen in the past without increased fuel mileage standards or higher oil prices. The business-as-usual scenario also assumes that the fuel efficiency of light trucks will not increase. The result is an increase in transportation energy use from 26,000 petajoules in 1997 to 34,000 petajoules in 2010 despite a 10 percent improvement in overall efficiency. Under the efficiency scenario, transportation energy use is 10 percent lower in 2010. Under the high-efficiency/low-carbon scenario, it is 14 percent lower (Interlaboratory Working Group, 1997).

The high-efficiency/low-carbon scenario includes the efficiency scenario assumptions as well as major breakthroughs in fuel cells for light-duty vehicles, large gains in the energy efficiency of aircraft, and an optimistic estimate of the cost of ethanol fuel from biomass. This modelling approach is very different from that taken for buildings, because of the assumption of breakthrough technology in transportation.

Bailie and others (1998), however, estimate an extremely low economic potential for energy efficiency improvement in Canada’s transportation sector.12 The study concentrates on efficiency standards for engines but also includes fuel switching. The baseline scenario assumes large growth in transport demand, dramatically increasing energy demand in Canada between 1990 and 2010. The study finds a large technical potential for efficiency improvement, but the costs of the economic potential are prohibitive. Hence the economic potential is estimated at just 3 percent relative to 2010 baseline energy use.

Japan and Southeast Asia

The literature on energy efficiency potentials in Japan and Southeast Asia is somewhat limited (table 6.6).13 Although the region has a relatively young capital stock, economic efficiency potentials are still quite high. This is due to intensive technological innovations and relatively high energy prices (Rumsey and Flanagan, 1995a).

Between 1975 and 1995 primary energy demand more than quadrupled, shifting the centre of the energy market from the Atlantic Basin to the Pacific Basin (Fesharaki, 1998). Hence energy efficiency is a paramount policy objective. The Asia Least Cost Greenhouse Gas Abatement Strategy (ADB, GEF, and UNDP, 1998) cites cumulative potentials for 2010 and 2020.

Industry. Goto (1996) estimates industrial energy efficiency improvements through 2010 for several energy-intensive branches in Japan (see table 6.6). The energy savings for iron and steel range from 10-12 percent, for chemicals from 5-10 percent, for cement production from 2-8 percent, and for pulp and paper from 6-18 percent (box 6.4). For Southeast Asia, ADB, GEF, and UNDP (1998), IIEC (1995), Adi (1999), Ishiguro and Akiyama (1995), and the Viet Namese government find that similar savings are possible in 2010 and 2020.

Residential, commercial, and public sectors. The energy savings potential of residential and commercial uses could be untapped with various demand-side management programmes for air conditioning, refrigeration, lighting, and cooling. Some 300-450 petajoules a year could be gained in Japan’s residential sector by insulating existing buildings within their reinvestment cycle. IIEC (1995) reports savings of 20-60 percent for electric appliances.

TABLE 6.6. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN JAPAN AND SOUTHEAST ASIA, 2010 AND 2020

Sector and area

Economic potential (percent or petajoules a year)a

Energy price level assumed (U.S. cents per kilowatt-hour)

If percent, base year

Source


Japan 2010

Southeast Asia 2020




Industry





Japan: Goto, 1996; JISF, 1993


Iron and steel

10-12%


0.2

1990-95

Southeast Asia: Ishiguro and


Cement

2-8%


2-20

1990-95

Akiyama, 1995; ALGAS, 1998,


Chemicals

5-10%


0.4-7.8

1990-95

IIEC, 1995; Adi 1999; Government


Pulp and paper

6-18%


1.5-3.3

1990-95

of Viet Nam; Nguyen


Electric motors


20%

1998 prices

1995

Thuong, 1998; Aim Project


Total industry


2,017 PJ

1998 prices

1998

Team, 1994

Residential





Kaya and others, 1991; IIEC,


Existing buildings





1995; ALGAS, 1998;


50-100 millimetre insulation

290-450 PJ


2.0-8.5

1995

Wanwacharakul, 1993


Electric appliances

20-60%

20-60%





Illumination

20-75%

20-60%




Commercial and public sectors





IIEC, 1995; ALGAS, 1999


Buildings 50-100 millimetre insulation

240-280 PJ

293 PJ

2-5

1991,92


Transportation


2,275 PJ


1992

IIEC, 1995


Compact cars

1.8%


0.044

1990

Japan: Goto, 1996;


Buses

0.2%


0.196

1990

Aim Project Team, 1994


Trucks

2.8%


0

1990



Compact cargo vehicles

13.7%


0

1990


Within cities







Vehicles

7%


0.01-0.06

1990



Buses, trucks cargo vehicles

14%


0.01-0.06

1990



Passenger cars

0.3%


0.06

1990


a. Assuming constant structure or use of the sector or technology considered.

BOX 6.4. JAPANESE COMPANIES GO AFTER OPPORTUNITIES

Hitachi city district heating system. Energy displacement between industry and buildings entails the use of residual heat from a cement factory for district heating and cooling in Hitachi city covering a total area of 12.5 hectares. Some 107,000 square metres of floor area will be covered by the district heating system, with a maximum supply capacity of 8.93 gigawatts of heat and 11.9 gigawatts of cooling. When the system produces a surplus of heat, the excess heat is used for electricity production with a 373 kilowatt-hour generator (Kashiwagi, 1994).

Iron and steel. Efficient ignition of a sintering furnace for crude steel production is possible through installed segregation equipment, slit burners, and changes in waste heat recovery - for savings of 56.5 gigajoules a year. Ignition fuel was reduced by 70 percent with a payback period of 1.6 years at 1986 prices (CADDET, 1997).

Cogeneration. The Jujo Kimberly K.K cogeneration power plant for a paper mill uses an aeroengine-driven gas turbine with an output of 7,600 kilowatts of electricity and 20 tonnes per hour of steam, meeting 70 percent of the mill’s electricity requirements. The system attains an overall efficiency of 81 percent, with a payback of four years. Energy costs were cut 30 percent, and labour costs 20 percent. The space saves confers an additional economic benefit.

In the commercial and public sectors the same efficiency technology would save 240-280 petajoules a year. Mungwitikul and Mohanty (1997) report electricity savings of 25 percent for office equipment at no additional cost in Thailand.

Transportation. In 1980-95 transport was the largest consumer of energy in Japan and Southeast Asia, with annual growth of 8.8 percent (excluding Viet Nam). Transport energy demand is still increasing because larger vehicles are becoming more popular, while the share of small vehicles in new car sales fell to 60 percent in 1996. Japanese government policy is now aiming to introduce the ‘top runner method’, setting efficiency standards above the performance standards currently achievable in order to raise vehicle fuel efficiencies. These measures include subsidies for hybrid vehicles, which double fuel efficiencies. Smaller cars are expected to reduce their fuel consumption to 3.0-3.6 litres per 100 kilometres, and one car manufacturer plans to increase efficiency by 25 percent between 1995 and 2005.

Energy policy also attempts to improve the energy efficiency of trains, ships, and planes, upgrading distribution efficiency by promoting railroad transportation, coastal shipping, and public transport. A study on an electric mass transit project under construction in Thailand identified potential savings of 28 petajoules a year. The savings would come from switching to diesel fuel in city buses. The introduction of fuel cells in road vehicles will further improve efficiency after 2010.

TABLE 6.7. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN EASTERN EUROPE, 2010

Sector and area

Economic potential (percent)

Energy price level assumed

Base year

Source

Industry






Pig iron

3

EU, 1995


Ministry of Industry, Poland, 1990


Electric steel

10

EU, 1995




Hot rolled products

32

EU, 1995




Ferrous metallurgy

24

EU, 1995




Electrolytic copper

15

EU, 1995




Aluminium

24

EU, 1995


National Energy Agency, Bulgaria, 1998


Non-ferrous metals

4

EU, 1995




Chemical products

31

EU, 1995

1995



Synthetic fibres

12

EU, 1995




Building materials

48

EU, 1995




Cement dry

16

EU, 1995




Leather, footwear

4

EU, 1995

1995



Timber, wood industry

5

EU, 1995

1995



Food industry

23

EU, 1995

1995



Machine manufacturing

22

EU, 1995

1995



Construction industry

24

EU, 1995

1995


Residential






Existing stock

25

EU, 1995

1995

IEA, 1999


New buildings

30

EU, 1995

1995



Electric appliances

25

EU, 1995

1995


Commercial/public






Heating

25


1995

IEA, 1999


Office equipment

20


1995



Lighting

40

EU, 1995

1995


Agriculture






Heating, drying

22

EU, 1995

1995

IEA, 1999


Electricity

15

EU, 1995

1995


Transportation






Cars

20

EU, 1995

1995

IEA, 1999


Public transportation, cities

15

EU, 1995

1995



Railways

25

EU, 1995

1995



Air transport

22

EU, 1995

1995


Eastern Europe

Economic restructuring is playing a decisive role for the energy system and its efficiency path in Eastern Europe, because the drivers of economic policy are now totally different from those under central planning.14 Under communist rule a standing ambition for expansion led to a very old capital stock with low energy efficiency for basic industries, buildings, and the energy industry itself. Because the region started the transition from an extremely weak social and financial position, the economic crisis - an unavoidable element of large-scale restructuring - influences voters (Levine and others, 1991).

As a result governments (who wish to remain in power) are often reluctant to take the restrictive steps needed for economic restructuring in general and energy pricing in particular. Countries starting from a better position (Czech Republic, Hungary, Poland, Slovakia, Slovenia) can take the painful steps earlier. Because statistical systems and aggregation practices differ considerably among transition economies and future developments are uncertain, the data on economic efficiency energy potential in table 6.7 should be viewed only as cautious estimates. The data may be subject to major changes when more empirical data become available.

Industry. Specific energy consumption and related efficiency potentials are related to physical production in energy-intensive industries. The economic potential of other sectors ranges from 4 percent (leather) to 40 percent (building materials) by 2010 (see table 6.7). Available data are from climatically and economically different countries (from Bulgaria to Poland) but most of the figures are similar - reflecting a shared history of Soviet technology and standards.

Residential. Individual heat metering in multifamily houses in Eastern Europe represents an energy efficiency potential of at least 15-20 percent. In panel-built housing estates, individual metering of domestic warm water consumption has already resulted in savings of up to 40 percent where it has been introduced. A programme to improve thermal insulation in these buildings began in the mid-1990s with central support. Thus a 20-30 percent reduction of the heat demand in these buildings can be achieved in the next 10 years.

For 2020 and beyond, specific energy and material demands are expected to be close to the EU average. Economic and technology development in Eastern Europe will likely be carried out through the expansion of multinational companies, integration with the European Union, and globalisation. As a consequence, by 2020 technologies will be in place that are technically and economically acceptable and comparable to EU standards. Exceptions will be some parts of the non-refurbished building stock.

Commercial and public sectors. Improved boilers and heating systems, insulation, high-efficiency window systems, and new lighting systems will contribute to substantial savings in the commercial and public sectors.

Transportation. Although specific energy consumption will likely fall by at least 1 percent a year, the final energy consumed by road transportation will substantially increase due to motorization in Eastern Europe.

Russia and other members of the Commonwealth of Independent States

Members of the Commonwealth of Independent States face very different climates, domestic energy resources, and levels of industrialisation and motorisation.15 The last extensive studies of economic energy efficiency potentials for the former Soviet Union were performed in the early 1990s (WBNSS, 1999). About 120 technologies and energy-saving measures with potential savings greater than 5.8 petajoules a year were considered, covering all the sectors and assuming the replacement of technology and equipment in use at that time with best-practice, world-class technology (CENEf, 1993). Potential savings were estimated at 21,690 petajoules a year, about 77 percent of which was considered economical by 2005.

TABLE 6.8. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN RUSSIA AND UKRAINE, 2010

Sector and technological area

Economic potential (percent or petajoules a year)

Energy price level assumed

If percent, base year

Source


Russia

Ukraine


Russia

Ukraine


Industry

3,370-4,980 PJ

1,430-2,485 PJ

1990s price levels of Western Europe

1995

1990

Russia: Federal Ministry of Fuel and Energy, 1998


General

1,524-2,198 PJ



1995


Ukraine: ARENA-ECO, 1997; Vakulko/Zlobin, 1997


Metallurgy

733-1,026 PJ

284-361 PJ


1995

1990



Iron and steel, coke ovens

132-161 PJ



1995




Construction materials

440 PJ








Cement

176 PJ



1995





Refineries

176-205 PJ

73-138 PJa


1995

1990



Basic organic chemicals

176-322 PJ



1995




Pulp and paper

176-322 PJ



1995




Investment goods industry

322-469 PJ

247-249 PJ


1995

1990



Electricity savings

More than 30%



1997




Food industries


114-205 PJ





Commercial and public sectors and agriculture



1995 price levels of European Union



Bashmakov, Gritsevich, and Sorokina, 1996; ARENA-ECO, 1997; Lapir, 1997


Commercial buildings








Agriculture

791-879 PJ

91-138 PJ


1995

1990



Horticulture

Up to 3 times



1997



Residential

1,905-2,198 PJ

475-570 PJb

1995 price levels of European Union

1995

1990

Bashmakov, Gritsevich, and Sorokina, 1996; ARENA-ECO, 1997


Automated boilers

20-40%



1995




Existing building stock

20-30%



1995




New buildings

381-431 PJ



1995




Hot water supply

197-276 PJ



1995



Transportation

967-1,172 PJ

290-293 PJ

1995 price levels of European Union

1995

1990

Russia: SNAP, 1999; Russian Federation, Ministry of Transport, 1995


Trains

10-15%



1997



a. Refineries and chemicals. b. Residential and commercial sectors.

BOX 6.5. MARKET FORCES DRIVE MORE ENERGY-EFFICIENT INDUSTRY IN THE COMMONWEALTH OF INDEPENDENT STATES

Automated controls introduced in the processing of petrochemicals reduced electricity consumption per unit of output by 40-65 percent at the Kirishinefteorgsyntez plant in Leningrad oblast. Narrower fluctuations in technological parameters also increased the lives of electric motors, valves, and transmitters (Goushin and Stavinski, 1998).

At one of Russia’s largest ferrous metallurgy plants, Magnitogorski, the energy management department developed and implemented a programme for energy saving and efficiency that took into account the plant’s new market environment. The programme focuses on making better use of internal energy resources. Steam is now used for electric power cogeneration (26 megawatts), and coke gas is used as a fuel at boilers-utilisers and in the drying of containers for transporting iron, replacing 19,000 cubic metres of natural gas (Nikiforov, 1998).

In 1996 Russia and Ukraine - the two largest members of the Commonwealth of Independent States - used 83 percent of the region’s primary energy. The most recent estimate of Russia’s energy efficiency potential was developed in 1997 (Russian Federation Ministry of Fuel and Energy, 1998). It projects savings of 13,000-15,500 petajoules by 2010; 80 percent of these savings are expected in the end-use sector. The most comprehensive recent evaluation of technological and economic potentials for energy efficiency in Ukraine was undertaken by the Agency for Rational Energy Use and Ecology (ARENA-ECO, 1997).

Industry. The economic efficiency potential of industry in 2010 is about 4,000 petajoules a year (table 6.8). This is equal to about 30 percent of the economic efficiency potential of the entire economy, or more than 30 percent of the projected energy demand for 2010. In ferrous metallurgy, replacing open-heart furnaces with oxygen converters and electric steel furnaces could save 73-88 petajoules a year (box 6.5). Introducing continuous casting on greater scale could save 59-70 petajoules a year. Recycling an additional 10 million tonnes of ferrous scrap would save 290 petajoules a year.

In primary aluminium production it is realistic to cut the use of electric power to 13,200 kilowatt-hours per tonne by using elec-trolysers of greater capacity and introducing automated control of technological parameters. In the production of building materials the transfer of cement clinker production to dry process in the production of bricks and lime and other related measures may cut energy use by 400 petajoules a year. In the chemical industry, replacing obsolete with modern technology in the production of ammonia, olefines, aromates, alcohols, and the like will not only reduce energy intensity to levels comparable to the best world examples (around 200 petajoules in 2010), it will also improve the product mix.

According to Vakulko and Zlobin (1997), the main directions for rational use of electricity in industrial facilities are: installing electricity metering and control devices, practising power compensation, determining the optimal number of working transformers, and making efficient use of lighting and lighting devices, high-efficiency electric drives, electrothermal devices, welding transformers and units, and converters. Ukraine’s energy efficiency potential in industry is similar once adjusted for the smaller country, but are still about 2,000 petajoules a year by 2010 (see table 6.8).

Residential. Better building insulation will reduce heat losses. Overall, by 2010 Russia could save at least 2,000 petajoules a year in its residential sector. Ukraine could save 500 petajoules a year (see table 6.8). Typical for Russian households, a 250-360-litre refrigerator consumes 500-600 kilowatt-hours a year. According to Bashmakov, Gritsevich, and Sorokina (1996), more energy-efficient refrigerators could save up to 175 petajoules a year by 2010. The efficiency measures in this sector and the commercial sector are very similar to those in Russia (installing new metering and control devices, improving insulation of buildings and heating systems).

Transportation. Russia’s Ministry of Transport has adopted several programmes to make the transportation system more efficient, safe, and comfortable (SNAP, 1999). In 1995 the ministry introduced a programme aimed at introducing energy-saving vehicles, optimising the structure of the vehicle stock, developing energy-efficient engines, and introducing energy-saving fuels and lubricants (Russian Federation Ministry of Transport 1995). Among other measures, the programme is expected to increase of the share of diesel-fuelled trucks and buses and modernise aeroplanes and helicopters.

Though there is great potential for economic energy savings, these savings will be difficult to achieve. Russia and Ukraine cannot provide the necessary financial support to industry and municipalities. Current investments in energy-saving measures are so low that less than 10 percent of economic energy saving potential is being reached in the Commonwealth of Independent States (Bashmakov, Gritsevich, and Sorokina, 1996). But this is likely to change with the economic recovery of Russia and Ukraine over the next 10 years.

India

With more than 1 billion inhabitants, India is one of the world’s biggest emerging economies.16 In the 50 years since independence the use of commercial energy has increased by ten times, and in 1996/97 was 10,300 petajoules (GOI, Ninth Plan Document, 1996). But per capita energy consumption is only about 15 gigajoules a year (including non-commercial energy) - far below the world average of 65 gigajoules. Given the ever-widening gap between energy supply and demand in India, and the resource constraint impeding large-scale energy generation at source, efficient energy use is an extremely important, cost-effective option. Commercial energy use is dominated by industry (51 percent), followed by transportation (22 percent), households (12 percent), agriculture (9 percent), and other sectors including basic petrochemical products (6 percent).

Industry. Indian industry is highly energy-intensive, with energy efficiency well below that of industrialised countries (see table 6.3). Efforts to promote energy efficiency in such industries could substantially reduce operating costs. About 65-70 percent of industrial energy consumption is accounted for by seven sectors - fertiliser, cement, pulp and paper, textiles, iron and steel, aluminium, and refineries. The other areas considered for this report are brick-making, foundries, and industrial cogeneration. Potential efficiency improvements are the result of a bundle of feasible and economic energy-saving options, identified through energy and technology audits (table 6.9, box 6.6).

TABLE 6.9. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN INDIA, 2010

Sector and technological area

Economic potential (percent or units of energy a year)

Energy price level assumed

If percent, base year

Source

Industry






Fertiliser

12.6 gigajoules per tonne of NH3

Today’s price


TERI and FAI, 1995


Cement

17%

Today’s price

1992

TIFAC, 1992



Electrical

17%






Thermal

27%





Pulp and paper

20-25%

Today’s price

1994

CII, 1994


Textiles

23%

Today’s price

1998

TERI, 1999


Iron and steel

15%

Today’s price

1998

TERI, 1996a


Aluminium

15-20%

Today’s price

1996

TERI, 1996b


Refineries

8-10%

Today’s price

1996

Raghuraman, 1989


Brick-making

15-40%

Today’s price

1989

TERI, 1997b


Foundries

30-50%

Today’s price

1997

TERI, 1998


Industrial cogeneration

3,500 megawatts (sugar)

Today’s price

1997

TERI, 1994

Residential






Lighting

10-70%

Today’s price

1996

TERI, 1997c


Refrigerator

25%

Today’s price

1996

TERI, 1997c


Air conditioning

10%

Today’s price

1996

TERI, 1997c

Agriculture






Pump sets

25-55%

Today’s price

1995

Kuldip and others, 1995

Transportation






Two- and three-wheelers

25%

Today’s price

1995

IIP, 1995


Cars

7.5-10%

Today’s price

1992

TERI, 1992


Trains (diesel)

5-10%

Today’s price

1997

TERI, 1997c


Trains (electric)

5-10%

Today’s price

1997

TERI, 1997c

Residential. Energy consumption in India’s residential sector varies widely across low-, medium-, and high-income classes in rural and urban areas. Household demand for electricity will likely expand rapidly as urbanisation continues and the availability of consumer durables expands with increasing income. About 40 percent of the electricity used by the sector goes to meet lighting demand, followed by 31 percent for fans and 28 percent for appliances (refrigerators, air conditioners, televisions). The economic potential of efficiency improvements was estimated for lighting (up to 70 percent), refrigerators (25 percent), and air conditioners (10 percent; see table 6.9).

Agriculture. The main areas for conserving energy in agriculture are diesel-fuelled and electric pumps, 16 million of which were in operation in 1991/92. The estimated savings potential of 25-55 percent involves avoiding such common drawbacks as improper selection of pumps and prime movers, improper installation, poor pump characteristics, high friction losses in the valves and the piping system, air inflow in the suction pipe, and improper maintenance and servicing.

Transportation. Transportation accounts for almost half of India’s oil product consumption, in the form of high-speed diesel and gasoline (TERI, 1999). Two major structural aspects of transportation are related to energy efficiency. First, the rail-dominant economy of the 1950s gave way to the road-dominant economy of the 1990s, reaching 81 percent of the sector’s energy consumption (TERI, 1997c). Second, inadequate public transport systems and increasing incomes have led to a rapid increase in personalised modes of transport and intermediate public transport, some of which are extremely energy-inefficient.

A large number of two-stroke-engine two-wheelers are used as personal vehicles. (In 1996 the number of registered two-wheelers was 23.1 million.) Efficiency improvements of 25 percent are possible for two-stroke engines (two- and three-wheelers). The stringent emission standards proposed for two- and three-wheelers will force manufacturers to switch to four-stroke engines. Efficiency improvements for cars and buses are expected to come primarily from switching from gasoline and diesel to compressed natural gas (TERI, 1992).

BOX 6.6. MORE ENERGY-EFFICIENT FOUNDRIES IN INDIA

Until recently most of India’s 6,000 small foundries had conventional cupolas (melting furnaces) with low energy efficiencies and high emissions. In 1998 a new divided-blast cupola and pollution control system were commissioned and fine-tuned. Once various control parameters were optimised, the demonstration cupola was far more energy efficient, with coke savings ranging from 33-65 percent relative to average small-scale foundries in India. Emissions of total suspended particulates are below the most stringent emission norm prevailing in India. In addition, the new cupola has a much reduced oxidation loss for silicon and manganese. This success story outlines an appropriate strategy for small-scale foundries to upgrade to an energy-efficient and environmentally cleaner option. This strategy can be adapted not only to other industry clusters in India, but also to units operating under similar conditions in other countries.

Source: TERI, 1998.

The importance of research and development for increasing energy efficiency is still underestimated in India. Spending on research and development increased from 0.35 percent of GNP in 1970 to 0.81 percent in 1994. But this share is still just one-third of the ratio in industrialised countries. Tackling the complex technological problems of the energy sector, particularly end-use efficiencies, will require research and development on a steadily increasing scale.

China

Like India, China is one of the world’s main emerging economies, with a population of more than 1.2 billion.17 In 1996 China’s primary energy demand was 44,000 petajoules, or 36 gigajoules per capita. Substantial energy efficiency gains could be realised through intensive investments in the country’s productive sectors.

Industry. In 1995 steel and iron industry consumed 3,740 petajoules, accounting for 13 percent of China’s final energy use with a performance of 46 percent energy efficiency. Energy consumption per tonne of steel will likely drop from 44 gigajoules in 1995 to 35 gigajoules in 2010, which is a little higher than the level in industrialised countries in the 1970s (table 6.10). The potential efficiency savings in some other energy-intensive branches are higher - construction materials could achieve 20 percent and chemicals up to 30 percent, with particular savings in basic chemicals such as ammonia, sulphate, soda, carbide, and olefine production.

Residential. Since the 1980s domestic energy consumption has increased because of higher living standards and expanded living space. Measures such as preventing heat losses, improving electric appliance efficiency, replacing incandescent lamps with fluorescent lamps, improving stoves and boilers, and using cogeneration will enhance energy efficiency in this sector. In 1995 the average efficiency of China’s energy use - as defined by the relationship between useful energy and final energy - was 45 percent in urban areas and 25 percent in rural areas, indicating considerable potential for improvement. By 2010 energy efficiency is expected to reach 50 percent in urban areas and 45 percent in rural areas, close to levels in industrialised countries in the early 1990s (box 6.7). This means savings of 10-15 percent in urban areas and 80 percent in rural areas. These gains are important because the drivers for energy services will be increasing by 5-18 percent a year.

TABLE 6.10. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN CHINA, 2010

Sector and area

Economic potential (percent)

Energy price level assumed

Base year

Reference

Industry






Iron and steel

15-25

Today’s price

1995

Hu, 1997


Cement

10-20

Today’s price

1995

Hu, 1997


Foundries

8-14

Today’s price

1995

Hu, 1997


Pulp and paper

20-40

Today’s price

1995

Hu and Jiang, 1997


Textiles

15-28

Today’s price

1995

Hu, 1997


Fertiliser

10-20

Today’s price

1995

Hu and Jiang, 1997


Aluminium

20

Today’s price

1995

Hu and Jiang, 1997


Brick kilns

32

Today’s price

1995

Hu and Jiang, 1997


Refineries

5-10

Today’s price

1995

Hu and Jiang, 1997


Ethylene

10-30

Today’s price

1995

Hu and Jiang, 1997


Calcium carbide

10-22

Today’s price

1995

Hu and Jiang, 1997


Sulphate

14-25

Today’s price

1995

CIECC, 1997


Caustic soda

10-30

Today’s price

1995

CIECC, 1997

Household






Lighting

10-40

Today’s price

1995

CIECC, 1997


Refrigerator

10-15

Today’s price

1995

CIECC, 1997


Air conditioner

15

Today’s price

1995

CIECC, 1997


Washing machine

15

Today’s price

1995

CIECC, 1997


Cooking utensils

20-40

Today’s price

1995

CIECC, 1997


Heating equipment

10-30

Today’s price

1995

CIECC, 1997

Agriculture






Motors

10-30

Today’s price

1995

CIECC, 1997


Pump sets

20-50

Today’s price

1995

CIECC, 1997

Transportation






Train (diesel)

5-15

Today’s price

1995

Hu, 1997


Train (electric)

8-14

Today’s price

1995

Hu, 1997


Cars

10-15

Today’s price

1995

Hu, 1997


Vessels

10

Today’s price

1995

Hu, 1997

Other sectors. In 1995 other final energy users in the service sector had an average end-use efficiency of about 40 percent. By 2010 technological progress and technical measures are expected to increase the efficiency level by 5-10 percentage points over 1995, reaching the level of industrialised countries in the early 1990s.

Transportation. Transportation is a large and fast-growing energy-consuming sector, especially for petroleum products (2,640 petajoules in 1995, including public transport). By 2010 energy consumption will almost double, with oil products accounting for 87 percent of transport energy consumption. Relative to other sectors, transportation has a low end-use efficiency of around 30 percent. The main technical measures for increasing efficiency are similar to those elsewhere: increase the share of diesel vehicles, rationalise the weight of cars, speed up road construction and improve its quality; increase the share of electric engines and internal combustion engines on trains, and optimise engines. Better-designed propellers on ships could save 5 percent on ships’ fuel consumption. Optimal ship shape energy-saving technology will save 4-10 percent of fuel, and the use of tidal energy another 3-5 percent.

Latin America

Primary energy demand in Latin America grew 2.3 percent a year over the past 20 years, reaching 18,130 petajoules in 1996.18 The region also contains several emerging economies that are increasing world energy demand. In 1997 Argentina, Brazil, Mexico, and Venezuela used 85 percent of the region’s primary energy (EIA, 1999b).

Industry. Four sectors (cement, iron and steel, chemicals, food and beverages) consume 60 percent of industrial energy in Latin America. Iron and steel alone account for 23 percent of industrial energy. Better management of blast furnaces, the injection of gases, and improved processes could reduce energy demand by 10-28 percent (Cavaliero, 1998). Machado and Shaeffer (1998) estimate potential electricity savings of 23 percent in Brazil’s iron and steel industry and 11-38 percent in its cement industry (table 6.11). The food and beverage industry and chemical industry have similar efficiency potential (Argentina Secretaria de Energa, 1997; Jannuzzi, 1998).

In Brazil’s industrial sector, electrical motors consume 51 percent of electricity, electrochemical processes 21 percent, electrothermal processes 20 percent, refrigeration 6 percent, and lighting 2 percent (Geller and others, 1997 and 1998). In Argentina nearly 75 percent of industrial electricity is used in motors (Dutt and Tanides, 1994) and in Chile it is 85 percent (Valdes-Arrieta, 1993). The Brazilian Electricity Conservation Agency estimates that savings of 8-15 percent are achievable in Brazilian industry based on cost-effective measures such as replacing oversized motors, improving transmission systems, replacing overloaded internal lines and transformers, correcting low power factors, and reducing excessive peak loads (box 6.8). Additional savings of 7-15 percent could be achieved by using efficient motors and variable speed drives; improving electrical furnaces, boilers, and electrolytic process efficiencies; and disseminating cogeneration in industry (Geller and others, 1998; Soares and Tabosa, 1996). Recycling the heat surplus or installing more efficient equipment could reduce by 10 percent the amount of electricity used in electric ovens. Similar savings for Argentina have been estimated by Dutt and Tanides (1994) and Argentina Secretaria de Energa (1997).

Low-energy houses need only
10-30 percent of the heat per
square metre that is used in the
average residential building
in West Germany.

The significant potential of combined heat and power is under-exploited in most Latin American countries. The potential is great in sectors such as paper and pulp, chemicals, and the alcohol-sugar industry, because they produce industrial residues that can be used to generate a surplus of electricity, which can then be sold to the common grid. Legislation establishing independent power producers is in place, but there are still problems in regulating buy-back rates, maintenance power, and wheeling between industry and electric utilities.

Residential. Annual energy use for cooking is estimated at 5.2 gigajoules per capita, nearly half of which is from firewood (data cover only Argentina, Brazil, Mexico, and Venezuela). The use of biomass (firewood and charcoal) is declining, however, and the use of liquefied petroleum gas and natural gas is on the rise. Because these fuels are more efficient, per capita energy consumption will be 20 percent lower by 2020. During 1990-95 per capita residential electricity use increased by 4-5 percent a year in Brazil and Mexico. Specific savings in electricity use by appliances range from 20-40 percent over the next 10-20 years for several Latin American countries (see table 6.11).

