By Dr Hisham Al-Khatib

16-07-04 It is now 30 years since the "oil shock" of 1973 that aroused worries about energy security and brought in its aftermath an avalanche of ideas, predictions and research about alternatives to oil -- new energy sources, renewables, conservation and efficiency measures. Other than for better efficiency, amazingly very little has changed in the global energy scene during the past three decades.
Oil was the major global energy fuel and is likely to remain so for the next 30 years, at least, and in real terms its prices did not increase. Fossil fuels dominated the energy supply in the second half of the last century and will almost certainly continue to do so in the second half of this century.

The promise of new and renewable energy sources and its great expectations were not realized and are unlikely to do so in the foreseeable future. New energy fuels, like biofuels proved to be uneconomical, and new energy carriers -- hydrogen energy and fuel cells are still in the research laboratories rather than in markets and are unlikely to have a dent on the energy scene for years to come.
The major development that affected the energy scene during recent years has been the growing importance of the environment and environmental preservation (in Europe as well as globally) and its impact on energy use. Emissions, mainly from firing fossil fuels are increasingly being believed to be a threat to the global environment.

In spite of the lack of conclusive evidence, growing CO2 concentration in the atmosphere is reckoned to cause global warming and lead to weather forcing. This global outcry peaked in the agreement on the Kyoto Protocol of 1998 which was the world's greatest achievement in globalisation but still it has not been ratified. The US withdrew from it and Russia has wavered.
The Kyoto Protocol ratification can have great impact on the global energy scene and energy markets. However, even if not ratified, its message has not been forgotten nor its tools ignored. Environmental considerations, carbon trading and other Kyoto mechanisms are going to influence gradually the energy market -- how much energy we use, and in what form and the way we use it.

The growing importance of natural gas (and LNG) has been another major development favoured by environ-mental considerations. Great strides were also made in regulation, restructuring, privatisation and competition where organizational aspects influenced the energy scene and will continue to influence it to a greater extent in the future. Such developments were greatly enhanced by the advances in information technology which advanced electricity trade and energy markets.
A significant development is the gradually shifting demand growth from OECD countries to Developing Countries (DCs). DCs demand for energy is growing rapidly in a way that is commensurate with their high economic growth and their early stages of development. However this has significant implications on both the extent of future demand and its regional and environmental implications.
The "hard ware" of the energy sector -- mainly fuels (dependence on fossil fuels) will slowly evolve overtime but is not likely to change dramatically in the foreseeable future. However the "soft ware", the way we use energy -- the carriers, end use efficiency, energy management, energy and electricity markets will continue to develop steadily over the coming years. All this is fostered by technology which had a marked effect on the energy scene, more than it has done in many other sectors.

Prospects for new energy sources
Prospects for the rise of new energy sources in the years to come are not promising, mainly because existing energy resources (particularly fossil fuels) are abundant, highly concentrated, cheap and tradable. The alternatives, particularly new and renewable energy are disbursed, intermittent and correspondingly expensive. No doubt some of the new energy sources like wind power are becoming competitive and certain applications of solar energy for water heating in sunny countries and for small electricity production by PV cells are becoming common. But this is only a small niche in a very large market.
The outlook for wind and solar energy is for double-digit growth, based on both continued public subsidies and technological advances. However, because they start from a very small base, their combined contribution to total energy supplies is likely to still be less than 0.5 % in 2020-30. Installed capacity of wind power in Europe, where it is most popular, was around 25,000 MW, almost doubling over the last two years. It is promoted by generous subsidies and tax credits.

Wind power is intermittent and correspondingly can not be relied on as a permanent electricity supply without adequate storage. This storage will make it uncompetitive. Wind power can still be competitive and useful in countries with proper wind regimes only as a limited source of electricity to augment existing electricity sources and save on use of fossil fuels. Its presence will add to energy security and energy independence in many countries, but only to a modest extent.
Photo Voltaic (PV) cells have many useful small power applications. Most important it can provide electricity in small amounts to many households in the world that lacks it. But all this, as said earlier, will only make a small dent in the global energy scene.
The two principle instruments used to promote renewables are renewable energy feed-in tariffs (REFIT) or simple quotas. REFIT is a system where the price of renewable power is politically set in advance at a level high enough to attract sufficient investment and the producers' output is bought regardless of how much it may be valued on the market. The quota system sets output levels, or as a percentage of generation, or other measures.

