Category: Natural gas

Can the energy transition help EU energy needs?

dchone August 11, 2022

As the EU grapples with the challenge of displacing Russian oil and gas and meeting immediate needs as Russian supplies are cut, the question of the scale and speed of the energy transition emerges. How fast can Russian supplies be displaced by the transition itself?

The two charts below show the current situation. Prior to the Russian invasion of Ukraine, oil and gas supplies from Russia and into Europe contributed to about 40% of overall European demand, with local production making up much of the balance in the case of gas, but just about half the balance in the case of oil. In the case of gas, the flow to Europe is about a quarter of Russian supply, but for crude oil and oil products it’s nearly half.

Both charts show that European production has declined over twenty years and in the case of oil reached an apparent plateau around 2012. It’s unlikely that local production increases could make up for the cut in Russian supplies, so that leaves three immediate options;

Immediately cut overall energy demand, which in turn could translate to a reduced need for Russian supply.
Find supplies elsewhere.
Accelerate the energy transition to reduce the overall need for oil and gas in the energy mix.

While it’s clear from recent announcements that the EU strategy will embrace all three options in the short term, the longer term strategy will almost certainly rest with the transition itself. But such a transition could well take all of this decade, and probably longer, to complete.

Gas supply is perhaps the more problematic issue, as supply is less flexible globally than oil due to pipeline constraints, LNG capacity (the availability of shipping, liquefaction and regassification facilities) and long term storage. While gas has become a flexible commodity in the 21^st century, it still remains easier to reorganise, redirect and store oil. However, gas may be faster to displace than oil from an energy transition perspective.

The gas chart above also shows how the rapid deployment of wind energy across Europe could be used to offset Russian gas requirements, but it’s a journey that takes the best part of a decade. This assumes a compounding growth rate in wind deployment of 10% per year, slightly above current levels of 8%, but equivalent to the growth rate from 2010 to 2017. However, with a much larger installed base, 10% growth in 2029-2030 means installing some 50 GW of wind in that year versus the 15 GW installed in 2017 and again in 2021. So the annual installation rate has to at least triple. Of course wind isn’t the only technology, there is solar PV as well, at least for the southern latitudes of Europe.

Further to the above, if rapid growth in renewables is focussed entirely on displacing Russian gas or filling the void left by the absence of Russian gas, less progress will be made in displacing the current use of coal in the EU. This could make meeting the EU 55% by 2030 emissions reduction goal more challenging, as eliminating coal for a given electricity production can deliver twice the emissions reduction versus the same shift for gas.

By contrast, displacement of Russian oil through the energy transition looks to be a slower process, although it may turn out to be less necessary. Oil is a more flexible commodity in terms of source and destination, although there could still be pinch points in the system, for example inland east European refineries tied to Russian crude via pipelines. The largest portion of EU oil demand is for transport and within that the capacity for replacement in the 2020s sits with electrification of passenger vehicles, vans and city buses. Alternatives for larger trucks, ships, barges and planes are not yet mature enough for fast large scale deployment.

If we assume a very rapid deployment of electric vehicles (EV), to the extent that all new sales are electric by late in the 2020s (a rate faster than the current goal of 2035 for all EV sales), only about 50 million tonnes per year of oil is displaced by 2030, or about a fifth of the oil that comes from Russia. This is because of the time it takes to turnover the exiting stock of vehicles. Within Europe there are some 250 million passenger cars (Source: Eurostat), but new car sales are in the range 12-16 million vehicles per year, so in eight years only about half the total stock will be replaced anyway. With EVs currently comprising about 10% of new sales, albeit that share growing rapidly, replacing even half the total vehicle stock with EVs will take longer.

In the end, a rapid energy transition can contribute significantly to the EU weaning itself off Russian oil and gas, but this won’t happen in the next few years. By the end of the decade significant progress can be made, especially for gas, but it will likely be well into the 2030s before the same is achieved for oil.

Getting to net-zero emissions in the UK

dchone May 9, 2019

Last week the Climate Change Committee (CCC) in the UK released its much anticipated report which is recommending that the government revise its emissions goal to net-zero in 2050. The Committee notes that this is an appropriate UK contribution towards the global need of meeting the goals of the Paris Agreement. The recommendation also follows in the wake of the IPCC Special Report on 1.5°C, which identified 2050 as the year in which the global economy should attempt to reach net-zero emissions in order to limit warming to 1.5°C with a 66% probability.

The recommendation is a shift from the current UK target which would see the country reach an 80% reduction by 2050, in support of which the country is broadly on track to deliver the first 3 interim carbon budgets to 2022. However, as it looks past 2022 the CCC notes there is insufficient early development of some technologies for the heavy lifting ahead. Examples of this include carbon capture and storage (CCS) and hydrogen for a variety of uses.

Nevertheless, the state of technology development, deployment and availability has shifted since the time of the first UK target back in 2008. The cost of wind and solar has dropped significantly, offshore wind is now a viable proposition, many electric car models are available and while not in the UK, some 20 CCS facilities are now running in various parts of the world. All of the technologies required to do the job set out by the CCC are in plain sight, although a number still require significant UK development for deployment in this country. The CCC report is also very clear on this issue.