Commercial and public sectors. More efficient energy use in the commercial and public sectors can be achieved by introducing better boilers and maintenance practices as well as small cogeneration. Mexico is implementing building standards, which will accelerate improvements in energy use (Huang and others, 1998). For lighting, air conditioning, and refrigeration, the main electrical end uses, substantial efficiency improvements are possible for most Latin American countries (see table 6.11).

BOX 6.7. GREEN LIGHT PROGRAMME OF CHINA

China’s Green Light Programme is an energy conservation project supported by UNDP and organised and carried out by the State Economic and Trade Commission of China. The programme is designed to increase the use of lighting systems that are highly efficient, long-lasting, safe, and stable. The goal is to save electricity, reduce environmental pollution from power generation, and improve the quality of working and living. The programme has had several achievements:

· Electricity savings. During 1995-2000, 300 million compact fluorescent lamps, thin-tube fluorescent lamps, and other high-efficiency illumination products will save 22 terawatt-hours of electricity (as final energy).

· Reduced emissions. By 2000 sulphur dioxide emissions will be reduced by 200,000 tonnes and carbon dioxide emissions by 7.4 million tonnes.


· Establishing the market. By creating market-driven demand for high-efficiency lighting products, China will minimise spending for the associated gains. Close attention has been given to upgrading energy-efficient products by improving quality standards and certification.

TABLE 6.11. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN LATIN AMERICA, 2010 AND 2020

Sector and area

Economic potential (percent)

Country/ region

Energy price level assumed

Base year

Source


2010

2020





Industry







Electric motors and drives

15-30a,d

30

Mexico

0.06-0.09

1996

Mxico Secretaria de Energa, 1997; Argentina Secretaria de Energa, 1997; EIA, 1999a; Geller and others 1998; IIEC, 1995; Sheinbaum and Rodriguez, 1997

Refrigeration

27-42b

15-30c

Argentina

(elect)d

1997


Process heat

10-20

21-44

Brazil


1997





Chile

0.01-0.02
(fuels)b

1994


Iron and steel


23b (elect)

Brazil


1998

Machado and Shaeffer, 1998; Cavaliero 1998; Argentina Secretaria de Energa, 1997; EIA, 1999a; IIEC, 1995



28b (coke)



1994




15a







10d

Argentina
Chile




Cement


11-38b (elect)

Brazil


1998

Machado and Shaeffer, 1998; Sheinbaum and Ozawa, 1998

Food and beverage


20b

Brazil


1998

Jannuzzi, 1998; Argentina Secretaria de Energa, 1997; EIA, 1999a; IIEC, 1995



30a

Argentina


1998




6d (elect)

Chile


1994


Residential


20-40 (elect)

Mexico,


1996

Mxico Secretaria de Energa, 1997; Argentina Secretaria de Energa, 1997; EIA, 1999a; Machado and Shaeffer, 1998; Friedmann, 1994




Argentina


1997





Brazil


1998


Cooking


24

Latin America


1997

Author’s estimate

Electrical appliances

20-25

20-40

Mexico


1996

Mxico Secretaria de Energa, 1997; Geller and others 1998




Brazil


1997


Lighting

30-80


Brazil

0.03-0.13

1997

Jannuzzi, 1998; Argentina Secretaria de Energa, 1997; EIA, 1999a; Blanc and de Buen, 1994




Argentina

(fuels and electricity)b

1991


Refrigeration


35-50

Brazil
Argentina


1998

Machado and Shaeffer, 1998; Mxico Secretaria de Energa, 1997




Mexico


1996


Commercial and public

20-40 (elect.)


Mexico


1996

Mxico Secretaria de Energa, 1997;




Argentina
Chile


1997

Argentina Secretaria de Energa, 1997; EIA, 1999a; IIEC, 1995

Shopping centres


13-38 (elect.)

Brazil


1998

Machado and Shaeffer, 1998

Hotels


12-23

Brazil


1998

Machado and Shaeffer, 1998

Lighting

40


Mexico


1996

Mxico Secretaria de Energa, 1997; Jannuzzi and others, 1991; Bandala, 1995




Brazil


1990


Public lighting

21-44a


Argentina


1991

Argentina Secretaria de Energa, 1997; EIA, 1999a; IIEC, 1995


37d


Chile

0.05d



Transportation

25


Argentina


1998


Note: Data for Argentina refer to the estimated technical potential. Data for Chile are for 2020; for Brazil, 2020 or 2010, as indicated; for Argentina, 2010 or 1998, as indicated; and for Mexico, 2006. a. Argentina. b. Brazil. c. Mexico. d. Chile.

Transportation. About two-thirds of Latin America’s transport energy demand is concentrated in Brazil and Mexico, where road transport accounts for 90 percent of the sector’s energy consumption. Past improvements in the average specific energy consumption of passenger cars in Mexico (from 491 megajoules per 100 kilometres in 1975 to 423 megajoules in 1990) will likely continue at a similar rate (Sheinbaum, Meyers, and Sathaye, 1994). Mexico’s freight transport has seen efficiency improve from 2.47 megajoules per ton-kilometre in 1975 to 1.8 megajoules per ton-kilometre in 1988. Subway systems have not grown at the same rate as passenger demand for travel in Latin America’s major cities, the exception being Curitiba, Brazil. In Argentina the Energy Secretariat estimates that 12 petajoules of fuel can be saved each year in passenger and freight transportation (about 25 percent of the transport sector’s energy use in 1995; Argentina Secretaria de Energa, 1998f).

BOX 6.8. EFFORTS TO PROMOTE ENERGY USE BY THE BRAZILIAN ELECTRICITY CONSERVATION AGENCY

In the mid-1980s the Brazilian government established PROCEL, a national electricity conservation agency. The agency is responsible for funding and coordinating energy efficiency projects carried out by state and local utilities, state agencies, private companies, universities, and research institutes. It is also responsible for evaluating efficiency programs carried out by privatised utilities. PROCEL also helps utilities obtain low-interest financing for major energy efficiency projects. In 1998 PROCEL’s core budget for grants, staff, and consultants was about $20 million, with about $140 million a year going towards project financing.

PROCEL estimates that its activities saved 5.3 terawatt-hours of electricity in 1998, equivalent to 1.8 percent of Brazil’s electricity use. In addition, PROCEL took credit for 1.4 terawatt-hours of additional power production due to power plant improvements that year. The electricity savings and additional generation enabled utilities to avoid constructing about 1,560 megawatts of new capacity, meaning approximately $3.1 billion of avoided investments in new power plants and transmission and distribution facilities. The overall benefit-cost ratio for the utility sector was 12:1. About 33 percent of the savings in 1998 came from efficiency improvements in refrigerators, freezers, and air conditioners, 31 percent from more efficient lighting, 13 percent from installation of meters, 11 percent from motor projects, 8 percent from industrial programs, and 4 percent from other activities (Geller and others, 1998).

Africa

Africa has great potential for energy efficiency savings in industry, households, and transportation, which together account for more than 80 percent of the continent’s energy consumption (21 gigajoules per capita in 1996).19 When assessing the economic efficiency potentials in table 6.12, however, one has to keep in mind the enormous differences in development in Africa and the fact that the literature on this subject is scarce and often dated. South Africa and most North African countries are at more advanced stages of industrialisation and motorisation than the rest of the continent.

TABLE 6.12. ECONOMIC ENERGY EFFICIENCY POTENTIALS IN AFRICA, 2020

Sector and area

Economic potential (percent)

Country

Energy price level assumed

Base year

Source

Industry






Total industry

15

Zimbabwe


1990

TAU, 1991


about30

Zambia


1995

SADC, 1996


32

Ghana


1991

Davidson and Karekezi, 1991; Adegbulugbe, 1992a


25

Nigeria


1985

Davidson and Karekezi, 1991; SADC, 1997


>20

Sierra Leone


1991

Adegbulugbe, 1993


20

Mozambique




Iron and steel

7.2

Kenya



Nyoike, 1993

Cement

11.3

Kenya



Nyoike, 1993


15.4

Ghana


1988

Opam, 1992


9.8

Kenya



Nyoike, 1993

Aluminium (sec.)

44.8

Kenya



Nyoike, 1993

Refineries

6.3

Kenya



Nyoike, 1993

Inorganic chemicals

19.0

Kenya



Nyoike, 1993

Consumer goods

25

Kenya



Nyoike, 1993

Food

16-24

Mozambique


1993

SADC, 1997


1-30

Ghana


1988

Opam, 1992

Cogeneration

600 MW

Egypt


1998

Alnakeeb, 1998

Residential






Electric appliances

20-25

Mozambique

1993

1991

SADC, 1997


11

South Africa


1995

Energy Efficiency News, 1996

Commercial/public/agriculture






Electricity

20-25

Mozambique

1993

1995

SADC, 1997


up to 50

Egypt

1998

1998

Alnakeeb and others, 1998

Agriculture/ forestry

12.5

Tanzania (biopower)

1993

1993


Transportation






Cars, road system

30

Nigeria


1985

Adegbulugbe, 1992a

Total transport

30

Ethiopia


1995

Mengistu, 1995

BOX 6.9. ENERGY-EFFICIENT COOKING IN RURAL AFRICA

The Kenya Ceramic Jiko initiative is one of the most successful urban cookstove projects in Africa. The initiative promotes a charcoal-based cookstove with an energy efficiency of about 30 percent. The stove is made of local ceramic and metal components. Since the mid-1980s more than 500,000 of the stoves have been produced and distributed in Kenya. The stove is not a radical departure from the traditional all-metal stove. Rather, it is an incremental development. On the other hand, the stove requires that charcoal be produced and transported.

The improved stove is fabricated and distributed by the same people who manufacture and sell traditional stoves. From the beginning the stove initiative received no subsidies - a decision that had a tremendous impact on its development, encouraging private entrepreneurs to invest their capital and work hard to recover their investment. This drive to recover the original investment helped ensure self-sustained production, marketing, and commercialisation of the charcoal stoves. In addition, the lack of subsidy enhanced competition between producers, bringing down its market price to a more realistic and affordable level for Kenya’s low-income urban households. The stove design has been successfully replicated in Malawi, Rwanda, Senegal, Sudan, Tanzania, and Uganda.

Industry. Studies indicate that good housekeeping measures can save substantial amounts of energy in African industries (see table 6.12). Potential energy savings in national industries range from 15-32 percent by 2020. Results from energy audits in Nigeria (of two cement plants, one steel plant, and a furniture manufacturing plant) show potential savings of up to 25 percent. In 28 small- and medium-size industries in Zambia and Zimbabwe the potential savings are between 15 and 30 percent, in Kenyan industries about 25 percent, in nine industrial plants in Egypt about 23 percent, in Ghana 32 percent, and in Sierra Leone more than 20 percent. A more recent analysis carried out in industries in Mozambique indicates an economic electricity saving potential of 20 percent (SADC, 1997). Cogeneration also seems to have unexploited potential - in Egypt four industrial branches could save 600 megawatts by engaging in cogeneration (Alnakeeb, 1998).

Residential. The use of inefficient traditional three-stone fuelwood stoves for cooking, mainly in rural areas, results in considerable energy losses. The end-use efficiency of the stoves ranges from 12-18 percent. Promoting better biomass-cooking stoves and switching to modern fuels would greatly reduce the huge energy losses in this sector. Better cooking stoves could raise efficiency to 30-42 percent in Ghana, Kenya, and Uganda (box 6.9). In urban areas the focus should be on energy-efficient appliances, lighting, and other housekeeping measures for domestic appliances. In lighting a shift from kerosene to incandescent lamps, and from incandescent lamps to fluorescent and compact fluorescent lamps, would increase energy efficiency (see table 6.12).

Transportation. Road transport is the dominant mode in Africa. Nearly all vehicles are imported from overseas, often used cars and trucks. Potential savings are achievable by using roadworthy vehicles and changing policies. Vehicles tend to have low fuel efficiency. The average fuel efficiency in Nigeria is estimated to be about 18 litres of gasoline per 100 kilometres (Adegbulugbe, 1992a). Fuel efficiency is low because the vehicle fleet is old and poorly maintained, because of traffic congestion in most urban centres, and because of bad driving habits. Energy savings of 30 percent could be achieved in the road subsector by shifting from an energy-intensive transport mode to a less energy-intensive public transport system and by adopting traffic management schemes. In Ethiopia and Nigeria the demand for gasoline and diesel could be cut by 30 percent by emphasising public transportation over private automobiles (Adegbulugbe, 1992b; Mengistu, 1995).

The economic potential of energy efficiency - a systemic perspective

The preceding section covered only individual technology for energy conversion and use.20 But additional - and sometimes major - energy savings can be realised by looking at energy-using systems in a broader sense. Aspects of this systemic view include:

· Optimising the transport and distribution of energy. Commercial energy use is often highly decentralised, yet the energy is produced in central plants; examples include electricity and district heating networks.

· Optimising the location of energy users to avoid transporting goods or people.

· Optimising according the second law of thermodynamics by supplying the suitable form of energy, including heat at the needed temperature and pressure, or by exploiting opportunities for energy cascading.

These concepts are not new. But they are often neglected in the planning of cities and suburbs, industrial sites and areas, airports, power plants, and greenhouses.

Excellent examples of the systemic approach include not only technical systems but also innovations in joint planning and coordinated - or even joint - operation or financing of energy generating, distributing, or using systems (IEA, 1997a):

· A district heating system in Kryukovo, Russia, that supplies almost 10 petajoules of heat was to a large extent manually controlled and monitored. Automated control of substations, remote sensing, and control between substations and the operator working station resulted in savings of 20-25 percent.

· Organising urban mobility is a major challenge for all countries. In areas with rapidly growing populations, planning decisions on residential, industrial, and commercial areas do not adequately consider induced mobility demand and possible modes of transportation. Incentives for car sharing, park-and-ride systems, and parking influence the use of cars and public transportation. In developing countries a lack of capital for subways must not lead to disastrous traffic jams. A possible solution has been realised by the bus system in Curitiba, Brazil (IEA, 1997a, p. 103).

· The adequate use of the exergy of energy carriers is another systemic aspect of energy efficiency. Cogeneration takes many forms: combined gas and steam turbines, gas turbines instead of burners, engine-driven cogeneration, and fuel cells that can supply heat at the correct levels of temperature and pressure (Kashiwagi, 1999). Excess heat at low temperatures may be used in heat transformers, heat pumps, or adsorption cooling systems. Production processes with high-temperature heat demand can be located in industrial parks surrounded by production processes with lower-temperature heat that can be reused in greenhouses or fish ponds (Kashiwagi, 1995).

These systemic aspects have been investigated less intensively because such systems demand a lot of coordinated planning and action by several actors and institutions. They often also demand changes in legal frameworks and decision-making in companies and administrations. Additional risks have to be managed by new entrepreneurial solutions and insurance services. In many cases, however, the efficiency potentials if such systems may exceed the economic efficiency potentials of individual technologies.

Technical and theoretical potentials for rational energy use after 2020

Many energy economists expect energy demand to increase in industrialised countries, accompanied by a substantial shift to natural gas, nuclear power, and renewables to avoid climate changes caused by energy-related greenhouse gases (chapter 9).21 Explicitly or implicitly, those expectations assume that substantial cost-effective efficiency improvements will be exhausted within the next 20 years, contributing to new growth in energy demand after some 25 years of stagnation. But applied scientists and engineers have questioned the judgement that feasible improvements in energy efficiency are limited to 30-40 percent (Jochem, 1991; De Beer, 1998; ETSU, 1994; Blok and others, 1996; Kashiwagi and others, 1998). These authors argue that, depending on new technology and scientific knowledge, the long-term technical potential for rational energy use may even exceed 80 percent in the 21st century, driven by efforts to:

· Increase exergy efficiency (which today is less than 15 percent, even in industrialised countries) by exploiting the different temperatures of heat streams and using the adequate form of final energy or heat at the needed temperature level.

· Decrease the level of useful energy by reducing losses (for example, through insulation or heat recovery) and by substituting energy-intensive processes (such as membrane and absorption technologies instead of thermal separation, thin slab casting of steel instead of rolling steel sheets, new catalysts or enzymes, new bio-technical processes, and inductive electric processes instead of thermal surface treatment).

· Apply new materials (new compound plastics, foamed metals, nano-technology applications).

· Intensify recycling of energy-intensive materials (increased shares of recycled plastics, aluminium, or flat glass, which still have low recycling rates in most regions).

· Re-substitute wood, natural fibres, and natural raw materials for energy-intensive plastics (due to great potential for genetic manipulation of plants and substitution among energy-intensive materials; see box 6.1).

Catalysts, enzymes,
new materials, and new
processes will make possible the
substitution of many energy-
intensive processes.

Because of the unbalanced perception between the long-term potential for rational energy use and energy conversion and supply technologies (Jochem, 1991), the huge long-term potential for increasing energy efficiency at the end-use level will likely remain underestimated for some time. Indeed, given the enormous economies of scale in fast-growing national, regional, and global markets, the economic efficiency potentials cited above for 2010 and 2020 may be too small in many cases.

To use as many energy sources as possible, the concept of cascaded energy use must be introduced in the energy conversion and end-use sectors. Cascaded energy use involves fully harnessing the heat produced by fossil fuel combustion (from its initial 1,700°C down to near-ambient temperatures), with a thermal ‘down flow’ of heat analogous to the downward flow of water in a cascade (Kashiwagi, 1995; Shimazaki and others, 1997). Applications that exploit the full exergetic potential of energy in multiple stages (cascaded) are not common. To exploit the exergetic potential of industrial waste heat, energy transfers between the industrial and residential or commercial sectors are advisable. But low energy prices make it difficult to find economically attractive projects.

For refrigeration, air conditioning, and hot water supply, it is possible to meet most of the heat demand with low-exergy waste heat obtained as a by-product of high-temperature, high-grade primary energy use in heat engines or fuel cells, in a cascaded use of cogeneration. From a thermodynamic viewpoint it is appropriate to combine low-exergy heat sources, such as solar and waste heat, with systems requiring low-exergy heat, such as heating, cooling, and air conditioning.

The level of specific useful energy demand can be influenced by innumerable technological changes without reducing the energy services provided by energy use and without impairing comfort. A few examples demonstrate these almost unconverted possibilities:

· The quality of insulation and air-tightness determine the demand for useful energy in buildings, furnaces, refrigerators and freezers.

· Low-energy houses need only 10-30 percent of the heat per square metre that is used in the average residential building in West Germany (box 6.12). A cold-storage depot or a refrigerator could be operated by outdoor air in the winter in zones with moderate climate. A substantial part of industrial waste heat occurs at temperatures below 50oC. Water adsorption chillers provide a way to recover such heat sources and produce cooling energy (Saha and Kashiwagi, 1997), increasing energy efficiency.

· Catalysts, enzymes, new materials, and new processes will make possible the substitution of many energy-intensive processes. High energy demand to activate chemical reactions, with high-pressure and high-temperature processes, may be rendered unnecessary by new catalysts or biotechnological processes. Membrane processes will use only a small percentage of the useful energy needed today in thermal separation processes. The production of iron - which today involves energy-intensive sintering and coke-making - will be switched to the new coal metallurgy, with substantial energy savings. Over the long term, the energy-intensive rolling-mill operation of steel-making will be replaced by continuous thin slab casting or even spraying of steel sheets.

· New materials for cutting edges will improve surface quality, avoiding several machine operations. Lasers will reduce the specific energy demand of metal cutting, and inductive electric processes will save energy in thermal surface treatment. New compound plastics or foamed metals will induce less energy demand in manufacturing and (because of smaller specific weight and reduced losses due to inertia) be used in vehicles and moving parts of machines and engines.

Over the past century energy systems in industrialised countries saw efficiency increase by 1.0-1.5 percent a year. Looking at the theoretical and technical potential of future energy efficiency, a similar increase of 1.0-1.5 percent a year appears possible over the next century. Increases in efficiency will be steadily exhausted by implementing economic efficiency opportunities and steadily fed by implementing technical innovations and cost reductions for energy-efficient technology. This process can be understood as a constant economic efficiency potential of 25-30 percent over the next 20 years, similar to the observation at the energy supply side that the ratio of proven reserves to consumption of oil remains at 30-40 years due to continuous searching for new reserves and technical progress on prospecting, drilling, and production techniques.

Obstacles, market imperfections, and disincentives for efficient energy use

Energy efficiency improvements since the oil shock of 1973 may have done more to redesign energy markets than did changes in conventional energy supply systems.22 And as noted, such improvements still offer huge opportunities and can contribute to sustainable development in all regions. But given today’s levels of energy-related knowledge, decision-making, and power structures, there is much evidence that the great potential for rational energy use will be overlooked by many companies, administrations, and households or deemed purely theoretical or unfeasible.

Of course, it will not be easy to fully achieve economic efficiency potentials, the ‘fifth energy resource’. The technologies are decentralised and technologically very different, and increased efficiency is harder to measure than energy consumption. In addition, instead of a dozen large energy supply companies or a few engineering companies in a country, millions of energy consumers have to decide on their energy efficiency investments and organisational measures. The heterogeneity and diversity of energy consumers and manufacturers of energy-efficient equipment contribute to a low perception of the high potential of energy efficiency. Because of this variety and complexity, energy efficiency is not appealing for the media or for politicians (Jochem, 1991).

In theory, given all the benefits of energy efficiency at the micro-economic and macroeconomic levels, a perfect market would invest in, and allocate the rewards from, new energy-efficient technologies and strategies. But in practice, many obstacles and market imperfections prevent profitable energy efficiency from being fully realised (Jochem and Gruber, 1990; Hirst, 1991; IEA, 1997a; Gardner and Stern, 1996; Reddy, 1991). Although these obstacles and market imperfections are universal in principle, their importance differs among sectors, institutions, and regions.

General obstacles

Obstacles to end-use efficiency vary by country for many reasons, including technical education and training, entrepreneurial and household traditions, the availability of capital, and existing legislation. Market imperfections include the external costs of energy use (Hohmeyer, Ottinger, and Rennings, 1997) as well as subsidies, traditional legislation and rules, and traditions, motivations, and decision-making in households, companies, and administrations. Finally, an inherent obstacle is the fact that most energy efficiency investments remain invisible and do not contribute to politicians’ public image. The invisibility of energy efficiency measures (in contrast to photovoltaic or solar thermal collectors) and the difficulty of demonstrating and quantifying their impacts are also important. Aspects of social prestige influence the decisions on efficiency of private households - as when buying large cars (Sanstad and Howarth, 1994; Jochem, Sathaye, and Bouille, 2000).

OECD countries. Obstacles to and market imperfections for energy efficiency in end-use sectors have been observed in OECD countries for more than 20 years.23 While limited, empirical research on the barriers underscores the diversity of individual investors (with thousands of firms, hundreds of thousands of landlords, and millions of consumers in a single country).

Lack of knowledge, know-how, and technical skills and high transaction costs. Improved energy efficiency is brought about by new technology, organisational changes, and minor changes in a known product, process, or vehicle. This implies that investors and energy users are able to get to know and understand the perceived benefits of the technical efficiency improvement as well as evaluate possible risks. It also implies that investors and users have to be prepared to realise the improvement and to take time to absorb the new information and evaluate the innovation (OTA, 1993; Levine and others, 1995; Sioshansi, 1991). But most households and private car drivers, small and medium-size companies, and small public administrations do not have enough knowledge, technical skills, and market information about possibilities for energy savings. The construction industry and many medium-size investment firms face the same problem as small companies on the user’s side. Managers, preoccupied with routine business, can only engage themselves in the most immediately important tasks (Velthuijsen, 1995; Ramesohl, 1999). Because energy efficiency reduces a small share of the energy costs of total production or household costs, it gets placed on the back burner.

Lack of access to capital and historically or socially formed investment patterns. The same energy consumers, even if they gain knowledge, often have trouble raising funds for energy efficiency investments. Their capital may be limited, and addi-tional credit may be expensive. Especially when interest rates are high, households and small firms tend to prefer to accept higher current costs and the risk of rising energy prices instead of taking a postponed energy credit (DeCanio, 1993; Gruber and Brand, 1991).

Disparity of profitability expectations of energy supply and demand. The lack of knowledge about energy efficiency among small energy consumers raises their perceptions of risk, so energy consumers and suppliers expect different rates of return on investments (Hassett and Metcalf, 1993). Energy supply companies in countries with monopolistic energy market structures are willing to accept nominal internal rates of return of 8-15 percent (after tax) for major supply projects (IEA, 1987). But for efficiency investments, energy consumers demand - explicitly or without calculating - payback periods between one and five years, which are equivalent to a nominal internal rate of return of 15-50 percent (DeCanio, 1993; Gruber and Brand, 1991). This disparity in rate of return expectations also seems to apply to international loans, putting energy efficiency investments in developing countries at a disadvantage (Levine and others, 1995).

The impact of grid-based price structures on efficient energy use. Grid-based forms of energy play a dominant role in OECD countries. The structure of gas, electricity, and district heat tariffs for small consumers and the level of the load-independent energy charge are important for energy conservation. Tariff structures are designed in two parts to reflect two services - the potential to obtain a certain amount of capacity at any given time, and the delivered energy. The capacity charge plays an important role in profitability calculations for investments where efficiency improvements do not reduce capacity demand, such as inverters on electric engines or control techniques in gas or district heating (IEA, 1991). In addition, in most OECD countries utilities still do not offer time-of-use or seasonal rates to small consumers, which would reward them for using energy during off-peak hours. This, however, may change in fully liberalised electricity and gas markets.

Legal and administrative obstacles. There are legal and administrative obstacles in almost all end-use sectors. They are mostly country specific, and often date back to before 1973, when energy prices were low and declining in real terms and there was no threat of global warming. For most local government authorities the budgeting format is an ‘annual budgeting fixation’, which means that they cannot transfer funds from the recurrent to the investment budget. With a lot of other urgent needs calling for capital investment, energy efficiency measures are given low priority. The poor perception of public goods adds to the obstacles confronting energy efficiency in developing and transition economies (see below).

Other market barriers. The investor-user dilemma points to the fact that for rented dwellings or leased buildings, machines, or vehicles, there are few incentives for renters to invest in property that they do not own. Similarly, landlords, builders, and owners have few incentives to invest because of the uncertainty of recovering their investment through higher rent (Fisher and Rothkopf, 1989; Golove, 1994). Finally, the quality of delivered energy (as with unstable frequencies or voltages of electricity or impurities in gasoline or diesel) may pose a severe barrier for effi-ciency investments (electronic control or high efficiency motors).

Because energy efficiency
reduces a small share of the
energy costs of total production or
household costs, it gets placed
on the back burner.

Additional barriers in transition economies.24 Transition economies did not experience the sharp increase in world energy prices in the 1970s. As a result opportunities for more efficient energy use were scarcely realised in these countries. Most transition economies suffer from all the barriers described above for OECD countries, as well as from additional market problems stemming from the legacy of central planning. The deep economic and structural crisis during the early years of transition shifted the investment priorities of industrial and commercial companies to short-term decisions, helping them to survive. Technological innovations that increase energy efficiency are hardly considered a priority in many transition economies (Borisova and others, 1997). There are, however, substantial differences among most Eastern European countries and members of the Commonwealth of Independent States.

Unpaid energy bills. The economic crisis in transition economies created special obstacles to investing in energy efficiency, including non-payments and non-monetary payments (barter, promissory notes, and other surrogates by energy consumers, mutual debt clearing between companies). In Georgia less than 30 percent of residential electricity rates were paid in 1994; industrial payments fell to 16 percent, and 25-50 percent of the electricity supply was not accounted or billed (World Bank, 1996; TACIS, 1996). In Russia about 25 percent of generated electricity was not paid for by customers in 1995-97 (BEA, 1998). Industrial and commercial customers covered up to 80 percent of their energy bills using non-monetary and surrogate means (Russian Federation Ministry of Fuel and Energy, 1998). The use of barter is contributing to the neglect of potential reductions in energy costs through efficiency measures. Experience in Eastern Europe, however, demonstrates that cutting customers off from the electricity or gas supply persuades them to pay (box 6.10).

BOX 6.10. THE IMPLICATIONS OF TERMINATING ELECTRICITY SUBSIDIES IN HUNGARY

Raising energy prices to cost-covering levels can produce miracles. Until 1997 Hungary spent $5-10 million a year on energy efficiency improvements. In January 1997 energy prices were raised to market-based levels - and in just two years, investments in energy efficiency jumped to $80 million a year. The usual argument against correct energy pricing, that consumers cannot pay the bills, is not proven in Hungary. Just 10 percent of the national energy bill remained unpaid, and that just partly. True, retirees with low incomes have difficulties. But they are not the big consumers with high bills. The problem is a social problem, and has been solved by special payment schemes in the social policy framework of local and national budgets.

Barriers to energy metering. Many energy customers in transition economies are still not equipped with meters and controllers or have simplistic, outdated meters. In particular, residential customers in the Commonwealth of Independent States often have no meters to measure the use of natural gas, heat, and hot water, reflecting a long-held view that heat and fuel are public goods. According to the Russian Federation Ministry of Fuel and Energy (1998), only about 10 percent of heat customers (and no more than 15 percent of hot water and natural gas customers) are equipped with meters. Since 1994, however, significant efforts have been made to manufacture modern meters and controllers and to develop related services (certification, maintenance, and verification) (Minfopenergo, 1996). Meters are far more common in Eastern Europe, because since the 1980s these countries have had to import needed energies in exchange for hard currency.

Lack of cost-based tariffs for grid-based energies. Natural gas, electricity, heat, and hot water are supplied to users in the Commonwealth of Independent States and some Eastern European countries by regional or local energy monopolies with government participation and municipal distribution companies. Energy tariffs are still set by federal and regional energy commissions in most of the Commonwealth of Independent States. In Russia a large portion of customers are subsidised; fuels are of poor quality, expensive, or both; resellers charge excessive costs and receive large profits; detailed information is lacking on the production costs of suppliers; and the decisions of regional commissions do not sufficiently reflect cost considerations, but depend on the political priorities of the local authorities (Vasiliev and others, 1998).

Subsidies. In all Commonwealth of Independent States countries and a few Eastern European countries the grid-based energy supply of residential and agricultural customers is still subsidised. Subsidies are driven by traditional concepts of public goods or social policy. In addition, some groups (war veterans, low income families) pay discounted residential tariffs. In Ukraine the government paid 20 percent of the cost of natural gas for residential customers in 1996 (Gnedoy, 1998). Russian municipalities spend 25-45 percent of their budgets on residential heat subsidies, covering more than half of heat bills (Bashmakov, 1997a).

Subsidised energy prices reduce the economic attractiveness of energy efficiency measures. Cross-subsidies for electric power in the Commonwealth of Independent States distort price signals between groups of customers. For instance, cross-subsidies for residential electricity account for 20-60 percent of prices for industrial customers in different regions of Russia (Moloduik, 1997; Kretinina, Nekrasov, and Voronina, 1998). In principle, this price structure would lead to large investments in efficiency in Russian industry. But non-payment of energy bills prevents that from happening. The case for abolishing electricity subsidies in most Eastern European countries demonstrates that the social aspects of such a pricing policy can be addressed by social policy at the municipality level (see box 6.10).