Much promise has been credited to hydrogen as a source of energy in the future. President George W. Bush pledged in his 2003 State of the Union address that "the first car driven by a child born today could be powered by hydrogen and pollution-free".
But is this realistic and justified? The most ambitious use of hydrogen is in a car powered by a fuel cell, a battery like device that turns hydrogen into electricity while emitting only heat and water vapour. Hydrogen can also be burned directly in engines much like those that run on gasoline, but the goal is fuel cells because they get twice as much work out of a pound of hydrogen.
But where is this hydrogen coming from? The main source of hydrogen is natural gas, which is in short supply, cumbersome to convert and may have better uses. Waiting in the wings is coal, burned in old power plants around the world that are already the focus of a dispute over their emissions.

The long-term hope is to make hydrogen from emission-free "renewable" technologies, like windmills or solar cells. In fact, hydrogen may be an essential step to translate the energy of wind or sunlight into power to turn a car's wheels. But electricity from renewable technologies is costly. In the US, hydrogen is five times more expensive than gasoline when produced from wind and 17 times when produced from solar.
A likely source of hydrogen is from a machine called an electrolyser, which is like a fuel cell in reverse. The fuel cell combines oxygen from the air with hydrogen to produce an electric current, with water as a by-product, while an electrolyser runs an electric current through water to split the water molecule into its constituent hydrogen and oxygen atoms. The problem is that if the electricity came off the national power grid to run an electrolyser, about half of it, on average, would be generated by coal.

Another problem is emissions. According to the US DOE, an ordinary gasoline-powered car emits 374 grams of carbon dioxide per mile, or 1.6 km, when driven, counting the energy used to make the gasoline and deliver it. The same car powered by a fuel cell would emit nothing, but if the energy required to make the hydrogen came from the electric grid, the emissions would be 436 grams per mile. Similarly, the car would not emit nitrogen oxides, a precursor of smog, but the power plant would.
Correspondingly an energy future, with hydrogen as its main fuel source, has to be viewed (at least now) with scepticism. It is not likely to come, if it comes, before the middle of this century. During 2002, the EU commission proposed that there would be a 20 % use of substitute fuels in road transport by the year 2020. The short term targets are to reach 2 % by 2005 and 5.75 % by 2010. The commission proposed that alcohol (ethanol) will be blended into petrol and that diesel oil will be partly replaced by vegetable oil derivatives. There are two approaches towards the solution: the use of pure vegetable oils; and biodiesel (transesteified vegetable oil or animal fat).

Bio energy in the form of ethanol and similar fuels (from corn or other agricultural products) are unlikely to pro-vide an alternative to oil. Cultivation of crops for use as fuel requires substantial land that otherwise be available for food, or other uses. With present technologies ethanol is more expensive than gasoline. It also requires substantial inputs of fossil energy for production and conversion into fuels.
The Brazilian experience of the last many years has not been an economic success and most new cars in Brazil are now sold to burn gasoline. Of course ethanol production does provide a measure of energy security but at a price.

The growing role of electricity
Electricity is versatile, clean to use, easy to distribute and supreme to control. Just as important, it is now established that electricity has better productivity in many applications than most other energy forms. All this led to the wider utilization of electricity and its replacement of other forms of energy in many uses. Demand for electricity is now growing globally at a rate higher than that of economic growth and in many countries, at almost 1.5-2 times that of demand for primary energy sources.
The future is going to show a growing role of electricity as the preferred energy carrier. Growth in electricity use has been during recent years markedly higher than energy demand growth and almost identical to that of economic growth, approximately 3 % annually. Of course such a trend cannot go on indefinitely. Electricity demand growth will gradually slowly depart from economic growth as substitution and markets mature.

