Energy one of the big three of sustainable growth

Energy, with water and food is one of the big three determining factors if the globe is to achieve sustainable development. “Better understanding of the water-food-energy nexus can lead to better economic and development plans,” was one of the few consensus points reached at the annual meeting of the World Economic Forum in Davos at the end of January this year.

“With continuing population growth, rising energy demand and the growing impact of climate change, the water-food-energy nexus is rapidly becoming a central concern for the world. Understanding and addressing the interlinkages between the three areas will be important in achieving economic development and sustainable growth,” reads a report from one of the discussion groups at the WEF-meeting.

Among the key consensus points reached at in Davos was that so-called green growth integrates objectives for energy security, environmental sustainability, economic and social development, and poverty reduction.

On the question of energy demand it was noted that it was expected to increase by 30 to 40% in the coming decades, on top of a growth of 40% in demand over the previous two decades.

Potential of renewables

At just about the time of the Davos meeting Jeff Siegel in his well-respected newsletter Energy & Capital wrote: “We can achieve 100% renewable energy by 2030! Well, at least that’s what a new study from the journal Energy Policy suggests. But I wouldn’t hold my breath for that one …

“While you’ll find no greater advocate of renewable energy than me, the truth is you and I will never see 100% renewable energy in our lifetimes, That’s just the reality.”

He points out that in theory 100% renewable energy is possible because:

Enough electric power for the entire United States could be generated by covering 9% of the Nevada desert with solar power systems;

Wind could provide 5 800 quads of energy every year – or about 15 times the current global energy demand;

There are over 100 million quads of accessible geothermal energy worldwide, while presently the world consumes about 400 quads; and

Wave energy along the US coastline could provide enough power to cover half the total consumption in the US.

“But jus because something could theoretically happen, doesn’t mean it will. Even the authors of the Energy Policy study suggest that interconnection challenges, a bottleneck of rare earth supplies, and political obstructions may be tough to overcome,” Siegel writes.

The energy efficiency equation

While all indications are that it is unlikely that the development of renewable energy sources and technologies will be quick enough to keep pace with the rate of depletion of affordable fossil fuel resources, increasing energy efficiency becomes crucial.

Another report from a discussion at Davos, under the headline Solving the Energy Efficiency Equation states that “… current energy efficiency levels fall far short of what can be achieved.”

The rapporteurs note that for instance “…in the US alone, an estimated $10 billions still spent to power electrical devices while on standby mode.”

It is, however also true that while the US economy has grown many times larger since 1973, energy use has increased by only one-third over the same period. “This proves that energy efficiency can be achieved without holding back GDP growth and may, in fact, contribute to it.

While South Africa’s Eskom has capacity problems in terms of meeting existing and growing electricity demand, its involvement in electricity austerity and efficiency campaigns seems to be a bit of an international exception.

The Davos-report points out that since the wastage due to factors like standby-use directly contributes to “the bottom line of utility companies,” many are not really engaged in energy efficiency campaigns.

“Another reason is volatility in the price of fossil fuels. There is a glut today in natural gas supplies, for example, which weakens the resolve for conservation and efficient use. Consumers and households are also not fully engaged in the energy efficiency drive. The focus has been on industry, which has probably already achieved energy efficiency.

“The G8 group of industrialised countries have endorsed a set of energy efficiency recommendations, but even the economy that has done the most to implement them has acted on only 60%. There are many reasons for this failure, including entrenched interests, creaky electricity infrastructure and inertia,” the report reads.

Educating consumers

The report puts the education of consumers forward as a possible solution, stating that educating them about how to achieve greater energy effency, including how household energy efficiency can result in big savings and help the environment.

“Governments should make sure energy-efficient appliances are available and extend targeted incentives for their use. In some instances, they may declare illegal the energy-hungry devices. In general, however, consensus among government,business and citizens should be the preferred approach,” the report reads.

It also encourages governments to disseminate information about mature energy efficiency technologies and to grant incentives for their adoption, such as smart grids, smart meters, LED lighting and high-powered batteries.

“There are countless case studies of companies cutting 30 to 35% of their energy costs through efficiency measures. Sharing information about these success stories is another way to promote energy efficiency,” the report  states.

Future of renewables

Despite his pessimism that renewables can largely replace traditional energy sources over the next two decades, Siegel is nevertheless optimistic about the general future of that sector.

“There’s absolutely no doubt renewable energy is still going to grow faster than any other energy sector over the next 20 to 30 years.

“Just last week, BP released a new industry forecast indicating renewable sources will grow dramatically as global energy demand surges nearly 40% by 2030,” he wrote in his report dated 24 January, 2011.

“Most of this will come from China, India, Russia, and Brazil – with renewable energy sources increasing their contribution from 5% to almost 20%. At the same time, coal and oil are likely to lose market share,” he wrote.

South Africa is likely to share in this surge of renewable energy. According to a report in the Cape Argus of 10 February this year up to 300 000 jobs could be created in the renewable energy sector, which would go a long way to helping the government create the promised five million job opportunities.

The government’s Integrated Resource Plan (IRP) anticipates that by 2030 48% of the country’s energy demand will be met by coal, 16% from renewable sources and 14% from nuclear generation, including power from six more nuclear power stations that are to be constructed, the first of which is expected to come online in 2023.

Independent private sector suppliers

In line with what is also predicted by Siegel, it is anticipated that in South Africa independent electricity producers would sell their electricity at a price determined by the National Energy Regulator (Nersa) under a renewable energy feed-in tariff structure, designed to cover the cost of power generation and provide for a reasonable profit.

Siegel foresees that “the realities of oil and coal shortfalls will … continue to result in a flood of capital being funneled into the clean energy space.

“Venture capital (VC) funding for clean energy companies rose by more than 76% in 2010, moving from $2.1 billion in 2009 to $3.7 billion,” he wrote and noted that of the ten biggest VC-investments in 2010 in the US, five were in clean energy companies.

“Assuming the economy doesn’t fall off a cliff (which isn’t necessarily a safe assumption to make), this trend is not going to slow,” he wrote.

According to the Cape Argus report studies have found that renewable energy technologies create more jobs on average for every megawatt of power generated and every dollar invested in construction, manufacturing, and installation than coal or natural gas.

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