Subsidised energy
prices reduce the economic
attractiveness of energy
efficiency measures.

Additional barriers in developing countries. The general obstacles to efficient energy use are sometimes more intense in developing countries than in OECD or transition economies.25 But there are similarities between subsidies and pricing policies in developing and transition economies. The situation in developing countries may be more complex given the big differences in energy use, income, development, and infrastructure between urban and rural areas in India, China, Latin America, and Africa.

Lack of awareness of potential benefits. The limited awareness of the potential for energy efficiency is the most important obstacle to wide-scale adoption of energy efficiency measures and technologies in developing countries. Limited awareness is a by-product of inadequate information infrastructure to raise awareness of the potential for energy efficiency and of available technologies and proven practices. The media used to raise awareness in most developing countries limit the audience. Awareness campaigns rely on radio, television, and newspapers, which most rural populations - the majority of the population in developing countries - do not have access to. In addition, managers in industry do not have timely information on available efficiency technology (Reddy, 1991), and many producers of end-use equipment are unacquainted with energy-efficient technology and related knowledge.

Many developing countries still lack an effective energy efficiency policy at the national level. Energy supply policies are preferred in most developing countries because of the focus on development policies. This pattern may also be due to the fact that grid-based energy supplies are often owned by national or local governments, a pattern that supports rigid hierarchical structures and closed networks of decision-makers.

Energy supply constraints. In some developing countries, energy supply constraints provide no alternative fuel and technology options for consumers. The limited availability of commercial fuels (petroleum products, electricity) in rural areas impedes switching to more energy-efficient stoves, dryers, and other technologies, posing a major challenge for energy policy (see chapter 10).

Inappropriate energy pricing and cross-subsidies. Energy prices are still below marginal opportunity costs in many developing countries, reflecting the desire of governments to use energy supply to achieve political objectives. Successive governments have upheld energy subsidies over decades, making it politically difficult to raise energy prices to the level of marginal opportunity costs (box 6.11; Nadel, Kothari, and Gopinath, 1991).

Lack of trained staff, operators, and maintenance workers. Insufficient energy workers are an important constraint to the investment and operation of buildings, machines, plants, and transport systems (Suzuki, Ueta, and Mori, 1996).

Lack of capital and import of inefficient used plants and vehicles. Many energy efficiency measures are delayed by a lack of financing. The availability of credit at high interest rates tends to make energy efficiency investments a low priority. In many developing countries there is also a conflict among investment priorities. Growing economies generally favour investments in additional capacity over investments in energy efficiency. This tendency and lack of capital lead to imports of used plants, machinery, and vehicles, aggravating the problem (see the section on technology transfer, above).

Proliferation of inefficient equipment and the desire to minimise initial costs. In the absence of energy labelling schemes and of standards for energy efficiency, energy-inefficient products continue to be manufactured and marketed. Examples include diesel-fuelled irrigation pumps, motors, and transformers. Many users focus on minimising initial costs, with little regard for operating efficiency and life-cycle costs. Thus they tend to opt for cheaper, locally manufactured, inefficient equipment.

Target group-specific and technology-specific obstacles

Many target group-specific and technology-specific obstacles also impede investments in energy efficiency.26

Buildings. Lack of information and knowledge is a problem not only among building owners, tenants, and users in industrialised countries, but also among architects, consulting engineers, and installers (IEA, 1997a; Enqute Commission, 1991). These groups have a remarkable influence on the investment decisions of builders, small and medium-size companies, and public authorities. The separation of spending and benefits (or the landlord-tenant dilemma) is common in rented buildings because the owner of a building is not the same as the user (IEA, 1991). This obstacle impedes the adoption of efficient space heating, air conditioning, ventilation, cooling, and lighting equipment in leased buildings and appliances. It is also a problem in the public sector, where schools, sports halls, hospitals, and leased office buildings may have a variety of owners - or where local governments operate and use buildings owned by state or federal governments. Building managers are often not sufficiently trained and do not receive adequate incentives for excellent performance. Planners and architects are often reimbursed based on the total investment cost, not the projected life-cycle cost of the planned building or equipment.

BOX 6.11. DISTORTED ENERGY PRICES RESULT IN BIG LOSSES FOR INDIAN SUPPLIERS

Distorted energy prices are a major obstacle to energy efficiency. In India electricity tariffs vary considerably between states and types of users. The average cost of supply for the country’s electricity boards is $0.049 a kilowatt-hour - yet revenue collection averages just $0.037 a kilowatt-hour. Utility losses are mounting and were reported to be $1.49 billion in 1994/95 (GOI, 1995). High commercial losses are mainly caused by the irrational tariff structure, which provides large subsidies to agricultural and domestic uses (see table).

Electricity tariffs in Indian states, 1998 (U.S. cents per kilowatt-hour)

State electricity board

User


Domestic

Commercial

Agriculture/ irrigation

Industry

Rail transport

Exports to other states

Average

Haryana

4.7

7.5

1.2

7.5

7.5

3.2

5.3

Himachal Pradesh

1.6

4

1.4

3.5

n.a.

3.5

2.8

Jammu, Kashmir

0.7

1.2

0.2

0.9

n.a.

n.a.

0.8

Kerala

1.4

4.6

0.5

2.4

n.a.

n.a.

2.2

Madhya, Pradesh

1.7

7.3

0.1

7.4

11.8

2.1

5.1

West Bengal

1.9

4.7

0.6

5.9

6.7

n.a.

3.3

Average

2.9

6.7

0.5

6.9

8.5

2.9

4.1

n.a. Not available.
Source: Ministry of Power, Government of India (http://powermin.nic.in/plc72.htm).

In many developing countries building design has been imitated from industrialised countries regardless of different climates, domestic construction materials, and construction traditions. This approach often results in an extremely energy-consuming design for cooling equipment in office buildings in warm developing countries. Houses in higher-income developing countries are often built by the affluent with a view to projecting prestige rather than reflecting economic concerns. Such buildings are generally devoid of energy efficiency aspects. Lack of information on energy-efficient architecture also undermines energy-efficient building standards and regulations. And in countries where such standards and regulations exist, non-compliance is a constraint.

Household appliances and office automation. Residential consumers in industrialised countries substantially underinvest in energy-efficient appliances or require returns of 20 to more than 50 percent to make such investments (Sioshansi, 1991; Lovins and Hennicke, 1999). Related obstacles include a lack of life-cycle costing in a culture of convenience, longstanding ties to certain manufacturers, aspects of prestige, and the investor-user dilemma in the case of rented apartments or office equipment.

Low incomes make it difficult for households in developing countries to switch from lower efficiency to higher efficiency (but more expensive) devices (improved biomass cook stoves, and liquefied petroleum gas and kerosene stoves). Similarly, fluorescent and compact fluorescent lamps are often not bought due to the lack of life-cycle costing by households.

Small and medium-size companies and public administration. In most small and medium-sized companies, all investments except infrastructure are decided according to payback periods instead of internal interest rate calculations. If the lifespan of energy-saving investments (such as a new condensing boiler or a heat exchanger) is longer than that of existing production plants and machinery and if the payback period is expected to be even for both investments, entrepreneurs expect (consciously or unconsciously) higher profits from energy-saving investments (table 6.13).

Lack of funds is a severe constraint for small and medium-size local governments in many countries. Many communities with high unemployment are highly indebted. Making matters worse, municipalities often receive a significant share of their annual budgets through some kind of tax or surcharge on electricity, gas, or district heat sales to their residents, lowering the enthusiasm of local politicians for promoting energy conservation. Finally, in public budget planning, budgets for operating costs are often separate from budgets for investment. Thus possible savings in the operating budget from energy efficiency investments are often not adequately considered in the investment budget.

For small and medium-sized enterprises and communities, installing new energy-efficient equipment is far more difficult than simply paying for energy (Reddy, 1991). Many firms (especially with the current shift towards lean firms) suffer from a shortage of trained technical staff (OTA, 1993) because most personnel are busy maintaining production. In the Netherlands a lack of available personnel was considered a barrier to investing in energy-efficient equipment by one-third of surveyed firms (Velthuijsen, 1995).

Insufficient maintenance of energy-converting systems and related control equipment causes substantial energy losses. Outsiders (external consultants, utilities) are not always welcome, especially if proprietary processes are involved (OTA, 1993). Many companies cannot evaluate the risks connected with new equipment or control techniques in terms of their possible effects on product quality, process reliability, maintenance needs, or performance (OTA, 1993). Thus firms are less likely to invest in new, commercially unproven technology. An aversion to perceived risks is an especially powerful barrier in small and medium-size enterprises (Yakowitz and Hanmer, 1993).

In transition economies small companies and local authorities may not be able to afford an energy manager.

In developing countries lack of information and technical skills is an enormous problem for small and medium-sized firms, because such firms often account for a large portion of the economy. In addition, the possible disruption of production is perceived as a barrier to investments in energy efficiency. Although such an investment may be economically attractive, unexpected changes in production increase the risk that the investment will not be fully depreciated.

TABLE 6.13 PAYBACK CALCULATIONS AS A RISK INDICATOR LEAD TO UNDER-INVESTMENT IN PROFITABLE, LONG-LASTING ENERGY EFFICIENCY INVESTMENTS


Useful life of plant (years)


3

4

5

6

7

10

12

15

Payback

2

24%

35%

41%

45%

47%

49%

49.5%

50%

time

3

0%

13%

20%

25%

27%

31%

32%

33%

requirement

4


0%

8%

13%

17%

22%

23%

24%

(years)

5



0%

6%

10%

16%

17%

18.5%


6




0%

4%

10.5%

12.5%

14.5%


8

Unprofitable




4.5%

7%

9%

Note: Percentages are annual internal rates of return. Continuous energy saving is assumed over the entire useful life of the plant. Profitable investment possibilities are eliminated by a four-year payback time requirement.

Large enterprises and public administrations. Mechanisms are often lacking to acknowledge energy savings by local administrations, public or private. Public procurement is generally not carried out on the basis of life-cycle cost analysis. Instead, the cheapest bidder gets the contract - and as long as the offered investment meets the project’s specifications for energy use, it need not be energy efficient. The industrial sector, where managers are motivated to minimise costs, poses the fewest barriers to energy-efficient investment (Golove, 1994). But DeCanio (1993) shows that firms typically establish internal hurdle rates for energy efficiency investments that are higher than the cost of capital to the firm. This fact reflects the low priority that top managers place on increasing profits by raising energy productivity.

Developing countries often lack sufficient human resources to implement energy efficiency projects and to adequately operate and service them. Thus, even when firms recognise the potential of energy efficiency and want to harness the benefits of energy efficiency measures, they are often hampered by a dearth of skilled staff and consultants and by a lack of competent energy service companies. Capital constrains also impede rational energy use in these countries. Furthermore, low capacity use (sometimes as low as 30 percent; World Bank, 1989) affects efficient energy use by industry. Low capacity use is caused by many factors, including poor maintenance, lack of spare parts and raw materials, and unsuitable scale and design of plants.

These factors are often complicated by the risk-averse management of big firms. This attitude usually stems from resistance to change, limited knowledge on the technical and economic analysis of energy efficiency technology, and a paucity of data on the experiences of previous users of such measures or technology.

Transportation. The transport policies of most countries rarely view transportation as an energy issue. Rather, transportation is considered a driver of economic growth with the development of infrastructure for moving goods and people. This policy is strongly supported by associations of car drivers, the road transport and aviation industries, and vehicle manufacturers. Most countries have no fuel efficiency standards for new vehicles; the exceptions are for cars as in Canada, Japan, and the United States (Bradbrook, 1997) and a recent voluntary agreement among Western European car manufacturers to improve fuel efficiency by 25 percent between 1995 and 2008. In nearly all countries, cars owned by companies or public authorities are often inappropriately powered. Bad driving habits, especially of government- and company-owned vehicles, also impede the rational use of energy in road transportation.

The benefits of fuel efficiency standards are evident from the success of mandatory Corporate Average Fuel Economy (CAFE) standards being introduced in North America (though the standards do not apply to light vehicles). Many voters in OECD countries consider driving a car to be an expression of individual freedom. As a result most drivers and politicians do not pay much attention to fuel efficiency.

The weak finances of local and national governments in transition economies make it difficult to introduce modern public transport systems or to upgrade existing ones. The limited financial resources of households and small companies are the main reason for heavy imports of used cars from Western Europe and Japan.

In developing countries road transportation increases mobility without the huge public upfront investment needed for railways, subways, and trams. Thus one major obstacle to improved energy efficiency is the limited number of alternative transport modes. In many developing countries vehicles are either assembled or imported. Economic problems and devaluations of local currencies have driven up vehicle prices. As a result many people and small firms cannot afford new vehicles, so a lot of car buyers opt for imported used vehicles that have been used for several years in the country of origin. Similar problems are being encountered with the pricing of spare parts. In addition, most developing countries lack regulation on regular car inspections. Together these problems have resulted in poor vehicle maintenance that has exacerbated energy inefficiency.

The Intergovernmental Panel on Climate Change report on aviation (IPCC, 1999a) projects a 20 percent improvement in fuel efficiency by 2015 and a 40 percent improvement by 2050 relative to aircraft produced today. Improvements in air traffic management would reduce fuel demand by another 8-18 percent. Environmental levies and emissions trading can help realise these improvements by encouraging technological innovation and reducing the growth in demand for air travel.

Agriculture. Agriculture is the main beneficiary of subsidised electricity in developing countries. In some cases electricity is even provided to agricultural consumers free of charge. One major fallout of this approach is the phenomenal growth in electricity consumption by this sector. In the 1980s agriculture consumed 18 percent of India’s electricity; by 1994 it consumed 30 percent (CMIE, 1996). Even after accounting for the additional pump sets installed during this period, extremely low electricity prices are one of the main reasons for the increase in the sector’s energy intensity.

Cogeneration. Cogeneration has considerable potential in industrial sites and district heating systems. Yet the monopolistic structure of the electricity sector in many countries has led to high prices for maintenance and peak power, rather low buyback rates and costly technical standards for grid connection, and to dumping prices in the case of planning new cogeneration capacity (VDEW, 1997). As a result many auto producers restrict the capacity of the cogeneration plant to their minimum electricity and heat needs, although they may wish to produce more heat by cogeneration. This situation is changing now in countries (such as France) with liberalised electricity markets and regulated or competitive buyback rates.

In Central and Eastern Europe centralised district heating remains a widespread solution for heating big housing estates. The economics of centralising the heat supply of a certain area is regarded not as a question of profitability, but a historical fact. But inadequate pricing, inefficient operation, mismanagement, and lack of full use of cogeneration potential are encouraging heat consumers to disconnect from the district heating grid. The easy availability of natural gas, existence of small and medium-size cogeneration units (namely, gas engines and gas turbines), and desire for independence also encourage consumers to disconnect. This tends to make the heat demand density leaner, driving the system in a negative spiral that may end in the economic collapse of many district heating enterprises in transition economies.

Low incomes make it difficult for
households in developing countries
to switch from lower efficiency
to higher efficiency (but more
expensive) devices.

The potential for industrial cogeneration is estimated at 20-25 percent of industrial and commercial electricity demand in several developing countries (TERI, 1994; Alnakeeb, 1998). India’s sugar industry, for instance, generates 3,500 megawatts of bagasse-based cogenerated power. But the full potential of industrial cogeneration in China, India, and Latin America has yet to be realised because of slow progress on power buyback arrangements and the wheeling and banking of cogenerated power by state electricity boards. Although institutional barriers are considered the main obstacle in this regard, limited indigenous capacity to manufacture high-pressure boilers and turbines is also an important barrier, as hard currency is scarce in developing countries (TERI, 1994).

For every obstacle and market imperfection discussed in this section, there are interrelated measures of energy efficiency policy that could remove or reduce them (figure 6.5). But the choice of which policies to pursue must be made with care, because their effectiveness depends on many regional, cultural, and societal circumstances and on the different weights of the obstacles in different regions.

National and international policies to exploit the economic potential of energy efficiency in end-use sectors

Despite the clear warnings of the scientific community (IPCC, 1995) and the commitments made under the Kyoto Protocol, and despite possible reductions in energy costs and the benefits of energy efficiency for employment and economic development (see box 6.3), many scientists and non-governmental organisations (NGOs) feel that “policy makers are still doing too little to use energy efficiency potentials in order to safeguard their citizens and their future” (Lovins and Hennicke, 1999, pp. 7-10; Phylipsen, Blok, and Hendriks, 1999; further citations).27 These authors ask for more activity in policy areas such as energy efficiency, transportation, and renewables.

Over the past 25 years individual and ad hoc policy measures - such as information, training, grants, or energy taxes - have often produced limited results (Dasgupta, 1999). But integrated energy demand policies - which consider simultaneous obstacles and the interdependence of regulations, consultations, training programmes, and financial incentives - and long-lasting programmes have been relatively successful. Energy demand policy is not only initiated by governments. Companies, utilities, industrial associations, and NGOs may also play an important part.

An integrated energy, transportation, financial, and economic policy is one of the main opportunities for realising the huge economic energy saving potentials not only of individual parts and technologies, but also of a country’s energy-using systems. There is a strong need to formulate a long-term strategy that promotes energy efficiency improvements in all sectors of the economy and that takes into account general obstacles, market imperfections, and target group-specific barriers. This section presents the policy initiatives to be taken in different end-use sectors in a linear manner, but such initiatives have to be implemented together to contribute to sustainable development (see figure 6.5). These policies include general policy instruments such as energy taxes, direct tax credits, emissions trading, a general energy conservation law, general education on energy issues in schools, and research and development (see chapter 11). In some cases international cooperation by governments and industrial associations may play an important supporting role.

General policy measures

General policies to promote energy efficiency try to overcome general obstacles and market imperfections. They may also be implemented in the context of broader economic issues, such as shifting the tax burden from labour to non-renewable resources through an ecotax at the national or multinational level (see chapter 11). Or new regulation may be needed to limit the ambiguous impacts of liberalised electricity and gas markets in their transition phase.


FIGURE 6.5. OBSTACLES AND MARKET IMPERFECTIONS FOR ENERGY EFFICIENCY AND RELATED POLICIES: A SCHEME FOR POLICY OPTIONS AND INTEGRATED EFFICIENCY POLICY

The acceptance of such policy measures differs by country and varies over time depending on how much an energy policy objective is violated or in question. Energy efficiency policy was widely accepted in OECD countries in the 1970s and early 1980s, when dependence on oil imports from OPEC countries was high and higher fuel prices had changed cost structures and weakened competitiveness in energy-intensive industries. With declining world energy prices between 1986 and 1999, reduced dependence on energy imports in many OECD countries, and stagnating negotiations on the implementation of the Kyoto Protocol, public interest in energy efficiency policy has fallen in many OECD countries.

By contrast, energy efficiency receives considerable attention from governments, industries, and households in Eastern European countries, in some Commonwealth of Independent States countries without indigenous energy resources, and in many emerging economies facing problems with sufficient and reliable supplies of commercial energy.

Energy conservation laws have been passed in many countries (Australia, Canada, China, Finland, Germany, Japan, Russia, Switzerland, the United States) or are in the process of being passed (India). Such laws are important for establishing a legal framework for sector regulation (building codes, labelling, technical standards for equipment and appliances) and for implementing other measures (energy agencies, financial funds for economic incentives or public procurement). In many countries with federal structures, however, much of the legislative power to enact energy conservation laws rests with individual states - posing problems for compliance and joint action.

Education on energy efficiency issues in primary or secondary schools, along with professional training, raises consciousness and basic knowledge about the efficient use of energy and the most recent technologies.

Direct subsidies and tax credits were often used to promote energy efficiency in the past. Direct subsidies often suffer from a free-rider effect when they are used for investments that would have been made anyway. Although it is difficult to evaluate this effect, in Western Europe 50-80 percent of direct subsidies are estimated to go to free riders (Farla and Blok, 1995). Low-interest loans for energy efficiency projects appear to be a more effective subsidy, although they may have a distribution effect.

Energy service companies are a promising entrepreneurial development, as they simultaneously overcome several obstacles by providing professional engineering, operational, managerial, and financial expertise, along with financial resources. Such companies either get paid a fee based on achieved savings or sign a contract to provide defined energy services such as heating, cooling, illumination, delivery of compressed air, or hot water.

Energy demand policy is not only
initiated by governments. Companies,
utilities, industrial associations,
and NGOs may also play
an important part.

Transition economies. From a policy perspective, efficient energy use creates enormous opportunities in light of huge reinvestments in industry and infrastructure and large new investments in buildings, vehicles, and appliances. In the Commonwealth of Independent States and Eastern Europe increased energy efficiency was made a top political priority in the early and mid-1990s - as with Russia’s 1994 National Energy Strategy (IEA, 1995). But according to the Russian Federation Ministry of Fuel and Energy (1998), government support for such activities was less than 8 percent of the planned funding in 1993-97.

Transition economies that were relatively open under central planning (defined as those for whom foreign trade accounted for more than 30 percent of GDP) have had an easier time adjusting to world markets. Multinational companies from Western Europe and other OECD countries maintain their technical standards when building new factories in transition economies. In addition, Eastern European countries are trying to approach (and later, to meet) Western European technical standards as part of their eventual accession to the European Union (Krawczynski and Michna, 1996; Michna, 1994).

Energy efficiency policies developed differently according to the speed of transition and economic growth in these countries. Some elements of efficiency programmes have been quite successful despite economic difficulties: laws, energy agencies, energy auditing of federal buildings. In most transition economies the first energy service companies were established with the support of international institutions. Some industrial enterprises established internal energy monitoring and control, reinforced by incentives and sanctions for particular shops and their management. The results of such activities differed considerably among transition economies, reflecting levels of organisation, human and financial capital, trade experience, foreign investment, energy subsidies, and other factors.

Developing countries. The phasing out of substantial energy subsidies can often be complemented by capacity building, professional training, and design assistance. Utilities in Mexico and Brazil, for example, have been active in demand-side management programmes with cost-benefit ratios of more than 10 to 1 (Dutt and others, 1996). Given the shortage of capital in many developing countries, financial incentives seem to have a large impact on energy efficiency (unlike in OECD countries). An example is China in the 1980s, where such incentives contributed to the remarkable decline in China’s industrial energy intensity (Sinton and Levine, 1994).

Sector- and technology-specific policy measures

Given the many obstacles that keep economic energy-saving potential from being realised on a sectoral or technological level, any actor will look for a single instrument that can alleviate all obstacles. For mass products, performance standards are considered an efficient instrument because they can be developed after discussions with scientists, engineers, and industrial associations, manufacturers, and importers. Standards and labelling avoid the need for information, high transaction costs, and dissemination to, consultations with, and training of millions of households, car drivers, and small and medium-size companies (Natural Resources Canada, 1998).

BOX 6.12. THE MULTIMEASURE CHARACTER OF NATIONAL ENERGY EFFICIENCY POLICY - A 20-YEAR LEARNING CURVE FOR MULTIFAMILY BUILDINGS IN WEST GERMANY

After the oil shocks of the 1970s, German professional organisations made recommendations for new building standards. In addition, the federal government enacted an ordinance for boiler efficiencies to accelerate the replacement of old boilers by new, more efficient ones. Building codes and boiler standards have since been tightened three times, and regulations on individual heat metering were introduced in the early 1980s. Research and development enabled the new standards to be met. Twenty-five years later, the results are convincing. New buildings are 50-70 percent more efficient, and retrofits have cut energy consumption by 50 percent in Germany (and by at least 30 percent in most Western European countries).


Interrelation between research to lower costs, proof of technical feasibility, and heating and insulation regulation in Germany

Source: EC, 1999b.

But no single, highly efficient instrument will be available in all cases (as with the refurbishing of buildings or efficiency improvements in industrial plants). In these cases a package of policy measures has to be implemented to alleviate obstacles (see figure 6.5).

Buildings. There seems to be an intellectual barrier between planners and architects for buildings in cold and warm climates, although building codes may offer huge efficiency potential in most countries. Jochem and Hohmeyer (1992) conclude that if comprehensive policy strategies are implemented, governments will discover that the economics of end-use efficiency are far more attractive than is currently believed. A good example is the refurbishing of residential buildings. Homes and apartment buildings consume about 20 percent of final energy in many countries. Refurbishing a building may be primarily an individual event, but its effectiveness depends on such political and social remedies as:

· Advanced education and training of architects, planners, installers, and builders, as carried out in the Swiss ‘impulse programme’, which has had outstanding results since 1978.

· Information and education for landlords and home owners (particularly on the substitution of energy costs for capital costs).

· Training professional advisers to perform audits and provide practical recommendations. These audits should be subsidised; otherwise they may be considered too costly by landlords or home owners. Such subsidies have proven cost-effective.

· Investment subsidies tied to a registered energy consultant and a formal heat survey report and minimum energy efficiency level.

· Investment subsidies for specific groups of home owners or multifamily buildings to overcome financial bottlenecks or risks of the investor-user dilemma. The cost-effectiveness of such subsidies has often been overestimated, however.

· Economically justified insulation and window design secured by new building codes that also cover the refurbishing of buildings.

· Research and development to improve building design (low-energy houses, passive solar buildings), insulation material, or windows, or to reduce construction costs.

Energy-saving programs in Denmark, Finland, Germany, Sweden, and Switzerland owe much of their success to this multimeasure approach, which is increasingly being adopted by other countries (box 6.12). The combination of measures has increased capacity in the construction sectors of those countries. Energy labelling for buildings has been introduced in a few OECD countries and is being considered in several others (Bradbrook, 1991). Such labelling provides information on a building’s energy costs when it is being rented or bought (Hicks and Clough, 1998). Building standards for cooling have been adopted in Indonesia, Mexico, Singapore, and Thailand. Compliance with building codes is uncertain in many countries, however, because (expensive) controls are lacking (Duffy, 1996).

Household appliances and office automation. Household appliances and office equipment are well suited for technical standards and labelling. Varone (1998) compared instruments used between 1973 and 1997 in Canada, Denmark, Sweden, Switzerland, and the United States to promote energy-efficient household appliances and office equipment. About 20 instruments were identified (table 6.14). Various attempts have been made in the past 10 years to coordinate and harmonise policies at an international level. Some analysts consider international cooperation to be the only real means for inducing a market transformation in office equipment. Varone and Aebischer (1999) prefer to keep a diversity of instruments in different countries - an approach that allows for the testing of new instruments, offers the possibility of testing diverse combinations of instruments, and takes advantage of political windows of opportunity specific to each country (as with the Energy Star Program for office equipment in the United States) (Geller, 1995).

Some developing countries (China, India) try to follow OECD policies on technical standards and energy labelling. OECD governments should be aware of this implication (box 6.13).

Small and medium-sized companies and public administrations. Small and medium-sized companies and public administrations are typical targets when several policy measures have to be taken simultaneously: professional training, support for initial consulting by external experts, demonstration projects to increase trust in new technical solutions, energy agencies for several tasks (see above), and soft loans. These companies and administrations are also affected by standards for labelling and for cross-cutting technologies such as boilers and electrical motors and drives (Bradbrook, 1992).

This policy mix seems to be successful for this target group in almost all countries. In Russia and most Eastern European countries, energy agencies are responsible for energy efficiency initiatives in end-use sectors. These agencies are playing an important role, supported by energy service companies that provide financial and technical assistance to realise the identified potentials. Brazil and Mexico have also established national agencies for energy efficiency (see box 6.8). With the privatisation of Brazilian utilities, the new concessionaires are required to spend 1 percent of their revenues (less taxes) on energy efficiency, with 0.25 percent specifically for end-use efficiency measures.

Big enterprises and public administrations. Big enterprises and public administrations have specialised staff and energy managers, but they still need specific policy measures to achieve their economic potential. The government of India occasionally uses expert committees to develop policy recommendations. The reports of the committees include several recommendations to encourage energy efficiency improvements (box 6.14). A ‘minister’s breakfast’ is a key tool for motivating top managers of companies and administrations and for raising awareness of energy efficiency potential. In addition, keynote speakers at the annual meetings of industrial associations can help convey positive experiences with new efficient technologies among the responsible middle managers.

BOX 6.13. FAST TRANSMISSION OF EFFICIENCY PROGRAMMES FROM OECD TO DEVELOPING COUNTRIES: THE CASE OF EFFICIENT LIGHTING

Mexico was the first developing country to implement a large-scale energy-efficient lighting programme for the residential sector. The programme was funded by the Mexican Electricity Commission, ($10 million), the Global Environment Facility ($10 million), and the Norwegian government ($3 million). Between 1995 and 1998 about 1 million compact fluorescent lamps were sold in the areas covered by the programme. Use of the lamps avoided 66.3 megawatts of peak capacity and resulted in monthly energy savings of 30 gigawatt-hours. Given the lifetime of the efficient lamps, the impacts of the programme are expected to last until 2006 (Padilla, 1999).

Economic evaluations show positive returns to households, the power sector, and society. The programme, ILUMEX (Illumination of Mexico), has also helped generate direct and indirect jobs, training and building indigenous capacity to design and implement large-scale efficiency programmes (Vargas Nieto, 1999). Smaller residential energy-efficient lighting programmes have been introduced in other Latin American countries, including Bolivia, Brazil, Costa Rica, Ecuador, and Peru.

Local governments should consider using life-cycle costs and increasing flexibility between investment and operating budgets. This move may require changes in legislation in some countries.

TABLE 6.14. POLICIES TO INCREASE EFFICIENCY IN ELECTRIC APPLIANCES AND OFFICE EQUIPMENT, VARIOUS OECD COUNTRIES

Area

Canada

Denmark

Sweden

Switzerland

United States

Household appliances

Mandatory labelling (1978)
Standards (1992)

Mandatory labelling (1982)
Standards (1994)

Mandatory labelling (1976)
Technology procurement (1988)

Negotiated target values (1990)
Voluntary labelling (1990)

Voluntary labelling (1973)
Negotiated target values (1975)
Mandatory labelling (1975)
Standards (1978)
Technology procurement (1992)

Office equipment




Negotiated target values (1990)
Quality labelling (1994)
Public purchasing (1994)

Quality labelling (1992)
Public purchasing (1993)

Source: Varone 1998, p. 143.

Transportation. Policies on road transportation may include efficiency standards for vehicles imposed by national governments or technical objectives achieved through voluntary agreements among car manufacturers and importers (Bradbrook, 1994). Similar measures can be taken by aeroplane, truck, and bus manufacturers. High fuel taxes in countries with low taxation may support technical progress. A more systemic view relates to several areas of transport systems and policy measures (IEA, 1997a):

· Subsidies for mobility (such as for daily commuting, national airlines, or public urban transport) increase the demand for transportation, especially road transport, and should be removed where socially acceptable. An untaxed benefit for employees driving a car bought by companies or institutions should also be removed.

· Road user charges and parking charges may reduce driving in cities, cut down on congestion and road accidents, and shift some mobility to public transport. Car sharing also has implications for car use and occupancy levels.

· It is possible to lower the cost of public transport through automation and international procurement, as is a better organisation of rail freight crossing national borders.

· In the long term, intelligent city planning that does not divide an urban area by functions and related sections creates substantial potential for reduced mobility.