2050 is just over thirty years away and that same time period reflecting backwards marks the time that I first arrived in the UK with Shell. In the next 30 years the whole energy system will need to shift to achieve net-zero emissions, but how does that compare with the changes seen over the last 30 years. While two thirds of that period has not been covered by the Climate Change Act and its carbon budgets, all but three years have been covered by the UK ratification of the UN Framework Convention on Climate Change.

The Sankey diagrams below reflect the change over the period, although the most recent from the IEA are 2016, so they won’t show the last two years of renewable energy development.

Overall primary energy consumption has fallen, with the most visible change being the shift away from coal and towards natural gas in power generation. Both bioenergy and renewables have also added to the generation mix. Nuclear plays an important and steady base load function. Natural gas is now the dominant contributor to the current power generation sector and in the past year there have been periods where coal has not played a role at all. Back in 1989 coal made up most of the generating capacity. Oil demand within the UK has hardly changed over thirty years (slightly up) although production has halved.

As noted above, one feature that has surged since 2016 is the proportion of renewable energy in the generation mix. Recent figures from BEIS show that wind and solar have now exceeded nuclear on a quarterly basis.

In the final energy system, the changes are more nuanced. The overall share of electricity has moved from 16.7% of final energy to 20.4%, or a shift of 3.7% points in 27 years. The global rate of change is tracking at 2% points per decade, so the UK is well short of that pace of transition. A net zero emissions economy would likely need electricity to be the major component of final energy, say around 60%, so the UK rate of change will need to shift from 1.37% points per decade to around 11% points in each of the coming decades.

Transport hasn’t shifted at all in the past 30 years, with oil use in transport slightly increasing. Electricity is just starting to creep into this mix, but pure electric vehicles have reached only 0.7% (2018) of new car sales. Worryingly, the total number of petrol and diesel cars registered in the UK in 2018 was unchanged from 2013, a period which has seen the first major push to get consumers to go electric. Reaching net-zero emissions by 2050 will not just mean seeing all new purchases as electric, but seeing all new purchases from about 2035 onwards as electric. It can take up to 15 years to completely turn over the entire on-the-road fleet, although a future government could presumably accelerate this process with a buy-back-and-scrap scheme.

In the industrial sector, energy consumption has dropped by nearly a third, presumably through efficiency improvements as industrial output has hardly changed (see chart below). Importantly, electricity use has stayed largely the same. This means that the sector is gradually electrifying, although again the pace of change is below that required.
UK Industrial Production (1970-2019).

Then there are the tricky bits, where the UK has made only limited progress. The CCC notes that radical change is needed in home heating, including a shift to hydrogen and heat pumps, with support from much better home insulation. But residential natural gas use has marginally increased in 30 years, despite significant improvements in boiler efficiency and the use of electricity instead of gas for new apartment buildings. One highlight in this area is the recent milestone of one million homes now being supplied with biomethane.

The overall change in 30 years has been one of continually falling greenhouse gas emissions, with much of the gain coming from natural gas replacing coal and a fall in industrial energy use. While the impetus for change over the last 30 years was perhaps not as great as it is now, the overall shift is symptomatic of typical energy system dynamics; rapid adjustment has never been a feature, primarily due to the large capital stock involved. Outside the energy sector change over the same period has been dramatic. In 1989 there was no internet, no social media, hardly a mobile phone to be seen and televisions were defined more by their depth than their width. So can the UK reach these sorts of transition rates and achieve the goal of net-zero emissions by 2050?

In the power generation sector, zero emissions should be entirely achievable in that time frame. Renewables are surging and new nuclear capacity is now under construction (although even getting that started took a decade). Similarly, with the models on offer or on their way, passenger vehicles could be entirely electric and various cities across the UK have demonstrated that electric buses are now a viable option. But there is no real sign of change for heavy goods vehicles, shipping or aviation. Perhaps the biggest challenge sits with the use of natural gas in homes and industry. It is easy to use, clean, provides a very high heat load and is backed by extensive infrastructure. Hydrogen and electrification are potential pathways forward, but as noted the electrification rate of change has to shift by nearly an order of magnitude. For hydrogen there are promising signs of change with the government now funding a major programme on supply and conversion of existing facilities away from natural gas.

Finally, there is carbon capture and storage (CCS), which may be a simpler solution in many applications than attempting to dislodge natural gas. CCS in combination with direct air capture (still a nascent technology) may also be needed to balance out emissions in sectors such as aviation. Even the production of hydrogen may be easiest at scale from natural gas, which would then also require CCS. The UK has tried and tried again with CCS, but there is still no operational facility to show for all the efforts made. Yet the UK is both pipeline dense and geologically gifted in terms of storage potential, so deployment could proceed given the right incentives to begin.

The Climate Change Committee have put forward a bold recommendation, but it is not without immense challenge. It ought to be possible to achieve the 2050 goal of net-zero emissions, but it won’t happen without some significant nudging by the government in a number of key areas. Policy decisions over the coming five years may well set the scene for the next twenty, so there is everything to play for.

