Energy trends and technologies in the coming decades

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1 Energy trends and technologies in the coming decades Steven E. Koonin Chief Scientist, BP plc GUIRR February 19, 2007

2 key drivers of the energy future GDP & pop. growth urbanisation demand mgmt. Demand Growth Supply Challenges Technology Environmental Constraints Security of Supply

3 energy use grows with economic development Primary Energy per capita (GJ) energy demand and GDP per capita ( ) US Australia Russia France Japan S. Korea UK Ireland Malaysia Greece Mexico China Brazil India 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 GDP per capita (PPP, $2000) Source: UN and DOE EIA Russia data only

4 DemographicTransformations 10 world population S-America N-America Oceania Africa N-America S-America Oceania Africa Europe 6.3 billion Europe 8.9 billion Asia source: United Nations Asia

5 energy demand growth projections Global energy demand is projected to increase by just over one-half between now and 2030 an average annual rate of 1.6%. Over 70% of this increased demand comes from developing countries Global Energy Demand Growth by Region ( ) 18,000 Energy Demand (Mtoe) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, OECD Transition Economies Developing Countries Notes: 1. OECD refers to North America, W. Europe, Japan, Korea, Australia and NZ 2. Transition Economies refers to FSU and Eastern European nations 3. Developing Countries is all other nations including China, India etc. Source: IEA World Energy Outlook 2006

6 Annual primary energy demand Source IEA, 2004 (Exclude biomass)

7 The Income Dependency of Mobility 80 Data for Santiago: Walking Auto Public transport Percentage of all trips $117 $117-$208 $208-$316 $316-$494 $494-$750 $750-$1,160 $1,160-$2,865 $2,865 Monthly income (1991 US $) Note: Santiago does not add to 100%; not all modal shares included Source: Arve Thorvik, WBCSD, Sustainable Mobility

8 growing energy demand is projected Global Energy Demand Growth by Sector ( ) Energy Demand (bnboe) Key: transport - power - industry - other sectors Notes: 1. Power includes heat generated at power plants 2. Other sectors includes residential, agricultural and service Source: IEA WEO 2004

9 A word about energy efficiency Demand depends upon more than GDP Multiple factors - geography, climate, demographics, urban planning, economic mix, technology choices For example, US per capita transport energy is > 3 times Japan Efficiency through technology is about paying today vs. tomorrow Must be cost effective May not reduce demand US Autos ( ) Net Miles per Gallon: +4.6% - engine efficiency: +23.0% - weight/performance: -18.4% Annual Miles Driven: +16% Annual Fuel Consumption: +11%

10 key drivers of the energy future GDP & pop. growth urbanisation demand mgmt. Demand Growth Supply Challenges significant resources infrastructure non-conventionals Technology Environmental Constraints Security of Supply

11 US energy supply since % 90% 80% 70% 60% 50% 40% 30% 20% Renewables Nuclear Gas Oil Hydro Coal Wood 10% 0% Source: EIA

12 2002 US energy (Net primary consumption = 103 Exajoules)

13 current and historical global energy mix Current global energy supply is dominated by fossil fuels oil has been the largest component of the energy mix for many decades; gas has grown strongly since the 1970 s; coal has been growing in the last four years; hydro is constant and nuclear has plateaued 50% 45% 27.8% 6.3% 6.0% 36.4% 40% 35% 30% 25% 20% 23.5% 15% 10% Oil Coal Hydro Source: BP Statistical Review Natural Gas Nuclear 5% 0%

14 Business as usual energy supply forecast Mtoe Other renewables Biomass/Waste Hydro Nuclear Coal Gas Oil +6.6% p.a. +1.3% p.a. +2.0% p.a. +0.7% p.a. +1.8% p.a % p.a % p.a Source: IEA WEO 2006

15 substantial global fossil resources 6,000 Yet to Find Reserves & Resources (bnboe) 5,000 4,000 3,000 2,000 1,000 0 Unconventional Yet to Find Proven R/P Ratio 41 yrs. Unconventional Yet to Find Proven R/P Ratio 67 yrs. Proven R/P Ratio 164 yrs. Oil Gas Coal Source: World Energy Assessment 2001, HIS, WoodMackenzie, BP Stat Review 2005, BP estimates