BOX 6.14. ENERGY EFFICIENCY POLICY RECOMMENDATIONS BY EXPERT COMMITTEES FOR COMPANIES IN INDIA

Technical and operational measures

· Detailed energy audit should be made mandatory in all large and medium-sized enterprises.

· Potential cogeneration opportunities should be identified and pursued by providing financial assistance

· Energy consumption norms should be set for each industry type and penalties and rewards instituted based on the performance of the industry.

Fiscal and economic measures

· Creation of an energy conservation fund by levying energy conservation taxes on industrial consumption of petroleum products, coal, and electricity.

· Customs duty relief on energy conservation equipment.

Energy pricing

· Energy pricing policies must ensure that sufficient surplus is generated to finance energy sector investments, economical energy use is induced, and interfuel substitution is encouraged.

Industrial licensing, production, and growth

· Before licenses are given to new units, the capacity of existing units and the capacity use factor should be taken into consideration.

· In setting up new units, the technology should be the least energy-intensive option.

· The possibility of using waste heat from power plants by setting up appropriate industries in the vicinity should be considered.

Organisational measures

· The appointment of energy managers in large and medium-sized industries should be mandatory. For small-scale enterprises, a mechanism should be instituted for energy auditing and reporting.

Energy equipment

· Better standards should be set for energy-consuming equipment.

· Restrictions must be placed on the sale of low-efficiency equipment.

· Manufacture of instruments required to monitor energy flows must be encouraged. Imports of such instruments and spare parts should be free of customs duty.

Research and development

· Each industrial process should be reviewed to identify the research and development required to reduce energy consumption.

· Research and development on energy efficiency should be sponsored by the government as a distinct component of the science and technology plan.

Other measures

· Formal training to develop energy conservation expertise should be introduced in technical institutions.

· The government should recognise and honour individuals and organisations for outstanding performance on energy conservation.


· Efforts to raise awareness on energy conservation should be intensified.

Source: Bhattacharjee, 1999.

In higher-income developing countries there are concerns that a shift from fuel-efficient to fuel-inefficient transport is threatening the oil security of these countries. To address these concerns, policies should encourage a shift from road transport to subways and rail transport by reducing travel times and increasing the costs of road transportation. These countries should also search for new financing to replace old bus fleets.

Agriculture. Two main issues affect the energy efficiency of agriculture in developing countries. The first is related to subsidised electricity tariffs for this sector; the second is the use of highly inefficient prime movers for agricultural pump sets and the ineffective configuration in which they are often used. Increases in electricity tariffs should be accompanied by free consultation by experts and an expansion of credit and savings schemes to help rural people keep their energy costs at an acceptable level. Efficient prime movers and appliances and organisational measures in water use efficiency and irrigation management would help achieve that goal.

Cogeneration. Liberalisation of the electricity market may have different implications for cogeneration in different countries (Jochem and Tnsing, 1998; AGFW, 2000). Earlier obstacles, such as low buyback rates and high rates for maintenance and emergency power, are alleviated by competition. But a legal framework for wheeling and public control seems to be necessary to level the playing field, particularly during the adaptation phase of liberalisation and for small and medium-size cogeneration plants of independent power producers. Lack of expertise and the trend of outsourcing cogeneration plants in industry can be addressed by supporting energy service companies with training, standardised contracts for small units, and deductions on fuels for cogeneration.

Maintaining energy-efficient cogeneration with district heating in industrialised and transition economies requires determination, a legal framework, technical and economic skills, and financial resources. Several steps are needed to make or to keep centralised district heating systems competitive:

· A possibility of switching between fuels (lowering gas prices by switching to storable oil in the coldest 100-200 hours of the winter) and using cheap fuel (‘puffer’ gas, coal, municipal solid waste, garbage incineration, sewage treatment biogas).

· Proper and economic sharing of heat generation between centralised heat units and peak load boilers, and an increase in the electricity production planted on the given heat demand by turning to higher parameters in the power-generating cycle (such as combined gas and steam cycles).

· Better performance control of the heating system, variable mass-flow in addition to temperature control in hot water systems, lower temperatures in the heating system, and the use of heat for cooling (through absorption techniques) to improve the seasonal load of the system.

· One-by-one metering and price collection for consumers in transition economies.

· A minimum buyback rate for cogenerated electricity in the adaptation phase of liberalisation (AGFW, 2000).

Such a bundle of measures can assure the competitiveness of other options and the realisation of the huge potential for cogeneration in centralised heating systems.

In developing countries a lack of knowledge, capital, and hard currency may constrain cogeneration investments. Thus policy measures and incentives are often needed - and were recommended, for example, by a task force in India in 1993. The Ministry of Non-Conventional Energy Sources launched a national programme promoting bagasse-based cogeneration. The process of agreeing on mutually acceptable buyback rates and wheeling of power by state electricity boards is still under way, but there is hope that the institutional barriers will give way to large-scale cogeneration, particularly in liberalised electricity markets.

International policy measures

The globalisation of many industrial sectors creates enormous potential for improving energy efficiency at the global scale. Harmonising technical standards for manufactured goods offers new opportunities for economies of scale, lowering the cost of energy-efficient products. To avoid the import of energy-inefficient products, governments, associations of importers, and NGOs may consider negotiating efficiency standards for appliances and other mass-produced products imported from industrialised countries. Imported vehicles, used cars, buses, and trucks should not be more than five or six years old (as in Bangladesh and Hungary). Similar rules could be introduced for major imported and energy-intensive plants.

The Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects entered into force in April 1998. The protocol is legally binding but does not impose enforceable obligations on nations to take specified measures. It is a ‘soft law’ requiring actions such as:

· Formulating aims and strategies for improving energy efficiency and establishing energy efficiency policies.

· Developing, implementing, and updating efficiency programmes and establishing energy efficiency bodies that are sufficiently funded and staffed to develop and implement policies.

· Creating the necessary legal, regulatory, and institutional environment for energy efficiency, with signatories cooperating or assisting each other in this area.

The protocol received significant political support from the EU Environmental Ministers Conference in June 1998. By December 1998, however, it had only about 40 signatories, mainly Western European countries and transition economies. Thus it has no world-wide support (Bradbrook, 1997).

The globalisation
of many industrial sectors
creates enormous potential for
improving energy efficiency
at the global scale.

Commitments to the Kyoto Protocol by Annex B countries are a major driver of energy efficiency, as about 70 percent of these countries’ greenhouse gas emissions are related to energy use. Although energy efficiency is a major contributor for achieving the targets of the protocol, there are few references to it in the text of the document. Ratification of the protocol and implementation of the flexible instruments will be important for developing policy awareness in industrialised countries of the substantial potential that improved energy efficiency offers for meeting the objectives.

Better air traffic management will likely reduce aviation fuel burn by some 10 percent if fully implemented in the next 20 years - provided the necessary international regulatory and institutional arrangements have been put in place in time. Stringent aircraft engine emission and energy efficiency regulations or voluntary agreements among airlines can expedite technological innovations. Efforts to remove subsidies, impose environmental levies (charges or taxes), and promote emissions trading could be negotiated at the international level (IPCC, 1999b). These economic policies - though generally preferred by industry - may be highly controversial.

Conclusion

As the long-term potential for energy efficiency reduces useful energy demand and the proceeding levels of energy conversion, future energy policy of most countries and on the international level will have to broaden substantially its scope from energy supply to energy services. This kind of policy will be much more demanding in designing target group-specific and technology-specific bundles of policy measures. But the success of this new policy process will be worth the effort from the economic, social and environmental perspective.

Notes

1. Lee Schipper was the lead author of this section.

2. Eberhard Jochem was the lead author of this box.

3. Inna Gritsevich and Eberhard Jochem were the lead authors of this section.

4. Anthony Adegbulugbe was the lead author of this section.

5. Somnath Bhattacharjee was the lead author of this section.

6. Eberhard Jochem was the lead author of this section.

7. Eberhard Jochem was the lead author of this box.

8. Bernard Aebischer and Eberhard Jochem were the lead authors of this section.

9. Ernst Worrell, Allen Chen, Tim McIntosch, and Louise Metirer were the lead authors of this section.

10. This means that the cost-effective potential is probably equivalent to the microeconomic potential (see the introduction to the section on potential economic benefits).

11. The estimates of the economic potential are based on supply curves for each sector developed by Bailie and others (1998). It is unclear what discount rate was used to estimate the economic potential. Hence we cannot determine if the study estimates a microeconomic or macroeconomic potential (see box 6.2).

12. It is unclear what discount rate was used to estimate the economic potential. In some economic assessments in this report a discount rate of 50 percent is used for investments in the transportation sector.

13. Bidyut Baran Saha and David Bonilla were the lead authors of this section.

14. Tamas Jaszay was the lead author of this section.

15. Inna Gritsevich was the lead author of this section.

16. Somnath Bhattacharjee was the lead author of this section.

17. Fengqi Zhou was the lead author of this section.

18. Gilberto M. Jannuzzi was the lead author of this section.

19. Anthony Adegbulugbe was the lead author of this section.

20. Eberhard Jochem was the lead author of this section.

21. Eberhard Jochem was the lead author of this section.

22. Eberhard Jochem was the lead author of this section.

23. Jean Pierre Des Rosiers was the lead author of this section.

24. Inna Gritsevich and Tamas Jaszay were the lead authors of this section.

25. Somnath Bhattacharjee, Gilberto Jannuzzi, and Fengqi Zhou were the lead authors of this section.

26. Eberhard Jochem was the lead author of this section.

27. Eberhard Jochem was the lead author of this section.

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Chapter 7. Renewable Energy Technologies

Wim C. Turkenburg (Netherlands)

LEAD AUTHORS: Jos Beurskens (Netherlands), Andr Faaij (Netherlands), Peter Fraenkel (United Kingdom), Ingvar Fridleifsson (Iceland), Erik Lysen (Netherlands), David Mills (Australia), Jose Roberto Moreira (Brazil), Lars J. Nilsson (Sweden), Anton Schaap (Netherlands), and Wim C. Sinke (Netherlands)

CONTRIBUTING AUTHORS: Per Dannemand Andersen (Denmark), Sheila Bailey (United States), Jakob Bjrnsson (Iceland), Teun Bokhoven (Netherlands), Lex Bosselaar (Netherlands), Suani Teixeira Coelho (Brazil), Baldur Eliasson (Switzerland), Brian Erb (Canada), David Hall (United Kingdom), Peter Helby (Sweden), Stephen Karekezi (Kenya), Eric Larson (United States), Joachim Luther (Germany), Birger Madson (Denmark), E.V.R. Sastry (India), Yohji Uchiyama (Japan), and Richard van den Broek (Netherlands)

ABSTRACT

In 1998 renewable energy sources supplied 56 ± 10 exajoules, or about 14 percent of world primary energy consumption. The supply was dominated by traditional biomass (38 ±10 exajoules a year). Other major contributions came from large hydropower (9 exajoules a year) and from modern biomass (7 exajoules). The contribution of all other renewables - small hydropower, geothermal, wind, solar, and marine energy - was about 2 exajoules. That means that the energy supply from new renewables was about 9 exajoules (about 2 percent of world consumption). The commercial primary energy supply from renewable sources was 27 ± 6 exajoules (nearly 7 percent of world consumption), with 16 ± 6 exajoules from biomass.

Renewable energy sources can meet many times the present world energy demand, so their potential is enormous. They can enhance diversity in energy supply markets, secure long-term sustainable energy supplies, and reduce local and global atmospheric emissions. They can also provide commercially attractive options to meet specific needs for energy services (particularly in developing countries and rural areas), create new employment opportunities, and offer possibilities for local manufacturing of equipment.

There are many renewable technologies. Although often commercially available, most are still at an early stage of development and not technically mature. They demand continuing research, development, and demonstration efforts. In addition, few renewable energy technologies can compete with conventional fuels on cost, except in some niche markets. But substantial cost reductions can be achieved for most renewables, closing gaps and making them more competitive. That will require further technology development and market deployment - and boosting production capacities to mass production.

For the long term and under very favourable conditions, the lowest cost to produce electricity might be $0.01 - 0.02 a kilowatt-hour for geothermal, $0.03 a kilowatt-hour for wind and hydro, $0.04 a kilowatt-hour for solar thermal and biomass, and $0.05 - 0.06 a kilowatt-hour for photovoltaics and marine currents. The lowest cost to produce heat might be $0.005 a kilowatt-hour for geothermal, $0.01 a kilowatt-hour for biomass, and $0.02 - 0.03 a kilowatt-hour for solar thermal. The lowest cost to produce fuels might be $1.5 a gigajoule for biomass, $6 - 7 a gigajoule for ethanol, $7 - 10 a gigajoule for methanol, and $6 - 8 a gigajoule for hydrogen.

Scenarios investigating the potential of renewables reveal that they might contribute 20 - 50 percent of energy supplies in the second half of the 21st century. A transition to renewables-based energy systems would have to rely on:

· Successful development and diffusion of renewable energy technologies that become more competitive through cost reductions from technological and organisational developments.

· Political will to internalise environmental costs and other externalities that permanently increase fossil fuel prices.

Many countries have found ways to promote renewables. As renewable energy activities grow and require more funding, the tendency in many countries is to move away from methods that let taxpayers carry the burden of promoting renewables, towards economic and regulatory methods that let energy consumers carry the burden.

Renewable energy sources have been important for humans since the beginning of civilisation. For centuries and in many ways, biomass has been used for heating, cooking, steam raising, and power generation - and hydropower and wind energy, for movement and later for electricity production. Renewable energy sources generally depend on energy flows through the Earth’s ecosystem from the insolation of the sun and the geothermal energy of the Earth. One can distinguish:

· Biomass energy (plant growth driven by solar radiation).
· Wind energy (moving air masses driven by solar energy).
· Direct use of solar energy (as for heating and electricity production).
· Hydropower.
· Marine energy (such as wave energy, marine current energy, and energy from tidal barrages).
· Geothermal energy (from heat stored in rock by the natural heat flow of the Earth).

Many renewables technologies are
suited to small off-grid applications,
good for rural, remote areas, where
energy is often crucial in
human development.

If applied in a modern way, renewable energy sources (or renewables) are considered highly responsive to overall energy policy guidelines and environmental, social, and economic goals:

· Diversifying energy carriers for the production of heat, fuels, and electricity.
· Improving access to clean energy sources.
· Balancing the use of fossil fuels, saving them for other applications and for future generations.
· Increasing the flexibility of power systems as electricity demand changes.
· Reducing pollution and emissions from conventional energy systems.
· Reducing dependency and minimising spending on imported fuels.

Furthermore, many renewables technologies are suited to small off-grid applications, good for rural, remote areas, where energy is often crucial in human development. At the same time, such small energy systems can contribute to the local economy and create local jobs.

The natural energy flows through the Earth’s ecosystem are immense, and the theoretical potential of what they can produce for human needs exceeds current energy consumption by many times. For example, solar power plants on 1 percent of the world’s desert area would generate the world’s entire electricity demand today. With ample resources and technologies at hand for renewable energy use, the question of future development boils down to economic and political competitiveness with other energy sources. Since the performance and costs of conversion technologies largely determine the competitiveness of renewables, technological development is the key. Still, the World Energy Council, Shell, the Intergovernmental Panel on Climate Change (IPCC), and several UN bodies project a growing role for renewable energy in the 21st century with major contributions from biomass, hydropower, wind, and solar.

TABLE 7.1. CATEGORIES OF RENEWABLE ENERGY CONVERSION TECHNOLOGIES

Technology

Energy product

Application

Biomass energy



Combustion(domestic scale)

Heat (cooking, space heating)

Widely applied; improved technologies available

Combustion(industrial scale)

Process heat, steam, electricity

Widely applied; potential for improvement

Gasification/power production

Electricity, heat (CHP).

Demonstration phase

Gasification/fuel production

Hydrocarbons, methanol, H2

Development phase

Hydrolysis and fermentation

Ethanol

Commercially applied for sugar/starch crops; production from wood under development

Pyrolysis/production of liquid fuels

Bio-oils

Pilot phase; some technical barriers

Pyrolysis/production of solid fuels

Charcoal

Widely applied; wide range of efficiencies

Extraction

Biodiesel

Applied; relatively expensive

Digestion

Biogas

Commercially applied

Wind energy



Water pumping and battery charging

Movement, power

Small wind machines, widely applied

Onshore wind turbines

Electricity

Widely applied commercially

Offshore wind turbines

Electricity

Development and demonstration phase

Solar energy



Photovoltaic solar energy conversion

Electricity

Widely applied; rather expensive; further development needed

Solar thermal electricity

Heat, steam, electricity

Demonstrated; further development needed

Low-temperature solar energy use

Heat (water and space heating, cooking, drying) and cold

Solar collectors commercially applied; solar cookers widely applied in some regions; solar drying demonstrated and applied

Passive solar energy use

Heat, cold, light, ventilation

Demonstrations and applications; no active parts

Artificial photosynthesis

H2 or hydrogen rich fuels

Fundamental and applied research

Hydropower

Power, electricity

Commercially applied; small and large scale applications

Geothermal energy

Heat, steam, electricity

Commercially applied

Marine energy



Tidal energy

Electricity

Applied; relatively expensive

Wave energy

Electricity

Research, development, and demonstration phase

Current energy

Electricity

Research and development phase

Ocean thermal energy conversion

Heat, electricity

Research, development, and demonstration phase

Salinity gradient/osmotic energy

Electricity

Theoretical option

Marine biomass production

Fuels

Research and development phase

BOX 7.1. LAND USE REQUIREMENTS FOR ENERGY PRODUCTION

Biomass production requires land. The productivity of a perennial crop (willow, eucalyptus, switchgrass) is 8 - 12 tonnes of dry matter per hectare a year. The lower heating value (LHV) of dry clean wood amounts to about 18 gigajoules a tonne; the higher heating value about 20 gigajoules a tonne. Thus 1 hectare can produce 140 - 220 gigajoules per hectare a year (LHV; gross energy yield; taking into account energy inputs for cultivation, fertiliser, harvest, and so on, of about 5 percent in total). The production of 1 petajoule currently requires 4,500 - 7,000 hectares. To fuel a baseload biomass energy power plant of 600 megawatts of electricity with a conversion efficiency of 40 percent would require 140,000 - 230,000 hectares. Annual production of 100 exajoules (one-quarter of the world’s current energy use) would take 450 - 700 million hectares.

A wide variety of technologies are available or under development to provide inexpensive, reliable, and sustainable energy services from renewables (table 7.1). But the stage of development and the competitiveness of those technologies differ greatly. Moreover, performance and competitiveness are determined by local conditions, physical and socioeconomic, and on the local availability of fossil fuels.

All renewable energy sources can be converted to electricity. Since some major renewable energy sources are intermittent (wind, solar), fitting such supplies into a grid creates challenges. This is less of a problem for biomass, hydropower, and geothermal. Only a few of them produce liquid and gaseous fuels as well as heat directly.

Biomass energy

Biomass is a rather simple term for all organic material that stems from plants (including algae), trees, and crops. Biomass sources are therefore diverse, including organic waste streams, agricultural and forestry residues, as well as crops grown to produce heat, fuels, and electricity (energy plantations).

Biomass contributes significantly to the world’s energy supply - probably accounting for 45 ± 10 exajoules a year (9 - 13 percent of the world’s energy supply; IEA, 1998; WEC, 1998; Hall, 1997). Its largest contribution to energy consumption - on average between a third and a fifth - is found in developing countries. Compare that with 3 percent in industrialised countries (Hall and others, 1993; WEC, 1994b; IEA REWP, 1999).

Dominating the traditional use of biomass, particularly in developing countries, is firewood for cooking and heating. Some traditional use is not sustainable because it may deprive local soils of needed nutrients, cause indoor and outdoor air pollution, and result in poor health. It may also contribute to greenhouse gas emissions and affect ecosystems (chapters 3 and 10). The modern use of biomass, to produce electricity, steam, and biofuels, is estimated at 7 exajoules a year. This is considered fully commercial, based on bought biomass or used for productive purposes. That leaves the traditional at 38 ± 10 exajoules a year. Part of this is commercial - the household fuelwood in industrialised countries and charcoal and firewood in urban and industrial areas in developing countries. But there are almost no data on the size of this market. If it can be estimated at between 10 percent and 30 percent (9 ± 6 exajoules a year), which seems probable, the total commercial use of biomass in 1998 was 16 ± 6 exajoules.

Since the early 1990s biomass has gained considerable interest world-wide. It is carbon neutral when produced sustainably. Its geographic distribution is relatively even. It has the potential to produce modern energy carriers that are clean and convenient to use. It can make a large contribution to rural development. And its attractive costs make it a promising energy source in many regions. With various technologies available to convert biomass into modern energy carriers, the application of commercial and modern biomass energy systems is growing in many countries.

TABLE 7.2. POTENTIAL CONTRIBUTION OF BIOMASS TO THE WORLD’S ENERGY NEEDS

Source

Time frame (year)

Total projected global energy demand (exajoules a year)

Contribution of biomass to energy demand (exajoules a year)

Comments

RIGES (Johansson and others, 1993)

2025
2050

395
561

145
206

Based on calculation with the RIGES model

SHELL (Kassler, 1994)

2060

1,500
900

220
200

Sustained growth scenario
Dematerialization scenario

WEC (1994a)

2050
2100

671 - 1,057
895 - 1,880

94 - 157
132 - 215

Range given here reflects the outcomes of three scenarios

Greenpeace and SEI (Lazarus and others, 1993)

2050
2100

610
986

114
181

A scenario in which fossil fuels are phased out during the 21st century

IPCC (Ishitani and Johansson, 1996)

2050
2100

560
710

280
325

Biomass intensive energy system development


FIGURE 7.1. MAIN BIOMASS ENERGY CONVERSION ROUTES

The potential of biomass energy

The resource potential of biomass energy is much larger than current world energy consumption (chapter 5). But given the low conversion efficiency of solar to biomass energy (less than 1 percent), large areas are needed to produce modern energy carriers in substantial amounts (box 7.1). With agriculture modernised up to reasonable standards in various regions, and given the need to preserve and improve the world’s natural areas, 700 - 1,400 million hectares may be available for biomass energy production well into the 21st century (Hall and others, 1993; Larson and others, 1995; Ishitani and others, 1996; IIASA and WEC, 1998; Larson, Williams, and Johansson, 1999). This includes degraded, unproductive lands and excess agricultural lands. The availability of land for energy plantations strongly depends on the food supplies needed and on the possibilities for intensifying agricultural production in a sustainable way.

A number of studies have assessed the potential contribution of biomass to the world energy supply (table 7.2). Although the percentage contribution of biomass varies considerably, especially depending on expected land availability and future energy demand, the absolute potential contribution of biomass in the long term is high - from 100 - 300 exajoules a year. World-wide annual primary energy consumption is now about 400 exajoules.

Biomass energy conversion technologies

Conversion routes to produce heat, electricity, and/or fuels from biomass are plentiful (figure 7.1).

Production of heat. In developing countries the development and introduction of improved stoves for cooking and heating can have a big impact on biomass use (chapters 3 and 10). Especially in colder climates (Scandinavia, Austria, Germany) domestic biomass-fired heating systems are widespread. Improved heating systems are automated, have catalytic gas cleaning, and use standard fuel (such as pellets). The benefit over open fireplaces is considerable, with advanced domestic heaters obtaining efficiencies of more than 70 percent and producing far fewer atmospheric emissions. The present heat- generating capacity is estimated to be more than 200 gigawatts of thermal energy.

Production of electricity. Some features of the main thermochemcial biomass energy conversion routes to electricity and combined heat and power (CHP) are presented in table 7.3. Combustion of biomass to produce electricity is applied commercially in many regions, with the total installed capacity estimated at 40 gigawatts of electricity. The application of fluid bed combustion and advanced gas cleaning allows for efficient production of electricity (and heat) from biomass. At a scale of 20 - 100 megawatts of electricity, electrical efficiencies of 20 - 40 percent are possible (van den Broek and others, 1996; Solantausta and others, 1996). Often the electricity is produced along with heat or steam (CHP) in Denmark and Sweden. In Southeast Asia, through the Association of Southeast Asian Nations - European Union COGEN Programme, sawmill factories in Indonesia, Malaysia, and Thailand have cogeneration systems, using wood-waste from the factories.

Co-combustion systems - combining, say, natural gas and coal with biomass - are built in such places as Denmark with the benefits of greater economies of scale and reduced fuel supply risks. Co-combustion of biomass in coal-fired power plants is a popular way to increase biomass-based power generation capacity with minimal investment (chapter 8). Other advantages over coal-based power production are the higher efficiencies (due in most cases to the large scale of the existing power plant) and lower sulphur dioxide (SO2) and nitrogen oxide (NOx) emissions (Meuleman and Faaij, 1999).

Large gasification. Gasification technologies can convert biomass into fuel gas, cleaned before its combustion in, say, a gas turbine. Biomass integrated gasification/combined cycle (BIG/CC) systems combine flexible fuel characteristics and high electrical efficiency. Electrical conversion efficiencies of 40 percent (LHV) are possible at a scale of about 30 megawatts of electricity (Consonni and Larson, 1994a, b; Faaij and others, 1997).

Demonstration projects are under way in various countries and for various gasification concepts. In Brazil a project supported by the World Bank and Global Environment Facility will demonstrate a 30 megawatts-electric BIG/CC unit fired with cultivated eucalyptus (Elliott and Booth, 1993). Sweden’s first BIG/CC unit, based on pressurised gasification, has several thousands of hours of operational experience. Three other demonstration units around the 6 - 10 megawatts-electric scale are under way. An atmospheric BIG/CC system is being commissioned in Yorkshire, United Kingdom. In the United States an indirect gasification process is under demonstration at the Burlington power station.

The first generation of BIG/CC systems shows high unit capital costs. Depending on the scale, prices are $2,800 - 5,000 a kilowatt of electricity. But cost reduction potential is considerable for BIG/CC systems - capital costs might come down to $1,100 - 2,000 a kilowatt (Williams, 1996; Solantausta and others, 1996; Faaij, Meuleman, and Van Ree, 1998). Co-gasification of biomass, another option, is being applied in the United States and Europe. An interesting alternative for fuel gas produced through biomass gasification is its use in existing (or new) natural gas-fired combined cycles. In this way, economies of scale come with a safe fuel supply (Walter and others, 1998). This option has not been demonstrated yet, but more research is under way.

Small gasification. Small (fixed bed) gasifiers coupled to diesel or gasoline engines (typically for systems of 100 - 200 kilowatts of electricity with an approximate electrical efficiency of 15 - 25 percent) are commercially available on the market. But high costs and the need for gas cleaning and careful operation have blocked application in large numbers. Some systems are being applied fairly successfully in rural India and in China and Indonesia (Kaltschmitt and others, 1998; Stassen, 1995).

Biogas production. Anaerobic digestion of biomass has been demonstrated and applied commercially with success in many situations and for a variety of feedstocks - such as organic domestic waste, organic industrial wastes, manure, and sludges. Large advanced systems are developed for wet industrial waste streams and applied in many countries. In India there is widespread production of biogas from animal and other wastes for cooking, lighting, and power generation (chapter 10).

TABLE 7.3. MAIN THERMOCHEMICAL BIOMASS ENERGY CONVERSION ROUTES TO HEAT AND ELECTRICITY

Conversion system

Range

Net efficiency (percent, LHV)

Investment cost (dollars a kilowatt of electricity)

Combustion





Combined heat and power (CHP)

100 kWe to 1 MWe

60 - 90 (overall)



1 - 10 MWe

80 - 99 (overall)



Standalone

20 - 100 MWe

20 - 40 (electrical)

1,600 - 2,500


Co-combustion

5 - 20 MWe

30 - 40 (electrical)

250 plus costs of existing power plant

Gasification





CHP



900 - 3,000 (depending on location and configuration)



Diesel

100 kWe to 1 MWe

15 - 25 (electrical)




Gas turbine

1 - 10 MWe

25 - 30 (electrical)



BIG/CC

30 - 100 MWe

40 - 55 (electrical)

1,100 - 2,000 (when commercially proven)

Digestion





Wet biomass materials

Up to several MWe

10 - 15 (electrical)

5,000

Digestion has a low overall electric conversion efficiency (roughly 10 - 15 percent, depending on the feedstock) and is particularly suited for wet biomass materials. Landfills contribute to atmospheric methane emissions. In many situations the collection of landfill gas and its conversion to electricity using gas engines is profitable, and such systems are becoming more widespread (Faaij, Hekkert, and others, 1998).

Production of liquid and gaseous fuels from biomass (bio-oil and biocrude). At temperatures around 500 degrees Celsius in the absence of oxygen, pyrolysis converts biomass to liquid (bio-oil), gaseous, and solid (charcoal) fractions. With flash pyrolysis techniques (fast pyrolysis) the liquid fraction can be up to 70 percent of the thermal biomass input. Bio-oil contains about 40 weight-percent of oxygen and is corrosive and acidic. The oil can be upgraded to reduce the oxygen content, but that has economic and energy penalties. Pyrolysis and upgrading technology are still largely in the pilot phase (Bridgewater, 1998).

Hydrothermal upgrading (HTU), originally developed by Shell, converts biomass at a high pressure and at moderate temperatures in water to biocrude. Biocrude contains far less oxygen than bio-oil produced through pyrolysis, but the process is still in a pre-pilot phase (Naber and others 1997).

Ethanol. Production of ethanol by fermenting sugars is a classic conversion route for sugar cane, maize, and corn on a large scale, especially in Brazil, France, and the United States. Zimbabwe also has a considerable fuel ethanol programme using sugar cane (Hemstock and Hall, 1995). The U.S. and European programmes convert surplus food crops to a useful(by) product. But ethanol production from maize and corn is far from being competitive with gasoline and diesel. Nor is the overall energy balance of such systems very favourable.

An exception is Brazil’s PRO-ALCOOL programme, due to the high productivity of sugar cane (Rosillo-Calle and Cortez, 1998). This programme is discussed in some detail later in this chapter. In 1998 world production of ethanol was estimated at 18 billion litres (equivalent to 420 petajoules).

Ethanol can also be produced by the hydrolysis of lignocellulosic biomass, a potentially low-cost and efficient option. Hydrolysis techniques are gaining more development attention, particularly in Sweden and the United States, but some fundamental issues need to be resolved. If these barriers are lowered and ethanol production is combined with efficient electricity production from unconverted wood fractions (such as lignine), ethanol costs could come close to current gasoline prices - as low as $0.12 a litre at biomass costs of about $2 a gigajoule (Lynd, 1996). Overall system conversion efficiency could go up to about 70 percent (LHV).

Esters from oilseeds. Oilseeds, such as rapeseed, can be extracted and converted to esters and are well suited to replace diesel. Substantial quantities of RME (rape methyl esters) are produced in the European Union and to a lesser extent in North America. But RME requires substantial subsidies to compete with diesel. Energy balances for RME systems are less favourable than those for perennial crops (Ishitani and Johansson, 1996), so the net energy production per hectare is low. These balances can be improved if by-products (such as straw) are also used as an energy source.

Biomass has gained
considerable interest world-
wide. It is carbon neutral
when produced
sustainably.

