Industry Agenda Energy Harnessing: New Solutions for Sustainability and Growing Demand

October 2013 Energy Harnessing: New Solutions for Sustainability and Growing Demand was produced by the World Economic Forum, and written by Sir David King and Clare Grey of the University of Cambridge, United Kingdom.

The significant contribution ofA.T. Kearney to the project and this paper is gratefully acknowledged.

Editors Andrew Hagan, Director, Head of Chemicals Industries, World Economic Forum Oliver Inderwildi, Senior Community Manager and Global Leadership Fellow, Chemicals Industries, World Economic Forum Stefan Muschal, Project Manager, Chemicals Industries, World Economic Forum/A.T. Kearney, Switzerland/Germany Thomas Rings, Vice-President, Global Leader, Energy and Process Industries, A.T. Kearney, Germany

The World Economic Forum would like to thank the following individuals for their contributions: Thomas Connelly, Executive Vice-President and Chief Innovation Officer, DuPont, USA Kiyoshi Matsuda, Chief Innovation Officer, Mitsubishi Chemical Holdings Corporation, Japan Peter Nagler, Chief Innovation Officer, Evonik Industries, Germany Rob W. Van Leen, Chief Innovation Officer, Royal DSM, Netherlands

Editing and Production Ann Brady, Associate Director, Head of Editing, World Economic Forum Floris Landi, Senior Associate, Graphic Designer, World Economic Forum

© World Economic Forum 2013 - All rights reserved.

No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system.

The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.

REF 021013 Contents

4 Executive Summary

5 Introduction

6 The Energy Harnessing Value Chain: From Capturing to Consuming Energy

7 Energy Harnessing Is Highly Influenced by Several of the Nine Global Megatrends

12 The Future Mix of Energy Sources Will Diversify

22 Shale Gas Has and Will Continue to Shape Energy Markets

26 Renewable Energies Will Be a Key Enabler to Transform the Current Energy Landscape

31 Advanced Energy Storage Solutions Will Be a Key Enabler for the Further Growth of Renewable Energy Sources

31 Grid-scale Energy Storage Poses Complex Challenges

34 E-mobility Applications Require Energy Storage Solutions that Provide a Higher Energy Density

37 The Grid Itself Offers Solutions for Reliable Electricity Supply

40 Increasing Efficiency in Energy Consumption Is an Important Lever to Transform the Energy Landscape

44 The Future Energy Landscape: Europe and China

44 Europe Has Put Its Energy Landscape on a Decarbonization Path

49 Environmental and Economic Sustainability Are the Key Challenges for the Chinese Energy Landscape

53 The European and Chinese Energy Landscapes Differ Significantly but Face Similar Challenges

54 Developments in Energy Harnessing Offer Opportunities but Also Pose Challenges to Most Industries

54 Chemicals

54 Electricity

56 Renewable Energy

56 Automotive

57 Construction

58 The Role of Collaborative Innovation in Energy Harnessing

62 Conclusion

Energy Harnessing: New Solutions for Sustainability and Growing Demand 3 Executive Summary

Energy is the fuel of the global Provision of renewables will have to Energy-efficiency measures will be vital economy. Without sufficient energy dominate the future energy architecture for energy security, and smart policies to heat and light our houses, run our on a global level, to supplement and smart grids must be put in place businesses, power our manufacturing and eventually substitute the more- to support this. Developed countries plants, and stoke our cars and planes, polluting traditional energy sources. have already succeeded in levelling our world would come to a standstill. But renewables such as solar and wind demand, mainly by becoming more Energy is provided via an Energy power have a major drawback – they energy efficient; the developing world Harnessing Network – a complex must be tailored to a certain area to has the opportunity to leapfrog various system that starts with extraction make best use of local conditions (for stages to start at a more energy- from a variety of sources and then example, high irradiation or significant efficient point. Efficiency measures are moves to transformation, storage, winds). Yet technologies and best the most cost- effective way to mitigate distribution and finally utilization. practices developed in one region can, greenhouse gas emissions and ease Global megatrends such as climate and should, be leveraged in another. energy demand. change and resource scarcity force a rethinking of this crucial network, The true challenge for renewables Technological developments alone especially in the light of a reshuffling of is intermittency, the periodic will not be sufficient to transform the global economic activity and significant availability of supply that will have an energy harnessing landscape. New demand growth in the developing enormous impact on energy security business models, capital and, most world. Innovative solutions are required when renewables are deployed importantly, political will are required to ensure that the world’s economy is on a large scale. In the short term, as well. Moreover, a collaborative fuelled in a socially and environmentally natural gas can be used to balance innovation approach is needed. Many responsible way that is also economic. this intermittency and hence the technologies that could be game- development in shale-gas production changing need to be developed in A global restructuring with so many globally is linked intrinsically to different areas, ranging from advances constraints is highly complex, and the success of renewables. In the in computational management to demands innovative solutions from medium to long term, smart grids and advanced materials and marketization. businesses and governments. A select electricity storage are necessary to group of specialists from industry, civil provide a large share of the energy society, government and academia demand from renewables. This report have therefore analysed this global details different technologies and challenge from different viewpoints their stages of development to give a and determined critically important comprehensive overview of the state- requirements for a successful of-play in renewable energy’s provision rearrangement of the Energy and storage. Harnessing Network. The findings of this holistic analysis are described in Smart integration of renewables into detail in this report. existing electricity grids will be of paramount importance; so-called smart Fossil fuels are still the main energy grids could help with the incorporation source for the world’s economic of intermittent renewable technology. engine. Unconventional resources This report assesses key technologies such as shale gas have already had a that must be developed in order to dramatic impact on the energy market convert current, out-dated grids to in the United States (US) and have the smart grids, which are essential for potential to affect others, for instance, a critical area of energy harnessing – China. While environmentally less using energy efficiently. favourable than conventional natural gas, shale gas can reduce emissions by crowding out highly polluting coal- fired power generation. This report details how and to what extent shale- gas reserves can change the energy harnessing landscape in different parts of the world, and visualizes the landscape in a comprehensive map.

4 Energy Harnessing: New Solutions for Sustainability and Growing Demand Introduction

The energy landscape faces enormous Stakeholders across the value network innovation for both fossil fuels and challenges, triggered by several global have the opportunity to develop renewable sources will continue to megatrends. Climate change, limited innovative technologies to enable a increase energy supply and energy resources and growing demand, to more viable long-term source mix efficiency, thereby improving energy name a few, have had a dramatic that meets future demand growth in security, managing demand growth, influence on the way the global society a way that is economically, socially lowering costs and cutting GHG will use energy in the future. To ease and environmentally sustainable. emissions. the impact of ongoing climate change Renewables and other alternative and stay within the widely accepted energy sources could provide lasting Today’s energy landscape does not range of a maximum of 2°C (3.6°F) of supplies, and thereby address the equip any single entity to provide the warming, solutions must be found now. concerns of regional shortages and entire solution to the world’s energy The Energy Harnessing value network energy security. In today’s economic challenges. Collaborative innovation is a major emitter of greenhouse gas environment, however, investments in – the partnering of different entities (GHG) and must drastically reduce enabling infrastructure and technology across the value network to develop its current impact on the climate. are limited, making it difficult for and introduce new energy solutions The stakeholders within the Energy innovations to take off and reach cost – is one way to address these Harnessing value network can still parity with fossil fuels. difficulties. A cooperative approach prevent a potentially disastrous global allows for shared risks and diversified warming. But time is short. Geographic, geo-economic and perspectives, and has the potential geopolitical considerations have to enable the development and Planned energy supply is likely to be a significant impact on Energy execution of innovative solutions to the insufficient to meet rapidly expanding Harnessing. Building domestic challenges associated with mounting global energy demand, especially in the energy supplies enhances a country’s global energy demand. developing world, which is forecast to energy security and mitigates the experience 80.5% of demand growth geopolitical risks in relying on energy between 2012 and 2035.1 China alone imports. Harnessing locally available will account for 35.5% of total global resources also reduces transmission demand growth and India for 11.1%, costs and increases control over according to current trend scenarios.2 setting of policy. To further address Fossil fuels will remain the dominant energy security and resource-shortage energy source in the near term. concerns, many countries have However, their quantity is limited, and sought to change their energy mix to regional availability and infrastructure capitalize on domestically available and will determine how various countries economically viable sources. expand their domestic energy supplies. As a consumer of one-third of the world’s energy, industry faces a number of energy risks and opportunities. Since the oil embargo of the 1970s, industries such as chemicals and steel have slowly enhanced their output per unit of energy consumed, in response to supply and cost issues. Industry

Energy Harnessing: New Solutions for Sustainability and Growing Demand 5 The Energy Harnessing Value Chain: From Capturing to Consuming Energy

The Energy Harnessing value For electricity generation, the value to chemical energy in a battery, or network encompasses the process of network is more complex than with potential energy in a pumped hydraulic capturing, transforming, transmitting fuels, and innovation is needed to storage system). However, conversion and using energy. Figure 1 depicts the raise performance effi ciency and lower introduces additional loss of effi ciencies Energy Harnessing value network for costs. Electricity must be converted to to the value network. different energy sources and illustrates another form of energy before it can the high degree of cross linking. be stored (for example, transformed

Figure 1: Current Energy Harnessing Value Network

Source: A.T. Kearney analysis

6 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 2: Nine Global Megatrends Infl uencing the Energy Harnessing Value Network

Energy Harnessing Is Highly earth metals, also is increasingly limited Resilience Centre and other scientists Infl uenced by Several of the in many parts of the world. Unequal suggested nine such planetary 3 Nine Global Megatrends distribution of water poses a particular boundaries in 2009. Listed are challenge, as does the uncertain future climate change, carbon dioxide (CO2) supply of certain rare earths that are emission, biodiversity, land use and Energy Harnessing is closely linked to used in the production of electric other boundaries that, if not adequately and infl uenced by several of the nine engines, solar panels and batteries. It addressed, will have a detrimental global megatrends identifi ed by the remains unclear if enough deposits can impact on the planet. 4 Any future Community of Chief Innovation Offi cers be explored at reasonable costs, or if development in the Energy Harnessing of the Chemicals Industry Community those minerals need to be substituted value network must be mindful to at the World Economic Forum (see in the future. Moreover, the shift of ensure that society at large stays within Figure 2). The fi rst megatrend is economic activity hubs from the West these boundaries. ongoing climate change and the need to countries such as China, India and for sustainable solutions pose major Brazil will require new solutions to meet Growing demand for energy. challenges for most industries and the specifi c energy needs of these new Since 1980, global primary energy society as a whole. Transformation of centres. consumption has nearly doubled from the energy landscape will be critical to 283 quadrillion British thermal units reduce global GHG emissions and the This chapter highlights some of the (Btu) to 542 quadrillion Btu in 2012.5 negative impact on the environment of consequences for Energy Harnessing During the same period, the world’s today’s energy production. derived from the megatrends. population surged by more than half to about seven billion.6 Figure 3 illustrates This target has to be achieved against Climate change, environment and that countries outside the Organisation a surging demand for energy, the sustainability. In 1987, the United for Economic Co-operation and second megatrend driven largely by Nations’ Brundtland Commission Development (OECD) have driven emerging countries, which have the defi ned sustainable development as much of the demand and have nearly highest population growth and an that “which meets the needs of current tripled their energy consumption since increasing middle class. Most emerging generations without compromising the 1980. countries lack suitable energy ability of future generations to meet infrastructure, like reliable transmission their own needs”. This defi nition of grids or effi cient power plants. Limited sustainability includes three pillars: availability of resources is the third economic, social and environmental. megatrend. As many conventional oil From an environmental perspective, it and gas fi elds are exploited, supplies means that humankind needs to stay in the future will become more diffi cult within certain “planetary boundaries”. and more expensive. Access to other Johan Rockström from the Stockholm resources, such as freshwater and rare

Energy Harnessing: New Solutions for Sustainability and Growing Demand 7 Figure 3: World Total Primary Energy Consumption, 1980-2035 (in quadrillion Btu)

Source: International Energy Statistics 2010 and International Energy Outlook 2011, US Energy Information Administration

Energy consumption forecasts In a seminal publication, J. Murray and Increasing scarcity and unequal anticipate that these sturdy trends will D.A. King exemplifi ed the latter issue, distribution of water. Water is an continue. From 2009 through 2035, using oil as an example resource. In essential component of the Energy the growth rate of the world’s gross 2005 production of conventional crude Harnessing value network. In the domestic product (GDP) is expected oil reached maximum capacity and United States (US), fossil fuels and to average 3.6% per year, driven from that year onwards the supply nuclear sources use 190,000 million largely by non-OECD countries.7 This curve has gone from elastic (bright) to gallons of water per day for electricity growth, combined with a projected inelastic (dark), which means increased production, accounting for 39% of all 26% increase during the same period demand is not met by increased supply freshwater withdrawals in the country.13 in the world’s population – 90% of but regulated by price increases (Figure For example, coal-fi red power plants which will occur in non-OECD regions 4)10. This effect is referred to as price require 25 gallons of water per kilowatt- with emerging middle classes and volatility. Additional supply could come hour (kWh) of power generated. rapid urbanization patterns – will cause from unconventional energy resources, Additionally, according to the US global energy demand to soar.8 Median but these are capital intense, have Department of Energy (DOE), drilling estimates suggest that between 2009 signifi cant lead times and their and hydraulic fracturing of horizontal and 2035, the world’s primary energy environmental impact is detrimental shale-gas wells requires two to four demand will climb by 52.5% to about beyond questioning, compared with million gallons of water over a well’s 770 quadrillion Btu; in non-OECD conventional resources11. Moreover, lifetime. However, for every million Btu countries, it will surge by 65.8%.9 The it has been proved that the effect of of natural gas produced from shale, regional stakeholders of the Energy resource price volatility on ailing global only 0.6-1.8 gallons of water are Harnessing value network have to economies is signifi cantly detrimental.12 required – 85% less than the amount ensure that the necessary investments, Hence, energy harnessing must be required to produce the equivalent primarily in infrastructure, will be carried a top agenda point for the economic amount of energy from coal.14 Despite out in a timely manner to ensure recovery process. higher water effi ciency relative to coal the world has an environmentally production, countries like China with sustainable and reliable energy supply. more immediate water scarcity issues have been slower to develop shale- gas reserves with this technology. Solutions are beginning to come online to capture shale gas by using less water. Technologies are being tested to either recycle the water used or substitute it, with liquid petroleum gas gel, for example.

8 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 4: World Total Primary Energy Consumption, 1980-2035 (in quadrillion Btu)

Freshwater is already scarce in many – Delivering water more effi ciently to changes will increase per-capita energy regions due to agricultural, industrial minimize losses consumption and will require novel and residential withdrawals, pollution – Minimizing the use of water for solutions to provide low-cost access and geography. As these competing mining, energy capture and use, for the 1.4 billion people (approximately demands on water increase, its disposal of by-products, water 20% of the world’s population) who availability for energy capture of shale treatment and distribution currently lack access to electricity.21 gas, biomass, coal and other sources The International Energy Agency will be limited. Figure 5 demonstrates Cooling power plants by utilizing air (IEA) estimates that US$ 9.1 billion the spread of water scarcity since 1975 or wastewater instead of freshwater was spent in 2009 to extend energy and projections by 2025, when every also can minimize water use, but it is services to previously un-served continent will suffer extreme water an expensive solution and decreases populations; it projects that an average scarcity. By 2025, 1.8 billion people net electricity output. 19 Additional of US$ 14 billion per year will be spent will be living with water scarcity and innovations will be required for this on such infrastructure investment two-thirds of the world’s population solution to become more widely between 2010 and 2014.22 Providing will lack access to water for basic adopted. Another possible solution worldwide universal energy access, consumption.15 Between 2011 and currently under development through however, would require investment 2025, water withdrawals are forecast the US National Aeronautics and of US$ 48 billion per year between to surge 50% in emerging countries Space Administration’s Offshore 2011 and 2030.23 Developed energy and 18% in developed countries.16 Membrane Enclosures for Growing infrastructure – which provides reliable Scarcity could limit the potential for Algae or OMEGA project, explores access to electricity and fuel – fosters countries to expand their energy supply using algae to clean wastewater, economic and social development, and infrastructures to sources that rely capture carbon dioxide and ultimately allows regions with a more developed heavily on water as a feedstock.17 produce biofuels without competing energy infrastructure to attract with agriculture for water, fertilizer, or industries like manufacturing, which To reduce the strain of Energy land.20 create jobs and economic growth. Harnessing on clean water reserves, the US Department of Energy Demographics, including shifting recommends possible innovations to populations and mobility. In help to extend water supplies.18 These emerging countries with limited include: infrastructure, rapid population growth – Treating and reusing non-potable and socioeconomic changes will lift water in energy capture millions from poverty into the middle – Accessing unused water sources class, building demand for a “middle such as saline aquifers and fl ooded class lifestyle”, which includes access underground mine workings to electricity, automobiles and other energy-consuming goods. These

Energy Harnessing: New Solutions for Sustainability and Growing Demand 9 Figure 5: Global Water Availability, 1975, 2000 and 2025

Source: Center for Environmental Systems Research, University of Kessel

Extreme scarcity Scarcity Stress Adequate <500 500 - 1,000 1,000 - 1,700 1,700 - 4,000

Abundant Surplus 4,000 - 10,000 >10,000 Ocean/ inland water No data

10 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 6: Growth Rates of Urban Agglomeration, 1970–2011

Source: World Urbanization Prospects: The 2011 Revision, 2012, New York, Department of Economic and Social Affairs, Population Division, United Nations

Source: World Urbanization Prospects 2011, United Nations, Department of Economic and Social Affairs, Population Div ision: World Urbanization Prospects, the 2011 Revision, New York 2012

Shifting centres of economic activity. Growing Demand for Energy availability will be one driver for The growing trend for urbanization has Summary technologies used across the several consequences for the Energy Energy Harnessing value network. Harnessing value network. Urbanization –– Several of the global megatrends, –– The growth of the global middle has raised energy demand and will such as climate change, class will increase per-capita energy continue to do so. Between 1965 and growing demand for energy and consumption. Providing universal 2010, the percentage of people living demographics influence the Energy energy access would cost US$ 48 in urban areas increased from 33.6% Harnessing value network. billion annually between 2011 and to 51.6%.24 As illustrated in Figure –– Any future development in the 2030. 6, the urbanization rate is highest in Energy Harnessing value network –– Growing urbanization strains urban developing regions like South-East has to be mindful of the nine energy resources and requires Asia and Sub-Saharan Africa. Higher planetary boundaries, and must additional improvements in energy urbanization in emerging countries ensure that society does not cross efficiency and infrastructure. will influence energy demand through any of them. –– Energy demand and economic changes in the economy, mobility and –– Global primary energy consumption development are interconnected. transport, infrastructure and population has nearly doubled since 1980 Energy access strengthens density, and household consumption and is expected to increase 52.5% economic growth and higher patterns.25 Compared to its agrarian between 2009 and 2035, driven standards of living increase energy counterpart, an urban economy by population and GDP growth. demand, especially in emerging tends to be more energy-intensive. Growth will occur mostly in non- countries.26 Urbanization drastically increases use OECD countries. –– Collaborative innovation will of motorized transport and places –– Constrained conventional be needed to develop new greater demands on infrastructure. resources, as well as the high technologies to meet the growing The urban lifestyle also heightens capital intensity and long planning demand for energy. consumption of goods and services, times of unconventional and which in turn escalates per capita alternative resources affect energy intensity. Therefore, sustainable macroeconomic stability and mobility solutions, higher energy- environmental security. efficiency and extension of the energy –– Water usage is a crucial component infrastructure are necessary to mitigate of energy extraction, storage and the consequences of this megatrend. usage. Concerns about freshwater

Energy Harnessing: New Solutions for Sustainability and Growing Demand 11 The Future Mix of Energy Figure 7: Global Primary Energy Consumption, by Fuel Type and Sector, Sources Will Diversify 2012

In 2012, global primary energy Source: International Energy Outlook 2011, US Energy Information Administration consumption reached 542 quadrillion Btu (see Figure 3). Liquid fuels were the most important type of fuel, accounting for 33.2% of total energy consumption, followed by coal, natural gas and renewable energy (see Figure 7). The main energy-consuming regions were Asia-Pacifi c (38.4%) and a combined Europe and Eurasia (24.4%), followed by North America (21.8%).

