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Understanding What's Wrong with Energy (& GDP Growth) in 7 Slides & 3 Minutes

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Information about Understanding What's Wrong with Energy (& GDP Growth) in 7 Slides & 3...
Business & Mgmt

Published on February 5, 2014

Author: NicolasMeilhan

Source: slideshare.net

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Understanding What’s Wrong with Energy (& GDP Growth) in 7 Slides & 3 Minutes Nicolas Meilhan Principal Consultant, Frost & Sullivan February 2014

2 Evolution of world primary energy consumption - Million tons of oil equivalent , 1860 to 2012 - What is the energy of the past? Oil remains by far the main source of world energy, but has lost market share to gas and coal. The portion of the global energy mix coming from fossil fuels will decrease only modestly, from about 80% today to about 75% in 2040 Sources: Shilling et al., 1977, et BP Statistical Review, 2013 30% 27% 22% 8% 6% 4% 2% 80% Biomass Nuclear Natural gas Coal Oil Hydro Wind, solar & geothermal

BrazilMexico Switzerland Belgium IndiaSpain Italy Sounth KoreaNetherlands United Kingdom France Japan Germany China United States 0 500 1000 1500 2000 2500 0% 20% 40% 60% 80% Exportsofgood&services(bn$) Electricity production from coal (% of total electricity production) 3 Isn’t coal the energy of the past? Yes it is as it fuelled the industrial revolution during the 18th century. But it is also the energy of the future as it should surpass oil as the primary energy used by 2015 Source: Worldbank Coal currently provides 40% of the world's electricity needs and 60% of the industry needs  We live in a “made in coal” world 1 % 5 % 10 % 15 % 20 % 25 % 30 % 35 % 40 % 0 % 45 % 50 % Exports vs. Electricity production from coal - Top 15 exporting countries*, 2011 - Electricity production from coal - % of total electricity production in 2012 - R2 = 0.7 * Energy exports excluded

Are we really running out of oil for transport? Knowing whether we’ll still have fossil fuels in 2100 is not the issue – the critical issue is for how long we will have affordable oil to fuel our economy (and our cars..) Source : Pierre-René BAUQUIS, Manicore , Jean-Marc Jancovici Energy density of energy vectors used in transport Energy density Specificenergy 4 1kg of oil contains as much energy as in 100 kg of batteries Productioninbillionsofoil barrelsperyear Liquid fuels production simulation - From 1700 to 2100 - It's not the size of the tank which matters, but the size of the tap

Houston, we have a problem Higher cost new oil projects require $100/bbl+ oil price to be profitable while oil demand (hence GDP per capita) contracts when oil price surpasses $102 in the US and $120 in China 5 Source: Goldman Sach Research Estimates, Douglas-Westwood Associates Economic Recession vs. Oil Price Four of the last five global recessions were preceded by an oil shock Breakeven of non-producing & recently on stream oil assets - Marginal Top 360 oil fields - Commercialbreakeven(US$/bbl) Cumulative peak oil production (kb/d) •Shale oil in the US cost $80/bbl to produce •Kashagan oil field need $125/bbl to be profitable

Is shale gas the energy of the future? In the short term maybe in the US with as high as 30% of gas demand in 2013, in the longer term probably not in Europe with only 10% of gas demand in 2030 6 Bird’s eye view of Texas shale gas field - click on the image- Source : Google maps http://goo.gl/maps/gm8RV

Can’t we just use renewable energies like our ancestors did in Middle-Age? Countries which inherited large significant forests, hydraulic or geothermal potential might get close to it – for others, it will be much more difficult unless consumption significantly decreases 7 Note: (1) Based on IEA conversion ratios, 16% by applying 33% conversion factor Sources: Eurostat, IEA, Frost & Sullivan analysis Share of renewable energies in primary energy consumption of selected countries - 2011, in % - 85% 80% 48% 40% 39% 34% 32% 26% 25% 22% 22% 17% 14% 13% 12% 11% 11% 10% 7% 7% 6% 6 4 270 29 20 4 50 34 36 19 24 413 6 7 173 129 2743 316 259 478 2189 Iceland Costa Rica Brazil Norway New Zealand Sweden Finland Austria CanadaDenmark ChinaPortugal Estonia Slovenia Italy Spain France JapanGermany USA Latvia UE Average (10%)(1) WW Average (13%)(1) Combustible Hydro Geothermal, Solar, Wind Primary energy consumption (Mtoe)

8 What is the real energy of the future then? The one we will not use! Note : koe = kilogram of oil equivalent ; best available technology in 1995 Source: Bernard Multon, ENS Cachan ; Commissariat au plan Sector koe / person In 1995 koe / person Best techno (1) Comments Housing Heating 740 300 • Norms Kitchen devices 35 25 • Best equipment Other devices 70 35 • Standby systems Tertiary Heating 415 200 • Norms Specific usages 90 50 • Standby systems Food 360 250 • 50% saving on cold and cooking Industry Intermediary products 625 450 • Recycling, eco processes Equipments 150 130 Transports Persons 490 250 • 4 liters / 100 km vehicles Goods 315 200 • Truck power reduction, rail freight Total 3290 1890 • Almost 50% energy reduction with no real change in comfort…not enough but a good start ! • But we have a strong inertia issue due to installed base replacement speed… Standby of electrical devices…5 to 6 TWh in France : almost one nuclear reactor !

Nicolas Meilhan Principal Consultant Energy & Transportation Practices (+33) 1 42 81 23 24 nicolas .meilhan@frost.com

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