Methanol, hydrogen, and hydrocarbons through gasification. Production of methanol and hydrogen using gasification technology and traditional syngas conversion processes could offer an attractive conversion route for biomass over the long term. Although such concepts received serious attention in the early 1980s, low oil prices made them unattractive. New technology - such as liquid phase methanol production (combined with electricity generation) and new gas separation technology - offers lower production costs and higher overall conversion efficiencies. With large-scale conversion and the production of both fuel and electricity, methanol and hydrogen from lignocellulosic biomass might compete with gasoline and diesel (Spath and others, 2000; Faaij and others, 1999). In addition, synthetic hydrocarbons and methanol can be produced from syngas using Fischer-Tropsch synthesis (Larson and Jin, 1999a, b).

Environmental impacts of biomass energy systems

Biomass energy can be carbon neutral when all biomass produced is used for energy (short carbon cycle). But sustained production on the same surface of land can have considerable negative impacts on soil fertility, water use, agrochemical use, biodiversity, and landscape. Furthermore, the collection and transport of biomass increases the use of vehicles and infrastructure and the emissions to the atmosphere (Tolbert, 1998; Borjesson, 1999; Faaij, Meuleman, and others, 1998). Seen world-wide, climatic, soil, and socioeconomic conditions set strongly variable demands for what biomass production will be sustainable.

Erosion. Erosion is a problem related to the cultivation of many annual crops in many regions. The best-suited energy crops are perennials, with much better land cover than food crops. And during harvest, the removal of soil can be kept to a minimum, since the roots remain in the soil. Another positive effect is that the formation of an extensive root system adds to the organic matter content of the soil. Generally, diseases (such as eelworms) are prevented, and the soil structure is improved.

Water use. Increased water use caused by additional demands of (new) vegetation can become a concern, particularly in arid and semi-arid regions. The choice of crop can have a considerable effect on water-use efficiency. Some eucalyptus species have a very good water-use efficiency, considering the amount of water needed per tonne of biomass produced. But a eucalyptus plantation on a large area could increase the local demand for groundwater and affect its level. On the other hand, improved land cover generally is good for water retention and microclimatic conditions. Thus the impacts on the hydrological situation should be evaluated at the local level.

Agrochemicals. Pesticides affect the quality of groundwater and surface water and thus plants and animals. Specific effects depend on the type of chemical, the quantity used, and the method of application. Experience with perennial crops (willow, poplar, eucalyptus, miscanthus) suggests that they meet strict environmental standards. Compared with food crops like cereals, application rates of agrochemicals per hectare are a fifth to a twentieth for perennial energy crops (Faaij, Meuleman, and others, 1998; Borjesson, 1999).

Nutrients. The abundant use of fertilisers and manure in agriculture has led to considerable environmental problems in various regions: nitrification of groundwater, saturation of soils with phosphate, eutrophication, and unpotable water. Phosphates have also increased the heavy metal flux of the soil. But energy farming with short rotation forestry and perennial grasses requires less fertiliser than conventional agriculture (Kaltschmitt and others, 1996). With perennials, better recycling of nutrients is obtained. The leaching of nitrogen for willow cultivation can be a half to a tenth that for food crops, meeting stringent standards for groundwater protection. The use of plantation biomass will result in removal of nutrients from the soil that have to be replenished in one way or the other. Recycling of ashes is feasible for returning crucial trace elements and phosphates to the soil, already common practice in Austria and Sweden. In Brazil stillage, a nutrient rich remainder of sugar cane fermentation, is returned to sugar cane plantations.

Biodiversity and landscape. Biomass plantations can be criticised because the range of biological species they support is much narrower than what natural forests support (Beyea and others, 1991). Although this is generally true, it is not always relevant. It would be if a virgin forest is replaced by a biomass plantation. But if plantations are established on degraded lands or on excess agricultural lands, the restored lands are likely to support a more diverse ecology.

Degraded lands are plentiful: estimates indicate that about 2 billion hectares of degraded land are ‘available’ in developing countries (Larson, Williams, and Johansson, 1999; IIASA and WEC, 1998). It would be desirable to restore such land surfaces anyway - for water retention, erosion prevention, and (micro-) climate control. A good plantation design, including areas set aside for native plants and animals fitting in the landscape in a natural way, can avoid the problems normally associated with monocultures, acknowledging that a plantation of energy crops does not always mean a monoculture.

Other risks (fire, disease). Landscaping and managing biomass production systems can considerably reduce the risks of fire and disease. Thus they deserve more attention in coming projects, policies, and research.

Conversion and end use. Conversion of biomass to desired intermediate energy carriers and their use for energy services should meet strict environmental standards as well. Problems that could occur (such as emissions to air) can be easily countered with technology that is well understood and available. Clean combustion of biomass is now common practice in Scandinavia. Gasification allows for cleaning fuel gas prior to combustion or further processing. Care should be paid to small (less than 1 megawatts of thermal energy) conversion systems: technology to meet strict emission standards is available but can have a serious impact on the investment and operational costs of such small systems (Kaltschmitt and others, 1998; Stassen, 1995).

Economics of biomass energy systems

Biomass is a profitable alternative mainly when cheap or even negative-cost biomass residues or wastes are available. To make biomass competitive with fossil fuels, the production of biomass, the conversion technologies, and total bio-energy systems require further optimisation.

TABLE 7.4. MAIN PERFORMANCE DATA FOR SOME CONVERSION ROUTES OF BIOMASS TO FUELS


RME

Ethanol from sugar or starch crops

Ethanol from lignocellulosic biomass

Hydrogen from lignocellulosic biomass

Methanol from lignocellulosic biomass

Bio-oil from lignocellulosic biomass

Concept

Extraction and esterification

Fermentation

Hydrolysis, fermentation, and electricity production

Gasification

Gasification

Flash pyrolysis

Net energy efficiency of conversion

75 percent based onallenergy inputs

50 percent for sugar beet;
44 percent for sugar cane

60 - 70 percent (longer term with power generation included)

55 - 65 percent
60 - 70 percent (longer term)

50 - 60 percent
60 - 70 percent (longer term)

70 percent
(raw bio-oil)

Cost range, short terma

$15 - 25 a gigajoule (northwest Europe)

$15 - 25 a gigajoule for sugar beet;
$8 - 10 a gigajoule for sugar cane

$10 - 15 a gigajoule

$8 - 10 a gigajoule

$11 - 13 a gigajoule

n.a.

Cost range, long terma

n.a.

n.a.

$6 - 7 a gigajoule

$6 - 8 a gigajoule

$7 - 10 a gigajoule

Unclear

a. Diesel and gasoline production costs vary widely depending on the oil price. Longer - term projections give estimates of roughly $0.25 - 0.35 a litre, or $8 - 11 a gigajoule. Retail fuel transport prices are usually dominated by taxes of $0.50 - 1.30 a litre depending on the country.

Source: Wyman and others, 1993; IEA, 1994; Williams and others, 1995; Jager and others, 1998; Faaij, Hamelinck, and Agterberg, forthcoming.

Biomass production. Plantation biomass costs already are favourable in some developing countries. Eucalyptus plantations in northeast Brazil supply wood chips at prices between $1.5 - 2.0 a gigajoule (Carpentieri and others, 1993). Costs are (much) higher in indus-trialised countries, such as $4 a gigajoule in parts of northwest Europe (Rijk, 1994; van den Broek and others, 1997). But by about 2020, with improved crops and production systems, biomass production costs in the United States could be about $1.5 - 2.0 a gigajoule for substantial land surfaces (Graham and others, 1995; Turnure and others, 1995; Hughes and Wiltsee, 1995). It is expected for large areas in the world that low-cost biomass can be produced in large quantities. Its competitiveness will depend on the prices of coal (and natural gas), but also on the costs and net returns from alternative, competing uses of productive land.

Power generation from biomass. With biomass prices of about $2 a gigajoule, state of the art combustion technology at a scale of 40 - 60 megawatts of electricity can result in electricity production costs of $0.05 - 0.06 a kilowatt-hour (USDOE, 1998b; Solantausta and others, 1996). Co-combustion, particularly at efficient coal-fired power plants, can obtain similar costs. If BIG/CC technology becomes available commercially, production costs could drop further to about $0.04 a kilowatt-hour, especially with higher electrical efficiencies. For larger scales (more than 100 megawatts of electricity) it is expected that cultivated biomass will compete with fossil fuels in many situations. The benefitsoflower specific capital costs and increased efficiency certainly outweigh the increase in costs and energy use for transport for considerable distances if a reasonably well-developed infrastructure is in place (Marrison and Larson, 1995a, b; Faaij, Hamelinck, and Agterberg, forthcoming).

Decentralised power (and heat) production is generally more expensive and therefore is better suited for off-grid applications. The costs of gasifier/diesel systems are still unclear and depend on what emissions and fuel quality are considered acceptable. Combined heat and power generation is generally economically attractive when heat is required with a high load factor.

Production of liquid and gaseous fuels from biomass. The economies of ‘traditional’ fuels like RME and ethanol from starch and sugar cropsin moderate climate zones are poor and unlikely to reach competitive price levels. Methanol, hydrogen, and ethanol from lig-nocellulosic biomass offer better potential in the longer term (table 7.4).

Implementation issues

Modern use of biomass is important in the energy systems of a number of countries (table 7.5). Other countries can be mentioned as well - as in Asia, where biomass, mainly traditional biomass, can account for 50 - 90 percent of total energy. India has installed more than 2.9 million biomass digesters in villages and produces biogas for cooking - and is using small gasifier diesel systems for rural electrification. Biomass power projects with an aggregate capacity of 222 megawatts have been commissioned in India, with another 280 megawatts under construction (MNCES, 1999). And with tens of millions of hectares of degraded soil, India is involved in wood-for-energy production schemes. Throughout Southeast Asia the interest in modern bio-energy applications has increased in recent years, partly because of the fast-growing demand for power and because biomass residues from various agricultural production systems are plentiful (box 7.2; Lefevre and others, 1997).

TABLE 7.5. BIOMASS IN THE ENERGY SYSTEMS OF SELECTED COUNTRIES

Country

Role of biomass in the energy system

Austria

Modern biomass accounts for 11 percent of the national energy supply. Forest residues are used for (district) heating, largely in systems of a relatively small scale.

Brazil

Biomass accounts for about a third of the energy supply. Main modern applications are ethanol for vehicles produced from sugar cane (13 - 14 billion litres a year) and substantial use of charcoal in steel industry. Government supports ethanol. PRO-ALCOOL is moving towards a rationalisation programme to increase efficiency and lower costs.

Denmark

A programme is under way to use 1.2 million tonnes of straw as well as use forest residues. Various concepts have been devised for co-firing biomass in larger-scale combined heating and power plants, district heating, and digestion of biomass residues.

Finland

Twenty percent of its primary energy demand comes from modern biomass. The pulp and paper industry makes a large contribution through efficient residue and black liquor use for energy production. The government supports biomass; a doubling of the contribution is possible with available resources.

Sweden

Modern biomass accounts for 17 percent of national energy demand. Use of residues in the pulp and paper industry and district heating (CHP) and use of wood for space heating are dominant. Biomass is projected to contribute 40 percent to the national energy supply in 2020.

United States

About 10,700 megawatts-electric biomass-fired capacity was installed by 1998; largely forest residues. Four billion litres per year of ethanol are produced.

Zimbabwe

Forty million litres of ethanol are produced a year. Biomass satisfies about 75 percent of national energy demand.

Source: Kaltschmitt and others, 1998; Rosillo-Calle and others, 1996; Rosillo and Cortez, 1998; NUTEK, 1996; USDOE, 1998a; Hemstock and Hall, 1995.

Barriers. Bio-energy use varies remarkably among countries. Varying resource potentials and population densities are not the only reasons. Other barriers hamper implementation:

· Uncompetitive costs. The main barrier is that the energy carriers are not competitive unless cheap or negative cost biomass wastes and residues are used. Technology development could reduce the costs of bio-energy. In Denmark and Sweden, where carbon and energy taxes have been introduced, more expensive wood fuels and straw are now used on a large scale. But world-wide, the commercial production of energy crops is almost non-existent. (Brazil is a major exception, having introduced subsidies to make ethanol from sugar cane competitive with gasoline.)

· The need for efficient, cheap, environmentally sound energy conversion technologies. Strongly related to costs issues are the availability and the full-scale demonstration of advanced conversion technology, combining a high energy conversion efficiency and environmentally sound performance with low investment costs. Biomass integrated gasifier/combined cycle (BIG/CC) technology can attain higher conversion efficiency at lower costs. Further development of gasification technologies is also important for a cheaper production of methanol and hydrogen from biomass.

· Required development of dedicated fuel supply systems. Experience with dedicated fuel supply systems based on ‘new’ energy crops, such as perennial grasses, is very limited. Higher yields, greater pest resistance, better management techniques, reduced inputs, and further development of machinery are all needed to lower costs and raise productivity. The same is true for harvesting, storage, and logistics.

· Specific biomass characteristics. The solar energy conversion efficiencyof biomass production is low - in practice less than 1 percent. So, fairly large land surfaces are required to produce a substantially amount of energy. Moreover, biomass has a low energy density. Compare coal’s energy density of 28 gigajoules a tonne, mineral oil’s 42 gigajoules a tonne, and liquefied natural gas’s 52 gigajoules a tonne with biomass’s 8 gigajoules a tonne of wood (at 50 percent moisture content). Transport is thus an essential element of biomass energy systems, and transportation distances can become a limiting factor. Another complication is that biomass production is usually bound to seasons, challenging the supply and logistics of a total system. And varying weather conditions affect production year-to-year.

· Socioeconomic and organisational barriers. The production of crops based on perennial grasses or short rotation forestry differs substantially from that of conventional food crops. Annual crops provide farmers with a constant cash flow for each hectare of land. For short rotation coppice, however, the intervals between harvests can be 2 - 10 years, restricting the flexibility of farmers to shift from one crop to another. In addition, bio-energy systems require complex organisations and many actors, creating non-technical barriers.

· Public acceptability. Since biomass energy systems require substantial land areas if they are to contribute much to the total energy supply, the needed changes in land-use, crops, and landscape might incite public resistance. And to be acceptable to most people, the ecological impacts of biomass production systems have to be minimal. Increased traffic in biomass production areas might also be seen as a negative.

· Ecological aspects. Not much is known about the effects of large-scale energy farming on landscapes and biodiversity. Energy crop plantations have to fit into the landscape both ecologically and aesthetically. And in addition to minimising the environmental impact, attention should be paid to fitting biomass production into existing agricultural systems.

· Competition for land use. Competition for land or various land claims may turn out to be a limitation in various regions. Opinions differ on how much (agricultural) land will become available for energy crops (Dyson, 1996; Brown and others, 1996; Gardner, 1996). An accepted principle is that biomass production for energy should not conflict with food production. But given the large potential to increase the productivity of conventional agriculture (Luyten, 1995; WRR, 1992; Larson, Williams, and Johansson, 1999), land’s availability is not necessarily a barrier. If conventional agriculture has higher productivity, it will become more profitable - so bio-energy will face even stiffer competition from conventional crops than it does today.

BOX 7.2. INDUSTRIAL USES OF BIO-ENERGY

Two large industrial sectors offer excellent opportunities to use biomass resources efficiently and competitively world-wide: paper and pulp, and sugar (particularly using sugar cane as feed). Traditionally, these sectors use biomass residues (wood waste and bagasse) for their internal energy needs, usually inefficient conversions to low-pressure steam and some power. The absence of regulations to ensure reasonable electricity tariffs for independent power producers make it unattractive for industries to invest in more efficient power generation. But the liberalisation of energy markets in many countries is removing this barrier, opening a window to reduce production costs and modernise production capacity.

Efficient boilers have been installed in many production facilities. Gasification technology could offer even further efficiency gains and lower costs - say, when applied for converting black liquor (Larson and others, 1998). The power generated is generally competitive with grid prices. In Nicaragua electricity production from bagasse using improved boilers could meet the national demand for electricity (van den Broek and van Wijk, 1998).

Some 700-1,400
million hectares may be
available for biomass energy
production well into
the 21st century.

Strategies. Six areas are essential for successful development and implementation of sustainable and economically competitive bio-energy systems: technologies, production, markets, polygeneration, externalities, and policy.

Technological development and demonstration of key conversion technologies. Research, demonstration, and commercialisation of advanced power generation technology are essential - especially for BIG/CC technology, which can offer high conversion efficiencies, low emissions, and low costs. Another interesting route is producing modern biofuels, using hydrolysis and gasification. Combining biomass with fossil fuels can be an excellent way to achieve economies of scale and reduce the risks of supply disruptions.

More experience with and improvement of biomass production. Local assessments are needed to identify optimal biomass production systems, and more practical experience is needed with a wide variety of systems and crops. Certainly, more research and testing are needed to monitor the impact of energy crops, with particular attention to water use, pest abatement, nutrient leaching, soil quality, biodiversity (on various levels), and proper landscaping. Perennial crops (grasses) and short rotation coppice (eucalyptus, willow) can be applied with minimal ecological impacts.

Cost reduction is essential, though several countries already obtain biomass production costs below $2 a gigajoule. Larger plantations, improved species, and better production systems and equipment can reduce costs further. Another promising way to lower costs is to combine biomass production for energy with other (agricultural or forest) products (multi-output production systems). Yet another is to seek other benefits from biomass production - preventing erosion, removing soil contaminants, and creating recreational and buffer zones.

Creating markets for biomass production, trade, and use. At local and regional scales, the starting phase of getting bio-energy ‘off the ground’ can be difficult. The supply and demand for biomass need to be matched over prolonged periods. Diversifying biomass supplies can be a key in creating a better biomass market. Flexible conversion capacity to deal with different biomass streams, as well as fossil fuels, is also important. And international trade in bio-energy can buffer supply fluctuations.

Production can also be started in niches. Major examples are the modernisation of power generation in the sugar, in paper and pulp, and in (organic) waste treatment. Regulations - such as acceptable payback tariffs for independent power producers - are essential. Niche markets can also be found for modern biofuels, such as high-value fuel additives, as mixes with gasoline, or for specific parts of a local transport fleet (such as buses). Successful biomass markets are working in Scandinavian countries and in Brazil (boxes 7.3 and 7.4).

Polygeneration of products and energy carriers. To compete with coal (chapter 8), biomass energy may have to follow a polygeneration strategy - coproducing electricity, fuels, fibres, and food from biomass. One example would be the generation of electricity by a BIG/CC plant as well as any fluid that can be produced from the syngas: methanol, dimethyl ether (DME), other liquids using Fischer-Tropps synthesis (Larson and Jin, 1999a; Faaij and others, 1999). Another could combine biomass and fossil fuels to coproduce modern energy carriers (Oonk and others, 1997).

BOX 7.3. BRAZIL’S NATIONAL ALCOHOL PROGRAMME

PRO-ALCOOL in Brazil is the largest programme of commercial biomass utilisation in the world. Despite economic difficulties during some of its 25 years of operation, it presents several environmental benefits, reduces import expenditures, and creates jobs in rural areas.

Roughly 700,000 rural jobs in sugar-alcohol are distributed among 350 private industrial units and 50,000 private sugarcane growers. Moreover, the cost of creating a job in sugar-alcohol is much lower than in other industries. But mechanical harvesting could change this.

Despite a small reduction in harvested surface, Brazilian sugar-cane production has shown a continuous increase, reaching 313 million tonnes in the 1998/99 season. Alcohol consumption has been steady, even though almost no new hydrated ethanol powered automobiles are being produced. The decline in consumption from the partial age retirement of this fleet has been balanced by significant growth in the number of automobiles using a blend of 26 percent anhydrous ethanol in gasoline.

Subsidies were reduced in recent years in the southeast of Brazil, where 80 percent of the ethanol is produced, and then fully removed early in 1999. Some government actions - compulsory increases in the amount of ethanol blended in gasoline and special financial conditions for acquisition of new hydrated ethanol powered cars - have favoured producers. Very recently the alcohol price at the pump stations was reduced, triggering the interest of consumers and carmakers in hydrated ethanol cars. Other government policies may include tax reductions on new alcohol cars, ‘green’ fleets, and mixing alcohol-diesel for diesel motors.

Another promising option is the implementation of a large cogeneration programme for sugar and alcohol. Revenues from electricity sales could allow further reductions in the cost of alcohol production, although it is not yet enough to make it competitive with gasoline in a free market. Even so, production costs continue to come down from learning by doing.

The programme has positive environmental and economic impacts. In 1999 it resulted in an emission reduction of almost 13 mega-tonnes of carbon. And the hard currency saved by not importing oil totals $40 billion over the 25 years since alcohol’s introduction.

BOX 7.4. BIOMASS USE IN SWEDEN

Sweden is probably the world leader in creating a working biomass market. Its use of biomass for energy purposes - domestic heating with advanced heating systems, district heating, and combined heat and power generation - has increased 4 - 5-fold in the past 10 years. And the average costs of biomass have come down considerably. Swedish forests have met this growing demand with ease.

The growing contribution of biomass has been combined with a big increase in the number of companies supplying wood and wood products and in the number of parties using biomass. As a result competition has led to lower prices, combined with innovation and more efficient biomass supply systems.

Some 14,000 hectares in short rotation willow plantations have been established. Sweden also imports some biomass, which make up only a small part of the total supply but keep prices low.

Sweden plans to increase the 20 percent share of biomass in the total primary energy supply to 40 percent in 2020, largely by extending and improving the use of residues from production forests and wood processing industries (NUTEK, 1996).

Internalising external costs and benefits. Bio-energy can offer benefits over fossil fuels that do not show up in its cost - that is, it can offer externalities. Being carbon-neutral is one. Another is the very low sulphur content. A third is that biomass is available in most countries, while fossil fuels often need to be imported. The domestic production of bio-energy also brings macro-economic and employment benefits (Faaij, Meuleman, and others, 1998). It can offer large numbers of unskilled jobs (van den Broek and van Wijk, 1998). It has fewer external costs than (imported) coal and oil (Borjesson, 1999; Faaij, Meuleman, and others, 1998).

Policies. Carbon taxes, price supports, and long-running research and development (R&D) programmes are often central in gaining experience, building infrastructure developing technology, and fostering the national market. Scandinavia and Brazil - and to a somewhat less extent northwest Europe and the United States - show that modernisation is essential for realising the promise of biomass as an alternative energy source (Ravindranath and Hall, 1995). It may even help in phasing out agricultural subsidies.

Conclusion

· Biomass can make a large contribution to the future world’s energy supply. Land for biomass production should not be a bottleneck, if the modernisation of conventional agricultural production continues. Recent evaluations indicate that if land surfaces of 400 - 700 million hectares were used for biomass energy production halfway into the 21st century, there could be no conflicts with other land-use functions and the preservation of nature.

· Bio-energy’s current contribution of 45 ± 10 exajoules a year - of which probably 16 ± 6 exajoules a year is commercial - could increase to 100 - 300 exajoules a year in the 21st century.

· The primary use of biomass for modern production of energy carriers accounts for about 7 exajoules a year. Modern biomass energy production can play an important role in rural development.

· Although developing countries are the main consumers of biomass, the potential, production, and use of biomass in these countries are often poorly quantified and documented.

· Biomass can be used for energy production in many forms. The resource use, the technologies applied, and the set-up of systems will depend on local conditions, both physical and socioeconomic. Perennial crops offer cheap and productive biomass production, with low or even positive environmental impacts.

· Production costs of biomass can be $1.5 - 2 a gigajoule in many regions. Genetic improvement and optimised production systems - and multi-output production systems, cascading biomass, and multifunctional land use - could bring bio-mass close to the (expected) costs of coal.

· A key issue for bio-energy is mod-ernising it to fit sustainable development. Conversion of biomass to modern energy carriers (electricity, fuels) gives biomass commercial value that can provide income and development for local (rural) economies.

· Modernised biomass use can be a full-scale player in the portfolio of energy options for the longer term. The production of electricity and fuels from lignocellulosic biomass are promising options. But they require the development of markets, infrastructure, key conversion technologies (BIG/CC), and advanced fuel production systems.

· Flexible energy systems combining biomass and fossil fuels are likely to become the backbone for low-risk, low-cost energy supply systems.

An accepted principle
is that biomass production
for energy should not
conflict with food
production.

Wind energy

Wind energy, in common with other renewable energy sources, is broadly available but diffuse. The global wind resource has been described in chapter 5. Wind energy was widely used as a source of power before the industrial revolution, but later displaced by fossil fuel use because of differences in costs and reliability. The oil crises of the 1970s, however, triggered renewed interest in wind energy technology for grid-connected electricity production, water pumping, and power supply in remote areas (WEC, 1994b).

In recent decades enormous progress has been made in the development of wind turbines for electricity production. Around 1980 the first modern grid-connected wind turbines were installed. In 1990 about 2,000 megawatts of grid-connected wind power was in operation world-wide - at the beginning of 2000, about 13,500 megawatts. In addition, more than 1 million water-pumping wind turbines (wind pumps), manufactured in many developing countries, supply water for livestock, mainly in remote areas. And tens of thousands of small battery-charging wind generators are operated in China, Mongolia, and Central Asia (chapter 10).

The potential of wind energy

The technical potential of onshore wind energy to fulfil energy needs is very large - 20,000 - 50,000 terawatt-hours a year (chapter 5). The economic potential of wind energy depends on the economics of wind turbine systems and of alternative options. Apart from investment costs, the most important parameter determining the economics of a wind turbine system is annual energy output, in turn determined by such parameters as average wind speed, statistical wind speed distribution, turbulence intensities, and roughness of the surrounding terrain. The power in wind is proportional to the third power of the momentary wind speed.

Because of the sensitivity to wind speed, determining the potential of wind energy at a specific site is not straightforward. More accurate meteorological measurements and wind energy maps and handbooks are being produced and (mostly) published, enabling wind project developers to better assess the long-term economic performance of their projects.

In densely populated countries the best sites on land are occupied, and public resistance makes it difficult to realise new projects at acceptable cost. That is why Denmark and the Netherlands are developing offshore projects, despite less favourable economics. Sweden and the United Kingdom are developing offshore projects to preserve the landscape.

Resources offshore are much larger than those onshore, but to be interesting they have to be close to electric infrastructure. A comprehensive study by Germanische Lloyd and Garrad Hassan & Partners (Matthies and others, 1995) concluded that around 3,000 terawatt-hours a year of electricity could be generated in the coastal areas of the European Union (excluding Finland and Sweden). With electricity consumption in those 12 countries at about 2,000 terawatt-hours a year, offshore options should be included in assessments of the potential of wind electricity.

Development of installed wind power

In 1997 the installed wind power was about 7,400 megawatts, in 1998 close to 10,000 megawatts, and in 1999 another annual 3,600 megawatts was installed (BTM Consult, 1999 and 2000). Between 1994 and 1999 the annual growth of installed operating capacity varied between 27 and 33 percent. The electricity generated by wind turbines can be estimated at 18 terawatt-hours in 1998 and 24 terawatt-hours in 1999.

There are 29 countries that have active wind energy programmes. Most of the capacity added in 1998 (2,048 megawatts) was in four countries: for Germany 793 megawatts, for the United States 577 megawatts, for Spain 368 megawatts, and for Denmark 310 megawatts (table 7.6).

Based on an analysis of the national energy policies for the most relevant countries, BMT Consult expects the global installed power to grow to around 30,000 megawatts of electricity in 2004.

Several generic scenarios assess the growth of wind power in the coming decades. One of the most interesting - by BTM Consult for the FORUM for Energy & Development, presented at the COP-4 of the UN-FCCC in Buenos Aires in December 1998 - addresses three questions. Can wind power contribute 10 percent of the world’s electricity needs within three decades? How long will it take to achieve this? How will wind power be distributed over the world?

Two scenarios were developed. The recent trends scenario extrapolates current market development, while the international agreements scenario assumes that international agreements are realised. Both scenarios assumed that integrating up to 20 percent of wind power in the grid (in energy terms) would not be a problem with present grids, modern fossil fuel power plants, and modern wind turbines. Analysis of the world’s exploitable wind resources, with growth of electricity demand as indicated in the World Energy Outlook (IEA, 1995 and 1996), led to the following conclusions:

· Under the recent trends scenario - starting with 20,000 megawatts by the end of 2002 and assuming a 15 percent cost reduction, and later 12 percent and 10 percent, for each doubling of the accumulated number of installations - 10 percent penetration is achieved around 2025, and saturation in 2030 - 35, at about 1.1 terawatt. In this scenario the cost of generating wind electricity would come down to $0.032 a kilowatt-hour (1998 level) on average, ± 15 percent (depending on wind speed, connection costs to the grid, and other considerations).

· Under the international agreements scenario - with the same starting conditions but a slightly different learning curve - growth is faster and 10 percent penetration is achieved around 2016, with saturation in 2030 - 35 at about 1.9 terawatts. In this scenario the cost would come down to $0.027 a kilowatt-hour on average, again ± 15 percent.

TABLE 7.6. INSTALLED WIND POWER, 1997 AND 1998


Installed megawatts 1997

Cumulative megawatts 1997

Installed megawatts 1998

Cumulative megawatts 1998

Canada

4

26

57

83

Mexico

0

2

0

2

United States

29

1.611

577

2.141

Latin America

10

42

24

66

Total Americas

43

1.681

658

2.292

Denmark

285

1.116

310

1.420

Finland

5

12

6

18

France

8

13

8

21

Germany

533

2.081

793

2.874

Greece

0

29

26

55

Ireland

42

53

11

64

Italy

33

103

94

197

Netherlands

44

329

50

379

Portugal

20

39

13

51

Spain

262

512

368

880

Sweden

19

122

54

176

United Kingdom

55

328

10

338

Other Europe

13

57

23

80

Total Europe

1.318

4.793

1.766

6.553

China

67

146

54

200

India

65

940

52

992

Other Asia

9

22

11

33

Total Asia

141

1.108

117

1.224

Australia and New Zealand

2

8

26

34

Pacific Islands

0

3

0

3

North Africa (incl. Egypt)

0

9

0

9

Middle East

8

18

0

18

Former Soviet Union

1

19

11

19

Total other continents and areas

11

57

37

83

Annual installed capacity worldwide

1.513


2.577


Cumulative capacity installed worldwide


7.639


10.153

Note: The cumulative installed capacity by the end of 1998 is not always equal to the 1997 data plus installed capacity during 1998, because of adjustments for decommissioned and dismantled capacity.

Source: BTM Consult, 1999.

In this second scenario, the regional distribution of wind power is North America 23 percent, Latin America 6 percent, Europe (Eastern and Western) 14 percent, Asia 23 percent, Pacific OECD 8 percent, North Africa 5 percent, former Soviet Union 16 percent, and rest of the world 5 percent.

Technology developments

Wind turbines become larger. From the beginning of the modern wind energy technology era in the mid-1970s, there has been gradual growth in the unit size of commercial machines. In the mid-1970s the typical size of a wind turbine was 30 kilowatts of generating capacity, with a rotor diameter of 10 metres. The largest units installed in 1998 had capacities of 1,650 kilowatts with rotor diameters of 66 metres. By 1999, 460 units with a generating capacity of 1 megawatt or more were installed world-wide. Turbines with an installed power of 2 megawatts (70 metres diameter) are being introduced in the market, and 3 - 5 megawatt machines are on the drawing board (table 7.7).

