Peter Tertzakian is an energy economist from Calgary whose skills as a writer and storyteller provide a perfect complement to his analytic skills. His first book, “A Thousand Barrels a Second”, forewarned that we were on an unsustainable energy path that will inevitably lead to a “break point” that necessitates a change the way we obtain and use our energy resources. This book continues on that theme, providing further evidence of the unsustainability of our energy economy, of the magnitude of the problem, and offering many technical ideas and policy suggestions for how to address this issue. Intertwined with solid analysis and an often somewhat technical content are a myriad of anecdotes and illustrations that serve to add insight and meaningfulness by both putting the issues in an historical context and providing a modern perspective.
His First Principle of Energy Consumption is based on the high positive correlation between economic growth and energy consumption. We all enjoy and strive for higher standards of living, and our success in achieving that means we are increasingly consuming more energy. There are two economies in the world: the first, representing 56% of all economic activity, 28 countries and 12% of global population is the WealthyWorld (essentially, the OECD countries); the second, comprising the remaining 150+ countries and 88% of global population, is the WantingWorld. WealthyWorld, consuming so much energy because of its wealth and high standard of living, is energy obese; whereas WantingWorld is still striving to reach these levels of economic development.
Both economies are subject to the First Principle but have very different energy consumption patterns. Current economic growth rates are higher in WantingWorld and its energy consumption is increasing faster than WeathlyWorld’s, especially since 2000. The economy of WealthyWorld is becoming more service-based, which is partly why it is becoming less energy intense. The increasing shift in production of goods to WantingWorld countries has resulted in “offshoring” of energy consumption by the WealthyWorld through the goods it imports. Tertzakian corrects for this in some of his comparisons of energy intensity calculations.
While energy consumption has made us better off, it is unsustainable because, like economic growth, our energy requirements are increasing exponentially. Almost 90% of current global energy requirements are met by fossil fuels, which are non-renewable. Energy crises in the past have been solved by increasing the supply of energy, either from conventional sources or new resources. The energy obesity of the WealthyWorld and the rapid growth expected in the WantingWorld make this traditional solution unlikely, and can only lead a break point.
Renewables can contribute but, at best, are a small part of any solution. Of the 6.3% of global energy provided by renewables, 6% is attributable to hydro, so the potential for solar, wind and biomass to meaningfully contribute to sustained energy growth is constrained by its small share. Some oft-touted solutions, such as ethanol and biodiesel, are constrained by insignificant net energy gains, as they require almost as much energy input as they produce.
Energy conservation is not the panacea, as it typically leads to a “rebound effect” whereby the energy savings from efficiency result in increased wealth and further increases in energy consumption.
Relying on fossil fuels to feed our energy obesity leads to 3 problems: energy security issues (geopolitics), potential limits to continued prosperity (due to the First Principle) and environmental challenges from greenhouse gas (GHG) emissions. Current energy polices are largely driven by climate change concerns and do not necessarily lead to optimal energy solutions. Carbon capture and storage (CCS), for example, is costly and its energy intensity results in a significant decline in net energy recovery from the applicable energy source (for example, CCS would cause the energy recovery ratio for oil sands to fall from 3:1 to 1.3:1).
If relying on more energy resources and using energy more efficiently are not sufficient to solve our energy obesity problem, the remaining alternative is to seek to reduce energy consumption directly. Reduced energy consumption without compromising our standard of living implies a break with the First Principle, which Tertzakian acknowledges as challenging but necessary. No magic bullet is offered, but lots of interesting ideas and food for thought.
Electricity provides very useful and convenient energy, but with high inefficiencies in generation and transmission and in electricity-using appliances. These are exacerbated by lack of transparency in electricity pricing. Real-time pricing information as well as programmability of appliances is an area where imminent innovations have the ability to reduce electricity consumption by making it price responsive.
The needs for commuting to the office and for general business travel are being made obsolete by virtualization technologies, although most organizations are slow in adopting these changes. Even the social networking benefits of the office are being replaced by online social networks. Tertzakian is an admitted technophile and offers some interesting insights on the possibilities.
A recently emerging possibility, for electricity generation especially, is converting to more natural gas. This possibility is arising because technology is now unlocking a massive unconventional gas resource. This would allow increased energy consumption without the same GHGs implications of the coal it would largely be replacing.
Tertzakian identifies the countries of Japan, Denmark and Switzerland as having recently broken the First Principle by continuing to prosper while maintaining stable or reduced energy consumption. They have demonstrated the success of some energy policies that other countries may seek to emulate in reducing their energy obesities.
This review just skims the surface of a book that offers valuable insights for anyone with an interest in energy policies and environmental policies (can’t be separated), and I strongly recommend it. It is an interesting complement to Jeff Rubin’s recent Why Your World is About to Get a Whole Lot Smaller, with many reinforcing themes.