Alain Grandjean / Partner, Carbone 4 / 2014-10-11
The energy mix can be defined as the distribution of primary energy sources consumed to produce various types of energy used in a given country. For different reasons, running from availability of the resources to policies enacted in the fight against global warming, national energy mixes will necessarily evolve over the coming decades. However, the natural inertia of history and the political and economic costs make the changes difficult. What are the most promising routes to transition?
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ParisTech Review – In today’s world, is there an ideal energy mix anywhere?
Alain Grandjean – No energy mix in the world today takes sufficient account of climate change issues. And for this reason alone, none of them is ideal. The main culprit is our strong dependence on fossil fuels. Over 80% of our energy has fossil fuel origins. But these fossil resources carry two major setbacks. On one hand, they emit large quantities of CO2 when burnt and this is one of the major causes for global warming. On the other, they are not infinitely available. Soon there will be 9 billion inhabitants on Earth and with that figure comes another serious problem. Rarefaction of oil already has a serious consequence: its increased price and associate social and economic impact negatively on the poorest households. And this is only the beginning. Tomorrow we shall experience the same depletion of gas, followed by coal. Considerations such as these should invite us to change our current energy mixes.
Certain countries are less dependent than others for their fossil energy sources. Can they be seen as models to follow?
Countries like France or Sweden have hydro-electric generation plants and also nuclear power stations to produce their electricity. They therefore have a lesser dependence on fossil fuels. But electricity today, in developed countries, only represents about 1/5th of their total energy consumption and such countries will always need oil and petrol for transportation and gas to make fertilisers, etc. Moreover, the petro-chemical sector, on which many industries rely (to make plastics, synthetic fibres, polyester, nylon, medicinal drugs such as aspirin) has petroleum products for origins.
Why is it that we rely so heavily on petroleum products, notably oil?
The advantage of oil is that it has a high energy density. It is therefore very easy to use to transport passengers and goods and leaving aside the case of air transport where there is no substitute for A1 aviation fuel, as yet. In contradistinction, its use to heat buildings is absurd, all the more so that there are numerous other substitute sources, such as gas, electricity, wood and renewable energies, etc. The time has really come to think about replacing oil wherever possible. One of the priorities today is to learn how to do without oil, so as to be ready when stocks begin to dwindle, and the resources deplete. The price of the barrel continues to climb. In 2008, it had even reached 148 $US. Today, despite the advent of non-conventional hydrocarbons, it is still higher than 100 $US/bbl.! And the price of oil will not drop significantly, for one simple reason; resource availability depends on pricing. Certain extraction sites today would not be viable economically for less than 70 $US/bbl… Furthermore, there can be other geopolitical factors or even crises likely to create tensions on the supply countries and routes. Non-oil-producing countries have to be all the more concerned that they will surely not be the beneficiaries of the last drops of oil: the oil producing countries will keep what is left one day, for their own domestic needs and consumption.
As you see things, is this the reason why we note a growing return to ‘King Coal’? What are the pros and cons of coal?
Coal is inexpensive to extract and known resources are still abundant. The return to coal can also be explained by the drop in the world market price for coal as a commodity, a consequence of the exploitation of shale gas in the USA, which allows Americans to export large quantities of coal. Moreover, coal reserves are spread fairly equitably round the Earth. We realize, of course, that 60% of the world’s coal reserves are located in four countries (China, United States, India and Russia) who together represent only 27% of emerged lands and are home to only 40% of the world’s population; nonetheless, coal deposits exist almost everywhere, to greater or lesser amounts. Finally, its negative impact on the environment has not yet been taken into account in our economic evaluations. All of the foregoing factors lends themselves to explaining why there is a steadily increasing return to using coal, mainly for electric power generation (in coal burning stations) where oil only plays a marginal role. However, as soon as the fight against climatic change becomes a real priority at global level, we shall also have to reduce our reliance on coal.
What different energy mix models exist? And what are their comparative advantages and disadvantages?
The choice of which mix to use depends on the level of development in any given country. Thus, for emerging or already developed countries, burning oil and petroleum products in general is ultra majoritarian in transportation (except in Brazil which uses more biofuels obtained from refining cane sugar).
In contradistinction, to assure electricity generation, each country opts for a specific mix as a function of the resource available in the country itself and also to offset the cost of importing energy. The relatively low cost of coal is an incentive, for some countries, to burn this fuel even if it is not extracted locally. Coal burning represents, on average, 40% of the world’s generated electricity, a fraction that rises to 70% in India and even 80% in China. It is the predominant energy resource in Poland, the USA or Australia. In other countries, such as Norway, Brazil, Venezuela or Canada, an extensive use is made of hydro-electric generation sites. En France, Sweden, Belgium and in Ukraine, nuclear power generation predominates for electricity production. Elsewhere, most of the time, the mix is highly diversified (coal, gas, hydro and nuclear).
