With the moment fast approaching when demand for oil outstrips supply, the opportunity to convert to alternative sources of energy, particularly for electric power generation, is being seized around the world
Oil is running out. Who says? Not Greenpeace or the many environment groups, though they of course agree; not the companies now investing billions of dollars a year in wind power; nor even the increasing number of senior oil executives who have been saying privately and in their annual reports that it’s getting much harder to replenish reserves.
No, the latest warning came in April this year from the US military, the biggest single user of oil in the world. According to its analysts, who have access to all US government data, surplus oil production capacity could entirely disappear by 2012, and as early as 2015 the shortfall in output could reach nearly 10 million barrels per day.
In a foreword to a US Joint Forces Command report, General James Mattis was unequivocal: “While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India.”
This stark warning from a military perspective was just the latest in a series from around the world that has turned ‘peak oil’ – the moment when demand exceeds supply – from a distant, theoretical threat, to something more imminent. The Paris-based International Energy Agency (IEA) is confident that there is no short-term risk but admits there is major disagreement among experts, most of whom say the likely tipping point is in 10-20 years’ time.
There is plenty of evidence that governments, industry, bankers and policy makers are not waiting for official reports but are waking up to the fact that the energy source that has sustained the world for the last 100 years is by no means assured into the future.
Saudi oil minister Sheikh Ahmed Yamani said famously in the 1980s: “The stone age did not end because the world ran out of stones. Nor will the oil age end because we have run out of oil.” General Mattis’s warning only adds to the raft of economic and environmental reasons to leave oil behind and speed the energy revolution to ‘low carbon’ power like renewables and nuclear energy.
The two Gulf wars, the breakneck economic rise of China, and the oil price shock in 1997 have all politically legitimised alternatives to oil and made renewables and nuclear power an essential part of the future energy mix in the minds of world leaders. And the spectre of climate change undermining the global economy has forced leaders to act.
Backed by an increasingly interested general public and dire warnings from climate scientists, at least 90 countries have published renewable energy policy targets – up from less than 40 in 2003. The Cinderella renewables industry of 20 years ago has now become a ‘guaranteed-growth’ sector, and even ‘crisis-proof’.
The US, which alone consumes more than 20 million barrels of oil a day, will invest $150 billion over ten years in renewable energy. The UK has committed itself to spending nearly $30 billion generating 15 percent of its energy from renewables by 2020. Australia plans 5 terawatt-hours (TWh) of renewables by 2020, Brazil will generate nearly 90 percent of its electricity and 50 percent of all its power from renewable sources by 2030, and India, China and Japan have all set new targets for wind and solar. The EU formally adopted its target to reach 20 percent of its energy from renewables by 2020.
In 2008 – the latest figures available – global power capacity from new renewable energy sources grew by 16 percent. Solar increased by 15 percent, and biofuel production by over one third. The fastest growth has been in China, which in 2009 overtook the US for the first time in a league table of investments in low-carbon energy. Renewables plus hydroelectric and nuclear power will make up one-quarter of China’s energy mix this year. More renewable energy than conventional power capacity was added in the EU, China and the USA for the first time ever.
Most developing countries have abundant renewable energy potential, whether from hydro, biomass or solar energy. In rural and remote areas, transmission of fossil fuel electricity is in any case difficult and expensive. Localised solar and biogas plants can bypass the need for centralised infrastructure. India has electrified 4,250 villages and 1,160 hamlets with solar power and plans at least 10,000 more by 2020. If others follow, nearly 50 percent of all electricity in developing countries could come from renewable energy, according to the World Bank.
Climate change is driving clean energy with financial incentives. The UN’s Clean Development Mechanism was set up to help rich countries meet their greenhouse gas emission reduction targets by investing in low carbon energy projects in developing countries, though most of the money to date has gone to China and India. Low carbon energy already provides nearly 20 percent of the world’s electricity. Almost 80 percent of that comes from hydroelectric sources, but wind is catching up as turbines get bigger, and giant energy companies sense guaranteed markets. The worldwide industry claims it now employs 500,000 people and avoids emissions of 204 million tonnes of carbon dioxide a year.
This may sound a lot, but wind and solar still only generate 1.5 percent of electricity worldwide. Coal is still king and its consumption rose 3.1 percent to 3.3 billion tonnes of oil equivalent last year. Other renewables are thought to be ten years behind wind. Solar photovoltaic has still not made the electricity generating price breakthrough it needs, although solar water heating has become mainstream. Wave and marine power have the most potential but need major investment. Geothermal power is growing fast from a low base, especially in the USA. Feed-in tariffs, letting people sell the surplus electricity they generate to the grid, has been adopted in more than 20 countries.
Fears about climate change and energy security have turned round other industries, too. Until a few years ago nuclear power was considered moribund, reviled in the UK, banned in Germany, shunned in the USA and elsewhere and seen worldwide as expensive and unsafe. Now, says the IEA, over 130 new nuclear power projects are either planned or under construction across the world, and a further 200 have been proposed. Not all these will get built, but the appetite for new nuclear is vast.
The USA has applications in for 26 new nuclear reactors while Britain, Finland, France, Germany and Italy intend to replace and expand their reactors. Romania, Turkey, Iran and Vietnam, as well as 15 other countries with no history of civil nuclear power, are actively considering building nuclear capacity. Russia plans to double the number of
its reactors. China, with ten plants built, is reportedly building two reactors a year and has said that it could complete 100 by 2030. The International Atomic Energy Agency (IAEA) expects the global output of nuclear power to nearly double within 20 years.
Meanwhile the bio-fuels industry has grown into a billion dollar behemoth and is surging, as the USA, EU and other countries plan to replace up to 40 percent of all petroleum and diesel with crop-based fuel. Last year, the global industry reported, the combined greenhouse gas emissions reductions from global ethanol and biodiesel production of 123.5 million tonnes was nearly the same as the emissions of Belgium or Greece.
The energy revolution is mostly being led from the East where demand for electricity is surging fastest. Of the 37 nuclear reactors now under construction, according to the IAEA, more than 30 are in Asia and Eastern Europe. China has now leapfrogged the West to emerge as the world’s largest manufacturer of solar panels and it expects to have the most wind power in a few years. It is pushing hard to build nuclear reactors and the world’s biggest wind companies are now setting up there. According to the government-backed Chinese Renewable Energy Industries Association, the wind industry employs more than 1 million people already, adding 100,000 each year.
“These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Middle East for a reliance on solar panels, wind turbines and other gear manufactured in China,” says an energy analyst in London who asks not to be identified. The race to wean the world off fossil fuels is on. Avoiding climate change by reducing global carbon emissions by a minimum of 80 percent in just 40 years is the big prize for the world. For the burgeoning low carbon industries, there is now the chance to earn trillions of dollars even without the oil running out.
John Vidal is Environment Editor at The Guardian, London