16 oil supply and cost curve Availability of oil resources as a function of economic price Source: IEA (2005)

17 key drivers of the energy future GDP & pop. growth urbanisation demand mgmt. Demand Growth Supply Challenges significant resources infrastructure non-conventionals Technology Environmental Constraints Security of Supply import dependence competition

18 significant hydrocarbon resource potential Oil, Gas and Coal Resources by Region (bnboe) Resource Potential (bnboe) 1200 North America Oil Gas Coal Resource Potential (bnboe) South America Oil Gas Coal Resource Potential (bnboe) Resource Potential (bnboe) Gas Europe Resource Potential (bnboe) Oil Gas Coal Africa Middle East Oil Gas Coal Oil Gas Coal Key: Resource Potential (bnboe) Resource Potential (bnboe) FSU Oil Gas Coal Asia Pacific Oil Gas Coal - conventional oil - gas Source: BP Data - unconventional oil - coal

19 and dislocation of supply & demand Regional Share of 2002 Consumption v s Reserves for Oil, Gas & Coal Oil Gas Coal 80% 89% 61% 69% 15% 32% Consumption Reserves Consumption Reserves Consumption Reserves Key: - 3 largest energy markets (N. America, Europe and Asia Pacific) - Rest of World Note: oil reserve figures do not include unconventional reserves estimates Source: BP Data, IEA WEO 2004

20 Mb/d energy security - import dependence Import dependence is rising in all the key markets; oil and gas production is also shifting increasingly away from OECD countries to non-oecd FSU Oil Importers Other Dev. ME OPEC (excl Iraq) US China Iraq Exporters bcm Russia ex FSU Natural gas EU Importers Pacific/ME LNG Other Europe pipeline Exporters US Asian LNG (Japan, Korea Taiwan) Atlantic LNG Canada

21 key drivers of the energy future GDP & pop. growth urbanisation demand mgmt. Demand Growth Supply Challenges significant resources infrastructure non-conventionals Technology local pollution climate change Environmental Constraints Security of Supply import dependence competition

Climate change and CO 2 emissions - CO 2 concentration is rising due to fossil fuel use - The global temperature is increasing - other indicators of climate change - There is a plausible causal

22 Climate change and CO 2 emissions - CO 2 concentration is rising due to fossil fuel use - The global temperature is increasing - other indicators of climate change - There is a plausible causal connection - but ~1% effect in a complex, noisy system - scientific case is complicated by natural variability, ill-understood forcings - Impacts of higher CO 2 are uncertain - ~ 2X pre-industrial is a widely discussed stabilization target (550 ppm) - Reached by 2050 under BAU - Precautionary action is warranted - What could the world do? - Will we do it?

23 Salient facts about CO 2 science The earth absorbs anthropogenic CO 2 at a limited rate Emissions would have to drop to about half of their current value by the end of this century to stabilize atmospheric concentration at 550 ppm This in the face of a doubling of energy demand in the next 50 years (1.5% per year emissions growth) The lifetime of CO 2 in the atmosphere is ~ 1000 years The atmosphere will accumulate emissions during the 21 st Century Near-term emissions growth can be offset by greater longterm reductions Modest emissions reductions only delay the growth of concentration (20% emissions reduction buys 15 years)

24 Some stabilization scenarios Emissions Concentration

There are many social barriers to meaningful emissions reductions Climate threat is intangible and diffuse; can be obscured by natural variability contrast ozone, air pollution Energy is at the heart

25 There are many social barriers to meaningful emissions reductions Climate threat is intangible and diffuse; can be obscured by natural variability contrast ozone, air pollution Energy is at the heart of economic activity CO 2 timescales are poorly matched to the political process Buildup and lifetime are centennial scale Energy infrastructure takes decades to replace Power plants being planned now will be emitting in 2050 Autos last 20 years; buildings 100 years Political cycle is ~6 years; news cycle ~1 day There will be inevitable distractions a few years of cooling economic downturns unforeseen expenses (e.g., Iraq, tsunamis, ) Emissions, economics, and the priority of the threat vary greatly around the world