As far as the less well-off countries are concerned, wood is largely burned as their energy source to heat homesteads, to cook food and boil water. This practice contributes to deforestation, detrimental to the local bio-system and also to the climate (through CO2released from the fires). But consumption in these countries falls below that in developed countries. In Europe, our average annual per capita consumption of primary energy, expressed is 4 toes (tonnes of oil equivalent), compared with 8 toes in in the USA while populations in the least developed counties do not exceed 1 toe.
As far as new energies are concerned (biomass, solar, geothermal and marine), they are just beginning to emerge from their current marginal position. ‘Renewables’ have some decisive arguments in their favour for the long term: low operating costs (wind and sun are ‘offered’ by Nature), a limited carbon print and low industrial risks. Notwithstanding, they represent high levels of investment and in the special case of wind farming and sun panel arrays, but cannot guarantee continuous ‘no-break’ supply to the grid.
Why are States taking so long to change their energy mix? Is it so complicated politically or economically speaking?
For many States, it proves very complicated politically speaking to penalize oil, given that its use is synonymous with mobility and freedom. Taxing oil, issuing regulations that would tend to reduce its consumption, remain very problematic.
Subsidies to the oil business are still high (estimated at 200 billion $US worldwide every year according to the International Energy Agency). They are particularly high in oil-producing countries. Even in France, we have observed just how difficult it is to instate a carbon tax, though it is necessary if we wish to reduce oil (and other petroleum products) consumption. As far as the use of coal to produce electricity is concerned, this option seems advantageous because of the low price tab. But, if we reduce the coal fraction, the short term price of electricity will inevitably increase. This, however, is difficult to defend from a political stance, even though in the long run it may seem unavoidable. In certain coal mining countries, such as Poland, reduction of its consumption would be even more complex. Coal for Poland is a guarantee for their national independence and represents thousands of jobs.
The margin for error is obviously narrow. So, taking everything into account, how could energy mixes be modified?
First of all, we would have to convince the populations about the reality of a negative impact of our options today on the climate and the environment. In China, for example, where the populations really suffer from atmospheric pollution, public opinion has been made aware of the problems and the Government is actively trying to replace its most polluting coal-burning power stations. Chinese national authorities have drafted into their latest 5 year Plan some ambitious and hitherto unheard of measures to reduce carbon prints. In the USA, problems of recurrent hurricanes and cold spells has helped enhance public debate about climate change. In France evolution is all the more difficult that we have a “God-protected country” in terms of climate. However, the latest IPCC Report clearly demonstrates that rising temperatures on Earth since the mild 20th Century are definitely due to accumulation of man-made GHGs (greenhouse gases). By year 2050, one out of two summers will be a scorching ‘roaster’. This entails heavy losses of productivity for farmers. Even in France, we shall have to react and take action. Moreover French Parliament has voted – in an important guideline and planning law on energy policy – the principle of reducing national GHG emissions by a factor 4 by 2050 with respect to levels measured in 1990. The sine qua non condition here is that the French adhere positively to the law’s decisions and consequences.
Is the national level appropriate when we reason in terms of energy mixes?
Depending on the country concerned, and its available resources, past policy decisions and the degree of awareness-acceptance of the populations, it remains true that the mixes can be different. Moreover, energy is a special commodity and the concept of energy independence is nerve-racking to say the least for each State’s policy makers. For this reason, the idea of defining an ideal energy mix for each European member state is a mirage.
Likewise, it is absurd to imagine that in France we could apply the same rules for extraction of shale gas as in the USA. The reasoning that can be applied in Arkansas is not the same as in the Luberon mountain range in South France. For one, the density of population in these two locations is very different. The land activities also differ. In France, we have numerous “land activities” such as agriculture but also tourism that would suffer if there were intensive, high-flow, shale extraction sites (this supposing that we discover sites that are viable, which has yet to be proved).
As far as electricity is concerned, France is a member of a European zone that must constantly ensure that its grid supplies electricity at the frequency of exactly 50Hz. Grid operators and regulators work hand in hand, so to speak, to coordinate their work and this is achieved and even improves from year to year. To avoid power blackouts, the fraction of electricity coming from intermittent renewable sources must be progressive and coherent technically. Moreover, the whole organization of the European electricity market has to be renewed.
In more general terms, European countries share a common strategic weak point: they are all strongly dependent on gas, on imported crude oil and soon on coal. It is therefore also in our common interest to face up to this challenge – which could lead on to other major difficulties, both for the development of the countries concerned and to maintain the level of comfort we enjoy, which depend so much on energy. The absolute priority common to these European States is to reduce the level of dependence, beginning by reducing their overall energy consumption.