The potential for rapid energy transition in North America

dchone March 5, 2019

Over recent weeks and months there has been considerable discussion in the USA and Canada on clean energy transition pathways, carbon pricing and the Paris Agreement. This has been catalysed by the IPCC 1.5° report, the arrival of new political figures on the scene and the prospect of elections in 2019 and beyond. As I discussed in my recent post on a new report that outlines a pathway for global transition consistent with 1.5°C, very steep emission reductions are called for in North America over the coming decade, as shown in the chart below. For the 1.5° case, a reduction of about 80% is proposed from 2015 to 2030.

Source: Achieving the Paris Climate Agreement Goals – Sven Teske (Editor)

But is such a rapid transition possible for an energy system as large as that found in the USA? This is similar to a pathway that has been proposed by those calling for a Green New Deal in the USA. But it is very different to that proposed by the Sky Scenario, released by Shell in 2018.

In Sky, to reach the goals of the Paris Agreement, global emissions need to peak in the 2020s and be falling by 2030, which happens in large part through an initial mobilization of effort throughout the 2020s. But emissions in the USA don’t get even close to an 80+% reduction in that time. North American emissions peaked around 2005 and are slowly falling, but in Sky the pace of change triples in the 2020s with a significant boost in effort, led by government policies such as carbon pricing and electric vehicle mandates and incentives. But by 2030, emissions have fallen by only 23% compared with 2015.

This would constitute a major shift in direction for the US economy. Five significant changes in the energy system in the decade to 2030 in Sky for North America are;

Doubling of wind generation. This should be a relatively easy goal, but on the basis of current build rates it would not be met. Current US capacity is around 90 GW with a recent quarter seeing 0.6 GW added.
A six-fold increase in solar generation. Current build rates would deliver about a third of the required capacity by 2030.
Coal use down by a third.
Natural gas demand plateaus and is the same in 2030 as it is in 2020.
Electric vehicle (EV) sales boom and by 2030, 20% of all vehicle miles traveled are in electric vehicles.

To imagine even more than this is quite challenging. In the EV sector, sales in the USA in 2018 grew rapidly, but still only amounted to 2.1% of the total (Source: EVVolumes.com). A looming issue is the lack of EV models in the SUV / light truck category, although this should start to correct in 2020 with several expected. Nevertheless, this category size makes up a large portion of the US market and it may take some time for consumers to adopt electric versions of their favourite model. While an all EV sales line up might be possible by 2030, an all EV fleet isn’t. For a 100% EV fleet to occur in 2030, all new passenger vehicle sales need to be electric in the next year or two.

In the power generation sector, the multipliers given for wind and solar above, together with an unchanged role for nuclear, results in over half the power generation coming from non-fossil sources by 2030. In Sky, it isn’t until after 2040 before coal is phased out, but natural gas persists in the power mix until the 2060s. A faster transition would require not only a further acceleration in solar and wind deployment, but also the development of major grid storage capacity to replace natural gas. Although there is some grid battery storage today, it amounts to some 2 GWh (Source: PV Magazine), a tiny fraction of the amount that might be needed for a 100% renewable energy system. Further technical developments will be required, or perhaps storage will be combined with ultra-high voltage long distance transmission.

But the most static sector over a ten year period may well be heavy industry; sub-sectors such as cement, iron ore smelting and petrochemicals. While Sky sees some shift towards electricity, the change from 2020 to 2030 is modest. Carbon dioxide emissions remain unchanged at 400 million tonnes per annum over this period. Change is measured in decades rather than years. This is because of the time it takes to develop new industrial processes that don’t use fossil fuels for energy (e.g. hydrogen based iron ore smelting), retrofit exiting capacity and build the necessary infrastructure to support such change (e.g. hydrogen generation).

The next ten years is critical for a transition that meets the goals of the Paris Agreement and this was a feature of the House Resolution for a Green New Deal. Significant changes must be achieved to set the scene for net-zero emissions in the decades following. But to imagine wholesale energy system change in s decade is not realistic. There may well be narrow pockets of very deep change found in parts of the system, but complete change remains a fifty year project.

Note: Scenarios are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Please read the full cautionary note in http://www.shell.com/skyscenario.

Where can the world get the energy it needs?

dchone November 30, 2017

A new tool from the Shell Scenarios Team provides new and unique insights

Those who follow my blog postings will have noted that I regularly use energy data, typically extracted from sources such as the IEA, the US Government EIA and even other energy industry company databases. The data I use is often resource based, such as in my piece, Infinite Solar, a bit over a year ago. Now, that data is available in the new Global Energy Resources (GER) database from the Shell Scenarios team.

This database provides an overview of resource potential across gas, oil, coal and renewable energy types, fossil and non-fossil, including oil, gas, coal, hydro-electricity, biomass and biofuels, geothermal, wind and solar.

A user-friendly interface allows for quick comparisons of data across countries and regions, as well as aggregation regionally and globally. You can access it on computers, tablets and smartphones, and the full database is also downloadable as an Excel spreadsheet.

The underlying data has been compiled using a rigorous research process combining raw data with expert assessment. The oil and gas database was constructed from analysis of external source data. It is supplemented by Shell’s extensive knowledge and technical assessment of sub-surface resource potential.

