Global Energy Demand Growth
Alternate Executive DirectorThe World Bank GroupWashington, DC
The need for secure, affordable and sustainable sources of Energy Supply are among the most strategic issues that countries need to safe for economic growth. Without energy, modern industrial and productive activities and day to day ways of life are not possible. Today the world consumes 550 Quadrillion Btu, almost 40% more than in year 2000. How much energy do we would need in ten, thirty or fifty years from now? On which sources we should rely for our future energy needs? In this article I provide some highlights on the theme of Global Energy Demand Growth. Briefly review where we stand today, what are the key drivers of global energy demand? What are the challenges that we should expect ahead and what are the needed and available resources to fulfill world energy needs in a sustainable and secure manner?
We have reached the figure of 7 billion humans living in the world, where only two decades ago the total population was a little bit more than 5 billion, and in 1950 half of that. If this trend continues, by year 2040 population can reach 9 billion. The regions where we can expected that population growth the most are in Africa, Middle East and parts of Latin America. We are more, and in the last two decades also we are getting better off. There has been a large reduction in the levels of poverty, where the percentage of population who lives with less than US$ 1.25 per day (PPP), has diminished from 43.1% in 1990 to 20.6% in year 2010, or from 1,908 million in 1990 to 1,215 million en 2010. However, still there are 1.2 billion people without access to electricity and 2.8 billion without modern cooking facilities.
A world with more population and higher living standards is and will put a bigger pressure on the energy markets. People are demanding more benefits and services which rely on energy. But, at the same time, are more informed, connected and increasingly aware of their reality and the environment. Energy is the engine that moves the modern world. Transportation, manufacturing, services, health, communications, tourism and many other industries and human activities depend on energy; and in an increasingly integrated and competitive world, access to secure and affordable energy sources is fundamental to sustain economic growth.
From the Industrial Revolution up-to-date world energy consumption has multiplied by more than twenty times, and moved from an agricultural based economy, where the main sources of energy was the use of firewood for cooking and heating, to a more industrialized one where fossil fuels and other modern energy sources have taken a key role.
Since the second half of the 19th century and into the 20th century we have witness an increased use of fossil fuels, first coal, then of oil, and finally natural gas (Figure 1). Most of the increase in energy consumption took place in the countries that made the flight to become industrialized countries, particularly the OECD countries, which by the end of the 20th century stand for 55% of world energy consumption, 19% of world population, and a share of 60% on world GDP (PPP).
Figure 1. World Energy Consumption by Source 1820-2010
Source: Based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects together with BP Statistical Data for 1965 and subsequent. On www.ourfiniteworld.com
With respect to 2010 world energy consumption of 524 (quadrillion Btu), EIA projections expected world energy consumption to growth by 20% by 2020, 39% by 2030, and 56% by 2040. However, they envisage different growth patterns among Non-OECD and OECD countries. EIA project an increase of 33%, 63% and 90% for Non-OECD countries, and 5%, 11% and 17% for OECD countries (See Figure 2). Non-OECD countries have increased energy demand more than 65% since year 2000.
Figure 2. World Energy Consumption, 1990-2040 (Quadrillion Btu)
Source: U.S. Energy Information Administration, International Energy Outlook 2012; DOE/EIA-0484(2012), Release date: July 25, 2013
Filling Global Energy Demand
The first decade of the 21st Century has been marked by a new boost in energy demand, most explained by Non-OECD countries. In 2012, fossil fuels represented 87% of the primary energy matrix (not accounting for the use of firewood), where oil is 33%, coal 30% and natural gas 24%.
In one decade oil consumption has increased by 15%, from 78,470 thousand bbd in 2002 to 89,774 thousand in year 2012, with oil reserves expected to last for 50 years. Demand increase in Non-OECD countries has more than compensated the reduction in consumption in OECD economies. Between year 2000 and 2012 Non-OECD economies have increased oil consumption by almost 50%, where China itself stands for 1/3 of oil demand growth for non OECD countries. China in one decade almost doubled oil consumption. In 2012 and among the emerging economies, China accounted for 11.7% of world oil consumption, from the 6.7% share it has in year 2002. However, in 2012 the US still stands as the largest oil consumer in the world, with 21.9% of total world oil consumption, but down from the 25% it had in 2005.