Several questions need to be answered to fi nd a suitable energy mix for future demand:

– What energy sources are most capable of fulfi lling large demand requirements in a sustainable manner, for example, in a cost-effective, environmentally responsible and socially acceptable way? – What are the essential drivers for site-specifi c conditions, various evaluation of cost and benefi ts that the future energy mix? renewable energy technologies also takes into account environmental – How do we best incentivize already compete with traditional fuel and social aspects might lead to a energy sources that are not sources. The key drivers for varying different result. However, as these yet economically viable but are the energy mix: cost-effi cient supply, valuations are not translated into essential to meet the requirements energy security and –currently only in a market prices, they are not a key driver of the nine global megatrends? minor way – environmental protection, of development. – How can energy security be including climate change. An increasing number of applications ensured? of renewable energy are already New technologies that enable other competitive today. Hydropower is These questions begin to outline the carbon sources, such as shale gas, well established and onshore wind myriad energy-related considerations to be used more cheaply will help can, in good locations such as the that must be taken into account by shift demand away from crude oil. Mid-West in the US or coastal areas governments, regulators and private In the wake of the Arab Spring and in Europe, reach levelized cost of sector stakeholders. No one “right” European Union (EU) sanctions on energy (LCOE)28 at, or below, the answer exists in most cases. Iran, this variation protects the energy level of new conventional capacity. value network while strengthening the Even less mature technologies such A multitude of sources will be required energy supply chain. It also permits as solar photovoltaic are already to meet the growing energy demand. more stable global economic and prevalent without support in remote Coal, crude oil and natural gas will energy security for nations with varied industrial applications or as fi nancially continue to dominate the energy mix access to natural energy resources. viable alternatives in rural micro- in the short-term, as they have the Nevertheless, the development of grids. Nevertheless, because their most well-established infrastructures shale-gas reserves outside North value chains and learning curves and are currently in many locations America is still in a start-up phase and are still maturing, renewable energy and applications. Inequitable global signifi cant environmental implications applications will continue to require distribution of natural resources, have to be addressed.27 fi nancial and regulatory incentives in specifi c resource attributes and trade- the short-term to ensure their cost- offs, varying end uses and simple Increasing renewable energy’s share of competitiveness. These incentives risk management principles suggest the energy mix poses some diffi culties. should be structured to avoid overly that developing more diversifi ed and Such sources are the most likely generous support, so that continued renewable energy resources will be candidates to replace fossil fuels in pressure will be felt to reduce needed to supplement and supplant the long term, but they are often less costs until these sources become crude oil and coal. In fact, in certain cost-effective. A full, macroeconomic competitive.

12 Energy Harnessing: New Solutions for Sustainability and Growing Demand The most frequent applied types of Under this system, entities may be of coal-fi red capacities to biomass incentives are feed-in tariffs (FiTs) obligated to buy RECs to prove their is a low-cost way to add sizeable and renewable portfolio standards compliance with renewable portfolio renewable energy capacity. For its part, (RPSs), although special renewable standards. Alternatively, companies biofuel has an inferior energy density energy certifi cates (RECs) also have and/or consumers seeking to reduce compared to crude oil, and this is an a role. FiTs are a type of economic their carbon footprints can buy RECs issue for end-markets such as the policy that offers long-term contracts voluntarily. automotive and aviation industries. for electricity generated by renewable sources. Generally, these contracts are Germany has strongly supported the Another future challenge is the based on the cost of each technology use of FiTs to boost its solar industry. vulnerability of the energy infrastructure rather than the prevailing cost of The country has repeatedly exceeded to environmental change. In a paper electricity. FiTs often also include a its goals to expand solar capacity by published by Chatham House in “tariff degression” that lowers the tariff between 2.5 and 3.5 gigawatts (GW) 2009, Cleo Paskal explains why over time, encouraging cost reduction. per year, due to better-than-expected environmental changes might pose RPSs, on the other hand, mandate that cost reduction in photovoltaics (PVs), a major challenge to the energy electricity supply companies produce leading to higher-than-predicted cost infrastructure. The report notes that a certain percentage of electricity from of the policy, which is rolled over to a major portion of the global energy renewable sources. Such a policy puts the fi nal electricity consumers. In infrastructure lies in areas projected the burden of implementation entirely response, the German government to become physically unstable due to on the private sector. In theory, this has repeatedly cut the subsidies, a changing environment. 29 The latter should allow greater competition and, sometimes at short notice, reducing is already posing challenges to the ultimately, lower cost. In practice, them by nearly 30% as of 1 April 2013, existing energy infrastructure. Nuclear however, empirical studies show with plans to eliminate them entirely power plants, for example, had to that private-sector risks associated when the government target of 52 GW be powered down in France, Spain with RPSs are charged back to the installed is reached. and Germany in the summer of 2006 projects, making them frequently more because of heat and water problems.30 expensive than those in FiT systems. To enable renewables on a large In 2008 and 2009, inadequate Experience in Europe shows, that scale, technical problems need to rainfall was blamed for the decline many countries that started with RPS be mitigated. For example, many of more than 8% in hydroelectricity systems modifi ed these signifi cantly renewable sources, such as solar production in India.31 Disruptions will to support the various technologies and wind, produce energy at volatile rise in the future. For example, Russian (e.g. the technology “carve outs” intervals and intensity; system-wide natural gas pipelines undermined supported by regulations in the US or improvements are needed in the ability by melting permafrost would cause various bands in the United Kingdom’s to absorb volatile generation (e.g. concerns for the country’s natural renewable obligation certifi cate or advanced energy storage technology gas sector.32 Future investments in ROC system). Others supplement and demand response mechanisms). energy infrastructure, therefore, should their RPS system with FiTs (e.g. Italy, In heat generation, however, renewable fi nd ways to alleviate the impact of a United Kingdom), which leads overall energy already makes a substantial changing environment. to a diversifi cation of the incentives contribution worldwide. Biomass is used in Europe. For their part, RECs widely used as a heat source in low- have been implemented as voluntary and high-tech applications. In fact, / industry-led certifi cation systems. biomass co-fi ring and boiler conversion

Energy Harnessing: New Solutions for Sustainability and Growing Demand 13 The future energy mix and the role of renewable energy sources often generate disagreement. The IEA’s World Energy Outlook 2010 presents different scenarios for the percentage of renewable energy in total global primary energy demand.33 In the Current Policy scenario, renewables will account for about 15% of the total in 2035. In the 450 scenario, which follows an energy path consistent with the 2°C global warming limit, will account for about 26% in 2035. Renewable energy’s share of electricity generation reaches 23% in 2035 in the Current Policy scenario, and 46% in the 450 Scenario. For its part, Greenpeace in a 2010 report estimates that renewable energy resources will account for 39% of global energy consumption by 2030 and 80% in 2050.34 In this projection, almost the entire global electricity supply would come from renewable sources in 2050, and transport, including shipping and aviation, would be among the last sectors to become fossil-fuel free. annual decline rates for crude oil are generate base load electricity.38 These However, enabling such a high share of about 6.4%.35 At that rate, crude oil factors make coal among the most intermittent renewable power requires production at a given site could be suitable sources for meeting high large-scale storage. reduced to about 50% in 10 years and demand across a variety of regions to 25% in 22 years, although decline in the near-term. However, coal is the Potential storage solutions are rates often increase with time.36 most polluting of fossil fuels and emits discussed in the section, Advanced the most GHG, and could contaminate Energy Storage Solutions Will Be a Many existing oil reserves are located water with toxic by-products such as Key Enabler for the Further Growth of in politically unstable regions, so coal ash. These traits render coal an Renewable Energy Sources, later in the producers are increasingly developing unappealing source with respect to report. harder-to-extract, higher-cost supplies. environmental sustainability. Recent Tar sands extraction, deep-water regulatory trends and abundant natural Crude oil. Crude oil is the world’s most drilling and pre-salt formations all gas supplies, e.g. in the US, may well important source of liquid fuel. It has present environmental and regulatory ease demand for coal as a low-cost, a high energy density and its refined issues that must be addressed, high-volume electricity provider. Coal products like gasoline and diesel are and that add cost to extraction. will increasingly be substituted by vital fuel for mobility applications. Increasingly heavier and sourer, i.e. natural gas in countries with significant Although many countries do not have more sulphur-rich, oil will require more natural gas reservoirs. Countries large domestic crude oil supplies, its complex refineries for processing like India, without those resource high energy density makes transporting into gasoline and diesel. Moreover, alternatives, will rely largely on coal it cost-effective. Since most countries geopolitical and regional security as a primary energy source in the already have built-in infrastructure that issues continue to raise concerns foreseeable future. relies on crude oil, especially within about crude oil, prompting countries the transportation sector, worldwide to look at expanding their energy Current attempts are under way demand will continue to climb, sources. In North America, significant to mitigate coal’s environmental especially in China and the rest of the unconventional oil reserves will change impact through carbon capture developing world. the energy landscape drastically as and storage (CCS) technologies. it is suggested that the US will be While CCS technologies could Despite a continued dominance of the independent of oil imports.37 theoretically reduce CO emissions energy mix in the near-term, crude 2 significantly, most current strategies oil faces emerging challenges, which Coal. Coal is currently the most are expensive39. Public perception support trends to diversify away from important energy source for poses another challenge. The German it as a primary fuel source. For a start, electricity generation, accounting government recently announced that existing conventional low-cost sources for approximately 36.7% of global the storage of CO in underground of oil are maturing. The IEA estimates 2 electricity generation due its caverns is doomed to fail, due to that non-OPEC (Organization of the abundance, low cost and ability to popular resistance. Furthermore, the Petroleum Exporting Countries) implied

14 Energy Harnessing: New Solutions for Sustainability and Growing Demand combination of coal combustion with Despite the environmental challenges Oversupply of shale gas has driven CCS technologies increases the LCOE and the new technologies aimed at down the price of US natural of this energy source. diversifying away from coal, demand gas, making it an extremely cost- for this source will continue to grow, competitive source of fuel. With Coal can be converted to liquid fuel especially in emerging countries. From abundant gas supplies in the US, some via direct or indirect liquefaction 2010 to 2035, coal use in OECD companies are considering liquefying processes. Both processes enable the countries will increase only slightly gas for export. Oil and gas companies creation of a variety of coal-to-liquid (7.4%), but in non-OECD countries have been studying liquefied natural (CTL) products, including: petroleum, will increase by 53.4%, led almost gas (LNG) projects to compete with diesel, synthetic waxes, lubricants, exclusively by growth in Asia, especially natural gas producers such as Russia, chemical feedstock, methanol and China.40 Qatar, Norway, Indonesia, Malaysia dimethyl ether (DME). CTL products and Algeria. can present economically viable Natural gas. Natural gas is used for alternatives for countries that are industrial, residential and commercial The current development and heavily dependent on oil imports applications, electricity generation and consequences of shale-gas exploration and have abundant coal reserves. increasingly, for transport. Compared are described in the section, Shale Gas According to a study in May 2011 to coal, natural gas emits almost 50% Has and Will Continue to Shape Energy by the Massachusetts Institute of less GHG, making it a relatively more Markets, later in this chapter. Technology (MIT) Joint Program on the attractive source of electricity in terms Science and Policy of Global Change, of carbon footprint. Additionally, natural South Asia and Brazil are experiencing in the absence of environmental policy, gas-fired plants have the ability to run greater use of natural gas in the form CTL fuels could provide up to 33.3% of intermittently, which enables them to of compressed natural gas (CNG) as global liquid fuel supply by 2050. In this better supplement renewable energy transportation fuel. Some commercial scenario, CTL products could become sources, such as wind and solar. fleets (e.g. waste management) in cost-effective in the US, China, India the US already have converted diesel and Africa, if the price of crude oil New advances in horizontal drilling trucks to use natural gas. Companies reaches or exceeds US$ 91 per barrel. and hydraulic fracturing – the process like Clean Energy Fuels have been One drawback of CTL products is that of extracting natural gas from hard promoting natural gas as an alternative they have a significantly higher carbon rock – enable the exploitation of large to imported oil-derived fuels. footprint than does crude oil. CCS reserves of shale gas in North America. technology used in conjunction with This new extraction technology has Natural gas can also be used as an CTL production could substantially also boosted the potential for natural affordable feedstock for conversion to lower the carbon footprint. gas to meet growing electricity demand synthetic crude oil directly or indirectly with a meaningfully reduced carbon via synthesis gas, a fuel gas mixture. footprint. These gas-to-liquid (GTL) technologies have advantages over crude oil and CTL that may help to move this source forward as a contributor to a more diversified energy mix. First, it allows gas producers to convert a portion of their gaseous waste (e.g. flare gas) into liquid fuel, which can be shipped worldwide using the petroleum-shipping infrastructure. Second, it may allow for the extraction of “stranded” natural gas that cannot currently be extracted because of the prohibitive cost of extraction and/ or transportation. Third, GTL plants generally make cleaner products than those using crude oil or the CTL process; these fuels are free from sulphur, nitrogen and aromatics. They also have a higher octane number than CTL products, which means that they are higher-quality fuels and will produce significantly less pollutants during combustion.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 15 Technologies that enable the Nuclear. The potential is enormous The question of final disposal of nuclear conversions of natural gas to fuel within for nuclear production as a low- waste also remains unanswered. the existing energy infrastructure are carbon energy source. The availability Most countries that produce nuclear already in place across the world. of uranium also is favourable – the energy have final disposal facilities for Compact GTL, a British company, International Atomic Energy Agency low- and intermediate-level waste but has worked with Petrobras, a semi- (IAEA) estimates that conventional none has a complete system to store public Brazilian multinational energy uranium resources at a cost of less high-level nuclear waste permanently. corporation, to create the type of than US$ 130/kg are available for the Many countries are investing heavily in modular GTL technology that will next 90 years, calculated at a 2009 the exploration of feasible concepts, enable its products to be incorporated rate of consumption.41 Third Generation techniques and locations to safely into existing oil and gas infrastructure Nuclear, spent-fuel recycling and fast- store radioactive waste. The issue and operations. It uses natural gas breeding uranium-238 into new fissile of safe, secure long-term storage is that would otherwise be burned off material, could extend already-mined rather complex. The waste needs to as a feedstock and turns it into high- uranium resources for centuries and be isolated from the biosphere for at value synthetic crude oil without the dramatically reduce the volume and least 100,000 years. Deep geological same emissions or supply issues as long-term toxicity of wastes.42 disposal can provide a safe means, traditional crude oil. If this technology but which type of geological formation can be expanded and commercialized, But concerns about safety, waste is suitable? Furthermore, it is argued this affordable feedstock could address disposal, high up-front capital costs whether the waste should be stored demand for transportation fuels in the and insurance have slowed demand or re-used. One technical solution to existing infrastructure of countries like for investment in large nuclear plants. cut the amount of high-level nuclear the US. It also could enhance energy The recent Fukushima accident in waste could be neutron irradiation security by alleviating the reliance of Japan has amplified scepticism in to transform long-lived radionuclides many countries on foreign oil and many countries. As a result of public into short-living ones. It remains to be creating a highly transportable source perception, Germany and Switzerland seen if this technique will mature and with export potential. Moreover, as the will phase out all their nuclear energy; if it will be suitable to reduce the large price of crude oil climbs and natural in Italy, a referendum rejected restarting amounts of radioactive waste. gas supplies continue to emerge, a nuclear power programme. Worries investment in these technologies about safety also are a trial for nuclear- will become more attractive and will dependent France, which generated enhance the potential of natural gas to 76.3% of its electricity from nuclear become a major fuel source in coming sources in 2010.43 decades.