The renewables database was developed through a collaboration between the Shell Scenarios team and Ecofys, a Navigant company and leading international energy and climate consultancy. It seeks to reflect a realistic assessment of resource potential rather than the perspective of technical potential that commonly characterizes academic literature. The dominant renewables, wind and solar, were evaluated on a grid-cell basis, providing a detailed analysis spanning the globe.

The GER database underpins energy transition outlooks developed by the Shell Scenarios team. These include our “New Lens Scenarios” (2013) and our recent work, “A Better Life with a Health Planet – Pathways to Net-zero Emissions” (2016).

Our analysis suggests that there is no lack of potential energy resources to support a decent quality of life for the 10 billion people expected to live on the planet towards the end of the century. However, differences in resource distribution will result in local and regional constraints, creating a myriad of energy consumption, production, and international trade patterns. These patterns trigger complex policy and socio-economic choices around the energy transition which will ultimately govern successful (or failed) transitions towards a net zero emissions world.

We hope that you find the GER database valuable, whether for quick investigations or for more systematic analyses of this most fundamental pillar of the global energy system, namely the distribution of energy resources across our world.

www.shell.com/scenariosenergymodels

www.shell.com/scenarios

Note:

The Scenarios are a part of an ongoing process used in Shell for 40 years to challenge executives’ perspectives on the future business environment. We base them on plausible assumptions and quantifications, and they are designed to stretch management to consider even events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. It is important to note that Shell’s existing portfolio has been decades in development. While we believe our portfolio is resilient under a wide range of outlooks, including the IEA’s 450 scenario, it includes assets across a spectrum of energy intensities including some with above-average intensity. While we seek to enhance our operations’ average energy intensity through both the development of new projects and divestments, we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years.

Disclaimer: Scenarios are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Please read the full cautionary note in www.shell.com/scenarios

Chasing electrification

dchone August 31, 2017

One of the important changes that needs to take place in the global energy system as it heads towards much lower emissions is electrification. This is the increasing use of electricity as final energy (i.e. the energy we all use to deliver services) rather than fossil fuels, such as natural gas for cooking and gasoline for mobility. According to the IEA, electricity made up nearly 19% of final energy use in 2015, with the bulk of the 81% that isn’t electricity being oil products, natural gas, coal and biomass. The Shell scenario work on a net zero emissions world indicates that electricity should exceed 50% of final energy use.

Over the course of the last few decades, electrification of final energy has moved relatively slowly, at around 2 percentage points per decade (i.e. it was about 16.5% in 2005 and 14.4% in 1995). This rate of change is far below what is necessary to reach 50+% during the second half of the century – in fact, at the current rate it would take over one and half centuries to get above 50%. Therefore, the rate of electrification of the final energy system has to approximately triple over the coming few years for the Paris goals to be approached. At the same time, overall expansion of the energy system also has to be catered for, which might see a near doubling in final energy demand, even as electrification brings considerable efficiency gains.

Today, global electricity production stands at some 25,000 TWh per annum, representing ~19% of final energy demand. The trends described above indicate electricity production rising to at least 100,000 TWh per annum during the second half of the century, or the addition of ~1,400 TWh of generation per annum from now on. The 3.3 GW Hinkley Point nuclear power station being constructed in the UK operating at full capacity for the entire year would add about 29 TWh. The likely progression probably won’t be linear, so good progress would still require some 800-1100 TWh added each year in the near term. That’s still at least 30 Hinckley Point projects brought on line each year.

This new electricity production shouldn’t contribute additional emissions to the atmosphere, so many will look for it to come from wind and solar. Total global generation from wind and solar was around 1,300 TWh in 2016, but the added generation from 2015 to 2016 was 208 TWh (Source: BP Statistical Review of World Energy) against total added electricity generation of 600 TWh. Total added generation in recent years has average around 500 TWh, well short of the 800-1100 TWh mentioned above.

Additional solar and wind are not yet close to meeting additional generation needs, although both are rising quickly with additional generation more than doubling over the last six years. That would point to somewhere around 2030 when all new generation needs are being met by additional solar and wind being added to the grid in sufficient quantity for both demand and increasing electrification needs. It also means that emissions from electricity generation globally will only fall in the medium term to the extent that natural gas and nuclear can displace coal. Although coal use is now falling in some economies, it is also increasing rapidly in others as new generation capacity is required for development. Vietnam is one such economy, with several new facilities close to approval.

Electrification of the energy system is a critical driver for change, yet progress today is more mixed than many recognize. Although renewable penetration has been significant in recent years, it must make even more rapid progress in the next decade to bring about material change in the time frames that are being contemplated for net-zero emissions (with some expecting such an outcome by 2050 ). The first electricity grid appeared in New York in September 1882, 135 years ago. Although the technology has spread globally and appears ubiquitous, it still requires significant development and expansion. That will certainly happen, but the time-frame in the context of the Paris Agreement appears uncertain.

Scenarios are part of and ongoing process used in Shell for more than 40 years to challenge executives’ perspectives on the future business environment. They are based on plausible assumptions and quantification and are designed to stretch management thinking and even to consider events that may only be remotely possible.