26 CO 2 emissions and GDP per capita ( ) 25 CO2 emissions per capita (tco2) Russia S. Korea Malaysia Greece China Mexico Australia UK Japan France Ireland US 0 India Brazil 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Source: UN and DOE EIA Russia data only GDP per capita (PPP, $2000)

27 Implications of emissions heterogeneities 21 st Century emissions from the Developing World (DW) will be more important than those from the Industrialized World (IW) DW emissions growing at 2.8% vs IW growing at 1.2% DW will surpass IW during E DW IW Sobering facts When DW ~ IW, each 10% reduction in IW emissions is compensated by < 4 years of DW growth If China s (or India s) per capita emissions were those of Japan, global emissions would be 40% higher Reducing emissions is an enormous, complex challenge; technology development will play a central role t

28 CO 2 emissions and Energy per capita ( ) CO2 per capita (tonnes) Source: UN and DOE EIA Russia data only Emissions and Energy Coal Current global average Primary energy per capita (Gj) Oil Gas USA UK France Japan China Brazil Ireland Mexico Malaysia S. Korea Greece India Australia Russia Thailand

29 key drivers of the energy future GDP & pop. growth urbanisation demand mgmt. Demand Growth Supply Challenges significant resources infrastructure non-conventionals Technology local pollution climate change Environmental Constraints Security of Supply import dependence competition

30 Some energy technologies Primary Energy Sources: Light Crude Heavy Oil Tar Sands Wet gas CBM Tight gas Nuclear Coal Solar Wind Biomass Hydro Geothermal Extraction & Conversion Technologies: Exploration Deeper water Arctic LNG Refining Differentiated fuels Advantaged chemicals Gasification Syngas conversion Power generation Photovoltaics Bio-enzyimatics H 2 production & distribution CO 2 capture & storage End Use Technologies: ICEs Adv. Batteries Hybridisation Fuel cells Hydrogen storage Gas turbines Building efficiency Urban infrastructure Systems design Other efficiency technologies Appliances Retail technologies

31 evaluating energy technology options Current technology status and plausible technical headroom Budgets for the three E s: Economic (cost relative to other options) Energy (output how many times greater than input) Emissions (pollution and CO2; operations and capital) Materiality (at least 1TW = 5% of 2050 BAU energy demand) Other costs - reliability, intermittency etc. Social and political acceptability But we also must know what problem we are trying to solve

32 two key energy considerations security & climate High CTL Capture & Storage Conv. Biofuels Carbon Free H 2 for Transport Concern over Future Availability of Oil and Gas GTL CNG Heavy Oil C&S Arctic Ultra Deep Water Capture & Storage Enhanced Recovery Vehicle Efficiency (e.g. light weighting) Dieselisation Hybrids Key: Adv. Biofuels - supply side options - demand side options Low Low Concern relating to Threat of Climate Change High

Power Generation Biomass Extra Heavy Oil Enzymatic/Biological Conversion Refining Processes -

33 The fungibility of carbon Primary Energy Conversion Technology Products Markets Natural Gas Coal Reforming Gasification Syngas Conversion - FT - Oxygenates - Chemicals Fuels Chemicals Power Generation Biomass Extra Heavy Oil Enzymatic/Biological Conversion Refining Processes - coking - hydro-treating - novel thermal processes CO 2 Capture Electricity CO 2 for EOR/Storage

34 what carbon beyond petroleum? Fuel Fossil Agriculture Biomass 15% of 15% of Transportation Fuels Transportation Fuels Annual US Carbon (Mt C) Gasoline Diesel Coal Natural gas Other petroleum NGLs Corn Paper Soy Woodpulp Wheat Edible fats/oils Meat/Poultry Cotton Biomass today Biomass potential