Market demands drive the trend towards larger machines: economies of scale, less visual impacts on the landscape per unit of installed power, and expectations that offshore potential will soon be developed. The average size of wind turbines installed is expected to be 1,200 kilowatts before 2005 and 1,500 kilowatts thereafter. Note, however, that the optimum size of a turbine - in cost, impact, and public acceptance - differs for onshore (nearby as well as remote) and offshore applications.

Wind turbines become more controllable and grid-compatible. The output of stall regulated wind turbines is hardly controllable, apart from switching the machine on and off. Output varies with the wind speed until reaching the rated wind speed value. As the application of the aerodynamic stall phenomena to structural compliant machines gets more difficult with bigger turbines, blade pitch control systems are being applied to them. For structural dynamics and reliability, a blade-pitch system should be combined with a variable speed electric conversion system. Such systems typically incorporate synchronous generators combined with electronic AC-DC-AC converters.

TABLE 7.7. AVERAGE SIZE OF INSTALLED WIND TURBINES, 1992 - 99

Year

Size (kilowatts)

1992

200

1994

300

1996

500

1998

600

1999

700

Modern electronic components have enabled designers to control output - within the operational envelope of the wind speed - and produce excellent power quality. These developments make wind turbines more suitable for integration with the electricity infrastructure and ultimately for higher penetration. These advantages are of particular interest for weak grids, often in rural and remote areas that have a lot of wind.

Wind turbines will have fewer components. For lower costs and greater reliability and maintainability, designers now seek technology with fewer components - such as directly driven, slow-running generators, with passive yaw and passive blade pitch control. In Germany 34 percent of the installed power in 1998 (770 megawatts) was realised with this type of technology.

Special offshore designs are on the drawing board. With the first offshore wind farms in Europe, industrial designers are developing dedicated turbine technologies for large wind farms in the open sea (Beurskens, 2000). Outages onshore can often be corrected quickly so that only a small amount of energy is lost. But offshore the window for carrying out repairs or replacing components is often limited. The high cost of complete installations implies the use of large wind turbines, which will probably have installed powers of 3 - 6 megawatts. Offshore design features will include novel installation concepts, electricity conversion and transport systems, corrosion protection, and integration with external conditions (both wind and wave loading).

Time to market is becoming shorter than project preparation time. Although there is a temporary shortage of supply of wind turbines in some countries, competition among manufacturers is fierce. One way to become more competitive is to keep implementing innovations and component improvements to reduce cost. Times to market new products are also becoming short (two to three years). As a result, just as the construction of a wind farm commences, the technology is already outdated.

System aspects

Wind turbines deliver energy, but little capacity. Because wind energy is intermittent, wind turbines mainly deliver energy, but little capacity value often 20 percent or less of the installed wind power. And this percentage falls when the penetration of wind turbines increases, requiring even more back-up power for a reliable energy supply. But wind-generated electricity can be transformed from intermittent to baseload power if it is combined with, say, compressed air energy storage. In this way a high capacity factor can be achieved with a small economic penalty, potentially about $0.01 a kilowatt-hour (Cavallo, 1995). This option becomes attractive when wind electricity generation costs fall below $0.03 a kilowatt-hour. It also opens the possibility of exploiting wind resources remote from markets, as in the Great Plains of the United States (Cavallo, 1995) and in inner Mongolia and northwest China (Lew and others, 1998).

Wind power becomes more predictable. Meteorological research on predicting the output of wind farms a few hours in advance has produced computer programs that optimise the operational and fuel costs of regional electricity production parks (Denmark, Germany). This will increase the capacity value of wind power and the value of the electricity produced.

Capacity factors are somewhat adjustable. Some general misconceptions sometimes lead to the wrong decisions or conclusions. The capacity factor (annual energy output/output based on full-time operation at rated power) depends on local winds and wind turbines. By optimising the turbine characteristics to the local wind regime, the capacity factor - now often 20 - 25 percent - can be optimised without losing too much energy output. But extreme capacity factors - say, 40 percent - automatically means a large loss of potential energy output.

Renewed interest in autonomous systems. In the mid-1980s interest grew in the application of wind turbines in isolated areas without an energy infrastructure. Two systems can be distinguished:

· Hybrid systems, in which a wind turbine operates in parallel with, for example, a diesel set (to save fuel consumption and to decrease maintenance and repairs) or a diesel generator combined with a battery storage unit.

· Standalone units, for charging batteries, pumping water for irrigation, domestic use, watering cattle, or desalination and cooling.

More than 30 experimental hybrid systems have been developed and tested, almost all stopped without a commercial follow up, because of unreliable and expensive components. The interest in hybrid and standalone systems is being revived - initiated by the search for new markets for renewable energy systems and influenced by spectacular improvements in performance and cost for wind turbines and power electronics (box 7.5 and chapter 10). For successful market entry, systems have to be modular, and standards for components and subsystems introduced.

Small battery-charging wind generators are manufactured by the thousand in China, Mongolia, and elsewhere, making them more numerous than larger diameter wind generators. Although their contribution to world energy supply is negligible, their potential impact on the energy needs of rural and nomadic families is significant (as with photovoltaic home systems).

Environmental aspects

Environmental aspects come into play in the three phases of a wind turbine project: building and manufacturing, normal operation during the turbine’s lifetime, decommissioning

Industrial designers
are developing dedicated
turbine technologies for
large wind farms in
the open sea.

Building and manufacturing. No exotic materials or manufacturing processes are required in producing a wind turbine or building the civil works. The energy payback time of a large wind turbine, under typical Danish conditions, is 3 to 4 months (Dannemand Andersen, 1998).

Normal operation. Negative environmental aspects connected to the use of wind turbines are: acoustic noise emission, visual impact on the landscape, impact on bird life, moving shadows caused by the rotor, and electromagnetic interference with radio, television, and radar signals. In practice the noise and visual impact cause the most problems. Acoustic noise emission prevents designers from increasing the tip speed of rotor blades, which would increase the rotational speed of the drive train shaft and thus reduce the cost of gearboxes or generators. Aero-acoustic research has provided design tools and blade configurations to make blades considerably more silent, reducing the distance needed between wind turbines and houses.

The impact on bird life appears to be minor if the turbines are properly located. A research project in the Netherlands showed that the bird casualties from collisions with rotating rotor blades on a wind farm of 1,000 megawatts is a very small fraction of those from hunting, high voltage lines, and vehicle traffic (Winkelman, 1992). In addition, acoustic devices might help prevent birds from flying into rotor blades (Davis, 1995).

During normal operation a wind turbine causes no emissions, so the potential to reduce carbon dioxide emissions depends on the fuel mix of the fossil-fuelled plants the wind turbine is working with. A study by BTM Consult (1999) indicates that in 2025 wind energy could prevent the emission of 1.4 - 2.5 gigatonnes of carbon dioxide a year.

Decommissioning. Because all components are conventional, the recycling methods for decommissioning the wind turbine are also conventional. Most blades are made from glass or carbon fibre reinforced plastics, processed by incineration. To replace glass and carbon and close the cycle of material use, wood composites are being applied and biofibres developed.

BOX 7.5. HYBRID WIND, BATTERY, AND DIESEL SYSTEMS IN CHINA

Since 1994 the 360 inhabitants of the village of Bayinaobao in Inner Mongolia have been provided with electricity from a hybrid electricity system that employs two 5-kilowatt wind turbines, a battery storage unit, and a diesel generator. In this system the wind turbines provide about 80 percent of the electricity generated. The technology is being developed under a German-Chinese industrial joint venture aimed at transferring the German-developed wind turbine and ancillary technologies. By the time 140 systems have been built, local content should account for about 70 percent of the wind turbine technology, reducing the cost of an imported system by half. Based on the performance of the first unit and the costs projected for components, the electricity from the hybrid system will cost less (up to 22 percent less, at a diesel fuel price of $0.38 a litre) than from the conventional diesel system (Weise and others, 1995).

Economic aspects

The energy generation costs of wind turbines are basically determined by five parameters:

· Turnkey project cost. Initial investment costs (expressed in U.S. dollars a square metre of swept rotor area), project preparation, and infrastructure make up the turnkey project costs. The costs of European wind turbines are typically $410 a square metre (machine cost, excluding foundation). Project preparation and infrastructure costs depend heavily on local circumstances, such as soil conditions, road conditions, and the availability of electrical substations. Turnkey costs vary from $460 a square metre to $660 a square metre (with 1 ECU = 1.1 U.S. dollar).

· Energy output of the system. The energy output of a wind turbine can be estimated by E = b. V3 kilowatt-hours a square metre, where E is the annual energy output, b is the performance factor, and V is the average wind speed at hub height. The factor b depends on the system efficiency of the wind turbine and the statistical distribution of wind speeds. In coastal climates in Europe a value of 3.15 for b is representative for modern wind turbines and not too far away from the theoretical maximum. On good locations in Denmark, northern Germany, and the Netherlands annual outputs of more than 1,000 kilowatt-hours a square metre are often achieved.

· Local average wind speed. In general, local average wind speed should exceed five metres a second at a height of 10 metres to allow economic exploitation of grid-connected wind turbines. Availability of the system. The technical availability of modern wind farms exceeds 96 percent.

· Lifetime of the system. Design tools have improved so much that designing on the basis of fatigue lifetime has become possible. As a result one can confidently use lifetimes of 15 - 20 years for economic calculations.


FIGURE 7.2. DEVELOPMENT OF WIND ELECTRICITY GENERATION COSTS IN DENMARK, 1981 - 1997

Source: BTM Consult, 1999.

For Europe a state-of-the-art reference calculation uses the following values:

Turnkey cost

$600 a square metre

Interest

5 percent

Economic lifetime

15 years

Technical availability

95 percent

Annual energy output

3.15 V3 kilowatt-hours a square metre

O & M costs

$0.005 a kilowatt-hour

If average wind speeds at the hub height range from 5.6 - 7.5 metres a second, the corresponding electricity production cost is $0.12 - 0.05 a kilowatt-hour. Because the energy of the wind is proportional to the third power of the wind speed, the economic calculations are very sensitive to the local average annual wind speed.

Figure 7.2 illustrates the cost reductions for electricity generation from wind turbines in Denmark since 1981. But take care in translating these figures to other regions, for the cost of project preparation, infrastructure, and civil works in Denmark is low relative to many other regions. BTM Consult (1999) expects a 35 - 45 percent reduction in generation costs in the next 15 - 20 years (figure 7.3).

Implementation issues

Manufacturers and project developers usually identify the following items as serious barriers for efficient implementation of wind turbine projects:

· Fluctuating demand for wind turbines as a result of changing national policies and support schemes.

· Uncertainties leading to financing costs as a result of changing governmental policies.

· Complicated, time-consuming, and expensive institutional procedures, resulting from a lack of public acceptance, which varies consid-erablyfrom country to country.

· Project preparation time often longer than the ‘time to market’ of new wind turbine types.

· Lack of sufficient international acceptance of certification procedures and standards.


FIGURE 7.3. POTENTIAL COST REDUCTIONS FOR WIND POWER, 1997 - 2020

Source: BTM Consult, 1999.

Denmark and the United States were the first to introduce an integrated approach to wind energy, encompassing both technical development and the introduction of market incentives. Now more than 25 countries use a great variety of incentives, some very successful and some complete failures. The applied incentive schemes can be grouped in three categories, or in combinations of these categories:

· Fixed tariff systems, such as those of Denmark, Germany, and Spain (favourable payback tariffs are fixed for a period of, say, 10 years).

· Quota or concession systems, such as the Non Fossil Fuel Obligation of England and the systems of France, Ireland, and Scotland (competitive bidding for projects until a set amount of electricity production is realised).

· Other systems to stimulate the application of wind energy, such as tax breaks, carbon taxes, green electricity, and tradable green labels.

With the first schemes, Denmark, Germany, and Spain installed many more wind turbines than countries using other schemes. Elsewhere in Europe, the second system has demonstrated success also (table 7.8). But none of the schemes can be easily translated from one country to another. Legal circumstances and public acceptance may differ completely. Moreover, several incentives have been introduced only recently, and their effectiveness is not yet known.

Under favourable legislation and general acceptance by the public, a fixed tariff system may be quite successful, because it provides financial security to project developers, owners, and financiers. In the long term, however, fixed tariffs will become too expensive to subsidise if they are not modified. As a result the industry might collapse unless the incentive program brings the cost of the technology down. Quota systems based on calls for tenders only once in two or three years may lead to extreme fluctuations in the market growth. Concessions appear interesting for harnessing large, high-quality wind resources in regions remote from major electricity markets (PCAST, 1999). However, very large wind projects for remote wind resources require a different industry structure from today’s. Needed are large project developers with deep financial pockets - not wind turbine suppliers. The installation of wind turbines can also increase if individuals, groups of individuals, or cooperatives are allowed to own one or more wind turbines as small independent power producers (IPPs) and to sell electricity to the grid.

It is too early to judge whether tradable green certificates, connected to a quota system, are viable. Marketing green electricity seems to developsuccessfully only when the public recognises green electricity as a product different from regular electricity, worth the additional costs.

TABLE 7.8. TYPE OF INCENTIVE AND WIND POWER ADDED IN 1998

Type of incentive

Country

Megawatts added

Percentage increase

Fixed tariffs

Denmark

310

28


Germany

793

38


Spain

368

72


Total

1,471

40

Quota or concession systems

France

8

62


Ireland

11

21


United Kingdom

10

3


Total

29

7

Conclusion

· The potential of wind energy is large, with the technical potential of generating electricity onshore estimated at 20,000 - 50,000 terawatt-hours a year.

· When investigating the potential, special attention should go to possibilities offshore. Studies for Europe indicate that the offshore wind resources that can be tapped are bigger than the total electricity demand in Europe.

· The average growth rate of the cumulative capacity over the last six years has been about 30 percent a year, bringing the cumulative installed wind turbine capacity to about 10,000 megawatts at the end of 1998 and about 13,500 megawatts at the end of 1999 - and wind energy production to 18 terawatt-hours in 1998 and 24 terawatt-hours in 1999.

· Wind turbines are becoming larger, with the average size installed in 1998 at 600 kilowatts, up from about 30 kilowatts in the mid-1970s. Turbines of megawatt size are being developed and should soon be commercially available.

· Costs have to come down further, requiring development of advanced flexible concepts and dedicated offshore wind energy systems. Cost reductions up to 45 percent are feasible within 15 years. Ultimately wind electricity costs might come down to about $0.03 a kilowatt-hour.

· Although wind-generated electricity is an intermittent resource, it can be transformed to baseload power supply if combined with energy storage. For compressed air energy storage the additional costs may be limited to about $0.01 a kilowatt-hour, opening the possibility of exploiting good wind resources remote from markets.

· The environmental impacts of wind turbines are limited, with noise and visibility causing the most problems, increasing public resistance against the installation of new turbines in densely populated countries.

· Interest in small turbines is being revived for standalone and autonomous systems in rural areas.

Photovoltaic solar energy

Photovoltaic solar energy conversion is the direct conversion of sunlight into electricity. This can be done by flat plate and concentrator systems.


FIGURE 7.4. VARIATIONS IN AVERAGE MONTHLY INSOLATION OVER THE YEAR IN THREE LOCATIONS

Source: Eliasson, 1998.

TABLE 7.9. POTENTIAL CONTRIBUTION OF SOLAR ENERGY TECHNOLOGIES TO WORLD ENERGY CONSUMPTION ACCORDING TO DIFFERENT STUDIES (EXAJOULES OF ELECTRICITY)

Study

2020 - 2025

2050

2100

WEC, 1994 a,b

16



IIASA and WEC, 1998

2 - 4

7 - 14


RIGES, 1993 (solar and wind)

17

35


Shell, 1996

<10

200


Greenpeace and SEI, 1993(solar and wind)

90

270

830

Reference: total world energy consumption

400 - 600

400 - 1,200


An essential component of these systems is the solar cell, in which the photovoltaic effect - the generation of free electrons using the energy of light particles - takes place. These electrons are used to generate electricity.

Characteristics of the source

Solar radiation is available at any location on the surface of the Earth. The maximum irradiance (power density) of sunlight on Earth is about 1,000 watts a square metre, irrespective of location. It is common to describe the solar source in terms of insolation - the energy available per unit of area and per unit of time (such as kilowatt-hours per square metre a year). Measured in a horizontal plane, annual insolation varies over the Earth’s surface by a factor of 3 - from roughly 800 kilowatt-hours per square metre a year in northern Scandinavia and Canada to a maximum of 2,500 kilowatt-hours per square metre a year in some dry desert areas.

The differences in average monthly insolation (June to December) can vary from 25 percent close to the equator to a factor of 10 in very northern and southern areas (figure 7.4), determining the annual production pattern of solar energy systems. The ratio of diffuse to total annual insolation can range from 10 percent for bright sunny areas to 60 percent or more for areas with a moderate climate, such as Western Europe. The actual ratio largely determines the type of solar energy technology that can be used (non-concentrating or concentrating).

The potential of photovoltaic solar energy

The average power density of solar radiation is 100 - 300 watts a square metre. The net conversion efficiency of solar electric power systems (sunlight to electricity) is typically 10 - 15 percent. So substantial areas are required to capture and convert significant amounts of solar energy to fulfil energy needs (especially in industrialised countries, relative to today’s energy consumption). For instance, at a plant efficiency of 10 percent, an area of 3 - 10 square kilometres is required to generate an average of 100 megawatts of electricity - 0.9 terawatt-hours of electricity or 3.2 petajoules of electricity a year - using a photovoltaic (or solar thermal electricity) system.

The total average power available at the Earth’s surface in the form of solar radiation exceeds the total human power consumption by roughly a factor of 1,500. Calculated per person, the average solar power available is 3 megawatts, while the consumption varies from 100 watts (least industrialised countries) to 10 kilowatts (United States), with an average of 2 kilowatts. Although these numbers provide a useful rough picture of the absolute boundaries of the possibilities of solar energy, they have little significance for the technical and economic potential. Because of differences in the solar energy supply pattern, energy infrastructure, population density, geographic conditions, and the like, a detailed analysis of the technical and economic potential of solar energy is best made regionally or nationally. The global potential is then the sum of these national or regional potentials.

The economic potential of solar energy, a matter of debate, depends on the perspectives for cost reduction. In the recent past several scenario studies have assessed the potential application of solar energy technologies (IIASA and WEC, 1998; WEC, 1994a,b; Johansson and others, 1993a; Shell, 1996; Greenpeace and SEI, 1993). They provide a picture of different views on the potential penetration of solar energy in the 21st century (table 7.9).

The technical potential of photovoltaics has been studied in some detail in several countries. In densely populated countries with a well-developed infrastructure, there is an emphasis on applications of grid-connected photovoltaic systems in the built environment (including infrastructural objects like railways and roads). These systems are necessarily small- or medium-sized, typically 1 kilowatt to 1 megawatt.1 The electricity is generated physically close to the place where electricity is also consumed. In less densely populated countries there is also considerable interest in ‘ground-based’ systems, generally larger than 1 megawatt. The area that would be required to generate an average electrical power equal to the total present human power consumption - assuming 10 percent plant efficiency and an insolation of 2,000 kilowatt-hours per square metre a year - is roughly 750 x 750 square kilometres. In countries or rural regions with a weak or incomplete grid infrastructure, small standalone systems and modular electric systems may be used for electrification of houses or village communities.

Photovoltaic market developments

Between 1983 and 1999 photovoltaic shipments grew by just over 15 percent a year (figure 7.5). In 1998 around 150 megawatts of solar cell modules were produced, in 1999 nearly 200 megawatts. In 1998 cumulative production was around 800 megawatts. Probably about 500 megawatts, perhaps 600 megawatts, of this production was in operation in 1998, generating about 0.5 terawatt-hours a year. In 1993 - 98 operating capacity increased by roughly 30 percent a year.

In 1990 - 94 the market share of solar home systems and village power systems was 20 percent (based on power volume). Grid-connected systems accounted for 11 percent, with the rest for water pumping, communication, leisure, consumer products, and the like (EPIA and Altener, 1996). In 1995 - 98 the relative importance of grid-connected systems increased to 23 percent (Maycock, 1998).

Current status and future development of photovoltaic solar cells and modules

The major component of photovoltaic solar energy systems is the solar module, normally a number of solar cells connected in series. The efficiency of an ideal photovoltaic cell is about 30 percent at most (for a single cell under natural sunlight). Higher efficiencies can be achieved by stacking cells with different optical properties in a tandem device, by using concentrator cells, or by combining these two. The efficiency of practical solar cells is determined by several loss mechanisms. An overview of efficiencies achieved through 1999 for different cells and modules is given in table 7.10.

Solar cells and their corresponding modules can be divided into two main categories: wafer-type and thin-film. Wafer-type cells are made from silicon wafers cut from a rod or ingot, or from silicon ribbons. Thin-film cells are deposited directly onto a substrate (glass, stainless steel, plastic). For flat-plate applications, the individual cells are connected in series to form a module. Solar cells for concentrator systems are mounted in a one-dimensional or two-dimensional optical concentrator.


FIGURE 7.5. PHOTOVOLTAIC SHIPMENTS, 1983 - 1999

Source: Based on a Maycock, 1998; PVIR, 1999.

TABLE 7.10. IMPORTANT PHOTOVOLTAIC SOLAR CELL AND MODULE TECHNOLOGIES

Technology

Symbol

Characteristic

Record efficiency laboratory cells (percent)

Typical efficiency commercial flat-plate modules (percent)

Single crystal silicon

sc-Si

Wafer-type

24

13 - 15

Multi-crystalline silicon

mc-Si

Wafer-type

19

12 - 14

Crystalline silicon films on ceramics

f-Si

Wafer type

17

(8 - 11)

Crystalline silicon films on glass


Thin film

9


Amorphous silicon (including silicon-germanium tandems)

a-Si

Thin film

13

6 - 9

Copper-indium/gallium-diselenide

CIGS

Thin film

18

(8 - 11)

Cadmium telluride

CdTe

Thin film

16

(7 - 10)

Organic cells (including dye-sensitised titanium dioxide cells)


Thin film

11


High-efficiency tandem cells

III-V

Wafer-type and thin film

30


High-efficiency concentrator cells

III-V

Wafer-type and thin-film

33 (tandem)
28 (single)


Note: Numbers in parentheses are results from pilot production or first commercial production.

Source: Green and others, 1999.

For the technologies in table 7.10, sc-Si, mc-Si, and a-Si are fully commercial, with the first two taking 85 percent of the 1998 commercial market, and the third 13 percent. (PVIR, 1999). CIGS and CdTe are emerging commercial technologies, whereas f-Si and one form of crystalline silicon films on glass appear to be in a pilot production phase. Organic cells are still in a laboratory stage, though dye-sensitised titanium dioxide cells are considered for near-term indoor applications. High-efficiency cells are used in concentrator systems.

It is still too early to identify winners or losers among the photo-voltaic technologies under development or in production. There is reasonable consensus that thin-film technologies generally offer the best long-term perspective for very low production cost. But crystalline silicon wafer technology also still has a huge potential for cost reduction through economies of scale and technological improvements. This perspective recently triggered major investments in new production capacity. So it is not yet clear when thin films will become dominant in the photovoltaics market.

The conversion efficiency of commercial modules should increase steadily over the next decades (irrespective of the technology). For the medium term (2010) the efficiency is likely to be about 12 - 20 percent (Maycock, 1998), and for the longer term (beyond 2020) possibly 30 percent or even somewhat more (EUREC Agency, 1996). Note, however, that this is based on an evaluation of what is physically possible, not on what could be done technologically at low cost. Moreover, it is not expected that these high efficiencies can be obtained by simple extrapolation of today’s commercial technologies. It is not very likely that modules with the lowest manufacturing cost per watt have the highest efficiency.

System aspects

Photovoltaic system components. To make use of the electricity from photovoltaic cells and modules, one has to build a complete system, also comprising electronic parts, support structures, and sometimes electricity storage. It is customary to use the term balance-of-system (BOS) for the sum of system components and installation excluding modules.

Type and size of photovoltaic systems. Photovoltaics can be used in a wide variety of applications, from consumer products and small standalone units for rural use (such as solar home systems and solar lanterns) to grid-connected rooftop systems and large power stations. Typical system size varies from 50 watts to 1 kilowatt for standalone systems with battery storage, from 500 watts to 5 kilowatts for rooftop grid-connected systems, and from 10 kilowatts to many megawatts for grid-connected ground-based systems and larger building-integrated systems. Of these market segments, rural electrification for sustainable development and building-integrated systems (as forerunners of large-scale implementation) are expected to grow rapidly because of concentrated marketing efforts and financial incentives.

Need for storage. Because photovoltaic modules offer an intermittent source of energy, most standalone systems are equipped with battery storage (usually a lead-acid battery) to provide energy during the night or during days with insufficient sunshine. In some cases batteries store energy during longer periods. When using grid-connected photovoltaic systems, the grid serves as ‘virtual storage’: electricity fed into the grid by photovoltaics effectively reduces the use of fuel by power plants fired by coal, oil, or gas.

Performance ratio of photovoltaic systems. It is of great practical importance to be able to predict the actual energy that a photo-voltaic system of a certain size feeds into the grid. But that requires reliable information on the insolation in the plane of the system, on the system power under standard test conditions, and on the system losses. For simplicity, all system losses in grid-connected photo-voltaic systems are taken together in the performance ratio, which is the ratio of the time-averaged system efficiency to the module efficiency under standard conditions. For grid-connected photo-voltaic systems the state-of-the-art performance ratio, now typically 0.75 - 0.85, could increase to 0.9 in the longer term. For state-of-the-art standalone systems the typical performance ratio is 0.6.

Environmental aspects

Environmental life-cycle analysis. Solar technologies do not cause emissions during operation, but they do cause emissions during manufacturing and possibly on decommissioning (unless produced entirely by ‘solar breeders’). With the industry growing, there is now considerable interest in environmental aspects of solar technologies. Environmental life-cycle analyses of photovoltaic systems and components (Alsema and Nieuwlaar, 1998) are already leading to the development of different materials and processes in the manufacturing of photovoltaic modules (see Tsuo and others, 1998). An example is developing water-based pastes instead of pastes based on organic solvents for screen printing. In addition, several recycling processes have been developed for off-spec or rejected modules.

Energy payback time. One of the most controversial issues for photovoltaics is whether the amount of energy required to manufacture a complete system is smaller or larger than the energy produced over its lifetime. Early photovoltaic systems were net consumers of energy rather than producers. In other words, the energy payback time of these systems was longer than their lifetime. This situation has changed and modern grid-connected rooftop photovoltaic systems now have payback times much shorter than their (expected) technical lifetime of roughly 30 years (Alsema, Frankl, and Kato, 1998) (table 7.11).

For grid-connected ground-based systems the energy payback time of the balance of system is longer than for rooftop systems, because of materials used in foundation and support. The energy payback time, now three to nine years, will decrease to one to two years.

For standalone photovoltaic systems with battery storage (such as solar home systems) the situation is less favourable than for grid-connected systems, because of the long energy payback time associated with the (lead-acid) battery. At an insolation of 2,000 kilowatt-hours per square metre a year, the energy payback time of modern solar home systems is now seven to 10 years (Alsema and Nieuwlaar, 1998). This number may come down to roughly six years, of which five are due to the battery. Since the technical lifetime of a battery in a photovoltaic system is usually five years or less, the direct effectiveness of (present generation) solar home systems for the reduction of greenhouse gas emissions is a matter of debate.

The total average power available at the
Earth's surface in the form of solar
radiation exceeds the total human
power consumption by
roughly a factor
of 1,500.

Carbon dioxide mitigation potential. The carbon dioxide mitigation potential of photovoltaics can be roughly inferred from the data on energy payback time, assuming that emissions of greenhouse gases (SF6 and CF4) related to photovoltaic cell and module production are effectively minimised. As an example, a photovoltaic system with an energy payback time of two years at 1,500 kilowatt-hours per square metre a year and a technical lifetime of 30 years (ratio 1:15) will produce 15 kilowatt-hours of electricity without emissions for each kilowatt-hour of electricity ‘invested’ in manufacturing. Specific carbon dioxide emissions are therefore fifteen times lower than those of the relevant fuel mix - the mix used in supplying the total photovoltaics industry chain with energy.

Materials availability. The crystalline silicon photovoltaics industry has so far used off-grade material from the semiconductor industry as its feedstock. Very fast growth of the crystalline silicon photo-voltaics industry would require dedicated production of ‘solar grade’ silicon (Bruton and others, 1997). Although several processes for solar grade silicon have been developed to a laboratory scale, none has been taken into commercial production. It is expected, however, that new feedstock can be made available in time if necessary. The availability of some of the elements in thin-film photovoltaic modules (like indium and tellurium) is a subject of concern. There apparently are no short-term supply limitations, but the match between demand from the photovoltaics industry and world market supply may become an issue at very large (multiple gigawatts a year) production levels (Johansson and others, 1993b). CdTe and CIGS may therefore be valuable bridging technologies (Andersson, 1998).

TABLE 7.11. ESTIMATED ENERGY PAYBACK TIME OF GRID-CONNECTED ROOFTOP PHOTOVOLTAIC SYSTEMS (YEARS)


State of the art

Near to medium term (<10 years)

Long term

Modules





Crystalline silicon

3 - 8

1.5 - 2.5

<1.5


Thin film

2 - 3

0.5 - 1.5

<0.5

Balance of system

<1

0.5

<0.5

Total system





Crystalline silicon

4 - 9

2 - 3

<2


Thin film

3 - 4

1 - 2

<1

Note: Based on an insolation of 1,500 kilowatt-hours per square metre a year.

Source: Alsema, Frankl and Kato, 1998.

Health. Of special concern is the acceptance of cadmium-containing photovoltaic modules. The cadmium content of CdTe (and CIGS) modules appears to be well within limits for safe use (Alsema and Nieuwlaar, 1998). And production processes can fulfil all applicable requirements. But political and public acceptance is not automatic. Therefore, there are efforts to eliminate cadmium from CIGS modules even at the cost of a reduced efficiency. Also a closed cycle for reclaiming and recycling of disposed CdTe modules has been developed (Bohland and others, 1998).

Economic aspects

Photovoltaic system cost. The turnkey cost of a photovoltaic system is determined by the module cost and by the balance-of-system (BOS) costs, which contains the cost of all other system components, electrical installation costs, and costs associated with building integration, site preparation, erection of support structures, and so on. The turnkey price is generally 20 - 40 percent higher than the cost.

In 1998 photovoltaic module prices were $3 - 6 a watt, depending on supplier, type, and size of order (Maycock, 1998; IEA PVPS, 1998). The prices of complete photovoltaic systems vary widely with system type and size, and from country to country (Thomas and others, 1999; IEA PVPS, 1998). But $5 - 10 a watt for grid-connected systems and $8 - 40 a watt for standalone systems are considered representative today.

The future cost and price reduction of photovoltaic modules and systems can be evaluated in two ways. The first is by detailed analysis of manufacturing costs for a specific technology as function of technology improvements and innovations - and of production volumes. The second is by general analysis of photovoltaic markets and industries, using a learning curve approach. (Note that the second approach deals with prices rather than costs.)