The battery that made headlines

dchone July 14, 2017

It is hard to imagine that something as mundane as a battery could make national headlines, but that is what happened last week in Australia. I was there for a family visit and as much as climate science gets debated in the media (see my previous post), it barely rates against the energy debate that has dominated the Australian headlines in recent months. The issue is the cost of electricity and the reliability of supply, both of which continue to be contentious subjects.

The cost of electricity has risen sharply in Australia over the last two years, but this has been coupled with supply problems that have led to blackouts in some parts of the country. This has been most visible in South Australia, which has closed all its coal fired power plants and invested heavily in renewable energy. The result is a wind / solar / natural gas power mix, backed up by an inter-connector with Victoria. For the most part this has been a workable solution, but when particular conditions coincide the result can mean blackouts or load shedding by some industrial customers. This usually involves periods of high load coinciding with low renewable energy availability at a time when some other part of the network is under stress, e.g. supply from the inter-connector. The problem is that this has happened enough times to become a major issue, leading to extensive media coverage, finger pointing and public outcry.

The reporting around this issue can be likened to the climate science debate I discussed in my last post – i.e. overly prone to hyperbole and lacking in basic facts. The solution that has been proposed for South Australia is the rapid construction of battery storage and into this foray stepped Elon Musk (CEO of Tesla). Some months ago, after power supply problems in South Australia hit the headlines yet again, he made the offer to build a major Lithium-Ion storage facility in 100 days, with no payment required if construction was delayed beyond that period. Not surprisingly this galvanized the government and led to a public tender for such a facility.

Last week the South Australia government announced that Tesla had won a tender to build a grid scale battery. The project will incorporate a 100MW peak output battery with 129 megawatt hours of storage alongside an existing windfarm, near Jamestown. Elon Musk flew into Adelaide for the announcement, which added to the fervour. What was interesting was the reaction in the media, ranging from support bordering on adulation to downright condemnation. Contrast the July 9^th Sun-Herald, where their social commentator Peter Fitzsimons noted;

Oh, how sweet it is. After all the haters, all the pile-ons, all the craven dinosaur politics which maintains that coal really does have a future, the SA government shimmies, shakes, steps left, steps right, bursts through into clear and announces its lithium battery deal.

. . . with political commentator Tim Blair in the Daily Telegraph on July 10^th, who starts a near full page article with the headlines;

Charge of the left brigade – People are falling over themselves to fawn over magic man Elon Musk’s battery absurdity but he is just the latest saviour to get the green light from eco worriers.

Neither are energy commentators of any note, but such is state of the energy transition debate in Australia that this doesn’t seem to matter. The controversy highlights the need for clear policy and thoughtful steps forward in implementing an energy transition, irrespective of the reasons driving such a transition, be they climate change, energy costs, local air quality or some combination of these and other needs.

In the case of South Australia, exuberance and some technology bias led to a rapid shift in the electricity system to a point where stability became a problem, which will now take some time to correct. The battery solution isn’t a full solution at all, but one of several measures that will be required to correct the imbalance that has been created. Alongside the Musk excitement, there was also the recent announcement that the government will build additional gas fired generation capacity at a cost of over A$300 million.

The South Australian electricity system operates at around 2-3 GW, with peaks and troughs depending on the time of day and year. Annual demand is some 14,400 GWh, or about 40,000 MWh per day. The initial battery capacity is 129 MWh. The gas capacity can add over 5,000 MWh per day if it operates continuously, or 13% of the demand. While the battery commanded all the headlines, it is clearly not a solution for extended periods of high demand or reduced supply, given that it can hold only 5 minutes of South Australian demand. However, it is an important step in the quest for a more balanced system that has very high levels (often >70%) of intermittent renewable energy. Further battery systems are likely, but a better balance between natural gas and renewable energy would appear to be the more achievable outcome in the short to medium term. It is also likely to be the more cost efficient outcome, given the ~A$100 million investment required (according to a local private source) for what will be the largest Lithium-Ion battery system in the world.

Drivers behind flattening CO2 emissions

dchone March 29, 2017

The International Energy Agency (IEA) recently reported that carbon dioxide emissions from energy use remained flat in 2016, the third year in a row. This is a noticeable departure from the 21^st century trend which has seen global carbon dioxide emissions rise by some 40% in just 14 years. The Guardian reported this story and added the by-line “International Energy Agency report puts halt in emissions from energy down to growth in renewable power”. But the story within the energy system has more facets than this (Data sourced from the BP Statistical Review of World Energy).

Although global growth hasn’t been outstanding in recent years, it has nevertheless chugged along at around 2.5-3%. Energy use has also increased, albeit at a lower rate of some 1% per annum. This is at the lower end of the expected range of energy vs. GDP, but it is probably too early to say that this represents a longer term shift in this relationship. However, this could be the case if efficiency improvements can outpace economic development or at least come close.

Renewable energy is growing rapidly, although this is mainly in the area of electricity generation. From 2014 to 2015 solar and wind generation increased globally by about 200 TWh, which was nearly equal to the overall growth in electricity generation for that year. As an aside, BP reported that the overall electricity growth rate in 2015 was down on 2014 (2.4%) and remained well below the 10-year trend (2.8%). This is slightly concerning as electrification of the energy system is a key requirement for long term emissions reduction. Electricity generation needs to be accelerating compared to overall energy demand growth.