16 Energy Harnessing: New Solutions for Sustainability and Growing Demand Security and proliferation fears are in recent years, solar capacity has total wind capacity.48 New turbine other barriers to nuclear development. grown dramatically. However, other technologies are enabling more efficient Some countries are seen as posing costs remain – associated with the wind capture and innovations are under risks in terms of political and economic installation and efficient grid integration way to allow for residential-scale wind instability, thereby raising concerns of this type of energy (e.g., permits, turbines to supplement large-scale about their having access to nuclear installation costs and materials). wind farms, but these, as well as even materials and the technology to enrich higher-potential off-shore farms, still uranium that could be used for military The growth of solar PV might be have high installation costs that have purposes. affected by inexpensive shale gas in the slowed production. US. At the same time, however, many While some countries are reviewing parts of the world show favourable As scale and economics continue to their nuclear programmes, it is unlikely irradiation conditions where the quick drive demand, wind will likely expand that the expansion of this industry cost- reduction of PV is likely to lead as a component of the electricity will completely cease. Between 2012 to competitiveness in the short term.45 portfolio, but will struggle to achieve a and 2020, total worldwide nuclear- Also, as the industry continues to cut significant share of the world’s energy generating capacity is still expected to the costs of installation and the total mix. Grid-scale storage and integration grow approximately 28%, largely driven system, PV will reach cost-levels that are required to enable wind to meet by countries like China, Russia, India are financially viable for final consumers its potential as a low-emission source. and South Korea, which are moving to displace some electricity purchased Wind also has potential for distributed forward cautiously despite the potential from the grid with power generated in generation via micro-turbines and safety risks.44 their own PV systems. The better the mobile solutions. On this scale, match between load profile and solar wind could be a viable solution for Fusion power, power generated irradiation, the higher will be the share populations in emerging countries with through nuclear fusion, could of self-consumed output and the better limited infrastructure and access to provide another energy source in the will be the business case.46 electricity. future. This technology is still very experimental and many technical While solar is not expected in the problems still need to be solved. Costs near term to take a large share of for development also will be high. the energy portfolio due to its low China, the EU, India, Japan, South capacity, it is projected to continue to Korea, Russia and the US are mutually grow in the foreseeable future. Lower developing the technology and are costs, government incentives and currently constructing the International subsidies, and new, more efficient PV Thermonuclear Experimental Reactor materials (such as organics, ceramics (ITER) in southern France. The goal of and dye-sensitized cells) will make the ITER project will be to explore if, solar an attractive energy source to and how, it would be physically and meet growing demand, especially in technically possible to use nuclear households and off-grid communities. fusion to produce power. Nevertheless, organic PVs are not as efficient as their conventional Solar. Solar power is a promising, counterparts and hence, further carbon-neutral energy source. Solar research and development is needed. power is produced in two ways: concentrating solar power (CSP) and Wind. Wind power has enormous photovoltaic. CSP utilizes focused potential for electricity generation,47 sunlight to generate heat and steam and power generated using wind that powers a standard turbine. When technology is often competitive coupled with storage solutions, CSP with conventional energy sources. may be able to provide dispatchable However, wind energy can vary greatly, energy, for example, energy that can depending on volatile environmental be stored for a several hours and called conditions, which can create supply upon when needed. Solar PV systems and demand problems. Additionally, convert sunlight directly into electricity. as with solar energy, wind faces challenges such as high installation Starting in the early 2000s, demand costs, intermittence and challenges for PV systems grew significantly when connecting to the electrical grid. Germany and later Spain instituted Despite these issues, from 1998 significant FiTs for solar-generated to 2010, cumulative installed wind electricity. As considerable poly-silicon capacity increased by a compound capacity has been added (largely annual growth rate (CAGR) of 28.1%, in China) to serve such demand, from 10.2 GW to 199.5 GW, led by PV module prices have fallen by China and the US, which represent 75%. As these costs have declined 22.4% and 20.2%, respectively, of

Energy Harnessing: New Solutions for Sustainability and Growing Demand 17 Biomass/biofuels. Biofuels, which Key success criteria are essential organism debates as biofuel include bioethanol, biodiesel and other to allow a successful development production currently relies mainly liquids from biomass, are created of biomass and biorefineries. These on first-generation biomass. To from biological feedstock such as criteria include: enhance positive public perception, crops, woody biomass or algae. –– Biomass. The food-versus-fuel it will be crucial to move from Many of these biomass-to-liquid tension has received a lot of food crops to second- and third- (BTL) fuels are created through a attention. For example, one statistic generation biomass, and to educate process of gasification that produces notes that in 2009, the amount the public on this development. syngas. Once biomass is gasified, the of corn required for ethanol to –– Profitability. While first-generation conversion to liquid fuels shares the fill the fuel tank of a sport-utility biofuels production is largely same processing steps as CTL and vehicle could feed two people in mature and profitable, second- GTL technologies.49 a developing country for a year.53 generation biofuels lack profitability. However, production of food While subsidies can, and should, Demand for biofuels, created in AND fuel is possible. While the be an initial lever for the industry, biorefineries via biochemical or food versus fuel debate is vivid in the long term boosting plant thermochemical processing, is driven and emotional, new technologies productivity and cheap feedstock largely by the desire to increase energy and new available feedstock supply should be crucial to make security and reduce GHG emissions. offer the opportunity to produce a profitable business case. Plant Especially for countries with a wide bio-based products without productivity can be increased by availability of natural feedstock and disturbing the supply of food. New various mechanisms: minimal access to crude oil deposits, technologies increasingly allow –– Greater use of valuable by- this fuel source holds promise. In the use of agricultural, forest and products integrated biorefineries, the possibility household garbage as feedstock for –– Metabolic engineering, exists to generate co-product biorefineries. Algae can potentially which allows development of biochemicals and generate electricity provide almost unlimited biomass highly efficient microbes and from heat produced in the conversion supply of various types in the future. enzymes; with synthetic biology, process. According to data from the US enzymes and pathways can DOE, the oil yield of algae could now be created from which Biofuels have the potential to replace be up to 6,500 gallons per acre even non-natural chemicals fossil fuels for transportation, including per year, while palm oil only offers can be derived, offering huge in aviation; many countries already 635 gallons and jatropha only 202 opportunities for biorefineries in have biofuel-blending programmes gallons per acre per year.54 the future that require a certain percentage of –– Public perception. This varies –– Reduction of costs of enzymes their fuels to be blended with biofuels. largely by region. For example, in –– Decreasing costs for the Estimates show the supply of gasoline Brazil, which has a mature biofuels development of new bio-based substitutes such as ethanol, which is industry and the largest flex- processes from scratch, which popular in Brazil, increasing from 100 fuel vehicle fleet globally, public can be up to several hundred billion litres in 2010 to 190 billion litres perception is rather positive. In million US dollars in 2020 and 300 billion litres in 2030.50 Europe, on the other hand, public In what is considered a conservative perception is dominated by the food estimate, biodiesel will grow from 50 versus fuel and genetically modified billion litres in 2010 to 100 billion litres in 2020 and 300 billion litres in 2030.51 The US Renewable Fuel Standard 2 (RFS2) mandates that 137 billion litres of biofuels be consumed in 2022.

Not only biomass converted into biofuels is used. Unconverted biomass is also used (e.g. for power generation) in combined heat and power (CHP) application or in pure biomass-firing plants. According to EU projections, the use of biomass and waste in power generation will more than double until 2030.52

18 Energy Harnessing: New Solutions for Sustainability and Growing Demand –– Collaboration. The fragmented further expansion of this renewable to supply electricity to more than 52.5 nature of the value network energy source will be limited.55 million people in 24 countries.58 seems highly challenging, if nearly impossible, for biorefineries to Water in reservoirs is used to One way to harness geothermal develop a fully self-integrated store energy and can be used to energy in other regions is to establish business model. Downstream dispatch electricity when demand enhanced geothermal systems (EGSs) and upstream players require a is high and kept in the reservoir that would drill deeper into the ground collective approach to achieve when it is low. In 2011, the US had to mimic the design of natural hot- industry progress. Leaders of approximately 78,000 megawatts water and steam reservoirs. Foro different parts of the value network (MW) of conventional hydro-generating Energy, a US-based company, is need to engage with one another to capacity, which is equivalent to about working to develop this technology. It foster innovation, reduce costs and 80 nuclear power plants.56 However, has created a transformational drilling increase the competitiveness of bio- dams can affect the environment platform enabled by technologies based products. – by disrupting or displacing large for transmitting high power lasers –– Policy framework. As in the case ecosystems, hurting fish migration and over long distances and focuses on of most innovative technologies, killing animals trying to move downriver. step-change drilling performance in large-scale commercialization Additionally, their plant operations may ultra-hard rocks to enable economical is hampered by funding-related affect water quality by churning up geothermal energy production. If challenges. Enhanced access metal deposits and changing water technology can be developed that to capital could bring benefits, temperatures and oxygen levels. would enable this to be a cost-effective particularly to small and medium- solution, the potential is massive. sized enterprises. Incentives to Geothermal. Geothermal energy According to The Future of Geothermal farmers, such as FiTs, should be captures natural sub-surface heat Energy, an MIT report in 2007, rethought. Subsidies should be and uses it to generate electricity. geothermal energy available in the US linked to skills and innovation, Unlike many renewables, this type in rocks from two to six miles (three and should be limited over time of energy is available at a constant to ten kilometres) under the earth’s to support the development of rate, which minimizes some of the surface is nearly 140,000 times greater profitable business cases. Second- storage concerns associated with than the country’s annual energy and third-generation biomass- other renewables. Regions located consumption. Even conservative based biorefineries in particular will close to rift zones or harbouring active estimates suggest that EGS could need public funding and a suitable volcanoes have a huge potential for harness 2% of that energy, which policy framework to ease initial risks capturing this type of energy. This could supply all of America’s electricity, and allow stakeholders to develop includes areas of the Pacific and illustrating the massive potential if this profitable solutions. western US, as well as Iceland, where can be implemented broadly.59 geothermal power stations produce Hydropower. Hydroelectric power about 25% of the country’s electricity.57 Only a few EGS plants exist today, but produces relatively inexpensive According to the Geothermal Energy utility companies across Europe, the electricity and has one of the lowest Association in the US, conventional US and Australia have been among rates of GHG emissions of any energy geothermal power stations have a the first to invest in this technology. source. However, since the most worldwide capacity of 10.7 GW and The biggest barrier at the moment is economical sites for creating dams and can generate 67,250 gigawatt-hours cost – electricity from EGS currently plants have already been developed, (GWh) of power in a year, or enough costs around 19 US cents/kWh, which

Energy Harnessing: New Solutions for Sustainability and Growing Demand 19 is approximately 9 US cents/kWh Figure 8: Characteristics of Energy Sources more expensive than conventional geothermal power, making it Source Pros Cons uncompetitive with more common Crude oil Proven, effective High CO2 emissions electricity sources.60 As technology for transportation fuel Found in limited areas drilling so deep into the earth’s core Basis of many products, Supply may be exhausted becomes cheaper, investment in this from prescription drugs to before natural gas / coal area will become more attractive. plastics resources Economical to produce Possible environmental Ocean tidal and wave. This refers to Easy to transport impact from drilling / energy that can be generated from the transporting changing tides and waves in the ocean – a promising source for the future. As Coal Abundant supply Highest greenhouse gas of now, however, challenges with how Currently inexpensive to (GHG) intensity of all fossil to store and transport this energy in an extract resources (CO2eq/kWh) and efficient manner have prohibited it from Reliable and capable of various pollutants becoming a viable source. Additionally, generating large amounts of High environmental in the case of tidal plants, only certain power impact from mining and sites across the globe, particularly in burning, although improved France, Canada and Russia, would technology is being have the potential to produce this developed type of energy economically. But Natural gas Widely available, new High transportation costs even in those regions, construction unconventional resources Lack of infrastructure makes costs would need to be lowered and offer opportunities gas resources unavailable in output efficiency increased for tidal Cleanest-burning fossil fuel some areas energy plants to become a worthwhile Currently cheap prices Burns cleanly, low GHG investment. Glasgow-headquartered intensity (CO2eq/kWh) ScottishPower Renewables is leading Pipelines impact ecosystems the way by investigating a 50-MW Nuclear No direct greenhouse gases Higher capital costs due 61 wave energy site and establishing the or C02 emissions to safety, emergency, world’s first commercial tidal energy Reserves are abundant containment, radioactive project in the United Kingdom, which Re-fuelled yearly (unlike coal waste and storage systems will provide up to 26 GWh of energy plants that need trainloads of Problem of long-term to the electrical grid per year, enough coal every day) storage of radioactive waste to power 5,000 households in that Negative public perception in 62 country. parts of the world Safety issue Summary of sources. The energy value network requires multiple Solar Non-polluting High initial investment, not sources in response to demand, and Most abundant energy yet cost-competitive these sources are interdependent in source available Supplemental energy might terms of usage and cost. As the price Systems last 15–30 years be needed in low sunlight of petroleum increases, renewable areas sources become more competitive and Limited availability of poly- attract investment; new innovations silicon for panels and discoveries, such as the extraction Energy-intense and polluting of shale gas in the US, have the manufacturing process; potential to disrupt markets. Figure 8 novel technology has the provides an overview of each source, potential to improve this including its benefits and drawbacks. Wind No emissions Output proportional to wind Affordable speed Source: BP Statistical Review of World Limited disruption of Not feasible for all Energy 2011, 2011, BP; The Limits ecosystems geographic locations of Energy Storage Technology, web Relatively high output High initial investment and edition, 2009 Bulletin of the Atomic Offshore facilities circumvent significant maintenance Scientists; Deloitte Touche Tohmatsu land-use constraints costs Limited Global Manufacturing Industry group analysis

20 Energy Harnessing: New Solutions for Sustainability and Growing Demand Biomass/ Significant supply Intense fuel versus food biofuels Often fewer emissions than debate for first-generation fossil fuel equivalents biomass/ biofuels Vehicle engines easily Life-cycle emissions not yet converted to run on fully understood biomass-derived fuels Hydropower No emissions Environmental impact by Reliable changing the environment in Capable of generating large the dam area amounts of power Hydroelectric dams are Output can be regulated to expensive to build meet demand Dams may be affected by drought Potential for floods Geothermal Minimal environmental Easy to access geothermal impact fields found in few areas Efficient around the world Power plants have low Expensive start-up costs emissions Low cost after the initial investment Ocean tidal and Minimal environmental Expensive wave impact Challenges with storage and No emissions transport of the energy High construction costs make this viable in only certain regions

Energy Sources Summary –– Technological advances in the exploration of unconventional –– Oil, coal and natural gas are oil resources are increasing the currently the dominant fuels; amount of technical recoverable oil however, the energy mix will reserves. diversify to meet growing energy –– The Fukushima accident has demand increased scepticism in many –– Crude oil is the most important countries about nuclear technology. resource for liquid fuels because Germany and Switzerland, for of its high energy density and example, have decided to phase the use of refined products, out nuclear power; however, other such as gasoline and diesel, countries, such as China, Russia, as transportation fuels. Due to India and South Korea, plan to geopolitical risk, declining reserves continue developing nuclear and increasingly heavier and sourer capacity. crude, producers are developing –– Solar- and wind-power facilities will harder-to-extract supplies and using continue to expand their shares of more complex refining processes, global energy production and will which increases costs. increase their efficiency. –– Globally, coal is the largest source –– Biofuels have the potential to partly of electricity generation. It is replace fossil fuels in transportation, abundant, low-cost and able to but face major drawbacks. generate base load electricity. It also emits more GHGs than any other fuel source. –– The development of hydraulic fracturing has significantly expanded recoverable natural gas reserves and reduced prices, especially in the US. Relative to coal-fired power plants, GHG emissions by natural gas-fired power plants is about 50% lower.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 21 Shale Gas Has and Will Continue to Shape Energy Markets

Shale gas is a hot topic and has the potential to change the energy industry not only in the short- to mid-term but also the long-term, as current estimates suggest that US shale-gas reserves might last for more than 100 years. Numerous articles in the popular press have described the current boom of shale gas in the US, with decreasing natural gas prices and decreasing energy imports.

The following chapter gives an overview of current and future developments in shale gas in the US and the world, and describes the most important challenges facing production.

United States. Currently the US is gas development will, without doubt, The industry ecosystem is highly the main producer of shale gas. US boost the US economy and reinforce complex; it includes independent production from shale has increased economic growth. Especially in states and major global producers drilling to 982 million barrels of oil equivalent with large resource endowments, for gas, mid-stream players investing (mmboe) in 2010, from 312 mmboe in a whole new industry is rising and in pipeline and gas processing 2007; thereof ~78% natural gas.63 The thousands of jobs are being generated. infrastructure, as well as gas exporters two main reasons for this remarkable investing in gas liquefaction facilities. development are: well characterized A resurrection of the US chemicals Sabine Pass Liquefaction is the first basins and technically recoverable industry also is realistic, as liquid-rich terminal to receive approval from the shale-gas reserves of 593 trillion cubic shale gas contains not only methane US Department of Energy (DOE) to feet; and technical advances such but also feedstock for the chemicals export domestic LNG not only to Free as horizontal drilling and hydraulic industry (mainly ethane, propane, Trade Agreement countries but also fracturing processes. Gas producers butane and condensate) at low prices. globally. As of 16 July 2012, eight have managed to drive impressive Furthermore, export of LNG and lower other terminals were under review by 67 levels of efficiency and have cut costs dependency on oil will contribute the DOE for approval. of drilling and completion by 50% towards shrinking the US trade deficit in 2009, with further reductions in – which has significant macroeconomic Furthermore, chemicals companies the following years.64 In the face of implications. Due to promising potential are taking advantage of the cheap this unprecedented domestic gas profits for oil and gas companies, feedstock available, while utility production, a warm winter in the US it seems possible that LNG will be companies are currently operating and the global economic crisis, gas exported on a large scale. However, gas plants at higher rates of capacity. prices have significantly dropped (since several economic and environmental Last but not least, potential new 2007) and have reached about US$ interest groups want to use shale gas uses of natural gas, such as CNG for 2-3/mmbtu (million Btu) currently. domestically to become independent fuelling cars and trucks, need to be Furthermore, net imports of natural gas of energy imports and to reduce considered. Analysing the industry into the US fell by 25% in 2011, while the possible negative impact on the and taking the complexity of the gas exports are rising.65 environment. industry into account, A.T. Kearney has developed several scenarios showing a The US will continue to race ahead in This glance at a bright future natural gas price of US$ 4-8 by 2020, terms of developing shale gas, which ahead should not obscure several with a favourite scenario showing a 68 might trigger up to US$ 400 billion challenges that might interfere with natural gas price of US$ 6-7. in downstream investments over the the development of shale gas in the next five years. According to the US US. If low prices of natural gas persist Different investment cycles of the Energy Information Administration, the in the US, shale gas producers, downstream, midstream and upstream country will become a net exporter of especially independent ones, might segments pose a challenge for natural gas by around 2022.66 This will go out of business, as they will not the shale-gas market. On the one have a tremendous impact on the US recover their costs for developing wells hand, oil and gas companies, with economy, especially the chemicals and extracting shale. At prices below short investment cycles, produce and energy industries, the US trade US$ 4/mmbtu only wells containing large amounts of shale gas and deficit and energy security. Shale- significant proportion of liquids are invest to further increase production profitable. volume, leading to low natural gas

22 Energy Harnessing: New Solutions for Sustainability and Growing Demand prices. Midstream and upstream are not the only factor influencing the several European countries. In France players, on the other hand, have strategic investment choices of utility and Bulgaria, authorities still ban drilling long investment cycles, taking the companies. Other factors to consider for shale gas using the widely used current price of feedstock and other include long-term contracts with coal hydraulic fracturing or fracking method. factors into account. For instance, suppliers, environmental regulations on Bulgaria revoked the permit given in utility companies can consume coal and the flexibility of gas to cope January 2013 to Chevron to drill for more natural gas and increase the with intermittent demand. It remains shale gas after street protests, claiming capacity utilization of their gas-fired to be seen if gas will significantly that shale gas drilling can cause earth power plants. However, this higher substitute coal as the major source of tremors and poison underground consumption is limited to total capacity electricity in the mid-term. water.69 available. A further increase causes a significant need for investment in new Global. Other countries with major In Poland it is not yet clear if the gas-fired power plants. The same is shale-gas reserves include China, country holds the reserves estimated. true for other downstream players such Poland, South Africa, Argentina and ExxonMobil stopped drilling in Poland as the chemicals industry, which will Mexico (see Figure 9). However, those after unsatisfactory flow rates, although need to invest in new cracker capacity countries lag behind in developing their other companies are still in the race. to benefit from the availability of natural reserves and doubts are increasing As in China, a critical issue seems to gas liquids. These different investment about their starting significant be difficult geological formation, which cycles, as well as the volume of production of shale gas in the near might require new technologies to investments and associated risk, are future. China, for example, offers produce shale gas efficiently. key reasons why it is difficult to reach great potential and has added shale equilibrium in natural gas supply and development to its current five-year Europe is currently preparing for an demand in the short- to mid-term. plan. But the country faces significant expected increase of LNG imports from challenges and it is unclear how the US and Qatar. In Rotterdam, a new The consumers of shale gas and successful production of shale gas will terminal for LNG imports called GATE in particular the utility companies, be overall. (gas access to Europe) was opened have to consider the future price for in 2011. Even without significant natural gas. If prices reach US$ 6-7, An in-depth look at shale gas and other own-production capacities, Europe investments in gas-fired capacity is unconventional fossil resources can be can increase its energy security by economically favourable. A potential seen in the chapter, The Future Energy diversifying its supplier base. future carbon tax makes gas-fired Landscape: Europe and China. capacity a good investment, compared to coal, at even higher prices. Because In Europe, relatively few activities in of many wildcards – such as the global shale gas have been started, apart economy, volatile oil prices, energy from significant reserves in France, and environmental policies, global and offshore in the United Kingdom. gas supply and future technological Major challenges are difficult geological developments – that might drive formations to produce the gas and a natural gas prices up or down, negative public perception (see Figure utility companies are still hesitating 10). Environmental concerns related to heavily invest in new gas-fired to the chemicals used to fracture the power plants. Forecast gas prices rock are preventing development in