TABLE 7.12. POSSIBLE COSTS OF GRID-CONNECTED PHOTOVOLTAIC SYSTEMS, BASED ON DIFFERENT EVALUATIONS OF PHOTOVOLTAIC PRODUCTION TECHNOLOGIES (APPROACH 1) (1998 DOLLARS PER WATT)

Element

1998

Short term (to 2005)

Medium term (2005 - 15)

Long term (after 2015)

Modules

3 - 4

1 - 2

0.5 - 1.0

£ 0.5

Balance of system

2 - 6

1 - 2

0.5 - 1.0

£ 0.5

Turnkey systems

5 - 10

2 - 4

1 - 2

£ 1.0

Note: Prices are 20 - 40 percent higher than costs.

It is still too early to identify
winners or losers among
the photovoltaic technologies
under development or
in production.

· Approach 1. For crystalline silicon technologies, the manufacturing cost of solar cell modules can be reduced from the present $3 - 4 a watt down to $1.5 - 2 a watt in the short term and to around $1 a watt in the longer term. For thin films (a-Si, CdTe, and CIGS), the module costs are expected to fall to $1 - 1.5 a watt in the short term, $0.5 - 1 a watt in the longer term (Carlson and Wagner, 1993; Bruton and others, 1997; Little and Nowlan, 1997; Maycock, 1998). EUREC Agency (1996, p.84) even mentions module costs as low as $0.30 a watt. The corresponding prices are again 20 - 40 percent higher.

The balance-of-system costs for rooftop and ground-based grid-connected systems are now typically $2 - 6 a watt. Improvements and economies of scale in power electronics, integration in the building process, and standardisation will enable reductions to $1 - 2 a watt in the short term, $0.5 a watt in the longer term. The turnkey system cost is therefore expected to decrease to $2 - 4 a watt in the short to medium term and to $1.0 - 1.5 a watt in the longer term. Ultimately (after 2015) system costs around or even below $1 a watt are foreseen (Johansson and others, 1993b; WEC, 1994b; Ber, 1998), resulting in prices of roughly $1 a watt (table 7.12). For such extremely low prices it is necessary to use very cheap modules with high efficiencies (15 - 30 percent), to reduce area-related balance of system costs.

· Approach 2. An evaluation of the development of photovoltaic (mostly module) costs and prices using a learning curve can be found in IIASA and WEC (1998), Maycock (1998), ECN (1999b), and elsewhere. For 1975 - 97 the learning rate has been roughly 20 percent: prices have been reduced by 20 percent for each doubling of the cumulative sales. When the technology and market mature, as for gas turbines, the learning rate may fall to 10 percent (IIASA and WEC, 1998). It is not clear, however, whether this will apply to photovoltaics as well, since the range for all industries is 10 - 30 percent and the value for the semiconductor industry is roughly 30 percent (ECN, 1999a). Here it is assumed that the learning rate stays at 20 percent - and that this rate applies to the total system price, not just to the module price.

In 1998 cumulative sales were roughly 800 megawatts. Production was about 150 megawatts. At growth of 15 percent a year (the average over the past 15 years; IEA PVPS, 1998), annual sales will double every five years - to about 3 gigawatts a year in 2020, when cumulative sales would be 25 gigawatts. As a result prices will have fallen in 2020 to a third of the 1998 level. With far more optimistic growth of 25 percent a year, annual sales would be 20 gigawatts a year in 2020, and cumulative sales 100 gigawatts. Prices will then have fallen to a fifth of the 1998 level.

Table 7.13 gives an overview of the cost estimates using a learning curve approach, for a learning rate of 20 percent (historic value). Results for a low learning rate of 10 percent are given for comparison. The projections using a learning curve approach show a somewhat slower decrease than those based on evaluations of photovoltaic production technologies. Note, however, that new technologies based on the use of thin-film solar cells can follow a different (lower) learning curve than the sum of all technologies.

Photovoltaic electricity costs. Electricity costs are determined by turnkey system costs, economic lifetime (depreciation period), interest rates, operation and maintenance costs (including possible replacement of components), electricity yields of the system (a function of insolation and thus of geographic location), insurance costs, and so on (table 7.14).

Implementation issues

Since the cost of photovoltaic electricity is now well above that of electricity from the grid, photovoltaics are implemented through two distinct paths. One is market development of commercial high-value applications. The second is stimulating the installation of grid-connected systems. Both paths are generally supported through government and international aid programs.

The first path deals mainly with standalone photovoltaic systems and (more recently but to less extent) with small grid-connected systems for private use. The photovoltaics industry has survived the past decades by actively developing niche markets in telecommunication, leisure, lighting, signalling, water-pumping, and rural electrification. The rural market is now being actively pursued as potentially huge, since an estimated 2 billion people in developing countries do not have access to a grid (see chapter 10).

Photovoltaics are often a viable alternative for bringing small amounts of electricity (less than 1 kilowatt-hour a day) to end users. More than 300,000 solar home systems (typically 50 watts) have been installed over the past 10 years, only a very modest step towards true large-scale use (Ber, 1998). In addition a large number of even smaller systems has been sold. This rural market cannot be judged by the total peak power of the systems (300,000 x 50 watts = 15 megawatts). Even if all 2 billion people were to own a 100 watt photovoltaic system, this would contribute less than 1 exajoule of electricity to the world’s energy consumption. Instead, it is the large number of people involved that is significant - and even more that photovoltaics provide light, radio, television, and other important services to them.

A major barrier for rapid growth and very widespread use is the lack (in most countries) of properly developed financing schemes and the infrastructure for distribution, after-sales service, and so on. Financing is essential because few of those 2 billion people can pay cash of $400 for a system. But some can pay a smaller amount, or even a monthly rate of a few dollars up to tens of dollars. This widely acknowledged problem has two solutions. The first is the full commercial development of very small photovoltaic systems to meet basic needs and be paid for in cash (mainly photovoltaic lanterns and other lighting systems in the range of 5 - 20 watts). The second is financing schemes using a down payment and monthly fees of roughly $5 - 20 a lease, or fee-for-service (Ber, 1998).

For grid-connected systems it is important to distinguish between small and medium-sized decentralised systems (typically 500 watts to 1 megawatt) integrated in the built environment and large ground-based, central systems (typically greater than 1 megawatt). Decentralised integrated systems have some advantages over central ground-based ones. Their balance of system costs are generally lower. And they have more technical and non-technical possibilities to increase their competitiveness.

Photovoltaic market development through government programs in industrialised countries (IEA PVPV, 1998) applies mainly to systems integrated in the built environment. The aim of these programs is to boost the development and application of photo-voltaic technology as an essential step towards future large-scale use. They provide market volume to the photovoltaics industry to achieve economies of scale and experience with a completely new way of sustainable (decentralised) electricity generation. Clearly, this policy-driven market depends on public support and high expectations for photovoltaics as a major electricity source for the future.

TABLE 7.13. POSSIBLE EVOLUTION OF TYPICAL COSTS OF GRID-CONNECTED PHOTOVOLTAIC SYSTEMS USING A LEARNING CURVE (APPROACH 2)


1998

Medium term (2010)

Long term (2020)

Average annual market growth rate (percent)

15
(1983 - 98)

15

25

15

25

Annual sales (gigawatts)

0.15

0.8

2

3

20

Cumulative sales (gigawatts)

0.8

6

11

25

100

Turnkey system price (1998 dollars per watt) at a learning rate of 20 percent

5 - 10

2.7 - 5.3

2.2 - 4.3

1.7 - 3.3

1 - 2

Turnkey system price (1998 dollars per watt) at a learning rate of 10 percent

5 - 10

3.7 - 7.4

3.4 - 6.8

3.0 - 5.9

2.4 - 4.8

TABLE 7.14 ELECTRICITY COST AS A FUNCTION OF COST, ECONOMIC LIFETIME, AND ELECTRICITY YIELD OF PHOTOVOLTAIC SYSTEMS (DOLLARS A KILOWATT-HOUR)

Turnkey system cost (dollars a watt)

Economic lifetime (years)

Electricity yield (kilowatt-hours a year per kilowatt of installed capacity)



750

1,500

5

10

1.00 - 1.22

0.51 - 0.61

(lower limit 1998)

25

0.61 - 0.87

0.31 - 0.44

1

10

0.12 - 0.24

0.10 - 0.12

(long term)

25

0.12 - 0.17

0.06 - 0.09

Note: Operation and maintenance and insurance costs are 2 percent of the annual system cost. The interest rate is 5 - 10 percent.

BOX 7.6 SELECTED NATIONAL AND INTERNATIONAL PHOTOVOLTAIC PROGRAMMES

Japan. In 1994 the Japanese government adopted the New Energy Introduction Outline, with targets for renewable energy technologies, including photovoltaics. The aim is to install 400 megawatts of (mainly residential grid-connected) photovoltaic systems by 2000 and 4,600 megawatts by 2010 (Luchi, 1998). The program is based on gradually decreasing subsidies (starting at 50 percent) and net metering.

United States. The Million Solar Roofs program aims to install 1,000,000 solar hot water systems and photovoltaic systems by 2010 (IEA PVPS, 1998; Ber, 1998). The trend is from demonstrations and tests towards market-centred projects with funding primarily from the private sector. The program works by creating partnerships between communities, federal agencies, and the Department of Energy (Rannels, 1998).

Germany. The 100,000 Roofs program (300 - 350 megawatts in 2005) is dedicated to grid-connected photovoltaic systems. Private investments in photovoltaics are stimulated by interest-free loans and a subsidy of 12.5 percent (Photon, 1999b). In addition, the government decided recently to pay nearly 1 deutsche mark a kilowatt-hour to owners of photovoltaic systems, financed by a small increase of electricity rates.

Italy. The 10,000 Rooftops program aims to install 50 megawatts by around 2005 (Garrozzo and Causi, 1998). With a focus on building small- and medium-sized integrated, grid-connected photovoltaic systems, funding may be mixed public (75 percent) and private (25 percent).

European Union. The target for photovoltaics is an installed capacity of 3 gigawatts by 2010. This has been translated into a Million Roofs program to install 500,000 grid-connected photovoltaic systems on roofs and facades in the Union and to export another 500,000 village systems for decentralised electrification in developing countries (EC, 1997; EC, 1999; IEA PVPS, 1998).

Indonesia. In 1998 the installed capacity of photovoltaic systems in Indonesia was 5 megawatts. A new strategy has been developed to enhance the use of renewable energy technologies, especially photovoltaics. Some characteristics of this strategy are: establish renewable energy non-governmental organisations, prepare renewable energy product standards, run demonstration projects in partnership with the private sector, provide training, disseminate information, strengthen international cooperation, and institute policy development and regulation.

India. With a total installed capacity of about 40 megawatts of photovoltaic systems, India has among the world’s largest national programs in photovoltaics. The five-year national plan 1997 - 2002 envisages a deployment of 58 megawatts in addition to the 28 megawatts installed as of 1997. Exports of 12 megawatts are also foreseen. Government-sponsored programs include installing solar lanterns and other lighting systems - and electrifying villages and grid-connected power plants. Subsidies are available to rural users (Sastry, 1999).

South Africa. Shell Renewables Ltd. and Eskom are investing $30 million in rural solar power development in South Africa from 1999 until 2001. This venture should provide standalone photovoltaic units to about 50,000 homes presently without electricity at a cost of about $8 a month (see chapter 10).

Kenya. Kenya has a high penetration rate of household photo-voltaic systems. In 1999 more than 80,000 systems were in place and annual sales are about 20,000 systems. The market operates without significant external aid or support (see chapter 10).

World Bank. The World Bank has become very active in developing financial schemes and programs for rural electrification in developing countries (Photon, 1999a). An example is the photo-voltaic Market Transformation Initiative. The Bank’s activities, fully integrated on a national level, mainly aim at removing barriers and building capacity. Generally, the approach is not to stimulate photovoltaics through subsidies for system hardware, but to facilitate commercial operations fitted to the local circumstances.

A variety of instruments can achieve a self-sustained market: rate-based measures (favourable feed-in tariffs), fiscal measures, investment subsidies, soft loans, building codes. Another instrument is the removal of barriers related, say, to building design and material use. In addition to these incentives, the added value of photovoltaics - like aesthetics in building integration, combining electricity generation and light transmission, and generating part or all of one’s own electricity consumption - are used in marketing photovoltaics. Green electricity and green certificates for the use of renewables are also expected to be important in the further development of a self-sustained market for grid-connected systems. They enable selling electricity from photovoltaics (or other renewables) to environmentally conscious electricity consumers.

Several countries have set targets or formulated programs for renewable energy technologies, specifically solar (box 7.6). In countries with a well-developed electricity infrastructure, the long-term aim is to achieve a substantial contribution to the electricity generation from solar energy. In developing countries and countries with a less-developed electricity infrastructure, efforts are focused on the large-scale implementation of smaller standalone solar photovoltaic systems. In these cases the dissemination of solar energy is a tool for social and economic development.

Space-based solar energy

A very different approach to exploiting solar energy is to capture it in space and convey it to the Earth by wireless transmission. Unlike terrestrial capture of solar energy, a space-based system would not be limited by the vagaries of the day-night cycle and adverse weather - and so could provide baseload electricity (Glaser and others, 1997).

In space the maximum irradiance (power density) is much higher than on Earth - around 1,360 watts per square metre - and is nearly constant. This energy can be captured and converted to electricity just as it can on Earth, as is done routinely to power spacecraft. The elements of such a space-based solar energy system would include:

· Satellites in geosynchronous or other orbits designed as large solar collectors.

· Power conditioning and conversion components to turn the electricity generated by the photovoltaic arrays into radio frequency form.

· Transmitting antennas that form one or more beams directed from the satellites to the Earth.

· Receiving antennas on Earth that collect the incoming radio frequency energy and convert it into useful electricity. Such a device is called a rectenna (for rectifying receiving antenna). The power yield from typical rectennas at low to middle latitudes would be on the order of 30 megawatts per square kilometre.

· Power conditioning components to convert the direct current output from the rectenna to alternating current for local use.

As with any solar source, space-based energy would not contribute to greenhouse gas emissions during operation. The high launch rate required to place a space-based energy system could affect the Earth’s atmosphere, however. The effects of power transmission to the ground need to be assessed for at least three factors: influences on the atmosphere (particularly the ionosphere on the way down), inference between the wireless power transmission and communications or electronic equipment, and the effects of the transmitted beam on life forms. Estimates and some experiments indicate that these effects might be small.

Very preliminary estimates suggest that a cost target of $0.05 per kilowatt-hour may ultimately be achievable for a mature space-based solar energy system (Mankins, 1998). But several important issues must be addressed:

· A number of key technologies require maturation.
· The cost of access to space must be substantially lowered.
· Safety and environmental concerns must be resolved.
· Optimal designs for space-based solar systems need to be established.
· Orbital slots for collecting platforms and frequencies for power transmission need to be obtained.

Conclusion

· Since 1983 the average growth rate of photovoltaic module shipments has been 15 percent a year. In 1998 the production was 150 megawatts, and in 1999, about 200 megawatts. In 1998 the cumulative production was around 800 megawatts, with the operating capacity probably about 500 megawatts, perhaps 600 megawatts. The growth of operating photovoltaic capacity in the last five years can be estimated at roughly 30 percent a year.

· Since 1975 the learning rate (cost reduction as function of cumulative production) has been roughly 20 percent. In 1998 turnkey costs of grid-connected photovoltaic systems were $5 - 10 a watt. In the future these costs may come down to about $1 a watt.

· Today photovoltaics generally cannot compete with conventional power plants in grid-connected applications. Photovoltaic electricity production costs are about $0.3 - 1.5 a kilowatt-hour, depending on solar insolation, turnkey costs, depreciation periods, and interest rates. Under favourable conditions and at favourable sites, the lowest cost figure may come down to $0.05-0.06 a kilowatt-hour.

· It remains uncertain whether and when photovoltaics will compete with fossil fuels on a large scale. This mainly depends on the development of photovoltaics, on the price development of coal and natural gas, and on possibilities for (or policies on) carbon dioxide removal at low cost.

· Supplying less than 1 percent of the world’s energy consumption, photovoltaic systems can play a major role in rural electrification by reaching many of the 2 billion people in developing countries who do not have access to electricity.

· There appear to be no invincible technical problems for solar energy to contribute much to the world’s energy supply. What matters are policy developments and the market position of fossil fuels and other energy sources.

Photovoltaics are often
a viable alternative for bringing
small amounts of electricity (less
than 1 kilowatt-hour a day)
to end users.

Solar thermal electricity

Solar radiation can produce high-temperature heat, which can generate electricity. The most important solar thermal technologies to produce electricity - concentrating - use direct irradiation. Low cloud areas with little scattered radiation, such as deserts, are considered most suitable for direct-beam-only collectors. Thus the primary market for concentrating solar thermal electric technologies is in sunnier regions, particularly in warm temperate, sub-tropical, or desert areas. About 1 percent of the world’s desert area used by solar thermal power plants would be sufficient to generate today’s world electricity demand. Here we will assess the current status and future development of solar thermal electricity (STE) technologies.

The potential of solar thermal electricity

STE is probably 20 years behind wind power in market exploitation. In 1998 operating STE capacity was about 400 megawatts of electricity, with annual electricity output of nearly 1 terawatt-hour. New projects in mind mount to a maximum of 500 megawatts of electricity, and it is probable that 2,000 megawatts of installed capacity will not be reached until 2010 (the capacity wind reached in 1990). Because STE costs are dropping rapidly towards levels similar to those obtained by wind, STE may grow in a manner somewhat similar to wind. If the growth rate is 20 - 25 percent after 2010, this installed STE capacity would be 12,000 - 18,000 megawatts of electricity by 2020. If annual growth rate then averages 15 percent a year, the result would be 800 - 1,200 gigawatts of electricity by 2050. The Cost Reduction Study for Solar Thermal Power Plants, prepared for the World Bank in early 1999 (Enermodal, 1999), concludes that the large potential market of STE could reach an annual installation rate of 2,000 megawatts of electricity. In the foregoing scenario this rate is reached between 2015 and 2020. Advanced low-cost STE systems are likely to offer energy output at an annual capacity factor of 0.22 or more. So, the contribution of STE would be about 24 - 36 terawatt-hours of electricity by 2020 and 1,600 - 2,400 terawatt-hours by 2050.

Solar thermal electricity market developments

STE technologies can meet the requirements of two major electric power markets: large-scale dispatchable markets comprising grid-connected peaking and baseload power, and rapidly expanding distributed markets including both on-grid and remote applications.

Dispatchable power markets. Using storage and hybridisation capabilities (integration of STE with fossil fuel power plants), dispatchable solar thermal electric technologies can address this market. Currently offering the lowest-cost, highest-value solar electricity available, they have the potential to be economically competitive with fossil energy in the longer term. With continuing development success and early implementation opportunities, the electricity production cost of dispatchable STE systems is expected to drop from $0.12 - 0.18 a kilowatt-hour today to about $0.08 - 0.14 a kilowatt-hour in 2005 and to $0.04 - 0.10 a kilowatt-hour thereafter.

In this market there is a huge existing global capacity of fossil fuel plant, much of it coal, available for low solar-fraction retrofit as a transition strategy. Coal-fired plants tend to be much larger individually than solar thermal standalone plants (600 - 1,200 megawatts of electricity compared with 5 - 80 megawatts), and usable land around coal-fired plants is restricted. Any solar retrofit to a typical coal-fired plant will supply only a small percentage of its total electricity output. But around the world, there are hundreds of such fossil fuel plants in good insolation areas, many with sufficient adjacent land area to accommodate a solar field of the size of the current largest STE units of about 80 megawatts. This market could account for a large fraction of the 12,000 - 18,000 megawatts by 2020 in the scenario above.

Distributed power markets. The majority of these applications are for remote power, such as water pumping and village electrification, with no utility grid. In these applications, diesel engine generators are the primary current competition. The STE technology appropriate for smaller distributed applications is the dish/engine system. Each dish/engine module (10 - 50 kilowatts of electricity) is an independent power system designed for automatic start-up and unattended operation. Multiple dish/engine systems can be installed at a single site to provide as much power as required, and the system can readily be expanded with additional modules to accommodate future load growth. The systems can be designed for solar-only applications, easily hybridised with fossil fuels to allow power production without sunlight, or deployed with battery systems to store energy for later use.

BOX 7.7. COMMERCIAL SOLAR THERMAL ELECTRICITY DEVELOPMENTS NOW UNDER WAY

Australia. Under the Australian Greenhouse Office (AGO) Renewable Energy Showcase Programme, a 13 megawatt-thermal compact linear fresnel reflector (CLFR) demonstration unit will be installed in 2001, retrofitted to an existing 1,400 megawatts-electric coal-fired plant in Queensland (Burbridge and others, 2000). It is expected to offer the solar electricity from this first commercial project as green power at a price below $0.09 a kilowatt-hour. A 2 megawatts-electric demonstration unit, using paraboloidal dish technology, has also been announced for installation in 2001, retrofitted to a gas-fired steam generating plant (Luzzi, 2000).

Greece. On the island of Crete, the private venture capital fund Solar Millennium - together with Greek and European industrial partners - has established the first solar thermal project company (THESEUS S.A.) and submitted an application for licensing a 52 megawatt-thermal solar thermal power plant with 300,000 square metres of parabolic trough solar field.

Spain. New incentive premiums for the generation of renewable electricity in 1999 caused Spanish companies such as Abengoa, Gamesa, and Ghersa to engage in solar thermal technologies and to establish various project companies (Osuna and others, 2000).

United States. Green electricity and renewable portfolio policies of various states have revived the interest of such industrial firms as Bechtel, Boeing, and Dukesolar in the further development of STE technologies.

Global Environment Facility. In 1999 the Global Environmental Facility approved grants for the first solar thermal projects in Egypt, India, Mexico, and Morocco - about $200 million in total. The proposed Indian plant uses integrated gas combined cycle and solar thermal (Garg, 2000).

The high value of distributed power (more than $0.50 a kilowatt-hour for some remote applications) provides opportunities for commercial deployment early in the technology development. The technology enhancements needed to achieve high reliability and reduce operation and maintenance costs are understood. With continuing development, the electricity production costs of distributed STE system are expected to drop from $0.20 - 0.40 a kilowatt-hour today to about $0.12 - 0.20 a kilowatt-hour in 2005 and to $0.05 - 0.10 a kilowatt-hour in the long run.

STE projects, ranging from about 10 kilowatts to 80 megawatts of electricity, have been realised or are being developed in Australia, Egypt, Greece, India, Iran, Jordan, Mexico, Morocco, Spain, and the United States (box 7.7).

Market entry strategy. Three phases can be distinguished in an STE market entry strategy:

· Solar field additions. Small solar fields can be integrated into combined cycle and coal or fuel oil-fired power plants for $700 - 1,500 per kilowatt installed.

· Increased solar share. With increasing fossil fuel prices or compensation premiums for carbon dioxide avoidance as well as solar field cost reductions, the share of solar can be increased to about 50 percent in solar-fossil hybrid power stations.

· Thermal energy storage. With further improvement in the cost-benefit ratio of STE, thermal energy storage will further substitute for the need of a fossil back-up fuel source. In the long run, baseload operated solar thermal power plants without any fossil fuel addition are in principle possible, and clean bio-energy back-up is also feasible.

Figure 7.6 presents an outlook on the market introduction of STE technologies and the associated reduction in electricity generation costs as presented by SunLab (1999).

Solar thermal electricity technologies

Five distinct solar thermal electric conversion concepts are available, each with different operating and commercial features. Two non-concentrating technologies - solar chimney and solar pond - are not included in this brief description of emerging solar thermal power concepts, because they lack significantly sized pilot and demonstration test facilities.

All concentrating solar power technologies rely on four basic key elements: collector/concentrator, receiver, transport/storage, and power conversion. The collector/concentrator captures and concentrates solar radiation, which is then delivered to the receiver. The receiver absorbs the concentrated sunlight, transferring its heat energy to a working fluid. The transport/storage system passes the fluid from the receiver to the power conversion system. In some solar thermal plants a portion of the thermal energy is stored for later use. As solar thermal power conversion systems, Rankine, Brayton, Combined, and Stirling cycles have been successfully demonstrated.


FIGURE 7.6 MARKET INTRODUCTION OF SOLAR THERMAL ELECTRICITY TECHNOLOGIES WITH INITIAL SUBSIDIES AND GREEN POWER TARIFFS, 1990 - 2020

Source: SunLab, 1999.

An inherent advantage of STE technologies is their unique ability to be integrated with conventional thermal plants. All of them can be integrated as a solar boiler into conventional thermal cycles, in parallel with a fossil-fuelled boiler. They can thus be provided with thermal storage or fossil fuel back-up firm capacity without the need for separate back-up power plants and without stochastic perturbations of the grid (figure 7.7). The potential availability of storage and ability to share generation facilities with clean biomass suggest a future ability to provide a 100 percent replacement for high capacity factor fossil fuel plant when needed.

Parabolic trough systems. The parabolic trough (solar farm) consists of long parallel rows of identical concentrator modules, typically using trough-shaped glass mirrors. Tracking the sun from east to west by rotation on one axis, the trough collector concentrates the direct solar radiation onto an absorber pipe located along its focal line. A heat transfer medium, typically oil at temperatures up to 400 degrees Celsius, is circulated through the pipes. The hot oil converts water to steam, driving the steam turbine generator of a conventional power block.

With 354 megawatts-electric of parabolic trough solar electric generating systems connected to the grid in southern California since the mid-1980s, parabolic troughs are the most mature STE technology (Pilkington, 1996). There are more than 100 plant-years of experience from the nine operating plants. The plants range in size from 14 - 80 megawatts of electricity. Until the end of 1998, 8 terawatt-hours of solar electrical energy had been fed into the Californian grid, resulting in sales revenues of more than $1,000 million. The technology is under active development and refinement to improve its performance and reduce production costs.

Central receiver/power tower. The solar central receiver or power tower is surrounded by a large array of two-axis tracking mirrors - termed heliostats - reflecting direct solar radiation onto a fixed receiver located on the top of the tower. Within the receiver, a fluid transfers the absorbed solar heat to the power block where it is used to heat a steam generator. Water, air, liquid metal, and molten salt have been tested as fluids.

Advanced high-temperature power tower concepts are now under investigation, heating pressurised air to more than 1,000 degrees Celsius to feed it into the gas turbines of modern combined cycles. In Barstow, California, a 10 megawatts-electric pilot plant (Solar One) operated with steam from 1982 - 88. After modification of the complete plant in 1996, it operated as Solar Two for a few thousand hours, with molten salt as the heat-transfer and energy-storage medium, delivering power to the electricity grid on a regular basis (Pacheco and others, 2000). The net solar-electric conversion efficiency was 8 percent. Solar Two has demonstrated, through storage, the feasibility of delivering utility-scale solar power to the grid 24 hours a day, if necessary (Kolb, 1998). In parallel, European activities have demonstrated the volumetric air receiver concept, where the solar energy is absorbed on fine-mesh screens and immediately transferred to air as the working fluid (Buck and others, 2000).


FIGURE 7.7. WITH MINIMAL FOSSIL BACK-UP AND THERMAL ENERGY STORAGE, SOLAR CAPACITY IS TRANSFORMED INTO FIRM CAPACITY

Source: Geyer, 1999.

Dish/engine power plants. Parabolic dish systems consist of a parabolic-shaped point focus concentrator in the form of a dish that reflects solar radiation onto a receiver mounted at the focal point. These concentrators are mounted on a structure with a two-axis tracking system to follow the sun. The collected heat is often used directly by a heat engine, mounted on the receiver. Stirling and Brayton cycle engines are currently favoured for decentralised power conversion. Central Rankine cycles are being studied for large fields of such dishes where the receiver does not contain a heat engine.

Several dish/engine prototypes have operated successfully in the last 10 years, including 7 - 25 kilowatts-electric units developed in the United States. But there has not yet been a large-scale deployment. In Spain six units with a 9 - 10 kilowatts-electric rating are operating successfully. Australia has demonstrated a 400 square metre, 10 kilowatts-electric ‘big dish’ at the Australian National University in Canberra (Luzzi, 2000). Work is proceeding to develop a dish plant of 2 - 3 megawatts- electric attached to an existing fossil fuel power plant.

Advanced systems under development. Compact linear fresnel reflector (CLFR) technology has recently been developed at the University of Sydney in Australia. Individual reflectors have the option of directing reflected solar radiation to at least two towers. This additional variable in reflector orientation provides the means for much more densely packed arrays. The CLFR concept, intended to reduce costs in all elements of the solar thermal array, includes many additional features that enhance system cost and performance. The technology aims only at temperatures suitable for steam boilers and pre-heaters, with the view that superheating is a minor input and can be done by other fuels.

Fuels. Long-term research is under way in Australia, Germany, Israel, Switzerland, and elsewhere to produce solar fuels for a range of uses, including fuel cells for electricity production. This work is targeted towards the thermochemical conversion of solar energy into chemical energy carriers (hydrogen, synthesis gas, metals).

Economic aspects

The Cost Reduction Study for Solar Thermal Power Plants (Enermodal, 1999) has assessed the current and future cost competitiveness of STE with conventional power systems for two STE technologies: the parabolic trough and the molten salt central receiver system. Two approaches were used to assess the future cost performance of these technologies: an engineering approach based on known technical improvements and cost reductions from commercialisation, and a learning (experience) curve approach. The two approaches yielded similar results.

Costs per kilowatt of trough plants are expected to fall from $3,000 - 3,500 a kilowatt in the near term (for a 30 megawatts-electric plant) to $2,000 - 2,500 a kilowatt in the long term (for a 200 megawatts-electric plant). For central receiver systems these figures are $4,200 - 5,000 a kilowatt in the near term and $1,600 - 1,900 a kilowatt in the long term. The attainable net solar-to-electric conversion efficiencies of these systems are expected to be 13 - 16 percent in the near term and 18 - 20 percent in the long term. Operation and maintenance costs can decrease from about $0.025 a kilowatt-hour in the near term to about $0.005 a kilowatt-hour in the long term.

If the cost of electricity from conventional power plants stays constant over the next 20 years, the solar levelised energy cost (LEC) can be calculated to fall to less than half of current values - from $0.14 - 0.18 a kilowatt-hour to $0.04 - 0.06 a kilowatt-hour. At this cost, the potential for STE power plants to compete with Rankine cycle plants (coal, gas, or oil fired) can be promising. The solar LEC for the tower is calculated to be less than for the trough because of the use of thermal storage. If troughs were equipped with storage as well, the same advantage would probably be found. It can thus be concluded that 24-hour power does not increase the total generating costs. If a credit of $25 - 40 a tonne were included for reduced carbon dioxide emissions, STE power may have an even lower LEC than coal-fired Rankine plants.

Environmental and social aspects

Carbon dioxide emission savings. A solar boiler can supply 2,000 to 2,500 full load hours per year to a steam cycle. With STE technologies, each square meter of solar field can produce up to 1,200 kilowatt- hours of thermal energy a year - or up to 500 kilowatt-hours of electricity a year. Taking into account a thermal plant carbon dioxide emissions of 0.4 - 0.8 kilograms a kilowatt-hour electric, there results a cumulative saving of up to 5 - 10 tonnes of carbon dioxide per square metre of STE system over its 25-year lifetime (Pilkington, 1996).