Although the 2016 data isn’t available yet, BP reported that coal use declined globally in 2015 vs. 2014 by 1.8% and natural gas use increased. While most of this could be attributed to the USA and Canada, China also saw a notable coal decline along with growth in natural gas use. The global coal use reduction is equivalent to nearly 300 million tonnes CO2, or about 0.8% of global emissions. Any replacement with natural gas would result in about half the emissions. This is very noticeable in the USA where coal use fell in 2015 by 13%, natural gas use grew by 3% (but against a larger absolute use), oil demand increased by 3%, but emissions declined by 2.6%.

Coal use is declining for a number of reasons;

The surge in natural gas production in the USA in particular, triggering the closure of older coal fired power stations that cannot meet new environmental regulations.
Air quality concerns in China, leading to a shutdown of coal fired industry and power generation around the major cities.
Some mothballing or closure of overcapacity in metallurgical industries in China.
The impact of a modest carbon price in a number of jurisdictions and some government imposed moratoriums on new coal generation construction (e.g. Canada).

However, coal use continues to increase sharply in a number of developing countries such as Vietnam, the Philippines, Malaysia, India, Colombia and Indonesia. Current expectations are that this will continue.

Oil use continues to increase, with BP reporting a global rise from 2014 to 2015 of 2%.

The final story is therefore one of several parts and it would appear that this trend has continued into 2016 although further data will be required for verification;

Global growth is modest, but energy use increases are trending at the lower part of the expected rise for this level of economic growth.
Coal use is declining, with natural gas filling much of the gap but at lower emissions.
Renewables are growing quickly, covering most of the increase in electricity generation, but not quite all.
Oil demand continues to increase, with its growing emissions being offset by the reduction in coal use.

The end result is that flattening in global emissions that has been seen for three years now.

Making the most of hydrogen

dchone February 24, 2017

As hydrogen refueling stations begin to appear, including one from Shell opening near London, Toyota makes its Mirai hydrogen fuel cell vehicle more widely available and iron ore smelters even look to hydrogen as an alternative reducing agent (rather than coal) that doesn’t involve carbon, it would appear that this important energy carrier is beginning to show its potential.

The final energy (i.e. energy we use) mix in use today is less than 20% electricity, in large part dictated by the need to transport, store and use energy well away and disconnected from the point of production. Vehicles are a common example of this, with the requirement to power them on the move. While electricity storage is coming of age with batteries, hydrogen offers an alternative route forward that provides much of the flexibility we have come to rely upon with liquid fuels.

Hydrogen also offers the possibility of providing intense heat very quickly in a confined area, such as required by various industrial processes. For these reasons, and as society looks to shift away from direct use of fossil fuels for the purpose of carbon dioxide mitigation or simply needs to augment the energy system with other carriers, hydrogen shouldn’t be ignored.

Hydrogen production comes via three routes. The first is as a by-product from some industrial processes (e.g. chlorine manufacture). When I first started work in a Shell refinery I was assigned to follow the operation of the platformer, a unit which increases the octane number of naphtha by creating cyclic ring compounds (aromatics). These have a lower hydrogen content than straight chain molecules, so hydrogen is a byproduct. For the most part this source of hydrogen is in full use, either within other processes in refineries or in neighbouring facilities.

The second is steam reforming of natural gas, which produces hydrogen and carbon dioxide. Most industrial hydrogen in the world today is produced via this route. The carbon dioxide is relatively pure and can be used or captured and stored, making the process very carbon efficient. In the Shell refinery in the Netherlands some carbon dioxide from its hydrogen manufacturing unit is sold to local greenhouses to provide the enhanced growing conditions that they need. In Alberta, Canada, one million tonnes per annum of carbon dioxide from the Shell Scotford Refinery hydrogen unit is captured and geologically stored.

Finally, hydrogen can be produced by electrolysis of water, an experiment almost everybody has done in chemistry class at school. This route has renewable energy enthusiasts very excited as it can provide a ready use of electricity when wind and solar production exceeds demand, a situation many grids may face as renewable energy penetration reaches very high levels. But this process suffers from a relatively low efficiency, with only a few percent of global hydrogen being produced via this route. Generating hydrogen by electrolysis is only (optimally) about 60% efficient and the use of this hydrogen in a car is (optimally) also only about 60% efficient, so two thirds of the energy input is lost. This can be improved to some extent if heat recovery methods are employed.

The economics of the electrolysis route can be difficult, particularly if it relies on renewable energy surpluses, which won’t always be available. That would leave the electrolyzer idle or having to use purpose generated electricity. Further, most current electrolyzers vent the oxygen that is made, which is effectively waste energy and explains why the process can only be 60% efficient if hydrogen is the only product being made.

The global oxygen industry is very large; today it is around 500+ million tonnes per annum, with the metallurgical industry being the largest consumer. Oxygen is typically manufactured by cryogenic distillation of air. In the context of a hydrogen economy based on electrolysis rather than steam reforming of natural gas, oxygen production would be significant. According to Toyota, the Mirai consumes 0.76 kg H2 per 100 km. Using these numbers as a basis, a 200 million vehicle hydrogen fuel cell fleet might consume 23 million tonnes of hydrogen per annum, which when produced by electrolysis would also generate around 180 million tonnes of oxygen, or around one third of the current demand. This of course presumes it can be efficiently captured and transported.