Energy Harnessing: New Solutions for Sustainability and Growing Demand 23 Figure 9: Estimation of Technically Recoverable Global Shale-Gas Resources (trillion cubic feet)

Source: US Energy Information Administration

Environment. The environmental The International Energy Agency As a potentially cheap source of assessment of shale gas is rather in a recent report reviewed the energy, shale gas might threaten complex and the environmental environmental and social impact of future investments in renewable concerns need to be elaborated the production of unconventional gas, energies with “front heavy” economics, carefully. The increasing use of shale including the potential for air pollution, leading to increased GHG emission gas, substituting coal, can be benefi cial contamination of groundwater as well overall. On the other hand, due to its due to the signifi cantly lower GHG as water and land use, and implications fl exibility, natural gas can supplement emissions from burning of natural for local communities.73 The report, the transformation of the energy gas compared to burning of coal. titled Golden Rules for a Golden Age landscape. Gas-fi red power plants However, recent studies published of Gas, elaborates rules to address are very fl exible and could provide by the European Commission show those infl uences: integrate engagement a suitable backup to cope with that extracting shale gas imposes with local communities, isolate wells, intermittent power supply from solar a larger environmental impact than prevent leaks and minimize emissions, and wind sources. It will be important conventional gas production.70,71 for example. New technologies for to fi nd the right balance to gain European shale gas causes more shale-gas production that consume maximum benefi t for the climate. GHG emissions than conventional less water and chemicals need to be natural gas produced in Europe. The developed and can address some of additional emissions mostly derive the environmental concerns. in the well completion phase, when the fracturing fl uid, together with the methane released, is brought back to the surface. On the other hand, if managed well, European shale gas causes fewer emissions than natural gas from outside the EU, imported via LNG terminals or pipelines, mainly because of emissions from liquefaction, long-distance gas transport and regasifi cation.72

24 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 10: Challenges for Development of Shale-Gas Production

Fuel for transportation. Natural gas While large-scale adoption of CNG – Increasing production of shale gas has the potential to become a major or LNG requires large investment in will signifi cantly alter the energy transportation fuel as CNG, LNG, infrastructure and the conversion of landscape at a global level, and at absorbed natural gas, or as a liquid all or part of the vehicle fl eet, GTL a regional level in countries having fuel using GTL conversion technology. technology allows natural gas to technically recoverable shale-gas One current impediment, however, is fi t into the existing transportation reserves. the paucity of distribution infrastructure infrastructure. In the US, the most – Natural gas has the potential to relative to gasoline. As a result, early immediate effect of large-scale GTL substitute coal as a source of adopters of CNG technology have technology would be the development electricity generation. However, included city transportation systems of big domestic fuel sources that signifi cant hurdles remain, so when or delivery fl eets that can create their would ease the country’s dependence and if this will happen is unclear. own centralized distribution centres. on foreign oil. However, GTL’s capital – Low gas prices and different For example, Frito-Lay, a division of costs are signifi cantly higher than that investment cycles for downstream, PepsiCo, which operates the seventh- for an equivalent petroleum refi nery. midstream and upstream players largest private delivery fl eet in the US, GTL’s success therefore requires pose a challenge for the shale-gas announced that it would convert the hedging of the current natural gas- market in the US. majority of its fl eet to CNG power. crude oil spread for the next 20 years, – China has large shale-gas reserves, Eventually, the company plans to at a differential that would justify the but faces signifi cant challenges in convert part of its long-haul fl eet to capital. As more such deals are done, exploitation. LNG power. Estimates indicate that the capital cost could decline due to – In Europe, public perception and the CNG-powered trucks will save learning-curve effects. Nevertheless, diffi cult geological formations are approximately US$ 2.50 per gallon due to the geographic concentration critical issues for development of a compared to current diesel prices and of shale-gas reserves, cost-effective shale-gas industry. will reduce GHG emissions by 23%. GTL technology could signifi cantly – With political and economic will, Similarly in India, the CNG-powered revolutionize the global oil trade. natural gas can play an important vehicle market is experiencing strong role in the future transportation growth and is helping to drive the Shale Gas Summary landscape. expected boost of the country’s CNG – The key drivers for the development market’s CAGR of approximately 22% of shale gas are the availability from 2011 through 2014 to reach of the gas, especially in the US, approximately Rs 30 billion (US$ 572.5 energy security and potentially million). stricter policies for GHG emissions in the future.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 25 Renewable Energies Will Be a only selected aspects to illustrate The pure consideration of current Key Enabler to Transform the the main ways that renewables can market rates is a narrow perspective, Current Energy Landscape transform the energy landscape. as true economic costs are not always included in the price. Willingness exists Renewable energies for electricity, heat Carbon intensity of energy provision. therefore to support renewables with and transportation are not only rapidly Renewables are generally regarded policy support such as subsidies. This gaining market share in end-user as “carbon free” or “low carbon”. support has resulted in a huge increase energy consumption, but they are also However, a full life-cycle analysis is of renewable energy production. spurring a need for, or bringing about, necessary, including the supply chain, The costs of supportive policies and paradigm shifts in additional aspects to judge a realistic carbon footprint of subsidy schemes have been allocated of today’s Energy Harnessing value renewables. Some renewables hold to consumers or tax payers. chain. This does not happen without this promise (e.g. wind and PV) while friction. Every structural change has others (e.g. biofuels) greatly depend on However, some technologies and 74 winners and losers. As the penetration the particular resource used. By and applications are providing energy level of renewable energies becomes large, it is true that renewables are “low at, or below, “market” rates and can more than marginal and adoption rates carbon”, as emissions from fossil fuels substitute conventional technologies in accelerate, this friction becomes more are often higher in a life-cycle analysis certain applications without regulatory apparent. At the same time, renewable than their carbon content suggests. or fi nancial support. With the right energies are mostly new technologies business model, e.g. leasing solar and need to further reduce costs and Growth of renewables thus affects panels instead of buying them, many integrate with the energy market. carbon-trading regimes such as the renewable energy sources are cost- EU Emission Trading System (EU ETS). competitive from an end-consumer Key areas in which renewables Also, due to the faster-than-expected perspective even in developed transform the current energy growth of renewables, fossil power countries. Furthermore, renewable landscape: generation capacities had a lot less energy sources are providing a – Carbon intensity of energy provision load hours than projected. This leads backstop price for energy in many – Overall cost of supplying energy to to a slackening of demand for emission markets and are depressing prices, consumers allowances and a dramatic decline in e.g. on power wholesale markets, as – Working and dynamics of their price. The low carbon price has they provide energy almost for free established market mechanisms for proved to be little incentive in reducing once installed. trading energy carbon emissions, thus leading some – Complexities and technical experts to call for an urgent adjustment In many emerging countries, where 75 solutions needed in grids and of the current scheme. The price for a signifi cant part of the population networks emission allowances was expected to lives in rural areas unconnected to the – Degree of distribution be between € 25 and 30 (US$ 34 and national electricity grid, renewables 40) per tonne of carbon dioxide (t CO can offer energy at lower cost than (decentralization) of power 2), generation and hence signifi cantly higher than the the currently used diesel generators. actual € 5 /t CO in August 2013.76 According to a study of the European – Composition and type of energy 2 player The parallel existence of carbon and Photovoltaic Industry Association – Availability of capital to fi nance renewable energy policies are seen as (EPIA), solar panels already compete energy investment a way to reduce emissions, and the with diesel generators, provided – Level of involvement and impact higher share of renewable energies is the latter’s fuel is not subsidized, in of political decision-making on the an objective in itself. countries with a high solar irradiation 77 energy value chain (“sunbelt countries”). Instead of using – Acceptance by, and involvement of, Cost of supplying energy to diesel generation sets throughout the citizens in the Energy Harnessing consumers. Most renewable energy whole day, solar panels can offer a value chain technologies generate only at cost cheap alternative during the day, while above the current market rates of other backup diesel generators provide As is clear, comparing renewables energy carriers. Figure 11 provides electricity during the night. Installation merely along technical properties, as an overview of LCOEs for selected of batteries to store the electricity from “alternative” sources of energy, while renewable energy technologies in the solar panels for night consumption necessary, is perhaps too narrow a Germany. The qualitative picture of is currently too expensive. Solar panels look at their impact on overall demand costs is similar in other developed can provide electricity in micro-grid and supply. Full treatment of the regions, but depends on different or off-grid solutions. Relatively high interlocking topics mentioned requires parameters that vary among countries. initial investment costs and generally a comprehensive coverage that is not low political will are hampering the feasible in this report, which covers development of solar panels in those regions.

26 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 11: Levelized Cost of Electricity of Selected Renewable Energy Technologies in Germany (€ct/kWh)78

Source: A.T. Kearney analysis

A steep cost decline of technologies Furthermore, the distributed nature generation above system-specifi c (PV but also wind power) has been and scalability of some renewable thresholds. Apart from changes to achieved and shows the potential of energy technologies, such as solar PV grid infrastructure, increased volatility a global technological value chain. and solar heating, enable consumers can be managed with increased That said, renewables are still far from to generate for self-consumption. fl exibility in established power plants fully mature, so additional downward The business case for consumers is and by adding storage. In grids with dynamics of costs can be expected driven by the alternative price at which high penetration, signifi cant progress and will foster the cost-competitiveness they can purchase energy from the was made to increase the fl exibility of renewable energy. power, heat or gas grid to which they of fossil- and nuclear-powered units; are connected. They might chose signifi cant investment and project The workings and dynamics of renewable energy self-generation also development in new storage is established market mechanisms because they can avoid grid utilization ongoing. New concepts, such as for trading energy. Power markets charges and taxes levied on traditional power-to-gas, are being used in the are feeling the impact of large installed energy carriers. fi rst industrial applications, to provide renewable capacities. The “front seasonal storage solutions. While not heavy” economics of renewable energy Complexities and technical solutions yet cost-competitive, rapid technology technologies, such as wind and solar, needed in grids and networks. The development has shown that technical pose a considerable threat to fossil variable nature of some renewable solutions can help to absorb volatile capacities, which have higher costs energy technologies (solar and wind) power sources. of operation. Because their costs are test established grid infrastructures. “sunk” once installed and returned via Power grid operators have to learn the support scheme, renewables can to handle a much more complex provide “free” power that depresses stabilization task. Experiences in the market price. As illustrated in Germany, Spain and the US show Figure 12, renewable energy sources that most operators have been already infl uence the average price of up to the challenge and thus far peak hours. In Europe peak prices are have managed to adapt managing coming down and the mid-day peak practices, monitoring and forecasting is almost history. This development capabilities to digest the increased decreases trading margins for all volatility. That said, there are physical generation technologies. limits and additional investment is needed to increase the share of volatile

Energy Harnessing: New Solutions for Sustainability and Growing Demand 27 Figure 12: Ratio of Average Prices of Peak Hours to the Annual Average of EEX Spot Prices

Source: IZES Kurzstudie. Kurzfristige Effekte der PV-Einspeisung auf den Großhandelsstrompreis, January 2012; EEX; A.T. Kearney Analysis

In summary, the following technical The degree of distribution of power To further develop self-consumption, solutions are available to address the generation. Renewables provide a several legal and economic barriers emerging imbalance: broad range of possible system size need to be mitigated. Existing barriers – Increased fl exibility of large and plant confi gurations, ranging from differ hugely among European generation large conventional power plants to countries. For example, Germany and – Additional energy storage capacities small applications for domestic use. the United Kingdom have incentive – Improved grid management While economies of scale work in schemes that actively support self- – Investment in grid strengthening / renewable energies, they are often consumption, while France and Spain expansion neglected because support schemes have signifi cant legal hurdles. – Systematic demand response provide incentives that are tailored – Increased share of dispatchable to small capacities. Political will is The market shift to more distributed distributed generation necessary to enable small and mid- energy generation is forcing utility – sized capacity additions. companies to change sales focus – Those solutions, however, face away from eroding commodity- challenges that include: Mostly due to their scalability and product markets to more sophisticated – High risk for most solutions, e.g. possible applications at small sizes, distributed-application markets. due to uncertainty of wholesale renewables are the key enablers Figure 13 provides an overview of the market prices for distributed generation close to generation portfolio dynamics. – Changing regulatory frameworks consumption and in the ownership that make strategy decisions of consumers. A study by SunEdison diffi cult and A.T. Kearney shows that self- – Multiple actors within utilities, often generation and self-consumption in not aligned internally behind one Europe is increasing and can offer strategic agenda benefi ts for the energy sector such as: – Driving energy conservation by Besides production of electricity, consumers (increasing energy renewables are used increasingly effi ciency) to generate heat e.g. using surface – Leveraging private investments geothermal heat, solar thermal or – Improving grid stability bioenergy heating systems. These – Developing innovative solutions for renewable heating sources, combined export with the impact of improved insulation, – Enabling public participation and are already negatively affecting the acceptance79 profi tability of district heat networks.

28 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 13: Power Generation Portfolio Dynamics

Source: IZES Kurzstudie. Kurzfristige Effekte der PV-Einspeisung auf den Großhandelsstrompreis, Januar 2012; EEX; A.T. Kearney Analysis

Composition and type of energy- encouraging newcomers in the energy mid-size segment dominates, as the sector players. A signifi cant infl ux of sector, including: availability of heat sinks and a limited new players can be seen, mainly due to – Developers with a renewable focus local biomass supply at acceptable the strong growth of renewable energy to develop and operate projects prices restrict plant sizes. Farmers and sources. In Germany, for example, the – Large consumers generating for forestry players own and operate small number of energy cooperatives has their own use plants, while cooperatives, municipal quadrupled in the past three years, – Financial investors engaged in utilities and industrial users dominate reaching about 600 in 2011.80 renewables and accumulating the segments greater than 500 kW/ portfolios backed by funds year. Another global indicator that utilities – Municipal utilities re-entering no longer are the sole players in the generation The availability of capital to market is the trend for green energy – Farmers diversifying their sources of fi nance energy-sector investment. cities and communities. Sustainability income Renewable energy has led to an is a key lever when advertising cities as – Residential and small commercial enormous infl ow of private capital into a desirable place to live. The European owners producing for FiT and / or the energy sector, from small investors Commission set up the “Green Capital” self-consumption to home owners. In 2010, they were award to recognize the role of local the second-largest group of investors authorities in increasing environmental Depending on the type of renewable in global clean-tech investment.81 The protection. Award-winning Stockholm energy source, different business German solar PV market mostly drove has set a target to become wholly models will be predominant in the growth in small, distributed capacity independent of fossil fuels by 2050. future. For wind power, the trend from 2009 to 2010. Funds and Other cities around the world are is towards larger wind turbines institutional investors also are making promoting their own green initiatives: and wind parks; the predominant capital available to renewables due Chicago defi ned a Climate Change business model will favour large power to the securities that many support Action Plan and New York set up a producers (utilities and independent policies provide the investor. At the GreenNYC programme. New city power producers). For PV and same time, the increased volatility in concepts such as Masdar in Abu Dhabi biomass, the business models are market prices, the erosion of peak- and Tianjin Eco-city in China illustrate different. Investment competitiveness power pricing (see Figure 12) and the that cities can be important players in for PV will be achieved fi rst for rapid deployment of renewable energy the energy sector, and help to protect residential applications, and dispersed sources have signifi cantly weakened the environment and climate. markets will have to be actively the business case and availability developed. Entry of large utilities is of fi nancing for conventional power These examples show that customers, currently confi ned to a few players, plants. in a bottom-up approach, are while regional utilities develop local demanding and realizing alternative potential. Project developers will energy supply mechanisms, and dominate the market. For biomass, the

Energy Harnessing: New Solutions for Sustainability and Growing Demand 29 The risk/return profi le varies Markets that liberalized in the 1990s participation in decision-making and signifi cantly between different (for example, the United Kingdom) investment by citizens, are means renewable energy technologies and face the challenge that renewable to increase acceptance. That said, regions. In general, offshore wind has a energies are undermining the liberalized renewable energies are often subject higher risk than onshore wind and PV. market mechanisms. The success of to signifi cant scrutiny for their impact The latter has mostly an attractive risk/ renewable energies causes a partial on the landscape (e.g. wind turbines) return profi le. To ensure the economic re-regulation of those markets. Either or local olfactory consequences (e.g. appeal of renewable energies certain this re-regulation is accepted or new biogas or biomass). criteria need to be fulfi lled. Due to the ways to integrate renewable energies high investment costs, a reliable and into the liberalized market need to The impact of renewable energies on stable political and policy framework is be established. In non-liberalized the energy sector is ongoing, but the essential to ensure achievement of the markets (e.g. China and several African degree varies by region and segment. business case. Moreover, the quality countries) the integration of renewable To enable transformation of the current of grid infrastructure, the experience energies is less a question of the energy landscape, certain hurdles of the project, and overall investment market and more one of political will. need to be overcome. As shown in conditions are vital to increase the In both cases, a political decision on Figure 14, continued cost reduction returns and decrease the risks. renewable energy’s role in the future is a critical issue for renewable energy landscape is required. energies. In the wind industry, for The level of involvement and impact example, production processes of political decision-making on Acceptance by, and involvement of, are often ineffi cient. Economy of the energy value chain. Politics citizens in the energy harnessing scale and optimized production often heavily infl uences the energy value chain. Public perception is a processes offer substantial cost- system and incentivizes energy vital factor in energy infrastructure reduction potential. In the PV sector, sources. Oil and gas pipelines, nuclear development; it affects renewable consolidation and continued research infrastructure and coal mining were energies as much as large coal-fi red and development (R&D) will leverage all the subject of political decision- stations. By revealing the idea of an cost reductions. Other diffi culties making and support. Renewables are alternative solution for energy supply, include grid integration, safeguarding no different. They are a policy-driven renewables have made it harder to public perception, easing reliance “new entrant”, which crowds out some establish conventional power plants. on subsidies, developing integrated technologies that were previously in In some parts of the world, citizens business models and managing social the liberalized energy market, and are no longer simply “against” a and environmental impacts. emerging in some countries towards certain development in their backyard; the latter part of the 1990s. they are attacking the very premise Renewable Energy Sources that certain types of conventional Summary technologies are even necessary. Greater transparency, enabling active – Renewables are changing the energy market in numerous ways: private capital is fl owing into the energy sector, mid-day price peaks in Europe are almost history, new players are entering the market and liberalized markets are facing re- regulation. – Most renewable energies are “low carbon” in a full life-cycle view. – Public acceptance is an important factor in energy infrastructure development, affecting renewable energies just as much as it does coal-fi red stations. – Key issues for renewable energies include cost reduction and integration with the energy market.

