Introduction to Energy Analysis

Kornelis Blok, Evert Nieuwlaar

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317207276
• Edition: 2
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

The energy supply and demand system is of great importance for society, from economic, social, and ecological viewpoints. The last decade in particular has seen rapid changes in the world of energy systems, and it is therefore now an important area for study, academic research, and professional work.

This textbook provides an introduction to energy analysis for those students who want to specialise in this challenging field. In comparison to other textbooks, this book provides a balanced treatment of complete energy systems, covering the demand side, the supply side, and the energy markets that connect these. The emphasis is very much on presenting a range of tools and methodologies that will help students find their way in analysing real world problems in energy systems.

Featuring learning objectives, further readings and practical exercises in each chapter, An Introduction to Energy Analysis will be essential reading for upper-level undergraduate and postgraduate students with a background in the natural sciences and egineering. This book may also be useful for professionals dealing with energy issues, as a first introduction into the field.

1 Energy and society

Developments in society influence the energy system in many ways, but the energy system also affects society. This chapter will start with a brief history of energy use in relation to the development of society (Section 1.1), followed by a discussion of the relations of energy use with human development (1.2), environmental issues (1.3) and security of energy supply (1.4). Finally, the concept of sustainable development and its relevance for energy will be introduced (1.5).

1.1 A brief history of energy use

The first source of energy that mankind used was food. People have always been able to produce useful energy out of food in order to stay warm and to generate power. The typical production of useful energy from food through human metabolism nowadays is 2–3 GJ per person per year (1 GJ = 10⁹ J). In the course of history, mankind has increasingly harnessed additional energy sources. This could lead to an increase in energy use per capita through the various development stages – see Figure 1.1.

The earliest use of another energy source by mankind was the use of firewood. Firewood was used for various applications, including the production of heat and light. Of all the applications, cooking was probably the most important. In many rural areas of the world, energy use for cooking is still the most important form of energy use.

An important change in the energy system came with the introduction of agriculture, about 10,000 years bc. Energy was from then on also used for agricultural applications, food processing and to some extent for transportation. Additional forms of energy became available, first through draft by animals. Later, early forms of hydropower and wind power were introduced. However, until 1900 wood remained the most important energy source.

The really transformative change, creating our present energy system, was the Industrial Revolution, first occurring around 1750 in England. Although fossil fuels were not unknown before this time, the scale of use massively increased in the nineteenth century. The invention of the steam engine made it possible to generate power to drive large-scale mining operations and industrial processes. Coal, and later oil products, were used for supplying heat to industrial processes and to the boilers that generated the steam for the steam engines. Steam engines also made rail transportation possible.

Figure 1.1 The development of energy use per capita from so-called primitive to modern societies (source: updated from Cook 1971)

Around 1900, two major developments occurred. The first was the introduction of electricity supply through electricity grids. Power plants were initially fired by coal and oil or were based on hydropower. Later natural gas and nuclear energy were added. The second change was the introduction of the car and eventually other vehicles. These developments led to another massive increase of energy use in the twentieth century.

And now, it seems we are in the early phase of the next transition, towards an energy system largely based on energy from renewable sources.

1.2 Energy and human development

Energy consumption patterns vary worldwide. World energy use is nearly 80 GJ per capita per year on average (2014). Most industrialised countries use 100–220 GJ per capita, with some countries, including the USA and Canada, at levels near 300 GJ per capita. Most developing countries are below the world average, but there is large variety here. The countries with the lowest energy use per capita, mostly located in Africa, are in the range of 10–20 GJ. Within the group of developing countries, China is at the high end with over 90 GJ per capita.