Significant production of oxygen may also benefit another facet of an energy system striving for net-zero emissions. Biomass could be used for power generation, but in an oxygen combustion system (i.e. combusting the biomass with pure oxygen rather than with air which is 79% nitrogen). This means that the waste gas would be mainly carbon dioxide, which in turn would lead to easier capture and storage. This could then be an important negative emission technology in the net-zero sum for the economy as a whole.

The hydrogen economy offers many new opportunities and it is good to see that it is starting to move forward. The Shell hydrogen refueling station that opened in Cobham, uses an on-site electrolyzer to produce its hydrogen, with the electricity coming from a certified green source. It is the first of three hydrogen stations Shell plans to open in the UK in 2017.

Infinite solar

dchone August 15, 2016

An infographic published earlier this year asks the question “Could the world be 100% solar?”. The question is answered in the affirmative by demonstrating that so much solar energy falls on the Earth’s surface, all energy needs could be met by covering just 500,000 km2 with solar PV. This represents an area a bit larger than Thailand, but still only ~0.3% of the total land surface of the planet. Given the space available in deserts in particular and the experience with solar PV in desert regions in places such as California and Nevada, the infographic argues that there are no specific hurdles to such an endeavour.

However, solar PV is both intermittent and only delivers electricity, which currently makes up just 20% of final energy use. Oil products make up the bulk of the remaining 80%. As I noted in a recent post, even in the Shell net-zero emissions scenario, electricity still makes up only 50% of final energy. In that case, what might a 100% solar world really look like and is it actually feasible beyond the simple numerical assessment?

The first task is of course to generate sufficient electricity, not just in terms of total gigawatt hours, but in gigawatt hours when and where it is needed. As solar is without question intermittent in a given location, this means building a global grid capable of distribution to the extent that any location can be supplied with sufficient electricity from a location that is in daylight at that time. In addition, the same system would likely need access to significant electricity storage, certainly on a scale that far eclipses even the largest pumped water storage currently available. Energy storage technologies such as batteries and molten salt (well suited to concentrated solar thermal) only operate on a very small scale today.

The Chinese State Grid has been busy building ultra-high voltage long distance transmission lines across China and they have imagined a world linked by a global grid (Wall Street Journal, March 30 2016 and Bloomberg, April 3rd 2016) with a significant proportion of electricity needs generated by solar from the equator and wind from the Arctic.

But could this idea be expanded to a grid which supplies all the electricity needs of the world? A practical problem here is that for periods of the day at certain times of the year the entire North and South American continents are in complete darkness, which means that the grid connection would have to extend across the Atlantic or Pacific Oceans. While the cost of a solar PV cell may be pennies in this world, the cost of deploying electricity from solar as a global 24/7 energy service could be considerable. The cost of the cells themselves may not even feature.

But as noted above, electricity only gets you part of the way there, albeit a substantial part. Different forms of energy will be needed for a variety of processes and services which are unlikely to run on direct or stored electricity, even by the end of this century. Examples are;

Shipping currently runs on hydrocarbon fuels, although large military vessels have their own nuclear reactors.
Aviation requires kerosene, with stored electricity a very unlikely alternative. The fuel to weight ratio of electro-chemical (battery) storage, even given advances in battery technology, makes this a distant option. Although a small electric plane for one person for 30 minutes flight has been tested, extending this to an A380 flying for 14 hours would require battery technology that doesn’t currently exist. Still, some short haul commuter aircraft might become electric.
While electricity may be suitable for many modes of road transport, it may not be practical for heavy goods transport and large scale construction equipment. Much will depend on the pace and scope of battery development.
Heavy industry requires considerable energy input, such as from furnaces powered by coal and natural gas. These reach the very high temperatures necessary for processes such as chemical conversion, making glass, converting limestone to cement and refining ores to metals. Economy of scale is also critical, so delivering very large amounts of energy into a relatively small space is important. In the case of the metallurgical industries, carbon (usually from coal) is also needed as a reducing agent to convert the ore to a refined metal. Electrification will not be a solution in all cases.

All the above argues for another energy delivery mechanism, potentially helping with (or even solving) the storage issue, offering high temperatures for industrial processes and the necessary energy density for transport. The best candidate appears to be hydrogen, which could be made by electrolysis of water in our solar world (although today it is made much more efficiently from natural gas and the resulting carbon dioxide can be geologically stored – a end-to-end process currently in service for Shell in Canada). Hydrogen can be transported by pipeline over long distances, stored for a period and combusted directly. Hydrogen could also feature within the domestic utility system, replacing natural gas in pipelines (where suitable) and being used for heating in particular. This may be a more cost effective route than building sufficient generating capacity to heat homes with electricity on the coldest winter days. It is even possible to use hydrogen as the reducing agent in metallurgical processes instead of carbon, although the process to do so still only exists at laboratory scale.