30 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 14: Overview of Key Challenges for the Further Development of Renewable Energies

Source: IZES Kurzstudie. Kurzfristige Effekte der PV-Einspeisung auf den Großhandelsstrompreis, January 2012; EEX; A.T. Kearney Analysis

Advanced Energy Storage sustainable energy production globally. Technologies. Different technologies Solutions Will Be a Key With the increasing use of renewable compete for grid-scale energy storage Enabler for the Further Growth energy sources, the old mechanisms solutions (see Figure 15). Many of of producing just-in-time energy, when them offer solutions for small niche of Renewable Energy Sources it is needed, is no longer valid. The applications. However, it is not clear production of energy from renewables which technologies will be competitive The rising percentage of electricity depends on the availability of the and feasible. In general, storage from renewable intermittent energy sources (e.g. solar energy can only be solutions can be separated into sources and the quest for sustainable produced during the day). electrical and non-electrical. mobility solutions lead to higher demand for advanced energy storage In future, the demand and supply of Today, the most important non- solutions, next to other balancing energy will be independent from each electrical storage technology is approaches and technologies (e.g. other. This could lead to high volatility pumped storage hydropower (PSH). demand management or fl exible in electricity prices. During peak-supply It is estimated to account for 127,000 conventional power plants). It will be times, producers offer energy for no MW of power, or 99% of bulk storage essential to provide advanced energy cost. Large energy storage solutions worldwide.84 It requires a specifi c storage solutions on a large scale to enable the use of renewable energy geography and the political means transform our energy landscape into sources, even during peak-supply to build the required infrastructure. a more sustainable energy market. times, and can increase the price of As a result, further development of Furthermore, the mobility sector will energy during periods of high supply PSH solutions vary by region, with increasingly rely on e-mobility, to and decrease it during periods of limited options in Europe and better decrease the impact of mobility on the low supply. In Germany, 127 GWh opportunities in parts of Asia. climate. Current storage technologies of renewable energy produced were lack cost-effectiveness and suffi cient lost in 2009 (thereof 98.7% from wind energy density for many applications. farms82) because of insuffi cient energy storage facilities and a lack of grid Grid-scale Energy Storage transmission capacity. An estimated Poses Complex Challenges 40 terawatt-hours (TWh) of energy storage capacity is needed by 2040 The strong growth of intermittent in Germany alone and investments power generation from renewable of € 30 billion in new energy storage resources increases the demand for facilities are required in the next two compensation technologies. Energy decades.83 Energy storage solutions storage solutions will be a key enabler are therefore vital to transform for disconnecting power generation energy production into a sustainable from consumption, and therefore landscape using renewable energy. for the successful deployment of

Energy Harnessing: New Solutions for Sustainability and Growing Demand 31 Figure 15: Overview of Major Grid-scale Energy Storage Solutions

Source: A.T. Kearney analysis

Compressed-air energy storage (power-to-gas). The latter offers the – NAS batteries were fi rst operated (CAES) is another possibility, opportunity to store energy on a large more than a decade ago and by where compressed air is stored in scale without additional investments 2011, more than 300 MW have underground caverns or large tanks in storage technology. Germany has been installed globally.90 Load and released into a combustion turbine facilities to store up to 217 TWh of levelling is the primary application, generator system when electricity gas, one-third of the country’s annual but they can also be used as a is needed.85 Pike Research reports electricity consumption88. However, standby power source and can that US$ 122 billion will be spent on the transformation of electricity into stabilize fl uctuating power from 91 energy-storage projects between 2011 H2 and CH4 is very ineffi cient and the renewable energy sources. and 2021, with the majority spent technology is expensive. In addition, – Redox fl ow batteries can store 86 on CAES. However, the process H2 has a lower fuel value than natural large volumes of energy – is expansive, ineffi cient and bears gas. Investments in the power-to-gas preliminary estimates are around technical complications. A large CAES concept can pay off and might offer a 1 GW. Vanadium redox and Zn/ storage plant requires investment of large solution for energy storage in the Br batteries store the electrolyte between € 300 and 500 million. The future – for example, Audi is investing in a separate container. The key effi ciency is rather low, compared with in the construction of a 6.3-MW power- advantage? Increasing the volume other technologies. CAES uses two to-gas plant and is collaborating with of the electrolyte used can easily existing technologies: diabatic and partners from the energy industry prolong the storage system’s adiabatic. Adiabatic captures the heat and academia to further develop this discharge duration.92 In addition, initially created by compressing air to storage solution. the electrolyte if degraded can be high pressures and reusing it, in an replaced, adding to the system’s approach called Advanced Adiabatic Batteries are the most important sustainability. CAES (AA-CAES). Diabatic does electrical storage technology, and not. Before AA-CAES can become range from lithium-ion (Li-ion) to Grid-scale batteries must have high a commercial option, however, the sodium-sulphur (NAS) and Redox fl ow. charge and discharge rates, as well as heat loss needs to be minimized – Li-ion batteries provide high energy the ability to withstand multiple cycles and equipment developed that can density and are typically lighter.89 in order to meet the demands of the withstand temperatures up to 650 However, the largest-scale lithium- electrical grid. Batteries are especially degrees Celsius.87 ion batteries are expensive and can suitable for fl exible, distributed only store up to the equivalent of applications, e.g. in private houses to

Not only air but also hydrogen (H2) 1 MW of energy. In the future, the store excess electricity produced from can be stored in underground caverns lithium-ion batteries of e-vehicles solar panels on the rooftop. or tanks. H2 can be produced from might be used after their lifespan excess electricity using electrolysis. It in the vehicle for grid-scale also can be transformed into methane applications still offering 80% of

(CH4) or stored directly in the gas grid their capacity.

32 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 16: Overview of Key Challenges for Grid-scale Energy Storage Solutions

Challenges. Grid-scale energy storage Academia and industry also need to wind parks in the North Sea, if those solutions face several crucial problems collaborate to scale up lab solutions wind parks are embedded in the right (see Figure 16). Most technologies are and test them in demonstration technological system. To fully leverage still at an early stage of development projects. the energy created, production, and are not economically feasible. High transmission and suffi cient storage costs and low effi ciency of storage Furthermore, energy storage solutions have to be combined. High solutions (for CAES, H2-storage or solutions alone cannot provide the voltage transmission lines can connect battery, for example) remain major fl exibility needed to base our energy wind parks with demand centres in hurdles. Two sites currently being built system on renewable sources. The neighbouring countries and with large in Germany transform the electricity smart combination of production, pumped hydropower storage (PHS) into thermal energy for storage or transmission, storage and consumption facilities in Norway, amassing excess heating purposes. A simple large- will be required (smart grid). How energy. Using this approach, demand scale water boiler is used, offering this can work was demonstrated by and supply peaks can be balanced in the advantage of low investment the Offshore Grid study within the the countries neighbouring the North costs for fi nancially weak cities, Intelligent Energy Europe programme.93 Sea, and a reliable local energy system but also the disadvantage of low In the future, large amounts of can be established. effi ciency. Technical issues still hobble electricity can be produced in offshore many technologies – for example, electrolysis, which can transform electricity into H2, suffers from low effi ciency.

Political will is a key enabler to transform the energy landscape. Without the right fi nancial and regulatory incentives, it will not be possible to develop cost-effective large energy storage solutions and build a dependable business case for them. The market itself will not be able to provide the necessary incentives for companies to invest in the development of these technologies in the short term.

But politics cannot provide all the answers. The industry itself must fi nd solutions and work across stakeholders to address the challenges of a complex value chain and decrease time to market. Industry participants such as chemicals, energy-producing and grid companies, and fi nancial institutions need to work together to fi nd solutions.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 33 E-mobility Applications internal combustion engines (ICEs) A price improvement is essential to Require Energy Storage before 2025, while EVs will have a achieve TCO competitiveness with Solutions that Provide a slightly higher TCO in 2025. Several ICE powertrains, and subsequently factors, including future CO2-based increase their attraction for customers. Higher Energy Density taxes for vehicles, oil prices and A 60% decline from current prices is decreasing costs of batteries, have expected by 2025. Improving battery- The electrifi cation of the powertrain been considered to assess TCO. cycle life is another prerequisite for the landscape is seen as one option to In a moderate scenario, oil prices will success of EV and HEV powertrains lower air pollution in cities and even to reach US$ 160 per barrel in 2025, and a lever to lower the total cost per reduce the climate change, if electricity battery costs will decrease by 6% vehicle. Battery-cycle life is estimated is produced using renewable energy per year, and taxes will be based fully to double to 3,000 cycles until 2025. sources. The automotive industry is on CO2 emissions. According to this, A number of safety incidents have addressing this trend and investing electric vehicles and range extenders occurred involving fi res and explosions, heavily in different technologies, are expected to capture 8% of global due to EV and HEV batteries’ high including strong- and plug-in market share. In the slow scenario, energy density, poor stability of some hybrid, range-extender and pure their market share will reach 3% only electrode materials (towards oxygen electric vehicles (EVs). Today, those in 2025, and in the fast scenario, 12%. evolution) when the cells are charged, technologies have a very minor global The fast scenario includes subsidies and the use of fl ammable organic market share (see Figure 17), but for EVs, which are not considered in electrolytes. Although pack cooling electrifi ed powertrains will appreciably the moderate scenario. The market and isolation of cells helps somewhat, expand their market share in the future. share of strong- and plug-in hybrids will it is diffi cult to reduce the fl ammability reach between 14% and 34% in 2025, of a single battery cell to enhance the Lower case all words in legend except depending on the scenario applied. overall safety of the battery. Another for “Range” and “Strong” trial is batteries’ still low energy density, Challenges. However, multiple issues compared with the energy density of Powertrain landscape development. related to batteries exist that must petroleum and diesel, for example. Different scenarios have been applied be overcome to enable substantial Higher energy density of batteries will to estimate the global market share of growth of EVs (see Figure 18). Batteries increase the range of e-vehicles, and electrifi ed vehicles in 2025 (see Figure account for a signifi cant portion of will be critical for their success. This is 17). The most important drivers for the acquisition costs of EVs and because customers typically demand development of hybrid electric vehicles HEVs; the battery of a compact EV vehicles with longer ranges, although (HEVs) and pure EVs will be the total car, such as Nissan’s Leaf with a 24 87% of the cars in Europe drive cost of ownership (TCO), technological 95 94 kWh battery pack, currently costs less than 60 km per day. An 80% maturity and regulation. It is expected between US$ 13,000 and US$ 18,000. improvement of the energy density that HEVs will reach TCO-parity with seems realistic until 2025.

Figure 17: Scenarios for Global Powertrain Landscape Development

Source: Powertrain 2025. May 2012. A.T. Kearney

34 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 18: Overview of Key Challenges and Targets for E-Mobility

Source: Powertrain 2025. May 2012. A.T. Kearney

Energy Harnessing: New Solutions for Sustainability and Growing Demand 35 Figure 19: Technology Roadmap of Lithium-ion Battery Cells

Source: Fraunhofer Institute for Systems and Innovation Research (ISI)

Technological developments. The Not only new material developments – Joint efforts of the automotive and trend for new materials to improve but also advanced battery battery industries, and legislation to batteries for e-mobility applications management can mitigate some of support a rapid increase in scale will continue. Figure 19 shows a the technical challenges of batteries. – Clear agreements between technology roadmap of lithium-ion Improved safety can partly be achieved the automotive and battery battery cells until 2030. Material by using less fl ammable materials and industries developments for anode and by advanced battery management with – Standardization of batteries cathode will be the main drivers for improved sensors. Timely detection – Technical progress improvements in energy density. A and shutting-down of cells reaching a – Battery companies’ R&D focus shift from graphite to silicon-graphite critical temperature can dramatically on most promising technologies can increase the energy density of the enhance battery safety, and advanced – Close cooperation between anode by three times. However, the charging management can improve value chain participants battery’s other components need to cycle life. Finally, achieving scale in be adapted accordingly to achieve a volume and automation of production Stable boundary conditions. A stable similar energy density improvement will be key levers to reduce battery policy framework is a major factor for on cell level. Nickel manganese cobalt costs and the TCO of electrifi ed a successful transformation of the (NMC) and lithium iron phosphate (LFP) vehicles. energy landscape, and especially of the will be the dominant material used in e-mobility market. The policy structure the cathodes of lithium-ion batteries Other technological developments must reduce the risks for the private in the short- to mid-term. NMC can include wireless charging of batteries. sector and promote investment in provide a high energy density, while This would be hugely benefi cial as future solutions. For example, the EU

LFP can offer a price advantage over vehicles can be charged while travelling has a regulation on CO2 emission. A NMC and will predominantly be used on equipped driving lanes or waiting recent European Commission proposal by Chinese battery producers. The at bus stops for passengers. Several sets stringent emission targets for car electrolyte will shift to a gel-polymer trials have already been launched fl eets, cutting average emission for electrolyte to improve cell safety and worldwide, and companies such new cars to 95 gm of CO2 per km in energy density. Lithium-air cells consist as Toyota, Nissan, General Electric 2020.96 An even stricter emission target of a lithium anode and a carbon-air and Qualcomm are investing in this of 70 gm of CO2 per km in 2025 has cathode. They can offer 10 times technology. been discussed, and might become a higher energy density and lower prices signifi cant driver for electrifi ed vehicles. than current lithium-ion technology. Key success factors. The main This will foster the development of However, widespread commercial factors that enable technological and alternative powertrains. Other key use is not expected before 2025- volume improvements include: enablers are regulatory and fi nancial 2030 at the earliest, because major – Stable boundary conditions incentives to ensure the economical technological hurdles remain to be – Regulations (e.g. CO2 limits) attractiveness of e-mobility solutions. overcome. – Subsidies and incentives An estimated € 20-30 billion will be

36 Energy Harnessing: New Solutions for Sustainability and Growing Demand spend globally on subsidies, of which network exist between OEMs, between as small wind and solar power plants, 85% will be for direct and indirect suppliers and between OEMs and are also possible solutions and might buyer’s premiums and 15% will be suppliers. However, those partnerships be apt for countries with limited or no paid to the industry.97 An example of a are diffi cult to manage and the future of infrastructure. regulatory incentive: in Oslo, e-vehicles several remains unclear. can use specifi c traffi c lanes and use Traditional electricity grid. This is municipal car parks for free. Demand for Advanced Energy a centralized solution that distributes Storage Solutions Summary electricity to consumers on a large Joint efforts. The success of EVs – Advanced energy storage solutions scale. From grid-connected power- and HEVs will depend not only on a for grid-scale applications are key generating facilities, high voltage policy framework and incentives. Clear enablers for a strong growth of transmission lines typically transport agreements between the automotive intermittent power generation from electricity over hundreds of kilometres and battery industries are equally renewable resources. and direct current lines are able to important to underpin a rapid increase – For grid-scale storage, PSH transmit electricity over thousands of in scale. Battery and automotive accounts for the vast majority kilometres. While this system allows companies have to agree on technical of energy storage worldwide. It electricity-generating facilities to service standards to avoid a fragmentation is not clear which of the other relatively large areas, transmission of the market and technologies available storage technologies is losses are a considerable limitation. used. The industry partners have to the most promising for a wide-scale About 10-15% of the total US$/KWh fi nd mutual solutions, for example, application. Power-to-gas might cost paid by consumers is related to to charging technology. Currently, offer signifi cant opportunities in the transmission.100 fast-charging (preferred by Western future. original equipment manufacturers – Early stage of development, low Two principal trials for the traditional or OEMs) and battery swapping effi ciency and high costs are the electrical grid are ageing infrastructure (preferred by Chinese OEMs) are two key trials facing grid-scale storage and the integration of renewable competing technologies that require solutions. energy sources. In many developed different charging infrastructure – A smart combination of production, countries, the electrical grid is over and have different requirements for transmission, storage and 40 years old, which decreases battery technology. Investments in consumption is needed to base the transmission effi ciency101. Transmission infrastructure needed are expected to energy system on renewables; an losses tend to be highest in developing be worth about € 21 billion in 2020.98 illustrative example is the Offshore economies, but developed countries This includes charging stations, Grid study within the Intelligent with older grids face similar problems. production of green electricity, and new Energy Europe programme. Power interruptions are another innovative services and accounting – Energy density for mobility- important obstacle. In the US, the DOE systems. Moreover, issue exist applications and high costs for estimates that power interruptions cost regarding the insurance of swapped lithium-ion batteries are still the consumers up to US$ 80 billion per batteries. most signifi cant challenges. year, which amounts to approximately – Regulatory and fi nancial incentives one-third of annual electricity costs.102 A cross-industry approach that will be key enablers for the Updating existing infrastructure and includes OEMs and utility companies problems confronting energy incorporating smart-grid technology can enable such investments. To storage solutions in both the grid- that improves electricity management enhance their revenue options, scale and the mobility segments. and grid effi ciency could address this investors should not only provide problem, but the extreme expense of the charging infrastructure but also The Grid Itself Offers Solutions the solutions is a potential roadblock to offer additional services such as for Reliable Electricity Supply widespread application103. standardized accounting systems or the possibility to reserve a charging In the developed world and countries Renewable energy integration. column.99 with emerging infrastructures, large Renewable energy sources pose many grids supply the bulk of electricity. problems for electrical grid operators Technical Technical progress. In regions with less established and technical advances will be required solutions are key to overcome the infrastructure, the development of to integrate these sources. The main challenges described. R&D efforts a large electrical grid might not be challenge is intermittency – renewables have to focus on the most promising appropriate or plausible. For example, cannot be relied upon to provide technologies to ensure a short time- countries with emerging economies, electricity consistently. They also are to-market and reduce R&D costs. weak regulatory environments, hobbled by the limits and cost of Furthermore, a collaborative approach limited infrastructure and dispersed electricity transmission. In contrast to along the entire value network is a populations may be better off traditional electrical plants, renewables prerequisite for the development of developing small solutions. Micro-grids, often must be located in specifi c areas technical solutions. No single player which mimic traditional energy grids on to capitalize on natural conditions, such covers every step from cell materials a smaller scale (for example, a region as rivers, high solar irradiation, or high to the EV, underscoring the need for or neighbourhood), may be suitable for wind speeds. Such locations frequently collaboration. Numerous joint ventures certain areas. Off-grid solutions, such are far from the demand for energy. and partnerships within the value

Energy Harnessing: New Solutions for Sustainability and Growing Demand 37 Several possible solutions exist Public opinion often poses another These technologies allow smart grids but they will be expensive. The IEA trial for extending a power grid. For to enhance reliability, time-shift usage estimates that grid integration from example, Germany currently is fi nding to off-peak hours and reduce peak 2011 to 2035 will cost US$ 15-24 it diffi cult to install new capacities for demand, lower aggregate electricity billion per year.104 As mentioned earlier, integration of renewable energies. usage and actively manage electricity one promising solution to intermittency Although at a national level the public demand (or supply) of EVs and certain is the development of grid-scale has accepted the idea and a political appliances. electricity storage to time-shift energy decision has been taken to develop and match supply and demand. renewables and cease nuclear power One of the most exciting capabilities generation, the people at a regional of a smart grid is an ability to better Improving transmission range and level are yet to agree to build those integrate renewable energy sources. minimizing losses will be important if new transmission lines. Compromises For example, a smart grid’s ability distant demand centres seek access will be necessary to transform the to monitor energy supply and to renewable energy sources. Several energy landscape and avoid power demand in real time can help to companies are developing solutions interruptions. address intermittency. It also enables – superconductive transmission and bidirectional or net metering, which high-voltage, direct current (HVDC) Smart grid. Smart-grid technology compensates electricity-producing lines are two examples. Norway, with is a promising way to facilitate the households and companies for their its huge PHS capacity, will play an integration of renewables and improve contributions to the electrical grid. important role in the integration of the overall operation of the electrical Even in the absence of renewable renewable energies in Europe. Norway grid. Though smart grids may differ in energy, smart grids offer numerous and Germany recently decided to complexity and capability, at the core advantages for electricity producers build a new HVDC transmission line they are digitally enabled electrical grids and consumers. For example, smart (NORD.LINK) with a capacity of 1,400 that use real-time supply and demand grids have a self-healing capability MW between the two countries. The information to increase effi ciency and and can detect possible loss in power installation will be completed in 2018 reliability. Smart grids involve networks quality and/or surge in load. They and will cost at least € 1.4 billion. The of computers and new technologies can also isolate sections of the grid new line will offer the opportunity to such as smart metres, dynamic pricing, automatically and prevent system-wide store excessive wind energy produced smart thermostats and appliances, and collapse of the kind that happened in northern Germany in Norway’s PHS consumer energy-use dashboards. in August 2003 in the north-east and facilities. Figure 20 depicts a hypothetical smart mid-west of the US and Ontario, grid that connects a variety of supply Canada. and demand technologies.