However with the type of technologies and applications that already exist, there is nothing to stop electricity's advancement, nor it assuming a higher share of the energy market. Saturation of electricity use is not yet in sight, even in advanced economies where electricity production claims more than half of the primary energy use. Other than for the transport sector, electricity can satisfy most human energy requirements. It is expected that, by the middle of the 21st century, almost 70 % of energy needs in some industrialized countries will be satisfied by electricity (Gerholm).
Electricity has become an important ingredient in human life. It is essential for modern living and business. Its interruption can incur major losses and create havoc in major cities and urban centres. Its disruption, even if transient, may cause tremendous inconvenience. Therefore, continuity of electricity supply is essential. Also, with the widespread use of computers and other voltage- and frequency-sensitive electronic equipment, the importance of the quality of supply has become evident. A significant proportion of investment, in the electricity supply industry (ESI), goes into the reserve generating plant, standby equipment and other redundant facilities needed to ensure the continuity and high quality of the supply.

Electricity future demand
In the near future, electricity demand growth is expected to match the growth of the world economy. This is expected to average around 2.5-3.0 % annually during the next few years. The International Energy Agency and the International Atomic Energy Agency (IAEA, 2002) estimate that global electricity production will increase at an annual average rate of 2.7-3.0 % during the first decade of the 21st century.
Therefore it is expected that total electricity production in 2010 will amount to around 20,000 TWh and in 2020 to 25,880 TWh. Most of this growth is going to occur in developing countries, particularly in south-east Asia, a region that is enjoying a rapid economic growth. In 2030 global electricity production is expected to exceed 28,000 TWh. Half of this amount will be accounted for by developing countries.

Reform trends in the electricity supply industry
Energy markets worldwide are currently in the midst of a fundamental transformation, as a result of technological change and policy reforms. The objectives of these reforms are: to enhance efficiency, to lower costs, to increase customer choice, to mobilize private investment, and to consolidate public finances.
The mutually reinforcing policy instruments to achieve these objectives are the introduction of competition (often supported by regulation) and the introduction of private participation.

As a large number of developed and developing countries have successfully restructured their electricity and gas markets, an international “best practice” for the design of the legal, regulatory, and institutional sector framework has emerged. It includes:
-- The corporation and restructuring of state-owned energy utilities.
-- The separation of regulatory and operational functions, the creation of a coherent regulatory framework, and the establishment of an independent regulator to protect consumer interests and promote competition.
-- The vertical unbundling of the electricity industry into generation, transmission, distribution, and trade.
-- The introduction of competition in generation and trade and the regulation of monopolistic activities in transmission and distribution.
-- The promotion of private participation in investment and management through privatisation, concessions, and new entry.
-- The reduction of subsidies and tariff-rebalancing in order to bring prices in line with costs and to reduce market distortions. These trends greatly widened the scope for financial management in the electricity supply industry, introducing to the industry new financial services like risk analysis and risk mitigation and electronic trading (World Bank, 2001).

Future energy investments
The IEA has recently carried out a comprehensive study on future energy investment over the period 2000-30. Accordingly, it the total investment required for energy-supply infrastructure worldwide over the period 2001-30 is $ 16 tn, or $ 550 bn a year. This would be necessary to expand supply capacity and to replace existing and future supply facilities that will be exhausted or become obsolete. The electricity sector will absorb 60 % of total energy investment, reaching almost $ 10 tn (WEIO 2003).
Almost half of total investment will be needed in developing countries, with China alone requiring $ 2.3 tn over the next 30 years. Total investments in the oil and gas sectors will each amount to more than $ 3 t, or around 19 % of global energy investment. The coal industry requires only about $ 400 mm, or 2 % of global energy investment (not including investment in coal-fired power generation).

The electricity sector dominates energy investment over the next 30 years, amounting to $ 10 tn-$ 5 tn in transmission and distribution. Around 4,700 GW of generating capacity needs to be built worldwide during this period, a third in developing Asia and more than 2,000 GW in OECD countries.
OECD countries will need to invest over $ 4 t during the Outlook period. Transition economies will need $ 700 bn, with more than half of it going into the Russian power sector. Transition economies currently have excess capacity because electricity demand is still below the level reached before the break-up of the former Soviet Union. However, existing power plants and networks are old and poorly maintained and will need extensive refurbishment to be able to provide reliable supplies to national or export markets.

