PBL Trigger 5

The fifth trigger is about the worldwide problem of increasing oil demand and Bloomberg’s forecast according to which the oil demand will be decreasing in a near future. Will oil demand be increasing or decreasing in a future?

Currently, the world depends heavily on coal, oil, and natural gas to meet its energy needs. However, the utilization of these energy sources has a drastic impact on our environment, which is well documented. Furthermore, these sources of energy are non-renewable, that is, they will not last forever. As their supplies dwindle, they will become too expensive, difficult to retrieve, and will also have a damaging impact on the environment. Eco-friendly sources of energy, also known as Green energy or renewable energy sources, have acquired tremendous attention and acceptance in the past few years as governments, organizations and people all over the world are embracing their environmental responsibilities. (William 2017.)

Peak oil — the point in time when domestic or global oil production peaks and begins to forever decline — has been looming on the horizon for decades. Countless research reports, government studies and oil industry analyses have tried to pin down the exact year when peak oil will occur, to no avail.

The stakes are undeniably high: Much of human civilization is now inextricably linked to a readily available supply of inexpensive oil and petroleum products. From heating, electricity production and transportation to cosmetics, medicines and plastic bags, modern life runs on oil.

The trouble is, determining when peak oil will occur, if it already has occurred, or if it will happen at all, are all dependent on an ever-changing set of assumptions and variables. (Lallanilla 2015.)

Problem

How the demand and the supply of new energies influence the economics?

1. What are the new alternative energy sources?

In addition to solar, wind and hydro power, there are even cleaner and more efficient alternatives. Here are the most potential ones:

Space-based solar power

Human power

Tidal power

Hydrogen power

Magma power

Nuclear waste power

Embeddable solar power

Algae power

Flying wind power

Fusion power 

Geothermal energy

Biomass energy

(Desjardins 2016; Rinkesh 2017.)

2. What are the benefits of new energy resources towards the countries economy?

More jobs

Renewable energy tends to be more labor-intensive than fossil fuel sources of energy, thus creating more jobs. In addition to the jobs directly created in the renewable energy industry, growth in renewable energy industry creates positive economic “ripple” effects. For example, industries in the renewable energy supply chain will benefit, and unrelated local businesses will benefit from increased household and business incomes

More diverse energy supply

Alternative energy sources reduce the dependence on foreign oil. Renewable energy is beneficial in terms of diversifying the supply to reduce the dependence on oil companies. Hydropower, for example, is a great source of domestically-produced power that generates power directly to the grid. The same can be said for solar, wind and geothermal energy sources.

Lower Consumer Expense

Production of renewable energy is usually more efficient compared to traditional energy. The American Wind Energy Association claims that a sufficient number of wind plants – that could be built in four years – could eliminate the gas shortage. All other forms of renewable energy sources also turn out to be way cheaper than traditional non-renewable sources. What this means for consumers is that they can save money on their utility bills.

Investing in renewable energy can also have a massive impact on the government’s expenses. For example, Germany is a major net importer of power. As per estimations, the country could be using only renewable energy by 2050 that could help it save billions of dollars as it would not need to import energy.

Universal Access to Energy

Dependence on fossil fuels continues to distort the energy market resulting in a significant number of people having no access to power. It is estimated that almost 1.3 billion people across the world had no access to electricity in 2011. A total of 2.6 billion people relied on traditional biomass for cooking for the same year. The vast majority of these individuals were in Asia and sub-Saharan Africa. Renewable energy can reach even these deprived areas.

Stable energy prices

Renewable energy is providing affordable electricity, and can help stabilize energy prices in the future. The costs of renewable energy technologies have declined steadily, and are projected to drop even more. For example, the average price of a solar panel has dropped almost 60 percent since 2011. Also, country’s fossil fuel bill will lower. 

A more reliable and resilient energy system

Wind and solar are less prone to large-scale failure because they are distributed and modular.  Distributed systems are spread out over a large geographical area, so a severe weather event in one location will not cut off power to an entire region. Modular systems are composed of numerous individual wind turbines or solar arrays. Even if some of the equipment in the system is damaged, the rest can typically continue to operate. Renewable energy sources are more resilient than coal, natural gas, and nuclear power plants in the face of these sorts of extreme weather events.