Figure 20: Map of a Hypothetical Smart Grid

Source: Smart Grid Demonstrations, Electric Power Research Institute (EPRI)

38 Energy Harnessing: New Solutions for Sustainability and Growing Demand Micro-grids. Micro-grids are Off-grid. The term “off-grid” is used Interconnectivity. Energy demand small electricity grids that operate to describe a situation in which a does not stop at national borders. independently of, or in conjunction village, company or household is not The variety of energy sources requires with, traditional electricity grids. Pike connected to any type of electrical grid. interconnectivity of transmission and Research estimates that micro-grids This includes a system developed for distribution systems. Every regional will account for 4.7 GW of electricity105 an individual household or individual market has gradually interconnected and US$ 17.3 billion of global revenue user. Currently, the most pervasive energy across borders112 to reap by 2017, which would represent a example is the diesel generator, but benefi ts such as lower costs, CAGR of over 22%.106 other exciting new solutions have higher reliability and increased emerged that use distributed power, competitiveness.113 For example, a Micro-grids have several advantages such as small solar and wind systems. boost in trade among the Baltic States over their traditional counterparts. For For example, in India, where rural has resulted in a combination of hydro- a start, they can provide electricity electrifi cation is relatively low and and thermal-based power supply in geographies where a traditional homelessness and poverty extremely across Europe, thus levelling prices grid is neither viable nor cost- high, the country’s Tata business across regions.114 Interconnected effective.107 They also require less group is developing a pre-fabricated countries should consider the capital investment and, as a result, low-cost house with a rooftop solar opportunities of mixing energy sources may be a better solution for poorer panel. Because these houses will to compensate for intermittency, but countries or regions.108 Micro-grids not be connected to an electric grid, also require substantial reserve power can often incorporate distributed- distributed solar power will provide as a safety net.115 energy and renewable energy sources most (if not all) of the home’s electricity. at a lower cost than traditional grids, Another example is Bergey Windpower, To make interconnectivity successful, while reducing GHG emissions and a US-based company that provides countries must be willing to purchase maintaining power quality and reliability. small wind-turbine solutions that can energy sourced outside their 109, 110 be used in villages. The systems cost borders.116 At a time of focus on between US$ 20,000 and 150,000 energy security and independence, However, micro-grids have several – often cheaper than extending the this could be challenging for countries disadvantages, including the typical electrical grid (if one is available) and with interconnected grids.117 Identifying drawback of grids of all sizes. For often cheaper to operate than a diesel an investment mechanism for cross- example, micro-grids can have generator. border connections could be another interoperability issues with traditional problem. International fi nancial grids; to address these challenges, Though these solutions target institutions have a role in such a both grid operators must work together emerging markets, the developed situation, establishing public-private to establish common standards. world also can benefi t from similar partnerships that bring countries to Additionally, micro-grids that connect renewable solutions; these might not agreement.118 Overall, the advantages to the traditional grid may be charged be technically off-grid, but are likely of interconnectivity for commerce standby fees for non-emergency to be part of the energy solution in all and development far outweigh its use.111 These challenges affect micro- markets. disadvantages. girds in developed countries, but are not relevant in emerging countries with true stand-alone micro-grids.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 39 The Future Electricity Grid Summary Figure 21: World Final Energy Consumption by Sector, 2010 – Traditional electricity grids in many developed countries are ageing, Source: World Energy Outlook 2012, International Energy Agency 123 resulting in transmission losses and power interruptions. Traditional grids also face a challenge of incorporating intermittent renewables with low capacity factors. – Smart grids use real-time supply and demand information to increase the overall grid’s effi ciency and reliability, and can more effectively integrate renewables. – Micro-grids require less capital investment than traditional grids and could be appropriate for geographies where traditional solutions are neither viable nor cost- effective. – New products such as bio- generators, residential-scale wind turbines and solar-powered houses enable off-grid energy generation and consumption.

Increasing Effi ciency in Energy Figure 22: Household Energy Consumption in the EU27 Consumption Is an Important Lever to Transform the Energy Source: Energy effi ciency trends for the households in the EU27, Odyssee Landscape

Two major levers exist to deal with growing energy demand, while reducing GHG emissions and enhancing energy security. One is the development of alternative energy sources such as unconventional natural gas reserves and renewable energies; the other is increasing the effi ciency of energy use.

Remarkable effi ciency improvements have been attained. As a result, energy effi ciency resulted in fuel and energy cost-savings of US$ 180 billion in 2005; global energy intensity (fi nal energy use per unit GDP) fell by 26% between 1990 and 2005.119 Signifi cant possibility for further effi ciency gains remains. According to IEA assessments, application of the best available technologies in industry alone could cut energy use signifi cantly increase the environmental developed countries use energy more in the sector by almost one-third.120 and economic sustainability of the effi ciently than do their emerging The agency estimates that the energy value network. counterparts. Europe and China are timely implementation of 25 policy compared in the chapter, The Future recommendations it has proposed Governments, industry and civil Energy Landscape: Europe and China, could save 7.6 gigatons of CO per 2 society are increasingly aware of this later in this report.122 year by 2030.121 Therefore, progress in potent way to transform the energy the implementation of already identifi ed landscape. Currently, the use of energy effi ciency measures could energy varies by country. In general,

40 Energy Harnessing: New Solutions for Sustainability and Growing Demand To address energy effi ciency potential, the use of biomass and waste as – Transforming production a toolset for different sectors is energy sources. Moreover, a facility systems. An integrated and holistic required. Industry, transport and management is needed to link and approach to manage resources buildings are the three biggest energy administer the different technologies. and waste can further improve consumers globally. Buildings consume energy effi ciency. Strategies include about 33.8% of fi nal energy, while Zero-emission buildings could greater use of recycled materials industry consumes about 28.1% and signifi cantly cut total GHG emissions. and sharing of resources among transport about 27.3% (see Figure 21). Certain enablers can ensure a industries. Each sector has numerous possibilities successful development of the to increase its energy effi ciency and concept: More and more companies set subsequently reduce demand. – Community models that increase specifi c effi ciency targets – for energy reliability. In the US, for example, in the framework of Buildings. The buildings sector is the example, severe weather conditions corporate sustainability initiatives – and largest consumer, with high potential sometimes cut off households from implement comprehensive energy for enhancing its energy effi ciency. the grids for days, and communities management systems to reduce costs Improvements could signifi cantly therefore want to be independent and GHG emissions. Generally seen reduce GHG emissions and ease from large centralized grids as vital for energy effi ciency, energy demand. Heating is the main consumer – Technological development management systems provide the of household energy; better insulation – Development of IT systems transparency and accounting that can therefore is the single most important trigger technological solutions along measure to improve effi ciency. In However, several obstacles remain, the entire value chain of an industry.129 Europe, this has led to heating including: Key technological potential in industry registering a decline in share of total – Inconsistent regulation – for includes drivetrains, compressed air, energy consumption (68% in 2009), example, in the US almost every cooling and venting equipment, as well while lighting and electrical applications town has its own building code as the more obvious energy demands showed a rise (15% in 2009; see – Out-dated education models – for heating and lighting. Figure 22).124 New technologies such for example, for engineers and as light-emitting diodes (LED) have the architects In other sectors, such as high energy- ability to considerably cut the amount – Costs – new investment models consuming industries, energy accounts of electricity used for lighting. and market prices have to refl ect for such a signifi cant share of total the real costs of technology production costs that energy-effi ciency

One trend is that while the residential – Remaining CO2 emissions – use improvements have long been at the buildings sector is improving energy of waste or biomass to generate core of production optimization. For effi ciency, households are using more power still produces a certain example, energy consumption for steel energy-consuming devices, largely amount of CO2 production globally has fallen from 0.51 offsetting the savings achieved125. In tonne of oil equivalent (toe)/ton in 1990 the EU’s 27 member-countries (EU27), Industry. In industry, energy effi ciency to 0.40 toe/ton in 2010 (-1.2% per energy effi ciency in the household is an important lever to reduce overall year).130 sector grew by 24% between 1990 costs. In regions such as Europe and 2009 (1.4% per year). Final energy with comparatively high prices for Increasing energy effi ciency is driven consumption in the EU27 in the same energy, companies recognize that by not only the industry itself, but period rose by about 8% (0.4% per energy effi ciency is essential to stay also public agencies. For example, year), while electricity consumption competitive with companies in regions the US DOE is launching a voluntary increased by an annual average of with low energy prices, such as China. programme that will provide 1.7%.126 This was due mainly to a industrial and commercial facilities greater number, and greater use, Energy-effi cient improvements can be the opportunity to earn a Superior of household electrical devices in classifi ed into three main segments:128 Energy Performance certifi cation, households, even though the energy – Investing in better equipment to allow and verify improvements effi ciency of the devices improved. and technology. Adaptation of in energy performance through The average energy consumption of best available technologies could application of the ISO 5001 energy large electrical devices such as dryers, cut global industrial energy use by management standard.131 The DOE washing machines and freezers fell in about one-third. is working with industry experts and the EU27 by about 7% between 2005 – Managing energy and optimizing standard-formulating bodies to build and 2010.127 operations. Systems optimization, a supporting structure for industry to such as integrated system design increase energy effi ciency.132 An evolving concept is the “zero- and operation, can achieve emission building” or even “zero- additional savings of up to 20% in Transport. Transport can roughly emission community”. The technology some cases. be divided into two sub-sectors: for zero-emission buildings largely freight and passenger. In the former exists, but requires the involvement of category, trucks consume most emerging industries such as energy of the energy in this sub-sector storage and information technology and are less energy-effi cient than (IT)-smart energy management, and ships and rail in ton-kilometres, and

Energy Harnessing: New Solutions for Sustainability and Growing Demand 41 therefore offer huge potential for In a passenger car, only 17-21% of Energy prices that refl ect the energy-effi ciency improvements.133,134 energy from fuel is transformed into environmental impact of energy Modal substitutions (e.g. diverting power to the wheels (see Figure 23).138 extraction could be a vital lever to freight movements from road to rail) More effi cient engine technologies further increase energy effi ciency and and advanced engine technologies are therefore a major lever to lower a curtail overall demand. therefore are critical factors in vehicle’s fuel consumption. Electrical diminishing the energy intensity of vehicles have the highest conversion Energy Effi ciency Summary freight. rate of chemical energy to energy – The three largest energy-consuming released from the powertrain, but the sectors globally are buildings In the passenger category, individual electricity needed for charging the (33.8% of fi nal world energy cars consumed more than 87% of the batteries can emit large amounts of consumption), industry (28.1%), energy in this sub-sector, while buses, GHGs if produced in coal-fi red facilities transport (27.3%). trains and ships together accounted for and transmitted over large distances. – Improving energy effi ciency is often only about 3%, and airplanes for about Such a scenario would essentially shift termed a “sleeping giant” and a 10%, according to 2005 fi gures.135 emissions from a tailpipe to a power crucial lever to make the energy Driving behaviour, reduction in weight plant, and move energy consumption landscape sustainable. of vehicles and volume of loads, and from engine to turbine. Moreover, – Companies recognize energy advanced engine technologies are the charging a battery is an ineffi cient effi ciency as an important main levers to cut fuel consumption in process, and energy essentially is lost criterion to stay competitive while passenger vehicles. at a different point in the energy supply governments increase legislative chain. pressure and policy incentives to Using new lightweight materials in increase the adoption of energy vehicles can signifi cantly restrain fuel Energy-effi ciency indicators can effi cient technologies. consumption. Since 2008 the average be a powerful tool to ensure the weight of a vehicle has dropped by development, implementation 20%, translating into a similar reduction and monitoring of energy-saving of GHG emissions per vehicle.136 technologies and approaches. Many In 2020 the average car will weigh countries already have indicators in approximately 1.1 tons, containing place, but these are distinct to each 18% plastics (up from 14% in 2000), country and therefore often are not 7% rubber, 55% metals (down comparable. The IEA assists efforts to from 63% in 2000) and 20% other develop consistent global indicators.139 materials.137 More and better data are needed to draw a full picture of the current state of energy effi ciency.

Figure 23: Energy Losses in a Passenger Vehicle (Combined City/highway Driving Cycle)

Source: US Department of Energy, http://www.fueleconomy.gov/feg/atv.shtml, October 2012

42 Energy Harnessing: New Solutions for Sustainability and Growing Demand Energy Harnessing: New Solutions for Sustainability and Growing Demand 43 The Future Energy Landscape: Europe and China

Europe Has Put Its trade to satisfy 53% of their gross –– European energy market integration Energy Landscape on a energy demand; the EU’s five largest – i.e. easing barriers between Decarbonization Path economies – Germany (60%), France national energy systems and (50%), United Kingdom (28%), Italy markets, thereby facilitating pan- (84%) and Spain (77%) – are no European trade in energy145 Europe’s energy consumption levels exception.142 have remained relatively constant over This chapter gives an overview of the past two decades. Gross energy The EU clearly addresses the the status of the European energy consumption had remained almost need for an energy setting that is market, and the key drivers of its unchanged from 2003 to 2008, and environmentally and economically transformation. showed a significant decrease in sustainable, as well as secure, and has 2009, mainly due to the economic put relevant policies in place. Under the Liberalization and integration of crisis.140 Given the region’s historically “20-20-20” targets for 2020, the EU the European energy market. The low population and economic growth aims to: European Commission has a target (as measured by GDP), it is likely that –– Reduce its GHG emissions by 20% to find a common energy policy for all energy demand will continue to exhibit from 1990 amounts member states and has announced a similarly flat trajectory, although –– Increase to 20% renewable that the next chapter in the integration some types of energy – for example, energy’s share relative to energy process is to build a European Energy electricity – are still expected to consumption Community (EEC).146 A fully integrated climb141. –– Achieve an improvement of 20% in European gas and electricity market is the EU’s energy efficiency143 planned for 2014.147 Besides the relatively modest increase in energy demand and a developed These three major policy objectives A key challenge for the EU will be to energy infrastructure, Europe faces currently shape the EU’s energy harmonize the 27 different national significant hurdles to making its energy landscape. Other longstanding policy regulatory regimes and existing landscape environmentally sustainable aims provide the (evolving) framework energy policies. Currently, a multitude and securing its energy supply in in which the objectives are being of policies act in concert with many the long term. Regarding energy implemented: overlapping areas and effects. For supply, European countries have a –– Full liberalization of energy markets example, while the ETS, the Renewable paucity of non-renewable energy – i.e. transition from (often) state- Energy Directive, and rulings aimed at resources compared to other regions. owned monopolistic supply the mobility and transport sectors have According to Eurostat, a Luxembourg- structures to competitive, market- had an impact on energy efficiency in based Directorate-General of the based energy provision144 Europe, energy efficiency is directly European Commission, Denmark is targeted by several other directives, the only EU27 country that is a net including the Energy Efficiency Directive exporter of energy. On average, the (EED) and the Energy Performance of EU27 countries rely on international Buildings Directive.