At present, developing countries account for a little over a quarter of global electricity production. By 2030, this share is expected to rise to 44 % and these countries will be producing as much electricity as the OECD. To provide for this level of increase, they will need to invest over $ 5 tn in electricity infrastructure. $ 2 tn of which will be in distribution networks.
Experience has shown that the world cannot sustain such high rates of economic growth and increases in energy and oil demand. Growth is most likely to be more modest and so are future investment requirements. Future energy investment requirements are unlikely to exceed $ 15 tn over the period 2000-30. Most likely they will be between $ 13-$ 15 tn.

Energy poverty
Till this very day almost one third of the world population suffers from energy poverty. Exact number varies between 1.6-2 bn. This poverty involves lack of access to commercial fuels and electricity. There are other hundreds of millions who have only unreliable and intermittent supplies of electricity.
Most of these people live in Sub-Saharan Africa, and South Asia. They depend mainly on biomass for cooking and exist without access to electricity and correspondingly without access to the media and the rest of the world. Their efficiency in energy use is very low. Collecting biomass takes a lot of time and firing of biomass inside homes badly affects people's health. Supplying these people with commercial energy, including electricity, is most pressing for them in attaining sustainable development and bettering their future.

These low income populations have the world's highest population growth figures. Their numbers increase by almost 2.5 % annually. This means that each year there are 40-50 mm people who are added up to those suffering from energy poverty. Therefore the challenge is not only to overcome energy poverty but, more important, to prevent it from spreading.
Unfortunately there are no serious programs to deal with energy poverty globally. Aims in this regard have to be modest at least in the medium term (10-20 years) and involve ensuring that numbers at least do not increase. This means that each year there is need to electrify and supply modest commercial energy access to at least 50 mm people who are now suffering from energy poverty, something like 10 mm homes annually. This is an essential program for sustainable development, it is the least required, but still it is not a modest program.

What is of interest to us here is the fuels, technologies and costs. For cooking, the best commercial fuel may be LPG in containers which vary from 5-20 kg. LPG is a versatile fuel which is safe and easily transportable and tradable and is widely available from refineries and imports. It can easily be used also for heating and many light industrial applications and suitable for activities of low income communities (GFSE 2004).
Provision of electricity is most important for development. This can be done by extending the national electricity networks into the unelectrified communities or build local central networks. This is very expensive and technologically it is also cumbersome because of the very low loads involved (mostly lighting) and also safety aspects. Due to costs it will be many decades before such application matures and erases energy poverty.
One of the cheap and practical applications is small individual photo-voltaic systems. Each PV system is small (20-60 Watt) supplying a home with lighting, also very small other applications (TV, and in certain cases light refrigeration). Such system is almost free to run and require little maintenance. Costs can be as low as $ 600-$ 1,000 for small installations. Small regional systems can also be arranged. With some subsidy for installation and small funds financing arrangements many rural communities in the world can afford this.

There are many ways also for supplying energy. Small mobile diesel sets can provide both electricity and mechanical power (but will require diesel fuel supplies). Mini-hydro schemes (where there is hydraulic prospects) are also workable arrangements. Each community will have its special conditions and needs and correspondingly appropriate least cost technologies.
Supplying annually 10 mm homes through nation and regional networks and individual PV system means an investment with around $ 8 bn-$ 10 bn annually. An ambitious program to end energy poverty over 30-40 years entails an annual investment of at least twice as much, i.e. $ 20 bn annually.
The IEA estimates that by 2030 there will still be 1.4 bn people without access to electricity. To completely end energy poverty there is need to invest a further $ 665 bn over the next 30 years. These are realistic figures, the aim is unfortunately unattainable.

References
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Dr Hisham al-Khatib is Vice-Chairman of the World Energy Council,