For example, coal, natural gas, and nuclear power depend on large amounts of water for cooling, and limited water availability during a severe drought or heat wave puts electricity generation at risk. Wind and solar photovoltaic systems do not require water to generate electricity, and they can help mitigate risks associated with water scarcity. 

(The Alternative Daily; Hausker 2016; Union of Concerned Scientist 2013; William 2017.)

3. How will the demand and supply of oil be influenced by new energy sources?

Globally, 2014 saw a record 95 gigawatts of new wind and solar, and the International Energy Agency (IEA) expects renewables to account for 25 percent of power generation in 2018, up from 20 percent in 2011. Solar, in particular, is hitting its stride and has grown an average of almost 30 percent a year for the past decade.

Why haven’t the much lower oil prices been kryptonite for renewables? And what does this mean for the future?

There are four main reasons why the link between oil and renewables appears to be weakening.

They operate in different markets. 

Oil is predominantly used for transport—cars, trucks, planes. Very little of it is used for power; oil accounts for less than 1 percent of power generation in the United States and Canada, for example, and not much more in Europe. Globally, the figure is around 5 percent. Renewables, in contrast, are used mostly to create electricity. 

The economics of renewables are improving.

To put it simply, renewables are getting cheaper all the time. In fact, when it comes to the price of solar, even the most optimistic estimates have not been optimistic enough. As NREL notes, today’s price projections to 2020 are about half of what was being predicted a decade ago. 

The global dynamics of energy are changing. 

Because renewables have been relatively expensive, historically, most investment has come from developed countries; poorer ones felt they could not afford these energy sources. In addition, oil-rich countries, many of them in places well suited for solar, didn’t bother either, because they could burn cheap oil. Both of those assumptions are swiftly changing.

In 2013, China for the first time invested more in renewable energy than Europe, according to the United Nations, and is now the global market leader. India’s spending on clean energy rose 14 percent in 2014, to $7.4 billion. South Africa ($5.5 billion) is also getting serious about the sector, as are countries in Latin America. Some countries in the Middle East are getting much more thoughtful about the possibilities of solar and Japan is also becoming a major player.

The science is improving. 

New solar technologies could allow solar cells to be rolled out via 3-D printer and applied almost anywhere. Japan is managing to make fuel cells work. Techniques to convert manure into methane are getting cheaper. Perhaps most important, storage is getting better and cheaper, and investment in the area is rising. 

The world is not running out of fossil fuels in the immediate term. There are enough known oil reserves for the next 53 years. In short, a world powered by renewables is not around the corner. This will be a long-term transition—a matter of decades, not years. But the resiliency of the sector in the face of much lower oil and gas prices is a sign that it may just be on its way. (Nyquist 2015.)

Sources:

The Alternative Daily. 6 Benefits of Renewable Energy We Need to Consider. http://www.thealternativedaily.com/benefits-of-renewable-energy/. Accessed: 30.10.2017

Desjardins, J. 2016. The Alternative Energy Sources of the Future. http://www.visualcapitalist.com/alternative-energy-sources-future/. Accessed: 30.10.2017

Hausker, K. 2016. Shifting to a Clean Energy Economy Would Bring Billions in Economic Benefits, Shows New Report. http://www.renewableenergyworld.com/articles/2016/12/shifting-to-a-clean-energy-economy-would-bring-billions-in-economic-benefits-shows-new-report.html. Accessed: 30.10.2017

Lallanilla, M. 2015. Peak Oil: Theory or Myth. https://www.livescience.com/38869-peak-oil.html. Accessed: 30.10.2017

Nyquist, S. 2015. Lower oil prices but more renewables: What’s going on? https://www.mckinsey.com/industries/oil-and-gas/our-insights/lower-oil-prices-but-more-renewables-whats-going-on. Accessed: 30.10.2017

Rinkesh 2017. What are Alternative Energy Sources? https://www.conserve-energy-future.com/alternativeenergysources.php. Accessed: 30.10.2017

Union of Concerned Scientist 2013. Benefits of Renewable Energy Use. http://www.ucsusa.org/clean-energy/renewable-energy/public-benefits-of-renewable-power#bf-toc-3. Accessed: 30.10.2017

William, J. 2017. Renewable Resources: The Impact of Green Energy on the Economy. https://www.business.com/articles/the-impact-of-green-energy-on-the-economy/. Accessed: 30.10.2017