Fossil fuels and energy into the future 3 rd Waterberg Coal Conference Dave Collins 15 October 2014
Fossil fuels and energy into the future The need for energy Global energy demand forecasts and scenarios Climate change Activism against fossil fuels The realities of renewable energy Where is the world going on energy? 2 MAC Consulting Proprietary and Confidential
The need for energy Global population and urbanisation Billions 2014 2050 Total 7.2 9.3 Urban 3.7 6.3 % urban 52% 67% Update September 2014: 80% likelihood that by 2100: Current global 7.2 billion will increase to between 9.6 and 12.3 billion Current African 1 billion will increase to between 3.5 and 5.1 billion 3 MAC Consulting Proprietary and Confidential
The need for energy Human development index and energy consumption Human development index Human body = 0.12 kw Got to today's basis of civilisation: 1. Stable climate over the last 10 000 years 2. Cheap energy from fossil fuels http://ef4india.wordpress.com/2012/01/04/ estimating-the-energy-requirement-in-2030/ 1 5 10 15 Annual energy per person, kw 4 MAC Consulting Proprietary and Confidential
The need for energy Population and energy demand 10 1 000 Billions 8 EJ 800 6 600 4 400 2 200-8000 -3000 2000 BC BC AD 0-8000 -3000 2000 BC BC AD 0 Got to today's basis of civilisation: 1. Stable climate over the last 10 000 years 2. Cheap energy from fossil fuels 5 MAC Consulting Proprietary and Confidential
The need for energy Cheap energy from fossil fuels Got to today's basis of civilisation: 1. Stable climate over the last 10 000 years 2. Cheap energy from fossil fuels 6 MAC Consulting Proprietary and Confidential
Global energy demand forecasts and scenarios Scenarios are not forecasts, but they do represent informed thinking on plausible futures. Neither scenarios nor forecasts pick up disruptions. 7 MAC Consulting Proprietary and Confidential
Global energy demand forecasts and scenarios: total Fossil fuels 2010 to 2040 + 35% Average fossil fuels 2010 = 81% = 441 EJ Average fossil fuels 2025 = 78% = 549EJ Average fossil fuels 2040 = 75% = 597 EJ 8 MAC Consulting Proprietary and Confidential
Global energy demand forecasts and scenarios: coal 9 MAC Consulting Proprietary and Confidential
Global energy demand forecasts and scenarios: gas 10 MAC Consulting Proprietary and Confidential
Climate change Emissions from energy Coal, oil and gas = 68% of anthropogenic emissions 11 MAC Consulting Proprietary and Confidential
Climate change Emissions from energy Coal, oil and gas = 68% of anthropogenic emissions 12 MAC Consulting Proprietary and Confidential
Climate change Global temperature rise Currently, the world is on track for a rise of around 3.5 4.0 C by 2100 13 MAC Consulting Proprietary and Confidential
Climate change Who thinks it s a problem? Amongst others.. American Association for the Advancement of Science 14 MAC Consulting Proprietary and Confidential
Climate change The impact of a global average rise of 4 C 12 16 C 2-3 C 15 MAC Consulting Proprietary and Confidential
Climate change The impact of a global average rise of 4 C 2-3 C 6-7 C 2-3 C 2-3 C 16 MAC Consulting Proprietary and Confidential
Climate change IPCC Assessment Report AR5 (Oct-13 Apr-14) The basic message is much the same as in 2007: Unequivocal evidence that since 1950 the atmosphere and oceans have warmed; Scientists 95 per cent certain that humans were the dominant cause; There is a need to reduce the emissions from fossil fuels, although it is positive about using gas in the medium term instead of coal. Carbon dioxide capture and storage (CCS) has not yet been applied at scale to a large, operational commercial fossil fuel power plant. CCS power plants could happen if incentivized by regulation and.. if the additional investment and operational costs.. are compensated by sufficiently high carbon prices (or direct financial support). Mitigation policy could devalue fossil fuel assets and reduce revenues for fossil fuel exporters. 17 MAC Consulting Proprietary and Confidential
Activism against fossil fuels UNBURNABLE CARBON In the past year, shareholder activism against fossil fuel producing companies has been on the risein the USA and the UK 18 MAC Consulting Proprietary and Confidential
Activism against fossil fuels Carbon Asset Risk Initiative UNBURNABLE CARBON September 2013: international group of 75 institutional investors with $3 trillion in assets launched the Carbon AssetRiskInitiative Asks 45 of the world stop oil and gas, coal and electric power companies to assess the financial risksthat climatechange poses to their business plans Writes to each of the companies requesting details of their plans. 19 MAC Consulting Proprietary and Confidential