Coal is the most abundant fossil fuel, with proven reserves for more than 100 years, with the US, the Russian Federation, China, Australia, India, Germany, Kazakhstan and South Africa owning 87% of all available reserves. Between 2000 and 2012 coal consumption increased by 60%, being the fossil fuel which had the most increase in its share in the primary energy matrix. China is responsible for 86% of the increase in world coal consumption, and currently is the country with the largest level of coal consumption, with 50.2% in 2012, followed by the US, with 11.7%, India 8%, Japan 3.3%, Russian Federation 2.5%, South Africa 2.4%, South Korea 2.2%, Germany 2.1%, Poland and Indonesia 1.4% each.
The largest challenge for coal to continue contributing in a large manner to the energy matrix is in the increasing concern with GHG emissions and the harmful consequences on populations´ health and the environment. Albeit the large improvements in emissions control equipments, CO2 emissions remains as a pending dilemma and Carbon Capture and Storage (CCS) technology is not coming yet as a solution.
In the last decade, natural gas has reshaped the energy landscape. The technological innovations and a favorable investment environment that exists in the US, which has made accessible shale-tight gas and oil, have reverted the declining trend of natural gas production that took place in the first half of the 2000 decade. Dry shale gas production has increased from 0.3 trillion cubic feet in year 2000 to 9.6 trillion cubic feet in year 2012, or to an equivalent of 40% of the US dry natural gas production. This also has leads to changes in domestic relative prices. Where, in the second half of the first decade of the 21st century, natural gas became relatively cheaper to oil and coal. Projections of the EIA point that by the end of this decade the US will become a net natural gas exporter.
The renascence of the US natural gas industry, with large tight shale but as well oil reserves, has favored similar expectations of more abundant natural gas production in other places of the world, where important reserves have been identified also in Russia, China, Argentina, Libya, Australia and other 36 countries. Estimates of technically recoverable resources of shale oil are set in 345 billion barrels and of shale gas in 7,299 trillion cubic feet. Regarding conventional sources, these figures imply an 11% increase in total crude oil resources and a 47% increase in total natural gas resources, and opens up enormous opportunities for a world with more abundant natural gas.
The interest on shale exploration is becoming wide spread, but there is the question on how fast it can go in other places. Among others, it will depend on the underground conditions but also on the attractiveness of the investment environment. According to the IEA, while the import market is becoming increasingly tight in response to growing global demand, gas markets could face tough times for the rest of the decade until they can replicate North America's shale gas innovation.
Among fossil fuels, natural gas is the one with the lowest levels of GHG emissions, friendlier to the environment, and better acceptance within the population. Thus, with increasing available reserves and more competitive prices, it is expected that natural gas will play an even larger role on power generation; which is also suited to complement other energy sources subject to intermittency, like wind, solar or other renewable. Conversely, the main concerns are the furtive methane emissions and the impacts on aquifers.
Natural gas has gained an ever-increasing share on the primary energy matrix, with a participation of 24% in 2012, up from a figure close to 15% in year 1965. The largest consumer in the world is the US with 22%, being followed by the Russian Federation 12.5%, Iran 4.7%, China 4.4%, and Japan 3.5%.
For fossil fuels one of the key challenges is on how to build an economy low in CO2 emissions, and part of the answer can be in an increasing use of natural gas.
Renewables represents a figure close to 9% of the primary energy matrix, with 7% from large hydro power plants and 2% from other renewable such as small hydro, wing, solar, geothermal and biofuels. Even with the small percentage that renewable represents in the primary energy matrix, there is a large potential for them to be developed as the technologies mature and their costs become more competitive with other energy sources. Hydropower generation is the most widely spread renewable, where less than 40% of what today is economically feasible has been constructed. Renewables are the energy sources which have grown the most. For example, between 2000 and 2011 solar PV install capacity multiplied by almost seventy times, reaching 70 GW in 2011; and wind install capacity multiplied by ten, reaching almost 250 GW of install capacity in 2011. Renewables are expected to have an increasing share in the energy matrix.
Nuclear, represents 4.5% of the primary energy matrix, and for it to continue playing a key role in power generation, especially following the Fukushima disaster, it needs to rebuild the confidence and reputation among the population. Without that, it will continue to face an uncertain future in many countries if not discarded.
Global Energy Demand and Challenges Ahead
The main challenges that appear on a global scale and of particular interest for the energy industry are:
Population growth and decreasing levels of poverty will put a big stress on energy demand. Today, average per-capita energy consumption on Non-OECD countries is 1/4 of the average per-capita energy consumption level in OECD countries. And in simple arithmetic, with constant population, if in Non-OECD countries per-capita energy consumption increases to 1/3 of the per-capita energy consumption of OECD countries, world energy consumption will increase by almost 20%, and if in Non-OECD countries’ per-capita energy consumption increases to 1/2 of the per-capita energy consumption of OECD countries, then world energy consumption will increase by more than 50%. Thus, what happens with energy consumption in Non-OECD countries will be key to the future path of global energy demand.