But the scale of a global hydrogen industry to support the solar world would far exceed the global Liquefied Natural Gas (LNG) we have today. That industry includes around 300 million tonnes per annum of liquefaction capacity and some 400 LNG tankers. That amounts to about 15 EJ of final energy compared to the current global primary energy demand of 500 EJ. In a 1000 EJ world that we might see in 2100, a role for hydrogen as an energy carrier that reached 100 EJ would imply an industry that was seven times the size of the current LNG system. But hydrogen has 2-3 times the energy content of natural gas and liquid hydrogen is one sixth the density of LNG (important for ships), so a very different looking industry would emerge. Nevertheless, the scale would be substantial.

Finally, but importantly, there are the things that we use, from plastic water bottles to the Tesla Model S. Everything has carbon somewhere in the supply chain or in the product itself. There is simply no escaping this. The source of carbon in plastics, in the components in a Tesla and in the carbon fibre panels in a Boeing 787 is crude oil (and sometimes natural gas). So our infinite solar world needs a source of carbon and on a very large scale. This could still come from crude oil, but if one objective of the solar world is to contain that genie, then an alternative would be required. Biomass is one and a bioplastics industry already exists. In 2015 it was 1-2 million tonnes per annum, compared to ~350 million tonnes for the traditional plastics industry.

Another source of carbon could be carbon dioxide removed directly from the atmosphere or sourced from industries such as cement manufacture. This could be combined with hydrogen and lots of energy to make synthesis gas (CO +H2), which can be a precursor for the chemical industry or an ongoing liquid fuels industry for sectors such as aviation. Synthesis gas is manufactured today on a large scale from natural gas in Qatar and then converted to liquid fuels in the Shell Pearl Gas to Liquids facility. Atmospheric extraction of carbon dioxide is feasible, but remains as a pilot technology today, although some companies are looking at developing it further.

The solar world may be feasible as this century progresses, but it is far from the simple solution that it is often portrayed as. Vast new industries would need to emerge to support it and each of these would take time to develop. The LNG industry first started in the early 1960s and is now a major part of the global economy, but still only carries a small fraction of global energy needs.

The new Shell publication, A Better Life with a Health Planet: Pathways to Net Zero Emissions, shows that in 2100 solar could be a 300 EJ technology, compared to 2.5 EJ energy source today. This is in a world with primary energy demand of 1000 EJ.

Scenarios are part of and ongoing process used in Shell for more than 40 years to challenge executives’ perspectives on the future business environment. They are based on plausible assumptions and quantification and are designed to stretch management thinking and even to consider events that may only be remotely possible.

A focus on the Philippines

dchone March 8, 2016

Last week I was in Manila participating in the opening panel session of the Shell sponsored energy event, Powering Progress Together. The panel included IPCC WG1 Co-chair, Dr. Edvin Aldrian from Indonesia; Philippine Department of Energy Secretary, Hon. Zenaida Y. Monsada; and Tony La Vina, a former Undersecretary of the Department of Environment and Natural Resources, but currently Dean of the Ateneo School of Government. With the focus of our panel being the energy transition and climate challenge it didn’t take long to get to the situation faced by the Philippines and the Intended Nationally Determined Contribution (INDC) it submitted to the UNFCCC in the run-up to COP21.

The Philippines has seen energy sector emissions rise sharply in recent years (see chart) with coal use doubling between 2007 and 2014, while natural gas and oil demand remained almost static. Although oil use for transport increased, this was offset by a drop in oil based power generation.

Against this backdrop the Philippines submitted an INDC which calls for a 70% reduction in emissions for 2030 against a business as usual projection which sees increasing coal use in the power sector. The charts below were prepared by the Department of Energy. By 2030, full INDC implementation would see only a modest change in coal capacity from current levels, but a significant increase in natural gas and growth in wind and solar such that they become material in the overall power generation mix.

The government also has big plans for the transport sector, with major electrification of the popular Jeepney (small buses) and tricycle (motorcycle based carriers) fleet. These are everywhere in Manila.

But as the Secretary pointed out in the panel discussion, this shift is dependent on outside financial help. The reduction goal represents at least 1 billion tonnes of cumulative carbon dioxide over the period 2015 to 2030 and although an anticipated cost of implementation isn’t given, it may well run into tens of billions of dollars. However, the immediate benefits should be considerable, particularly for health and welfare in cities such as Manila itself as roadside air quality improves with an alternative bus fleet. The INDC specifically notes (one of several mentions);

The mitigation contribution is conditioned on the extent of financial resources, including technology development & transfer, and capacity building, that will be made available to the Philippines.

The Philippines have certainly felt the sharp end of the global climate in recent years, but particularly with Typhoon Haiyan, a Category 5 Super Typhoon, in November 2013. That event led to a member of the Philippine delegation pledging to fast for the duration of COP 19 in Warsaw. The INDC is an ambitious start on their mitigation journey, but also highlights the challenges faced by many countries at a similar stage in their development. As the Philippine economy develops it will need much more energy than currently supplied; the surge in coal use as a response is also seen in many other national energy plans. Limiting the early growth of coal in emerging economies is one of the big global issues that the Paris Agreement and related INDCs must address as they are implemented. The provisions within Article 6 of the Agreement can help; ideally by channelling a carbon price into those economies with the necessary climate finance to change the energy outlook.