Activism against fossil fuels Responses to Carbon Asset Risk Initiative ExxonMobil,Statoiland Shell: oildemand willkeep growing until at least 2030 Reject the idea that they face substantive financial risk Coal companies limitedresponse? Expecting summaryofresponses in lateoctober 20 MAC Consulting Proprietary and Confidential
Activism against fossil fuels Coal's position (WCA) A global industry association formed of major international coal producers and stakeholders Extractsfrom ClimatePolicyStatement: Secure, affordable and sustainable sources of energy are key to addressing the challenge of reducing greenhouse gas emissionswhilstachieving energy securityand poverty alleviation. Significantly reducing poverty in developing economies is a necessary first step to reducing greenhouse gases. Without this first step, developing economies will not have the capacity to focus their attention on reducing their greenhouse gas emissions. Ensuring secure, affordable and sustainable energy requires adiverse energy mix and coal is akey part of that mix. http://www.worldcoal.org/about-wca/ http://www.worldcoal.org/coal-the-environment/climate-change/ 21 MAC Consulting Proprietary and Confidential
Activism against fossil fuels Financial services and analyst comments UNBURNABLE CARBON In the past year, financial services agencies and analysts have begun to comment on the End of Coal, citing developments in energy efficiency, grid efficiency, and renewables; and a growing patchwork of air quality and carbon emissions standards. 22 MAC Consulting Proprietary and Confidential
Activism against fossil fuels Events late September 2014 2 646 events and rallies were held in 156 countries demanding action on climate change: 600 000 marchers, including 300 000 in New York UN Climate Summit 23 September: Intended to build momentum leading up to next year s COP21 negotiations in Paris Coal remains the primary target; Oil and gas companies have hit upon the tactic of saying that coal is the big problem, that oil and gas are necessary. 23 MAC Consulting Proprietary and Confidential
The realities of renewable energy Technically feasible maximum available energy Solar Wind Wind-drivenocean waves Hydro Geothermal Tidal Ocean currents Total Primary Energy Supply 2010 15 000 TW 10 TW < 5 TW 1 TW < 1 TW <1 TW < 1 TW 16 TW Vaclav Smil 13 fossil fuel + 3 other 24 MAC Consulting Proprietary and Confidential
The realities of renewable energy Development of mix of primary energy supply There can be no quick switch to the low carbon economy % Natural gas ±50 Coal Oil Oil ±30 Years for share to increase from 1% to 10% ±50 http://www.mckinsey.com/features/resource_revolution.aspx 25 MAC Consulting Proprietary and Confidential
The realities of renewable energy Development of mix of primary energy supply Robust empirical laws limit the build rate 1. Scale up means learning by doing -takes time 2. Energy system is huge - takes time to build the human & industrial capacity to achieve substantial deployment 3. The energy system has an enormous amount of embedded capital Intermittency of solar and wind Energy storage technology is not yet sufficiently developed to handle this 26 MAC Consulting Proprietary and Confidential
The realities of renewable energy Development of mix of primary energy supply Moving power generation from centralised to dispersed will take time Centralised Fossil fuel & nuclear driven Dispersed Diverse sources Big grids Smaller grids Smart grids Clusters of local energy production & consumption 27 MAC Consulting Proprietary and Confidential
Where is the world going on energy? Balancing the Energy Trilemma Many significant oil, gas and coal companies and organisations such as ExxonMobil, Peabody Energy and the World Coal Association, while acknowledging the climate change issue, have taken the positionthat EnergySecurity and EnergyEquity must comefirst. Energy Security: keeping the lights on Reliability of energy infrastructure Ability of energy providers to meet demand Adapted from: > 4 C warmer world < 2 C warmer world Energy equity: energy for all Accessibility and affordability of energy supply across the population Environmental Sustainability Reducing carbon emissions and other impacts Using low-carbon energy sources Energy efficiency 28 MAC Consulting Proprietary and Confidential
Conclusions Humanity is running out of space, especially for carbon disposal Fossil fuel energy demand up 35% from 2010 to 2040 Renewables development will take longer than expected Global average rise of 4 C by 2100 29 MAC Consulting Proprietary and Confidential
Dave Collins Associate Director MAC Consulting 8th Floor, The Mall Offices Cradock Ave Rosebank Cell: +27 83 659 1712 Phone: + 27 11 537 1800 Email: davec@macgroup.co.za www.macgroup.co.za 30 MAC Consulting Proprietary and Confidential