Impact on fossil fuels consumption. The embodied energy of a STE plant is recovered after less than 1.5 years of plant operation (Lenzen, 1999). STE systems can preserve fossil energy or biomass resources. Taking into account an average conventional thermal power plant efficiency of 40 percent, there results a cumulative saving of about 2.5 tonnes of coal per square metre of solar field over its 25-year lifetime.

Land use. Land use is sometimes cited as a concern with renewables. If renewables are to contribute to energy production on a global scale, sufficient areas have to be available in suitable locations. Most solar thermal power plants need about 1 square kilometre of area for 60 megawatts of electricity capacity, although STE technologies like CLFR (see above) might reduce this by a factor or 3 or so (Mills and Morrison, 2000a, b).

Domestic supply of equipment and materials. The higher up-front cost of solar thermal power stations results from the additional investment into the STE equipment and erection. Most of this equipment and most of the construction materials required can be produced domestically. The evaluation of the domestic supply capability of selected countries indicates national supply shares ranging from 40 percent to more than 50 percent of the total project value. This supply share can be increased for subsequent projects (Pilkington, 1996).

Labour requirements. The erection and operation of the nine STE power plants in California indicate current labour requirements. The last 80 megawatts-electric plants showed that during the two-year construction period, there is a peak of about 1,000 jobs. Operation of the plant requires about 50 permanent qualified jobs (Pilkington, 1996).

Conclusion

· In the sunbelt of the world, solar thermal power is one of the candidates to provide a significant share of renewable clean energy needed in the future.

· STE is now ready for more widespread application if we start more intensified market penetration immediately; its application is not strongly restricted by land area or resource limitations.

· The STE technology appropriate for smaller remote power production is the dish/engine power plant. For grid-connected applications, technologies such as the parabolic trough system and the central receiver/power tower are applied.

· The installed STE capacity, now about 400 megawatts of electricity, may grow to 2,000 megawatts of electricity in 2010 - and to 12,000 - 18,000 megawatts of electricity in 2020. An annual growth rate of 15 percent after 2020 would yield 1,600 - 2,400 terawatt-hours a year by 2050.

· Small solar fields can be integrated into fossil fuel power plants at relatively low costs. With improvement of the cost-benefit ratio of STE, the solar share in hybrid solar/fossil power plants may increase to about 50 percent. Thermal energy storage will be able to further substitute for the need for a fossil back-up fuel. In the long run, baseload-operated solar thermal power plants without any fossil fuel addition are now technically proven.

· STE is the lowest-cost solar electricity in the world, promising cost competitiveness with fossil fuel plants in the future - especially if assisted by environmental credits. Electricity production costs of grid-connected STE systems may come down from $0.12 - 0.18 a kilowatt-hour today to $0.04 - 0.10 a kilowatt-hour in the long term. In remote areas, the production costs of distributed systems may come down from $0.20 - 0.40 a kilowatt-hour today to $0.05 - 0.10 a kilowatt-hour in the long term.

The easiest and most direct
application of solar energy is the
direct conversion of sunlight
into low-temperature heat.

Low-temperature solar energy

The easiest and most direct application of solar energy is the direct conversion of sunlight into low-temperature heat - up to a temperature of 100 degrees Celsius. In general, two classes of technologies can be distinguished: passive and active solar energy conversion. With active conversion there is always a solar collector, and the heat is transported to the process by a medium. With passive conversion the conversion takes place in the process, so no active components are used.

In this section the main focus is on active conversion, for which a broad range of technologies is available. The best known is the solar domestic hot water system. Another technology in the building sector is the solar space heating system. Such a system can be sized for single houses or for collective buildings and district heating. Similar technologies can be applied in the industrial and agricultural sector for low-temperature heating and drying applications. Heating using solar energy can also be achieved by heat pumps. Finally, there are technologies to use solar energy for cooling and cooking purposes.

Low-temperature solar energy potential and market developments

The world’s commercial low-temperature heat consumption can be estimated at about 50 exajoules a year for space heating and at about 10 exajoules a year for hot water production. Low- and medium-temperature heat (up to 200 degrees Celsius) is also used as process heat, in total about 40 exajoules a year. Almost any low-and medium-temperature heat demand can be met at least partially with solar energy. One of the drawbacks for this application is the mismatch between availability of sunlight and demand for heating. Therefore nearly any solar heating system contains a storage unit.

The solar domestic hot water system (SDHW) is the most important application for low-temperature solar heat at this moment. In 1994 some 7 million SDHWs had been installed world-wide. In 1994 the total installed collector area of SDHWs and other solar energy systems was about 22 million square metres (Morrison, 1999) and in 1998 about 30 million square metres. This can be expressed as an installed capacity of around 18,000 megawatts. The total amount of heat generated by these solar energy systems can be estimated roughly at 50 petajoules a year. This is only 0.5 percent of the potential of around 10 exajoules a year. Table 7.15 provides an overview of the annually produced and total installed glazed collector area.

In Europe the market rapidly expanded after 1994. In 1996 about 700,000 square metres were produced, mainly in Germany (330,000 square metres) and Austria (230,000 square metres). The European Solar Industry Federation expects annual growth of around 20 percent (ESIF, 1996). In 1998 sales in Europe were probably on the order of 1 million square metres. In the United States the market has declined - the amount of collector area sold in SDHW systems decreased from 1.1 million square metres in 1984 to around 80,000 square metres in 1998 (Morrison, 1999). The market collapsed in 1986 because the federal R&D funding and tax credits ended abruptly. In China production is increasing rapidly. In Japan the market is increasing after a collapse in 1987 (ESIF, 1996). For different regions, growth of 10 - 25 percent a year is foreseen. In 2010 the installed collector area could be 150 million square metres.

TABLE 7.15. MAJOR SOLAR COLLECTOR MARKETS, 1994 (THOUSANDS OF SQUARE METRES)

Economy

Total glazed collector area installed

Glazed collector area produced

Australia

1,400

140

China

1,500

500

India

500

50

Israel

2,800

300

Japan

7,000

500

Taiwan, China

200

90

United States

4,000

70

Europe

4,700

500


Austria

400

125


Cyprus

600

30


France

260

18


Germany

690

140


Greece

2,000

120


Portugal

200

13

World

~ 22,000

~ 2,200

Source: Based on Morrison, 1999.

TABLE 7.16. CHARACTERISTICS OF SOLAR DOMESTIC HOT WATER SYSTEMS IN EUROPE

Feature

Northern Europe

Central Europe

Mediterranean

Collector area (square metres)

3 - 6

3 - 5

2 - 4

Storage capacity (litres)

100 - 300

200 - 300

100 - 200

Annual system performance(kilowatt-hours per square metre)

300 - 450

400 - 550

500 - 650

Installed system costs(dollars per square metre)

400 - 1,000

400 - 1,000

300 - 600a

Common system type

Pump/ circulation

Pump/ circulation

Thermosyphon

a. In countries like Israel and Turkey this figure can be even lower.

Another important technology is the electric heat pump. Driven by electricity, this pump can withdraw heat from a heat source and raise the temperature to deliver the heat to a process (such as space heating). Tens of millions of appliances have been installed that can be operated as heat pumps, while most of them can also be operated as cooling devices (air conditioners). Whether the application of these machines results in net fuel savings depends on the local situation, taking into account aspects such as the performance of the heat pump, the reference situation, and characteristics of the electricity source. A lack of data makes it impossible to determine the net contribution of heat pumps to the energy supply.

Low-temperature solar energy technologies and systems

Solar domestic hot water systems. The solar domestic hot water system (SDHW) consists of three components: a solar collector panel, a storage tank, and a circulation system to transfer the heat from the panel to the store. SDHW systems for household range in size, because of differences in hot water demands and climate conditions. In general price/performance analysis will be made to size the solar hot water system and to investigate the optimum solar fraction (contribution of solar energy in energy demand). The results show a general dependence on the climate. The SDHW systems in Northern and Central Europe are designed to operate on a solar fraction of 50 - 65 percent. Subtropical climates generally achieve solar fractions of 80 - 100 percent. Table 7.16 indicates typical characteristics of applied systems in various climate zones in Europe.

Pump/circulation systems are generally used in climate zones with a serious frost and overheating danger. These systems either use the drain-back principle (the fluid drains from the collector if there is no solar contribution) or an antifreeze additive in the collector fluid. In countries with a warmer climate, natural circulation systems are mostly used. Almost all collectors installed are of the flat plate type. But in China in 1997 about 2 million evacuated tube collectors (about 150,000 square metres of collector area) were produced (Morrison, 1999). These are double-walled concentric glass tubes, of which the enclosed space is evacuated. In regions with high solar irradiation, the use of SDHW systems may result in solar heat production costs ranging from $0.03 - 0.12 a kilowatt-hour.

In regions with relatively low solar irradiation, the costs may range from $0.08 - 0.25 a kilowatt-hour. In many areas these costs can be competitive with electricity prices - but in most cases not with fossil fuel prices. Further cost reductions are therefore required.

· One approach is the use of complete prefabricated systems or kits, leaving no possibility to make changes in the system design, thus simplifying the installation work and reducing both the hardware and the installation cost.

· Another approach, in Northern Europe, is the development of solar thermal energy markets on a large scale, to reduce production, installation, and overhead costs. As demonstrated in the Netherlands, large projects can reduce the installed system price by 30 - 40 percent relative to the price of individually marketed systems.

· Cost reductions can also be achieved by further development of the technology (including integration of collector and storage unit). As a result of these approaches, solar heat production costs may come down 40 - 50 percent (TNO, 1992).

SDHW systems are commonly produced from metals (aluminium, copper, steel), glass and insulation materials. In most designs the systems can easily be separated into the constituent materials; all metals and glass can be recycled. The energy payback time of a SDHW system is now generally less than one year (van der Leun, 1994).

Large water heating systems. Solar thermal systems can provide heat and hot water for direct use or as pre-heated water to boilers that generate steam. Such large water heating systems find widespread use in swimming pools, hotels, hospitals, and homes for the elderly. Other markets are fertiliser and chemical factories, textile mills, dairies, and food processing units. Substantial quantities of fossil fuels or electricity can be saved through their use. But the installed collector area is rather low - around a tenth of the total installed area. It is especially low in the industrial sector, mainly because of low fossil fuel costs and relatively high economic payback times of solar systems. India provides tax benefits through accelerated depreciation on such commercial systems and also has a programme to provide soft loans to finance their installation. Within these systems about 400,000 square metres of collector area has been installed in India (TERI, 1996/97). The costs per kilowatt-hour of large water heating systems are now somewhat less than SDHW energy costs. And in the long term these costs can be reduced, probably about 25 percent, mainly by mass production.

Solar space heating. Total world space heating demand is estimated at 50 exajoules a year. In northern climates this demand can be more than 20 percent of total energy use. Mismatch between supply and demand limits the direct contribution of solar thermal energy to the space heating of a building to a maximum of 20 percent in these regions. If seasonal storage of heat is applied, solar fractions of up to 100 percent are achievable (Fisch, 1998). Space heating systems are available as water systems and as air heating systems, with air heating systems generally cheaper. Water-based systems are usually solar combi-systems that supply domestic hot water and space heating.

Seasonal storage has mainly been applied in demonstration projects, showing its technological feasibility. The technologies are divided into large and small systems. For large systems (storage for more than 250 houses) the insulation is not so important, and duct storage or aquifer storage is possible. For small systems storage of heat in an insulated tank is the only solution to date. More advanced concepts - such as chemical storage of heat - have been proven on a laboratory scale. Storage of cold from the winter to be used in the summer has proven to be profitable, if aquifers are available in the underground.

Passive solar energy use has become
an attractive optionfor heating and
cooling buildings because of
the development of new
materials and powerful
simulation tools

District heating. Solar energy can also be applied for district heating. Providing hot water and space heat, several of these systems, using a central collector area, have been realised in Denmark, Germany, and Sweden. They reach similar solar fractions as single house systems: 50 percent for hot water production and 15 percent for the total heat demand (hot water plus space heating). Some of these systems have been combined with a seasonal storage increasing the solar fraction to 80 percent for the total heat demand.

Heat pumps. Heat pumps can generate high-temperature heat from a low-temperature heat source. Working in the opposite direction the same appliance can also be used as a cooling device. In fact most heat pumps are air conditioners that are also suitable for heating purposes. Tens of millions of these appliances have been installed world-wide. In colder climates there is a market for heat pumps for heating only. In Europe in 1996 around 900,000 of these pumps were installed (Laue, 1999), and the market is growing at about 10 percent a year (Bouma, 1999).

Energy (mostly electricity) is needed to operate the heat pump. Typically the heat energy output is two to four times the electrical energy input. The low-temperature heat input can come directly or indirectly from the sun. For example, with ground-coupled heat pump systems, the surface can be seen as a cheap solar collector - and the ground beneath it as a storage system from which the low-temperature heat can be extracted. Today, however, most systems extract heat from the open air. Different systems have been tested using solar collectors as a heat source. Because heat pumps can work with low temperatures, the collectors can be cheap.

No general statement can be made about the contribution of heat pumps to savings in fossil fuel consumption and environmental emissions. But by further improving the performance of the heat pump and by using electricity from renewable sources (hydro, wind, photovoltaics), this contribution will be definitely positive.

Solar cooling. About 30 million air conditioners are sold each year (Nishimura, 1999). Cooling with solar heat seems an obvious application, because demand for cooling and supply of solar heat are in phase. The technologies available are absorption cooling, adsorption cooling, and desiccant cooling. A standard, single-effect absorption chiller can be driven with temperatures around 90 degrees Celsius. This can be generated with standard flat plate solar collectors. Different systems have been designed and tested, but their economics turned out to be poor. As a result this field of applications has been disregarded over the last 10 years. Recently some newer cooling cycles have become available, the solar collector performance has improved, and collector prices have gone down. So solar cooling may become a feasible option (Henning, 1999).

Solar cooking. About half the world’s cooking uses firewood as the fuel, with the other half based on gas, kerosene, or electricity. In some regions cooking energy requirements place a great pressure on biomass resources while also causing considerable inconvenience and health effects to users in the collection and burning of biomass (see chapter 3). Considering that these regions also have significant levels of solar radiation, it would appear that cooking provides a significant and beneficial impact.

China and India are among several countries promoting the use of solar cookers. A simple box-type cooker and a parabolic concentrating type cooker are among the common models deployed. Efforts have also been made to develop solar cookers for institutional use. In India some 450,000 box type cookers have been installed. The world’s largest solar cooking system - capable of preparing meals for 10,000 persons twice a day - was installed in 1999 in Taleti in Rajasthan, India (TERI, 1996/97; MNCES, 1999). In China some 100,000 concentrator-type cookers have been deployed (Wentzel, 1995).

Solar cooking devices have certain limitations and can only supplement, not replace conventional fuels. A home that uses a solar cooker regularly can save a third to a half of the conventional fuel that is used for cooking. The economic payback time is usually between 2 - 4 years. The large-scale use of solar cookers, however, will also require some adjustment by users.

Solar crop drying. The drying of agricultural products requires large quantities of low-temperature heat - in many cases, year round. Low-cost air-based solar collectors can provide this heat at collection efficiencies of 30 - 70 percent (Voskens and Carpenter, 1999). In Finland, Norway, and Switzerland hay drying is already an established technology. By 1998 more than 100,000 square metres of air collectors for drying purposes had been installed.

In developing countries 60 - 70 percent of grain production (as estimated by the Food and Agriculture Organisation) is retained at the farmer level, and crop drying is effected predominantly by exposure to direct sunlight (sun drying). In industrialised countries crops are typically dried in large fossil-fuelled drying systems, operating at relatively high temperatures with a high throughput of material. If a solar dryer is used in place of sun drying, there will not be any energy savings, but the solar dryer will achieve higher throughput of material, better quality of material, and lower loss of material (to pests or theft). Air-collector-type solar dryers have the most potential in replacing fuel-fired dryers for crops dried at temperatures less than 50 degrees Celsius (table 7.17).

TABLE 7.17. WORLD PRACTICAL POTENTIAL ESTIMATION FOR SOLAR CROP DRYING (PETAJOULES A YEAR)

Type of drying

Low

High

< 50 degrees Celsius

220

770

> 50 degrees Celsius

40

110

Sun dried

420

650

Total

680

1,530

Source: ESIF, 1996; Voskens and Carpenter, 1999.

The technology for solar crop drying is available, and its application can be economically viable. Market introduction of these technologies will thus be the next step, but that will require training and demonstration projects targeted at specific crops and specific potential users and regions.

Passive solar energy use. The application of passive solar principles can contribute significantly to the reduction of (active) energy demands for heating, cooling, lighting, and ventilating buildings. Some of these principles (Boyle, 1996) are:

· Be well insulated.
· Have a responsive, efficient heating system.
· Face south.
· Avoid overshading by other buildings.
· Be thermally massive.

The principles have to be considered in relation to the building design process, because they have a direct effect on the architectural appearance of the building, on the level of comfort (heat, cold, light, ventilation), and on people’s experience of the building. Nowadays a number of techniques can diminish energy demands with passive means:

· Low-emission double-glazed windows. In cold climates these windows keep out the cold while allowing the solar radiation to pass. In summer the windows can be shaded, and heat is kept outside.

· Low-cost opaque insulation material and high insulating building elements. These elements can keep out the heat as well as the cold.

· Transparent insulation material. This material can be used to allow day-lighting while keeping out the cold or heat.

· High-efficiency ventilation heat recovery.

· High-efficiency lighting systems and electrical appliances with automatic control. These can bring down the internal heat gain, reducing the cooling load. Advanced daylight systems can lead to 40 percent reduction of the energy use for lighting purposes.

By carrying out detailed simulation studies, the energy demand of a building can be optimised, without affecting comfort (Hastings, 1994). It has been estimated that 13 percent of the heat demand of buildings is covered by passive solar energy use. For optimised buildings this fraction can go up to 30 percent without major investments (Brouwer and Bosselaar, 1999). Because of the development of better materials and powerful simulation models, passive use of solar energy is becoming the number one consideration for heating and cooling buildings.

Implementation issues

In many countries incentive programmes help to stimulate the further development and application of low-temperature solar energy systems, improving their performance and reducing economic and other barriers. In countries where government stimulation is lacking, it is often the economic attractiveness of the system or environmental conscience that motivates people to install these systems.

In many cases energy companies, especially utilities, have stimulated the use of solar thermal energy. Motivated by environmental action programs, demand-side management programs, or a desire to diversify and serve new markets, these companies have taken over a significant part of the effort to get the solar water systems to the market. They support these projects by active marketing, by financial contributions, or by offering the possibility to rent or lease a system (IEA Caddet, 1998).

Conclusion

· Low-temperature solar thermal technologies can contribute many exajoules to the annual heat demand. Today this contribution is limited to about 50 petajoules a year (excluding heat pumps and passive solar energy use).

· World-wide, about 7 million solar hot water systems, mainly SDHW systems, have been installed. In many regions their dissemination strongly depends on governmental policy, mainly because of the relatively high heat-production costs ($0.03 - 0.20 a kilowatt hour). They can, however, compete with electric hot water systems.

· The costs of installed solar hot water systems in moderate climate zones may be reduced 25 - 50 percent by further technology development and/or mass production and installation.

· Active solar systems for space heating with seasonal storage are mainly in a demonstration phase.

· Passive solar energy use has become an attractive option in heating and cooling buildings, because of the development of new materials and powerful simulation tools.

· Electric heat pumps for space heating are especially attractive in countries where electricity is produced by hydropower or wind energy. In other countries a net contribution to the energy supply is achieved only if they have a high performance factor.

· Solar drying of agricultural crops is in many cases a viable technological and economical option. The next step is market introduction.

· Solar cooking provides a significant beneficial impact. Many hundreds of thousands of solar cooking devices have been sold, but they have limitations and can only supplement conventional fuel use.

Hydroelectricity

There is a general view that hydroelectricity is the renewable energy source par excellence, non-exhaustible, non-polluting, and more economically attractive than other options. And although the number of hydropower plants that can be built is finite, only a third of the sites quantified as economically feasible are tapped.

Hydropower plants emit much less greenhouse gas than do thermal plants. Greenhouse gas emissions of hydropower are caused by the decay of vegetation in flooded areas and by the extensive use of cement in the dam construction. Unfortunately, there are local impacts of the use of rivers, social as well as ecological, and they are gaining importance as people become aware of how those impacts affect living standards.

Most renewable sources of energy hydroelectricity generation are capital intensive but have lower operational costs than thermal and nuclear options. The high initial cost is a serious barrier for its growth in developing countries where most of the untapped economic potential is located.

The potential of hydroelectricity

Chapter 5 provides extensive information on the theoretical and technical potential of hydroelectricity. An overview is given in table 7.18, which also presents the economically feasible potential, estimated at 8,100 terawatt-hours a year.

In 1997 total installed hydroelectric capacity was about 660 gigawatts, of which about 23 gigawatts were small scale (plant capacity of less than 10 megawatts). About a fifth of the world electricity supply, hydroelectricity produced 2,600 terawatt-hours (World Atlas, 1998), of which about 3.5 percent (about 90 terawatt-hours) was in small hydroelectric plants.

In some regions (North America, Western Europe, Pacific OECD countries) more than 65 percent of the economically feasible potential is already in use. In others (Sub-Saharan Africa, centrally planned Asia, India) less than 18 percent of the potential is in use (see table 7.18). In Latin America and the Caribbean nearly 44 percent of the economically feasible potential is already tapped. Since the OECD operational capacity is at 80 percent of the economic potential, most experts believe this value to be an upper limit for capacity installation.

In 1997 the hydro capacity under installation was 125 gigawatts. Assuming these plants will have the same average capacity factor as the units already in operation (45 percent), this represents another 490 terawatt-hours a year, or 6 percent of the economically feasible potential. This will push the hydroelectricity production in the first years of the 21st century to at least 3,000 terawatt-hours a year. By the middle of this century that could grow to 6,000 terawatt-hours a year (IIASA and WEC, 1998; Johansson and others, 1993a).

In 1997 developing countries had a total installed capacity of 262 gigawatts, soon to grow to about 364 gigawatts (see table 7.18). In 1997 the 70 major developing countries were responsible for 225 gigawatts of installed capacity (World Atlas, 1998). In 1989 - 97 these 70 countries’ installed capacity increased by 40 gigawatts, or about 22 percent (2.5 percent a year),2 much less than the 5.7 percent a year growth forecast by Moore and Smith (1990). The significant slowdown in the construction of hydroelectric plants in developing countries, compared with 1970 - 90 (Moore and Smith, 1990; Churchill, 1994), can mainly be explained by shortages of capital and difficulties in finding financing abroad.

Hydroelectric technology development

Technologies to reduce dam construction and power generation costs. Hydroelectricity generation is usually regarded as a mature technology, unlikely to advance. That may be so for the efficiency and cost of conventional turbines, where the large number of units constructed has led to an optimised design. But for small-scale hydropower, there is room for further technical development. Examples include the use of variable speed turbines at low heads, induction generators, electronic control and telemetry, submersible turbo-generators, new materials, and the further development of innovative turbines (EUREC Agency, 1996; Schainker, 1997).

On dam construction, there has recently been further progress, especially with roller compacted concrete (RCC) dams. The lower cement content and the mechanised placing of the concrete yield a relatively low unit cost of around $30 - 40 per cubic metre of dam body, less than half the price of conventional placed concrete. Due to the rapid concrete placement with the RCC technique, dams can grow by 60 centimetres a day, making it possible to build a 200-metre high dam in less than a year (Oud and Muir, 1997). With RCC dams, river diversion during construction is often in-river, rather than by diversion tunnels, saving time and money. The RCC technology has made many dams feasible that previously appeared economically unattractive (Oud and Muir, 1997). For smaller structures, dams with geo-membrane lining (up to 80 metres high) and inflatable rubber weirs (up to 15 metres high) are becoming acceptable alternatives to concrete weirs and low rock-fill or earth-fill dams.

Other parts of the operational system, such as spillways, are now better understood, allowing the use of higher specific discharges per meter width of the spillway chute, saving on cost (Oud and Muir, 1997). Tunnel-boring machines are becoming more attractive. Underground water conduits are attractive because they do not disturb the landscape (Oud and Muir, 1997). Power houses and control rooms are being designed to cut costs and manufacturing time of hydroelectric equipment.

The present installed system cost ranges from $1,000 - 1,500 a kilowatt for the most favourable sites. In practice cost figures of $3,000 a kilowatt and higher are also found. There are some expectations that technology advances can reduce costs, but in small amounts since the present technology is well optimised. With low investment costs and favourable financing conditions (interest 6 percent a year and 30 years for payment), generation costs for an average capacityfactor of 45 percent is $0.04 - 0.06 a kilowatt hour. At higher capacity factors and with longer payback times, lowest generations costs of about $0.02 a kilowatt hour are found. Because the plant is usually placed far from the point of electricity use, investment can also be required for transmission, perhaps adding another $0.01 per kilowatt-hour.

For small-scale hydropower, the unit cost is expected to be higher than for large-scale hydro. But with the choice of very favourable sites, the use of existing administrative structures and existing civil works for flood-control purposes, avoiding the use of cofferdams during installation, and refurbishing of old sites, electricity production costs may come down from $0.04 - 0.10 a kilowatt-hour to $0.03 - 0.10 a kilowatt-hour.

Technologies to reduce social and ecological impacts. Considering the criticism of hydropower production, especially when large dams are built, modern construction tries to include in the system design several technologies that minimise the social and ecological impacts. Some of the most important impacts are changes in fish amount and fish biodiversity, sedimentation, biodiversity perturbation, water quality standards, human health deterioration, and downstream impacts (see also chapter 3).

Only a third of the sites
quantified as economically
feasible for hydro-
electricity production
are tapped.

· Changes in fish amount and fish biodiversity. Technologies are being pursued to preserve subsistence and commercial fish production as well as fish biodiversity. Further R & D is being recommended to achieve a quantitative understanding of the responsesof fish to multiple stresses inside a turbine and to develop biological performance criteria for use in advanced turbine design (National Laboratory, 1997). Inclusion of passage facilities, such as fish ladders (Goodland, 1997), are becoming a necessity for renewing dam operational contracts in the United States. In tropical countries, where such technology is not useful, electric luring of fish into containers or elevators, as carried out in Yacyreta(between Argentina and Paraguay), may be a solution (Goodland, 1997). Because most new dams will be built in tropical countries, it is necessary to carry out extensive studies to identify new or rare species and determine if they can live in adjacent rivers not slated for damming (Goodland, 1997).

· Sedimentation. Sedimentation increases strongly when catchments are developed. Another possibility is the sporadic filling of the reservoir with large amount of land due to land slide or due to some exceptional flood (Goodland, 1997). Such problems can be minimised through watershed management, debris dams, sediment bypassing, sediment flushing, sediment sluicing, sediment dredging, and using reservoir density currents.

· Biodiversity perturbation. Conservation of biodiversity demands, at the least, no net loss of species. This requires complete knowledge of what is present before the dam is built, which is difficult. The main conservation measures have become site selection and selection of reservoir size. In practice, the conservation of onsite biodiversity depends on not flooding large areas, particularly intact habitats such as tropical forests, and on conserving an offset in perpetuity (Goodland, 1997).

· Water quality. Initially water quality is mainly disturbed by the large amount of biomass left in the flooded area and by filling the reservoir. This can be mitigated by removing biomass and by fillingthe reservoir at a moderate rate. After filling, thermal stratification frequently occurs in reservoirs with a long water residence time (full seasons cycle) and water depths of more than 10 metres. Reservoir stratification can release water of colder or warmer temperatures than the river would experience without a dam, with positive or negative impacts on the river fishery. It can be minimised through (1) changes in inlet structure configuration, (2) in-reservoir de-stratification, (3) multilevel outlet works for mitigation of downstream effects, and (4) positive mixing and aeration by fountain jets or compressed air. But sufficient knowledge is not yet available, and further R&D is recommended (National Laboratory, 1997).

· Human health deterioration. Reservoirs can cause epidemics of three water-related diseases: malaria, schistosomiasis, and Japanese B encephalitis. The proliferation of malaria and encephalitis can be avoided with chemicals and chemotherapy. But resistance ofmosquitoes and Plasmodium protozoan parasite makes malaria increasingly expensive to control. Schistosomiasis is better controlled by chemotherapy.

· Downstream impacts. Downstream social impacts can exceed upstream resettlement upheavals, and they deserve more attention than is common nowadays. Cessation of annual fertile silt and moisture deposition leads to declining yields, grazing impairment, fish and wildlife decline, and erosion at the mouth of the river, due to the reduction in suspended particles that replace the land normally washed out by the ocean. In addition, the decline in water availability and agricultural yields increases the competition for water and other scarce resources. Furthermore, the construction of a dam forces people who are long adapted to cyclical floods to switch suddenly to rainfed livelihoods (Goodland, 1997). Some of these issues can be mitigated through off-takes at various levels to allow for flexibility of the water temperature in accord with downstream needs, and others through measures that reduce reservoir stratification, including local mixing and shorter water residence time.

System aspects

To even out annual seasonal flow, dams are erected and land areas flooded. Since the flows vary from year to year, every attempt to increase the reliability of the water supply increases the flooded area, and that increase is exponential for reliability above 70 percent (Moreira and Poole, 1993). Another alternative to increase system reliability and reduce cost is hydropower complementation, based on the notion that different river basins can be wire connected, letting a higher flow in one basin compensate for low flow in the other. Hydrologic diversity usually involves large geographic distance, but on either side of the equator distances are modest (Moreira and Poole, 1993).

A third alternative is to use hydroelectricity to store intermittent renewable energy. Storage energy, to ensure reliable, high quality service, will provide for increased renewable use and system stabilisation with distributed generation. Areas of importance include pumped hydro (Schainker, 1997). Further research is recommended to examine the benefits and costs of coupling hydropower to renewable energy storage needs (PCAST, 1997).

TABLE 7.18. HYDROELECTRIC THEORETICAL, TECHNICALLY FEASIBLE, AND ECONOMICALLY FEASIBLE POTENTIAL AS WELL AS INSTALLED AND UNDER INSTALLATION CAPACITY IN 1997, BY REGION (TERAWATT-HOURS A YEAR UNLESS OTHERWISE NOTED)

<

Region

Gross theoretical potential

Technically feasible potential

Economically feasible potential

Installed hydro capacity (gigawatts)

Installed hydro capacity in developing countries (gigawatts)

Production from hydro plants

Hydro capacity under construction (gigawatts)

Hydro capacity under construction in developing countries (gigawatts)

North America

5,817

1,509

912

141.2

0

697

0.9

0

Latin America and Caribbean

7,533

2,868

1,199

114.1

114.1

519

18.3

18.3

Western Europe

3,294

1,822

809

16.3

16.3

48

2.5

2.5

Central and Eastern Europe

195

216

128

9.1

9.1

27

7.7

7.7

Former Soviet Union

3,258

1,235

770

146.6

16.5

498

6.7

3.9

Middle East and North Africa

304

171

128

21.3

0

66

1.2

0.03

Sub-Saharan Africa

3,583

1,992

1,288

65.7

0

225