35 what carbon beyond petroleum? Fuel Fossil Agriculture Biomass > % of Transportation Fuels Gasoline Diesel Coal Natural gas Other petroleum NGLs Corn Paper Annual World Carbon (Mt C) Soy Woodpulp Wheat Rice Edible fats/oils Meat/Poultry Cotton Biomass today Biomass potential

36 Evaluating power options power sector High Unconventional Gas Hydrogen Power Solar Concern over Future Availability of Oil and Gas Coal Hydro Gas CCGT Nuclear Geothermal Key: Wind Biomass - power generation options - supply option Low Low Concern relating to Threat of Climate Change High

37 electricity generation shares by fuel Oil 6.67% Nuclear 15.74% Hydro 16.14% Gas 19.60% Coal 39.73% Other 2.13% Biomass 1.30% Wind 0.47% Geothermal 0.32% Solar 0.02% Tidal/Wave 0.01% Source: IEA WEO 2006

38 levelised costs of electricity generation CCGT, gas $4/mmbtu Coal $40/tonne Hydrogen Power Gas, $4/mmbtu Hydrogen Power Coal $40/tonne Nuclear Onshore Wind Offshore Wind Biomass Gasification Wave / Tidal Solar (Retail Cost) Cost of Electricity Generation 9% IRR ($/MWh) Fossil energy source Low/Zero carbon energy source Renewable energy source Source: BP Estimates, Navigant Consulting

39 Impact of CO 2 cost on Levelised Cost of Electricity 160 Cost of Electricity ($/MW -hr) Area where options multiply Solar PV ~$250 $0.35/gal or 5 p/l Conventional Coal Natural Gas ($5/MMBTU) CCS Onshore Wind Nuclear CO2 Cost ($/tonne) Source: IEA Technology Perspectives 2006, IEA WEO 2006 and BAH analysis Notes: 1) Add solar 2) $40/tonne CO2 cost or tax is $0.35/gallon of gasoline or $0.09 (or 5p)/litre

Challenges are consumer behaviour, policy and business models 75% of the world s population will

40 potential of demand side reduction Low Energy Buildings Urban Energy Systems Buildings represent 40-50% of final energy consumption Technology exists to reduce energy demand by at least 50% Challenges are consumer behaviour, policy and business models 75% of the world s population will be urbanised by 2030 Are there opportunities to integrate and optimise energy use on a city wide basis?

41 Likely 30-year energy future Hydrocarbons will continue to dominate transportation (high energy density) Conventional crude / heavy oils / biofuels / CTL and GTL ensure continuity of supply at reasonable cost Vehicle efficiency can be at least doubled (hybrids, plug-in hybrids, HCCI, diesel) local pollution controllable at cost; CO 2 emissions now ~20% of the total Hydrogen in vehicles is a long way off, if it s there at all No production method simultaneously satisfies economy, security, emissions Technical and economic barriers to distribution / on-board storage / fuel cells Benefits are largely realizable by plausible evolution of existing technologies Coal (security) and gas (cleanliness) will continue to dominate heat and power Capture and storage (H 2 power) practiced if CO 2 concern is to be addressed Nuclear (energy security, CO 2 ) will be a fixed, if not growing, fraction of the mix Renewables will find some application but will remain a small fraction of the total Advanced solar a wildcard Demand reduction will happen where economically effective or via policy CO 2 emissions (and concentrations) continue to rise absent dramatic global action

42 Necessary steps around the technology Technically informed, coherent, stable government policies Educated decision-makers and public For short/mid-term technologies Avoid picking winners/losers (emissions trading) Level playing field for all applicable technologies For longer-term technologies Support for pre-competitive research Hydrates, fusion, advanced [fission, PV, biofuels, ] Business needs reasonable expectation of price of carbon Universities/labs must recognize and act on importance of energy research Technology and policy

43 Questions/Comments/Discussion

The Energy Challenge

The Energy Challenge Farrokh Najmabadi Prof. of Electrical Engineering Director of Center for Energy Research UC San Diego September 26, 2007 With Thanks to Dr. Steve Koonin, BP for energy charts Energy