EU member states that are in the forefront, have opted for ambitious objectives to reduce the fraction of fossil fuels by several dozen percent over the coming two decades. Do you think this is realistic?
Before changing our national mix, we must envisage first how to massively reduce our energy consumption bill. The question is – where do we have room to manoeuvre? A notable area is building insulation, which accounts for 40% final consumption and 25% GHG emissions. This presupposes that we launch an ambitious programme to rehabilitate service sector premises and homes through fiscal incentives and aids to fiancé the work. We must also work on energy efficiency in freight and passenger transportation modes as well as in industry at large and for household equipment. Lastly, we must accelerate the production of light energy lean cars (2 litres per 100km or less).
Taking the example of France. Even if the fraction of nuclear power in our electricity generation contributes to our lesser dependence on fossil fuels, 70%of our final consumed energy still comes from oil (petroleum products) and gas (CH4). There are still 3M households heated by oil, and part of this is represented by families with a precarious energy shortage. It is possible (and indeed desirable) that this heating mode be changed to that of heat pumps (or other solutions) and, at the same time, insulation improvements should be carried out on the houses. We must also accelerate the move to introduce gas-burning lorries and to encourage the transfer from road to rail freight mode
Some countries have chosen to invest strongly in the nuclear power production. Is it reasonable to continue?
Let us look at the example given by France, to get a better idea of the challenges ahead. There will soon be major investments made in our nuclear power stations which, by 2025, will almost all be 40 years’ old or more (40 years being the initially planned operational life). Some important decisions are therefore on the agenda. Should the operational life cycle be extended? French President F. Hollande took the commitment to reduce the fraction of nuclear electricity production from 75% to 50% by 2025; however to diversify the sources for production of electricity by implementing renewable energy facilities by that date will not be easy, even if their cost will normally decrease. Also, we must bear in mind that he nuclear industry is a high-level sectors that needs very skilled personnel. To attract qualified engineers and to maintain the countries special skills in nuclear activities, we must adopt a clear and ambitious plan.
Thus, attaining the objective to reduce nuclear electricity production to 50% by 2025 presupposes that several nuclear reactors be decommissioned (around 20). Some stations might have to close because of the level and cost of work required by the national nuclear safety authority (ASN), if the operators deems that upgrading them would be too expensive. Beyond that consideration, it also presupposes that a policy path takes numerous parameters into its stride: the social and economic impact of closing the nuclear plants, the industrial outlay needed to dismantle the nuclear facilities, the handling of increased power input from renewables and a rhythm that will be a function, of progress and costs too. It is more than likely that the objective of 50% drop is not achieved by 2025 but spread out over time. But it would offer two interesting changes: progress in operating renewable energy sources, modified mentalities in this area and finally a changed deal.
A country like Germany has changed a lot over the past decade. But is the German model so virtuous, given the fact that it burns a lot of coal and that the overheads induced by renewable energy sources is estimated at 23.6 billion euros for 2014?
As I said earlier, no model is perfect. We recall that Germany began its change from an electricity mix that used a lot of coal and majors efforts have been made here over the past 20 years. In 1991, coal represented 60% of the country’s electricity production, the fraction dropping to 45% in 2010 while at the same time electricity production increased by 10%. This change was due to increased use of renewable energy sources and gas.
The recently observed return to coal was offset by a drop in gas-burning stations at this policy change is damaging for the climate, of course (for each kWh produces, burning coal leads to 4 to 5 times more CO2 emissions than by burning gas). The change is due to factors that are not specific to Germany: France, for example, also made a “policy switch” as of 2010 (with lesser consequences because the country burns less gas and coal than Germany). There are two underlying reasons: a drop in world prices for coal, more economical than gas in Europe and also the dysfunctions of the CO2 coupon market the intention of which was to offset the competitivity differential. But because of the 2008 economic crisis and the subsequent drop in Europe’s industrial production output, the tariffs for CO2 emissions dropped so low that they were no longer seen as relevant.
As far as renewable energies are concerned (for electricity, essentially wind turbines and photovoltaic arrays), their installation has been made possible via subsidies paid for by consumers and enterprises. Over-dimensioned aids enabled Germany to structure its RE industries and to build up a solid knowledge base in an area that most certainly will have a fine success on a worldwide scale.
The final point is the controversial issue of abandoning (or not) nuclear power generation. This is a societal question. The arbitration between accepting and running the risk of a nuclear accident with major consequences such as happened at Fukushima and a significant hike in the kilowatt hour pricing belongs to the Nations and their elected Representatives.
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