44 Energy Harnessing: New Solutions for Sustainability and Growing Demand Although liberalization of the energy market has progressed in recent years – consumers can switch suppliers, for example – further work is required to align national markets and grid-operation policies, and facilitate cross-country investment in infrastructure.148 Moreover, the market concentration in electricity wholesale and natural gas wholesale is still high on a national basis.149 The European Commission announced the third energy legislation package in 2007 to strengthen competition in the natural gas and electricity markets.150 Another trial is the integration of renewables into the energy market, as they partly undermine the liberalized market mechanisms.151

Reduction of greenhouse gas emissions. Europe has set its energy 2005. Luxembourg and Denmark at If implemented and controlled sector towards “decarbonization” the bottom end have to lower their appropriately, all the tools described and is dedicated to becoming a low- emission levels by 20%, while Bulgaria will support the target. GHG emissions carbon economy. The EU is, and at the upper end is allowed to increase have indeed been lowered in Europe, most likely will remain, at the forefront its emission level by 20% in the same but a significant amount of this was of international climate policy and is period. The levels are based on the – and is – due to the economic crisis. committed to limiting global warming relative wealth of member states, each Strong efforts to reach the reduction to a maximum of 2°C. It has a target of which is responsible to meet this goal need to continue.158 Further to reduce GHG emissions by 20% in target. advancements in the renewables 2020 compared with 1990, but has sector and greater energy efficiency offered to further cut its emissions to Carbon capture and storage are other essential tools to achieve the 30% in the same period if other major technologies are a third pillar of target. economies in the world undertake to the package from the European 152 reduce global emissions. Commission.156,157 The CCS Directive Increasing share of renewable establishes a legal policy framework energy sources. Renewable energy’s A key EU mechanism is the ETS, to capture and store CO2 in share of primary energy consumption the first such system put in place in geological formations. However, CCS is continuously increasing; a target 2005 by the European Parliament and technologies are currently expensive to achieve a 20% share by 2020 has the European Council. Its success and many issues remain unresolved, been set. According to the European has been very limited. Incentives for such as the long-term stability of CO2 Commission, renewable energy’s share industry to curb GHG release are in subsurface cavities. In 1986 naturally of gross electricity generation can extremely low, at the current prices of 159 sequestered CO2 leaked from Lake reach 36% by 2030. below € 5/t, induced by the financial Nyos in Cameroon and killed 1,700 crisis in 2008. To reinforce the ETS, people. To ensure public safety, a The development of renewables offers the EU decided to change the current significant regulatory framework has the possibility in Europe not only for system of giving emission allowances to be created to guarantee that stored energy security and a reduction in to companies in the third trading period CO cannot leak or induce subsurface climate change, but also for economic 153 2 (2013-2020). EU-wide rules will apply sediment movements. Public growth. A report from the European across all European states and most perception of this technology is partly Commission states that strong emission allowances will no longer be negative. Public resistance in Germany, development of renewable energies allocated for free. for example, has led the government could generate more than 3 million new

to announce that storage of CO2 in jobs by 2030, and such an advance is The national goals for non-ETS underground caverns is unlikely to a top target of the EU 2020 strategy emissions are another tool to constrain play a major part in decarbonization. for smart, sustainable and inclusive GHG emissions – and one that Although pilot CCS plants have growth.160 The political decision to 154 complements the ETS. A binding launched around the world, it remains foster renewable energy is therefore target to cut GHG emissions has to be seen if this technology can driven by not only environmental been set in most sectors that are not support the GHG emission reduction considerations, but also local economic included in the EU ETS, e.g. transport, target. needs and industrial and energy 155 agriculture or buildings. The “Effort security policies. Sharing Decision” sets individual nation targets for 2020, compared to

Energy Harnessing: New Solutions for Sustainability and Growing Demand 45 Figure 24: Wind Velocity, Solar Irradiation and Forest Coverage in Europe

Source: US Department of Energy, http://www.fueleconomy.gov/feg/atv.shtml, October 2012

The development of renewable Looking only at future gross electricity electricity generated there could be energy as a whole, as well as the generation, renewable energy sources transported to Europe using high- mix of different renewable energy will reach 36% of total generation, voltage direct-current transmission technologies, is determined more by according to national plans of the lines. This would be a large project political decisions and less by technical member states.164 Figure 25 provides needing major investments in power feasibility or environmental conditions an overview by country of the shares plants and transmission lines, but (e.g. wind velocity, solar irradiation and of different renewable energy sources it holds the promise to signifi cantly forest coverage). Figure 24 shows that in electricity generation in 2030. Wind boost the percentage of renewables wind velocity is higher in northern parts power will be the most important, in Europe’s energy mix. The non-profi t of Europe than in the southern parts, providing 17% of total electricity; DESERTEC Foundation explores and solar irradiation is more intense in followed by hydropower, providing those opportunities.165 Such a project the Mediterranean states than in the 9%; and biomass, providing 7%. In can only be successful with the northern. However, even in regions Austria, Denmark, Latvia, Portugal and right political support, and if different with only average solar irradiation, the Sweden, renewable energy sources stakeholders take on the investments costs to produce energy with solar will provide 60% or more of electricity and the North African states sign a energy technologies are below fi nal in 2030. In addition, in 12 of the 27 long-term agreement of mutual benefi t. consumer prices. Moreover, new wind member states, renewables will be the turbines can produce cost-competitive most important source for electricity electricity with only medium wind generation. velocity, and cheap biomass is often shipped from other regions to Overall, policies and consumer choices fuel biomass-based power plants, will drive and determine the future independent from the availability of energy mix in Europe; environmental domestic biomass. conditions will infl uence development in each country, but will be much less The EU’s member states have set important. Europe can transform its binding national targets to raise energy landscape and can generate the share of renewables in energy most of its energy using renewable consumption in 2020.161 But the sources. It will require political will to targets vary by country, from 10% in make this happen. Malta to 49% in Sweden. Biomass will have the largest share of all Europe could also benefi t from the renewable energy sources in every vast potential for solar power in member state except Cyprus, and North Africa. Concentrated solar will account for 12% of total energy power technologies have enormous contribution in the EU27 in 2020.162,163 potential in northern Africa, and

46 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 25: EU27 Future Gross Electricity Generation, by Renewable Energy Source and Country, 2030166

Source: EU Energy Trends to 2030, 2009 update, European Commission

Improvement of energy effi ciency. According to the Energy Effi ciency Plan As mentioned earlier, energy effi ciency The EU currently is not on track to 2011 of the European Commission, is an important lever to reduce meet its target of cutting energy effi ciency is a key component of overall costs, which in turn is vital consumption by 20% by 2020. European energy policy and therefore for European industry to compete in With all of today’s initiatives, at the constitutes a cornerstone of overall global markets against companies EU and national levels, reductions EU 2020 strategy.168 The 2011 plan from countries such as China with would amount to only 9%. To fi ll the highlights, for instance, the necessity low energy prices. Highly effi cient gap of 11% (204 million tonnes of oil to reduce fi nal energy consumption in production capacities therefore are equivalent or Mtoe), the European buildings, as this sector is responsible critical. The European Commission Council endorsed the new EED on 4 for about 40% of such consumption. proposes to create instruments that October 2012. The directive sets legally To achieve this, adaptation of link the profi ts of utility companies binding measurements to enhance training for architects and engineers to energy effi ciency rather than to the efforts of EU member states to is suggested. Other targets are the volume of energy delivered, and increase energy effi ciency at all stages adaptation of national and European instruments that allow fi nancial value to of the energy value network.167 The fi nancing (e.g. intensifi cation of energy be attributed to saving of energy.169 directive requires member states to taxation), savings for consumers and establish energy- effi ciency schemes improved transport effi ciency. or policy measures that cover households, industries and transport.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 47 Figure 26: Gross European Union (EU) Primary Energy Consumption (in Mtoe)

Source: A New Directive on Energy Effi ciency presentation, 2011, European Commission

Post 2020. Further integration of costs, as this will make transformation – The EU ETS, targets for non- energy policies throughout the EU of the energy landscape easier in EU ETS emissions, national will remain a key challenge even after the long run. Addressing regulatory renewable energy targets, and CCS 2020. As described earlier, a multitude and structural shortcomings, and technologies are the main tools to of policies needs to be implemented establishing a fully integrated market cut GHG emissions and develop and harmonized to ensure sustainable are also mentioned. With those renewable energy sources. energy supply in the medium to long conditions in mind, Europe can – The EED and Energy Effi ciency term. transform the energy market into an Plan 2011 set legally binding environmentally, economically and measurements and specifi c targets To achieve the 2050 target of reducing socially sustainable energy landscape. to enhance the efforts of EU GHG emissions to 80-95% below To achieve this goal, a collaborative member states to boost energy 1990 levels, the European Commission approach is needed, including among effi ciency. has developed a roadmap for 2050 the different European nations, industry – The potential for various renewable that lays out how to secure and stakeholders and civil society. energy sources differs by country, decarbonize the energy system until although Europe overall can meet 2050, and how to move from 2020 to European Energy Landscape most of its energy demand through 2050. 170, 171 The study shows that a Summary renewable energy. fully decarbonized electricity sector, – European energy policy is driven by – Transformation of the energy theoretically, is technically feasible and the “20-20-20” targets for 2020 to landscape will enable a secure economically affordable, but can only secure energy supply and reduce supply, mitigate climate change, be realized with signifi cant political the impact on the climate: reducing and foster the growth of the will at both the European and national GHG emissions by 20%; increasing European economy, with the levels. the share of renewable sources possibility of an estimated 3 million to 20%; achieving a 20% energy- new jobs until 2030. The European Commission’s Energy effi ciency improvement. – Energy Roadmap 2050 outlines Roadmap 2050 lists 10 conditions – Longstanding policy provides an the way to achieve the goal of an that must be met to achieve a new evolving framework in which energy 80-95% reduction of GHG emission decarbonized energy system in objectives are being implemented: by 2050. Europe.172 They include: a requirement full liberalization of energy markets, to boost energy effi ciency, continued and European energy market development of renewable energy integration. sources, and greater investment in R&D. The roadmap emphasizes that energy prices should refl ect real

48 Energy Harnessing: New Solutions for Sustainability and Growing Demand Environmental and Economic its economy to become a leader in has built several ultra-high voltage Sustainability Are the Key developing new energy-harnessing (UHV) electricity transmission lines and Challenges for the Chinese technologies. The question is: How will is among the world’s leaders in this China transform its energy landscape technology. Energy Landscape into a sustainable one? Sustainability. Yet China needs to China has shown remarkable The following chapter gives an transform its energy landscape for development of its energy landscape in overview of past developments and the future. Most importantly, energy the past decade. It has established a highlights key targets in China’s current supply and demand must be made grid system that covers almost 100% fi ve-year plan and the challenges to more sustainable. China’s current of households and provides reliable reach them. 12th Five-Year Plan (2011-2015) electricity supply even to remote aims to establish an environmentally regions. Having successfully overcome Achievements. China has managed to friendly and resource-effi cient society. earlier hurdles, China now faces new evolve a reliable energy infrastructure, Specifi cally, non-fossil fuel resources ones: tremendous growth in energy including a large centralized electricity should increase their share to 11% demand (China will account for 35.5% grid, to which almost every household of primary energy consumption (see of total global energy demand growth in the country is connected. Massive Figure 27), energy consumption per between 2012 and 2035), energy power outages, as happened in unit of GDP should decrease by 16%, security concerns, climate change northern India in July 2012, are largely and CO2 emissions per unit of GDP and environmental protection. To unknown in China. Indeed, the country should decline by 17%. At the same feed its impressive economic growth, was, for a long time, energy self- time, the plan expects an annual GDP China is extremely dependent on suffi cient and able to provide reliable growth rate of 7%. fossil-fuel imports. While China has electricity despite a steady growth been importing oil for more than 10 in demand. China in recent years What has been done and what is still years, it now has to import gas and has launched programmes to shut needed to meet these different targets? even coal. Energy-related topics, such down the most ineffi cient plants and China faces low energy-effi ciency per as alternative and renewable energy increase the energy effi ciency of large unit of GDP, which has a huge infl uence sources, environment protection and production facilities. on environmental, economic and alternative-fuel vehicles are at the social sustainability. Currently in China, top of Chinese legislators’ agenda. It also has balanced the regional about 0.36 tonne of oil equivalent Moreover, life-threatening air pollution mismatch of energy demand and (toe) primary energy is needed to in its major cities has encouraged supply. Most fossil-fuel reserves are produce US$ 1,000 of GDP, while in China to invest heavily in low-emission located in the west and north-west, Germany and France, only about 0.1 energy. This combination offers China while the large cities and economic toe and in the US about 0.15 toe is the opportunity to not only mitigate hubs are predominantly in the east and needed.173,174 This ineffi ciency is largely the challenges of energy harnessing south. To mitigate this disparity China due to long-distance transmission but also foster the restructuring of Figure 27: China’s Estimated Energy Consumption (as a % of the Total), 2010 and 2015

Source: China Electricity Council; APCO; A.T. Kearney analysis

Energy Harnessing: New Solutions for Sustainability and Growing Demand 49 lines, lack of building insulation, and for consumers are well below the real To enhance energy efficiency, the structure of industry. China has price, because the NDRC wants to cut CO2 emissions and develop a high amount of heavy industry keep energy at an affordable level, renewable energies, some provinces consuming a lot of energy. Industry thereby preventing energy prices from are implementing a tax on carbon also is largely fragmented, missing out pushing up the consumer price index emissions, but the current system is on the advantages of scale. The result and consequently possibly leading to only a first step towards an effective is high inefficiencies, particularly among social instability. carbon levy. China’s industry is largely the thousands of small and mid-sized based on coal, which makes it difficult companies. Many companies are The NDRC implemented a first- to implement an extensive carbon unwilling to make the initial investments tier electricity-pricing system for tax system, leading to higher energy for more efficient systems and energy- households in the first half of 2012, costs without a major impact on saving equipment. giving local authorities the right to economic growth. It seems unlikely decide thresholds of the first tier. This that the Chinese government will push To achieve the Five-Year Plan’s targets, pricing mechanism was primarily for a carbon tax, but instead will most China must boost energy efficiency. established to control energy demand probably promote GHG credit trading The government has established an peaks and save energy, but not and emission quotas for unit products. extended version of the former Top- to reflect the real price for energy. 1,000 Energy-Consuming Enterprises Controlling energy demand peaks China’s national power grid is in the programme, which now covers 10,000 is necessary, as China’s utility is not hands of two state-owned enterprises: companies, to tackle the issues of very flexible and has difficulties with State Grid Corporation of China, inefficiency and high CO2 emissions. fluctuating demand and supply. which supplies electricity to most The initiative, along with others such as Instead of enhancing the electricity of northern and north-east China; the Small Plant Closure Programme, infrastructure’s flexibility, which would and China Southern Power Grid can create higher efficiency if cause tremendous investment costs, Corporation, which supplies most implemented. China tries to ease fluctuation in of south-east China. This monopoly demand via pricing mechanisms. A structure hampers competition. The However, the most important enabler market-driven price for energy, and government has tried to foster direct would be a pricing mechanism that consequently a significantly higher selling of electricity to consumers from reflects the real energy costs. Prices price, is unlikely to emerge in China independent power producers (IPPs), for electricity and refined oil are not in the near term. However, a rise in but faces resistance from the politically based on the market but controlled energy prices will occur in the medium well connected utility companies. by the National Development and term and will pose a tremendous trial Reform Commission (NDRC), a for industry if it does not become more macroeconomic management agency energy-efficient. under China’s State Council. Costs

50 Energy Harnessing: New Solutions for Sustainability and Growing Demand As it tries to rebalance economic Meanwhile, Europe and the US have China’s electric-vehicles market is growth, the government is emphasizing begun antitrust investigations against forecast to reach 1.15 million units in emerging industries and power-related China’s solar industry to protect their annual sales and total ownership of 5 sectors. Power-generation equipment own, which have been hit hard by million units by 2020. The Department and electrical vehicles are two cheap Chinese competition. The loss of Science and Technology has examples. In keeping with renewable of the EU market, which is vital to launched an aggressive five-year plan energy priorities set down in the 12th China’s solar industry, would be the to develop electric vehicles, which Five-year Plan, further hydropower last straw. To protect its wind and solar have been named one of seven key projects, onshore and offshore large industries, and fulfil its own emission emerging industries. The government wind-power bases and solar energy targets, China therefore needs to plans to invest RMB 115 billion (US$ plants are scheduled. develop the market at home. 18.7 billion) in energy saving and new EV technologies between 2011 and So far, the domestic market for wind Even after Japan’s Fukushima 2020. However, the time frame for and solar energy is weak, and their accident, nuclear power is promoted ramp-up may shift due to “growing development faces major hurdles. in China, which continues to have pains” – for example, low customer About 40% of installed wind-power ambitious nuclear plans. Mainland acceptance because of inadequate capacity currently is not connected China has 14 nuclear power reactors, infrastructure for charging, or safety to the grid, and offshore wind energy with more than 25 under construction concerns after an electric taxi burst into has limited potential as China’s deep and several more planned. The current flames in Hangzhou in April 2011. It is shelf restricts possible locations and upcoming plants are expected to also questionable whether developing for offshore wind parks. Moreover, increase production capacity to 70-80 an EV market will benefit the renewable power plants (and suitable GW by 2020 from 11 GW today.175 environment and the climate, because wind and sun conditions) often are The most significant challenge is that much of the electricity produced in situated in areas without large demand the plants under construction face a China is by burning high GHG-emitting (e.g. solar power plants in Tibet, Inner huge shortage of skilled workers over coal. Mongolia and Xinjiang). Long-distance the next several years. Other major transmission lines are needed, which trials include nuclear safety issues At the social level, people in China often means low economic profitability and an insufficient domestic uranium are becoming increasingly aware of of these resources. supply. However, China has already environmental issues and progressively signed deals for uranium supply from worried about the health effects of air On the global market, China is the Canada, for example, and is buying pollution in their cities. The Olympics in largest producer of wind turbines and into Namibia’s uranium mines. 2008 were a trigger. The government’s solar panels. But the success of its efforts to reduce the smog and chronic solar industry, especially in Europe and air pollution in Beijing, including by the US, means China now has excess temporary closing many industrial production capacity of solar panels. facilities during the games, made people realize how clean the air could be if industrial emissions were cut. Overall, though, the budding awareness is not yet at a stage to drive changes in energy politics, as economic growth is still considered the country’s first priority (to create jobs and wealth).