Figure 1.2 Commercial energy use (horizontal axis) and infant mortality, illiteracy, fertility and life expectancy. Each dot represents a country (source: compiled using data from the IEA 2012 and UNDP 2013)

Energy is critical for human development. Energy is needed for sufficient food supply and the preparation of healthy food, as well as for heating and lighting. Energy is also needed for other important preconditions for development: water supply, health care and education. It is no surprise that there is a relation between per capita energy use and important development indicators like child mortality, life expectancy and illiteracy (see Figure 1.2). Countries with a per capita energy use below 30 GJ are also the countries where child mortality and illiteracy are the highest and life expectancy is the lowest.

Most human activities require energy, and we may expect that economic growth and energy consumption are to some extent correlated. The amount of economic activity of a country is generally expressed in terms of gross domestic product (GDP). Figure 1.3 depicts the development of primary energy use per capita versus the development of GDP per capita for some large countries. One may expect that increasing GDP as a result of increasing activity will lead to a higher energy use. However, the relation between the two quantities is not proportional. There are two key reasons for this.

The first reason is that economic activities differ in how much energy use is needed for a certain contribution to GDP. For instance, it takes less energy for a bank to contribute 1$ to GDP than for a steel factory to contribute the same amount. In general, the service sector (e.g. banks, schools and hospitals) is less energy-intensive than the manufacturing industry. For countries in an early stage of development, the emphasis is often very much on the growth of industry, resulting in a rapid increase in energy use. At a later stage it is the service sector that grows, leading to only modest increases in energy use.

Figure 1.3 Development of energy use per capita versus the development of GDP per capita for China, India, Japan, the UK and the USA. The GDP is corrected for purchasing power parity. Note that the time periods differ from country to country (see legend). The starting point is at the left, the 2008 point at the right. There are several irregularities in the graphs, these often have to do with economic recessions (source: Grübler et al. 2014)

The second reason is energy efficiency. Energy efficiency improvement leads to a reduction of energy use per unit of activity. In an early stage of development, countries often show rapid economic growth. Although energy efficiency improves in this stage, this cannot compensate for the high economic growth. Later in the development stage, economies still grow by, for example, a few per cent per year, and then energy efficiency can compensate the growth. In recent years, we even observe declining energy use in many industrialised countries. Differences in energy efficiency also partly explain the differences in energy use per capita among developed countries, for example the USA uses about two times more energy (per capita) than the UK and Japan. One of the reasons for this is that in the USA energy efficiency is often worse, e.g. steel companies use more energy per tonne of steel, and cars use more gasoline per km driven than in the UK and Japan.

The impact of energy efficiency and the composition of the economy (the ‘sector structure’) on energy demand will be treated more quantitatively in Chapters 10 and 13.

The energy sector develops as a result of economic development, but the energy sector is, in itself, also an important source of economic activity and makes a significant contribution to GDP. This contribution differs significantly from country to country and depends primarily on the availability of energy resources in the country. The energy supply sector, consisting of energy production, conversion, transport and distribution, by itself contributes 5–15 per cent of GDP in most countries. In the group of oil producing countries dependence on the energy sector is even higher.

The contribution of all energy-related activities to GDP is even larger if we also take into account producers of all kinds of energy-using equipment, insulation manufacturers and installers. However, since these activities are spread across different economic sectors, they are difficult to quantify.

In terms of turnover, the biggest economic players are oil companies, of which Sinopec (China), Royal Dutch Shell (UK/Netherlands), China National Petroleum (CNPC), Exxon Mobil (USA) and BP (UK) are the largest. With annual turnover of around 300 billion (300 · 10⁹) US$, they are among the largest companies in the world. One order of magnitude smaller are electricity and gas companies, such as E.ON and RWE (Germany), Engie GDF Suez and Electricité de France (France) and TEPCO (Japan). Manufacturers of electrical and electronic equipment (e.g. General Electric, Siemens), car manufacturers and other manufacturers are also important players. Compared to these large companies, the renewable energy industry is still relatively small, but there are already several companies with a turnover in the order of 10 billion US$ per year. Important wind turbine manufacturers are Vestas (Denmark), Siemens (Germany) and Goldwind (China). Leading solar photovoltaic manufacturers are Trina,...