Every day we find new evidence that the problem of climate change has an anthropogenic cause, mostly related to the burning of fossil fuels, and this is an issue of increasing concern as are the risks that we could face, such as heavy rains, severe droughts, extreme heat or polar waves, rise in sea level, and changes in water supply and glaciers, among others. Since 1900 world atmospheric concentration of CO2 has increased from 300ppm to almost 400 ppm (see Figure 3), and between year 2000 and year 2012 CO2 emissions related with fossil fuels consumption increased by 36%, mainly associated with coal consumption. China has become the largest emitter of GHG, where in year 2012 it accounted for 26.7% of global CO2 emissions, being followed by the US with 16.8%, India 5.3%, the Russian Federation 4.9%, Japan 4.1%, Germany 2.4%, and South Korea 2.2%. Furthermore, China itself explains 66% of total increase in CO2 emissions between years 2000 and 2012.
Figure 3: World atmospheric concentration of CO2 and average global temperature change
Note: The temperature refers to the NASA Global Land-Ocean Temperature Index in degrees Celsius, base period: 1951-1980. The resulting temperature change is lower than the one compared with pre-industrial levels. Data sources: Temperature data are from NASA (2013), CO2 concentration data from NOAA Earth System Research Laboratory.
Source: World Energy Outlook, Special Report: Redrawing the Energy Climate Map, IEA 2013.
On the environmental issues we can expect an increased pressure regarding the way we solve energy demand, where low GHG emissions technology and those with a lower environmental footprint will be favored on top of those that have larger environmental impacts. A sign of this is shown by the new investment directions taken by the energy sector of the World Bank Group, where it will provide financial support to green field coal power plants “only in rare circumstances”, as well as that it will intensify global advocacy, which includes encouraging developed countries and large emerging economies to lead efforts on pricing GHG emissions and the promotion of renewables.
With a growing energy demand exists the risk of increasing geopolitical tensions when energy security is under stress. Globalization and larger energy demand certainly will not be absent of new tensions. Further, the future consensus between states and markets in addressing countries energy needs is uncertain. It will be key as to how technology evolves and new energy resources become available. Innovations in the renewable sector and the shale-tight oil and gas revolution are good examples on how technological change and markets has expanded the frontier of energy resources reducing energy dependency and increasing energy security.
Global energy demand and its future trigger many questions and challenges. How much energy will be need in 20, 30 or 50 years from now? How we will fill our future energy needs? What role will play oil, coal, natural gas, nuclear, hydro and newest renewable energy sources like wind, solar, geothermal, waves and tidal, biomass? Is energy efficiency a solution? How the challenge of climate change and increasing concern with environmental issues will be a wedge against the different energy source? What role we should expect for private and public sectors? How world energy markets, regional integration and local solutions will provide an answer to the increasing energy needs of this 21st century? Will the pace of technological change be enough to provide the resources and technological solutions needed to feed securely the energy demand without stressing the geopolitical situation of the world? These, and many others, are the questions we will be addressing in the Closing Plenary Session on Global Energy Demand Growth, during the 37th IAEE International Conference: Energy and the Economy, that will take place the 15-18 June, 2014, in New York City, USA.
Notes and References:
* This article reflects the author´s personal views only.
 OECD Annual Report, 2002.
 Quadrillion BTU = 1.05505585 Exajoules (EJ), and 1 EJ = 1018 Joule
 EIA, Annual Energy Outlook 2013
 EIA, Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States. 2013.
 “Technologically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States”, June 2013, plus EIA estimates for the US.
 IEA, Medium-Term Gas Market Report, 2013.
 According to IRENAs study, for every doubling of the installed capacity of solar PV, module costs are expected to decrease as much as 22%.
 Source: “Hydropower and Dams”. World Atlas, 2009.
 Source: IRENA
 See, for example, the draft paper of the Working Group I, IPCC Fifth Assessment Report, Climate Change 2013: the Physical Science Basis, 2013.
 This year, for the first time since the inauguration of the Volcano Mauna Loa observatory, was measured a CO2 concentration level on the atmosphere that surpassed 400ppm.
 World Bank, 2013. Toward a sustainable energy future for all: directions for the World Bank Groups energy sector. Washington DC ; World Bank
 Shell. 2013. New Lens Scenarios: A Shift in Perspective for a World in Transition.