Unconventional fossil-fuel reserves. China has a huge hunger for energy to foster its economic growth. Energy security therefore is vital, as demand cannot be met by domestic sources and a reliable supply is essential for further economic development. For example, China is the world’s biggest consumer of coal (49.4% of total global consumption in 2011176) and currently cannot supply enough coal from its sizeable domestic resources (13.3% of global reserves177). More than half of China’s oil supply currently is imported, and though gas imports are smaller these also will climb in the future. Besides efforts to secure resources abroad and to develop non-fossil fuels,

Energy Harnessing: New Solutions for Sustainability and Growing Demand 51 China has substantial plans to develop – Build new infrastructure. It but in China the geology makes domestic coal and unconventional is proposed to construct gas it more complicated to produce fossil-fuel reserves. It aims to increase transmission pipelines in shale- the gas. Chinese companies lack natural gas’ share of total energy gas exploration and development the technological expertise and consumption from 4% in 2010 to 8% zones, and grant shale gas access the lessons learned from the US in 2015. to existing pipelines. apply only partially in China. The hit rate is still low, when drilling for Two types of unconventional gas The government wants to develop unconventional gas reserves; the reserves mainly can be found in China: CBM/CMM production to reach 22 capabilities for horizontal drilling are shale gas and coal bed methane billion cubic metres (m3) in 2015. limited, and the abundance partly (CBM) or coal mine methane (CMM). To encourage exploitation, China’s proves to be poor. According to the 12th Five-year Plan, national energy agency plans to double – Pipeline infrastructure and a continued increase in shale gas- the subsidy for CBM production to access. China’s natural gas pipeline based exploration is expected. The RMB 0.4 per m3 from RMB 0.2 per m3. infrastructure is insuffi cient and government is realizing several policies the current construction rate is aimed at encouraging its development: Experts believe the government’s too slow. Furthermore, a few large – Classify shale gas. Shale gas was targets for unconventional natural gas companies, mainly China National classifi ed as a separate “mineral might be too ambitious under current Petroleum Corporation (CNPC), resource”, breaking the exclusive conditions, and require more time control the pipelines. CNPC rights for exploration of national oil and effort to scale up. The shale-gas has rejected other companies’ companies. reserves are not well explored, and requests to use its existing pipeline – Complete shale-gas assessment. current volume estimates might not infrastructure. Plans exist to complete a prove true. – Water scarcity. Substantial nationwide assessment of shale gas water scarcity exists near shale by 2015 defi ning 30-50 shale-gas Several major obstacles also need to gas-rich areas in China’s north- prospect areas. be overcome to foster development west. Technologies currently are – Speed up exploration and of unconventional gas reserves. In the developed to reduce the amount development. Plans exist to build case of shale gas, these include: of water needed to drill for the gas. 19 exploration and development GasFrac, a Canadian company, bases in Sichuan province within – Diffi culty in exploitation, is experimenting with liquefi ed the next four years. poor abundance and lack propane gas to substitute water; – Set incentives and market based of technological expertise. the gas evaporates underground pricing. Plans exist to release Geological formations in China and returns to the surface for re- favourable fi scal incentives to shale- containing shale gas differ from use.178 gas producers and set a market- those in the US. Access to shale based pricing regime. gas is relatively easy in the US,

Figure 28: CBM/CMM Production during the 11th Five-Year Plan

Source: CUBM 2011, Oxford Institute for Energy Studies, A.T. Kearney analysis

52 Energy Harnessing: New Solutions for Sustainability and Growing Demand Plans to foster CBM/CMM production ineffi cient industrial facilities). independent. China is also aggressively were announced several years ago, – Major efforts are under way to securing reserves abroad, and buying but a boost has not yet been seen. explore unconventional natural gas African mines or Western know-how. The previous Five-Year Plan had aimed reserves, but signifi cant obstacles to produce 10 billion m3. Figure 28 could stymie the increase of natural Both Europe and China face illustrates that only 8.9 billion m3 was gas’ share of total consumption as considerable challenges in energy reached, of which only 3.4 billion m3, planned. effi ciency, to not only reduce climate or 38%, were commercialized. The – The government acknowledges change but also remain competitive other 62% was either wasted or used the need to transform the energy in global markets. In spite of having differently, e.g. for electricity production landscape, and the 12th Five-Year one of the most advanced energy via gensets in mines. Plan sets specifi c targets. However, landscapes worldwide – which is much change will take time and further more effi cient than China’s – Europe Several reasons prevent success. efforts are urgently needed. still needs to enhance its energy As with shale gas, an insuffi cient – The development of the energy effi ciency. One way would be to set pipeline infrastructure hampers CBM/ landscape will also depend on up a pricing mechanism that refl ects CMM production. But the biggest future economic growth. Since the real costs of energy. Neither region challenge is the monopolistic structure this currently is diffi cult to forecast, has such a tool. Europe has market of the industry. China United Coalbed estimates of advancements in mechanisms in place, but the actual Methane (CUBM) was established in energy are equally hard to make. movement of energy prices is highly 1996 as a state vehicle to develop dependent on political decisions CBM/CMM. It has exclusive rights The European and Chinese (for example, Quotas, RES targets, to explore and produce CBM/CMM Energy Landscapes Differ Nuclear Exit, Grid Expansion). In China, in cooperation with international Signifi cantly but Face Similar regulators largely set prices. companies. Even companies producing coal from a certain mine do Challenges The environmental impact of energy not have the licence to produce CMM production without doubt is greater from the same mine. This monopoly The energy landscapes of Europe and in China than it is in Europe, due structure has led to ineffi ciency, partly China differ signifi cantly. Both face to China’s far less energy-effi cient because CUBM in 2003 became a different challenges, though also some industry and the predominant use joint venture between CNPC and China common ones. of coal in energy. Even so, Europe, Coal, neither of which put CBM/CMM as one of the world’s largest energy- production high on their agendas.179,180 A major variation is in energy demand. consuming regions, has to heighten its China’s government is addressing this China’s growing economy will lead efforts to protect the environment and issue and slowly curtailing CUBM’s to a substantial surge in energy the climate. Both Europe and China monopoly. consumption in coming years, while already address this issue (for example, Europe will show a modest increase. through policy frameworks), but further Chinese Energy Landscape This means that Europe “only” has to action is required. Summary maintain its existing infrastructure and transform it step by step. China, on In both regions, a key question – China has established a reliable the other hand, has to transform its is that of the political will. Further energy infrastructure that enables energy landscape and invest heavily technological developments are its current economic growth. in necessary infrastructure to manage needed, but existing technology – Despite large domestic rising energy use. already provides most tools. The resources, China has lost its energy sector is largely affected energy independency, due to its Europe has the advantage of a mature by governmental regulations, and remarkable economic growth and energy infrastructure, while China’s lobbying from various groups makes it the subsequent increase in energy is still emerging, and is hobbled by diffi cult to change the current status. consumption. Energy security is very low energy effi ciency, insuffi cient Whether it is to increase the share of therefore at the top of Chinese transportation structure, and a less- renewable energies, construct new policy-making. developed power set-up. The power transmission lines or foster distributed – The energy sector is centralized and infrastructure in Europe can cope energy solutions, political will is crucial. monopolistic, and greatly affected with greater fl uctuations in supply and The greatest challenge for both by government regulations. demand than can its counterpart in regions therefore is policy rather than – Increasing energy effi ciency China. technological breakthrough. will be vital for China to sustain economic growth and become Another dissimilarity is the availability of environmentally and socially viable. domestic fossil-fuel reserves. Neither Different instruments will be required region is energy- independent and to transform the energy landscape energy security is important for both. accordingly. These include: energy But unlike most countries in Europe, prices that refl ect actual costs, a China holds noteworthy energy carbon tax system, and investments resources, including coal and shale in infrastructure (e.g. replacing gas, and could be largely energy

Energy Harnessing: New Solutions for Sustainability and Growing Demand 53 Developments in Energy Harnessing Offer Opportunities but Also Pose Challenges to Most Industries

Industry accounts for about one-third an energy-intensive component demand in developing markets, the of the world’s energy consumption, of manufacturing and a supplier automotive industry is crucial to the and although usage is overwhelmingly of supply-side, energy-efficient shaping of future energy needs. concentrated in basic and heavy technologies. As a result, chemicals –– Construction. This industry industries, all companies should make companies have a dual mandate to encompasses infrastructure as energy management important. improve their own energy efficiency well as commercial and residential and develop the next generation of buildings, which represent a large The results of a 2011 survey of solutions to increase energy supply. percentage of aggregate energy businesses and consumers on energy –– Electricity. As generators, use. By embracing innovative efficiency and use, demonstrated transmitters and distributors, concepts in construction and overwhelmingly the emphasis placed electricity utilities are involved in design, the industry has an on energy management across a nearly every facet of the Energy opportunity to slash aggregate variety of industries.181 According to the Harnessing value network. energy consumption. survey by Deloitte Touche Tohmatsu, Consequently, it is imperative one of the Big Four professional that the utilities collaborate with Chemicals services firms, 90% of companies other stakeholders to develop and reported having electricity and energy commercialize innovative energy Resources and energy are critical management goals. Most commonly, solutions. inputs for the chemicals industry. companies sought to cut electricity –– Renewable energy. As suppliers of Over the past few decades, the usage or costs by 25% within two to renewable energy technology, these industry has greatly reduced its energy three years; 24% of them expected companies will develop innovative intensity. It also has been involved in future regulations for better energy solutions that help to satisfy a creating several products to facilitate management. In addition, 53% of growing energy demand. These the expansion of energy supply. The companies reported reducing electricity solutions also will help to mitigate industry was instrumental in developing use because it is “the right thing to do”. the harmful environmental impact of fluids that enable deeper, safer drilling most fossil fuel- and nuclear-based and hydraulic fracturing for shale- The following section provides an Energy Harnessing. gas production. Because of their overview of specific industries and –– Automotive. This industry is a involvement on both the demand and highlights the ways in which they manufacturing component that supply sides of the energy equation, interact with the Energy Harnessing deserves particular attention chemicals companies will continue to value network, in terms of demand and because of its role in generating be fundamental to the future of Energy supply. The industries are: demand for transportation Harnessing. fuels. With a rising emphasis –– Chemicals. This industry occupies on fuel economy and emerging a unique position in the Energy technologies (such as hybrid and Harnessing value network as both electric vehicles), as well as surging

54 Energy Harnessing: New Solutions for Sustainability and Growing Demand Challenges –– Development of new materials industry’s future development. Many –– Access to feedstock. Chemicals that increase energy efficiency. utilities are already adjusting. For companies face uncertainty related New materials have the opportunity example, some incentivize customer to feedstock availability and prices, to promote energy efficiency. investment in green construction, which will be driven by several For example, structural foam heating and lighting; construct EV- factors: decoupling of oil and gas has reduced automobile weight charging stations, or encourage prices, energy security concerns, by an average of 36 lb (16.3 efficiency during peak periods through increased focus on carbon intensity kg) and helped to increase fuel time-of-use pricing.184 and as-yet unclear commercially economy.182 Future opportunities viable alternatives, such as include: new catalysts for natural Challenges biomass, coal-to-liquids and others. gas and hydrocarbon conversion, –– Infrastructure development. The –– Changing end-markets. Changes and conversion of ethanol to integration of renewable energy in end-markets driven by the gasoline; new enzymes for cellulosic sources often requires upgrading demand for energy-efficient and conversion; feedback and sensing of existing infrastructure, from green products will require to optimize the electrical grid; and new offshore wind parks, new chemicals companies to develop new materials for batteries and transmission lines to large storage new solutions. solar PV cells.183 The development solutions. Huge investments of a catalogue on emerging also are necessary to replace old Opportunities technologies and materials for infrastructure, such as unreliable –– Reducing costs. This is possible Energy Harnessing could help transmission lines and inefficient through energy-efficient processes. the industry to select the most gas- or coal-fired power plants. –– Access to feedstock from liquid- promising for further development. A cross-stakeholder approach is rich shale gas. Production of necessary to fund and realize those liquid-rich shale gas in the US Electricity projects, as a single participant offers the opportunity for the cannot cope with the outlay, domestic chemicals industry to As producers, transmitters and especially in times of financial grow significantly, due to low-cost distributors of electricity, utilities play pressure. feedstock (mainly ethane, propane, a major role in the Energy Harnessing –– Volatile raw material prices. butane and condensate). value network. Depending on the Volatile prices for fossil fuels, –– Increasing recycling. Chemicals regulation in a given locality, utilities’ especially gas, are a major companies have the opportunity to interests and actions can vary widely. challenge for utility companies. introduce new processes to recycle In many instances, utilities have an They have to decide on large raw materials or extract additional incentive to sell as much electricity as investments, such as new power value from used articles possible (without harming the electrical plants that will last for up to 40 –– Introduction of renewable raw grid), which might conflict with larger years, even though forecasting materials. Chemicals companies societal goals to cut energy use. future prices for fossil fuels is can develop and use renewable However, such behaviour is far from difficult. For example, the current raw materials to create green, universal and certain policies, such as low price of natural gas in the US sustainable products. Renewable decoupling, discourage it. Regulations would make construction of new materials can slash products’ to boost energy efficiency and use gas-fired power plants economically carbon intensity and promote more renewable energy sources exist unfavourable. However, gas prices environmental sustainability. in many countries and will drive the have always been highly volatile and

Energy Harnessing: New Solutions for Sustainability and Growing Demand 55 increases are expected, with many next generation of energy solutions Opportunities wildcards influencing the outcome. to meet growing energy demand –– Increasing distributed energy –– Regulation. Utilities are often highly and reduce society’s global carbon generation and grid parity. These regulated. The utility companies footprint. drive growth of renewable energy are able to influence policy to a sources such as wind and solar. certain degree but their actions Challenges –– Policy support fosters are largely dictated by regulations. –– Competition with fossil fuels. renewables in the market. For example, many utilities Except for hydropower and some Incentives, such as subsidies would prefer to invest directly in wind projects, most renewable and carbon pricing, bolster the renewable solutions, but regulation energy sources have not yet economics of renewable energies can restrict their ability to make reached cost-parity with fossil and help them to reduce costs certain decisions and take certain fuel-based sources. Indeed, and compete against other energy risks, which can discourage low-cost shale gas (with a lower sources. investment.185 carbon footprint than coal or oil) –– Collaboration with industry will provide significant competition members. Renewable energy Opportunities for renewables for a long time. To companies can partner with –– Uniquely situated to provide become truly viable, renewables other industry members, such solutions. Utilities are uniquely must reduce cost and operate as manufacturers, power situated to innovate for the independent of government companies and utilities, to develop energy value network. They subsidies and other financial commercially viable renewable generally have access to capital, incentives. energy solutions. understand customers’ needs and –– Access to capital. Many renewable are established members of their energy companies are small- Automotive communities.186 They are also well growth and require financing to positioned to work with regulators survive. Securing funds is often a From 2012 through 2016, the and manufacturers to determine problem due to the capital intensity automotive industry’s revenue is standards, pricing models and of developing and scaling new projected to rise at an annual rate regulations for new technologies. technologies, the risk associated of 4.6%, driven largely by growth They can provide the competence with renewable energy ventures, in emerging countries, especially and investment necessary for the and an uncertain path to economic in Asia-Pacific.188 Several trends development of distributed energy viability. are likely to change the nature of generation. –– Lack of storage options and consumer demand in the industry. The –– Development of storage insufficient transmission lines uncertainty around future oil prices, solutions. Large-scale storage restrict integration. To allow for tighter regulations (such as emissions solutions are essential for renewable demand shifts and to balance the standards) in the developed world, and energy sources and utilities are in a base load, renewable energies like cost-consciousness in the emerging unique position to test and deploy solar and wind require large storage economies will greatly encourage these technologies (once they are options to counteract intermittency. car companies to create more fuel- 187 commercially viable). Storage Renewable energies also often efficient and environmentally friendly technologies also allow utilities to need to be transported over large vehicles. These trends will create operate more efficiently. distances (if produced in offshore multiple opportunities: for example, the –– Integration of smart grid wind parks, for example) and adoption of alternative fuels (including technology. Smart-grid technology therefore require new transmission electricity), the use of lighter and more has the potential to dramatically lines that can transport electricity energy-efficient parts, the redesign improve the efficiency of the with minimal losses. of manufacturing processes, and electrical grid. In addition, such –– Shifting regulatory and policy improvements in the supply chain. technology will facilitate the environments. Renewables often These trends, along with general incorporation of intermittent rely upon government subsidies advances in manufacturing process, renewables, such as solar and and other policies to make them have the potential to slash worldwide wind. competitive with other energy reliance on transportation fuels and sources. When a country or region reshape global energy demand. Renewable Energy is in financial trouble, these policies are often modified or abandoned. Challenges Renewable energy companies range This uncertainty makes potential –– Increasing regulation. Stringent from start-up ventures that focus investors wary of renewable energy emission regulations, such as on R&D of new concepts to large- companies, reducing the latter’s the US’ Corporate Average scale producers of alternative-energy access to capital and limiting the Fuel Economy and mandatory technologies, such as solar panels and pursuit of innovative ideas. European car fleet targets, force the wind turbines. Across the spectrum, industry to focus on improving fuel these companies are developing the efficiency.

56 Energy Harnessing: New Solutions for Sustainability and Growing Demand –– Cost of green technology. Green Construction –– Establishment of national and technology, such as EVs, need local building regulations. to cut costs further to become Between 2000 and 2010, energy Establishing policies in coordination economically viable. consumed globally by buildings with the energy and climate change –– Lack of required infrastructure increased from 397 quadrillion Btu to policies of nations and localities for new technologies. New 522 quadrillion Btu.190 By 2030, the will create a baseline for energy technologies, such as EVs and UN Environment Programme estimates efficiency and set expectations. alternative fuels, require additional that GHG emissions from buildings will This should be accompanied with infrastructure to facilitate mass reach up to 15.6 billion tons in 2030 appropriate training and education, adoption. EVs in particular need from energy used to heat, ventilate, a focus on defining baseline charging stations and connection to cool and light buildings – double the performance measurements, as the electrical grid. Ways to enable 8.6 billion tons produced in 2004.191 well as a mechanism to enforce the necessary investments need to Fortunately, the UN Programme reports compliance. be found. that energy consumption in new and –– Rising transportation fuel costs. older buildings can be cut by 30- Strategic Relevance for Industries Rising fuel costs are boosting 50% without significant investment.192 Summary demand for more fuel-efficient Globally, these reductions could have vehicles and creating opportunities an enormous impact. In Europe, –– Industry plays a dual role in the for alternative technologies such as lowering energy use in buildings by Energy Harnessing value network EVs. 30% would result in an 11% reduction as a consumer and a developer of in overall energy use; this would supply solutions. Opportunities represent half of Europe’s 20-20-20 –– Across all industries, policy and –– Cost reduction. This can be targets – achieving an improvement of regulation, an emphasis on cost enabled through energy-efficient 20% in energy efficiency. reduction, and changing consumer processes. preferences will drive efforts to –– Commercialization of fuel- Challenges improve the energy efficiency of efficient automobiles. Automotive –– Inadequate regulatory processes and end- products. companies are focusing on environment. Some regions For example, the automotive developing lighter auto parts, such lack energy-efficiency regulations industry will continue to cut energy as lightweight plastics, to use and others change their policies consumption in the manufacturing instead of steel. Lighter vehicles frequently, particularly during process, even as it creates more would be more fuel-efficient. BMW’s bad financial times, which deter fuel-efficient vehicles. i3 model aims to be the first fully investment in energy-efficient –– From a supply perspective, emissions-free vehicle, with a target construction. renewable energy companies, in to use 50% less energy and 70% –– New sustainable building collaboration with industries such less water than typical BMW Group materials. In many regions, as chemicals, will develop the next assembly processes.189 construction companies use generation of energy solutions. –– Expansion of alternative fuels. energy-intensive building materials. –– The unique position of utilities Companies are increasing their Developing sustainable materials to as producers, transmitters and investments in new technologies substitute the unsustainable ones distributors of electricity gives them to produce cars that run on flex can be expensive. an integral role in developing and fuels, as well as hybrid and electric integrating new energy solutions vehicles. These cars will help to Opportunities from a demand and supply address emission standards and –– Cost reduction. This can be perspective. regulatory reforms that require enabled through energy efficient improved efficiency. They may have processes. the potential to reduce dependence –– Innovations for reducing the on foreign oil (e.g. by using biofuels energy footprint. A number of or electricity generated from natural technologies exist to improve the gas-fired power plants or renewable energy efficiency of buildings, energy sources). including new forms of insulation, –– Collaboration with non-traditional energy-efficient windows, heat players. Such collaboration will be pumps, high-efficiency gas boilers important. Partnerships with battery and building-integrated PVs.193 manufacturers, electrical utilities and These innovations can be applied to governments will help companies to new construction and can be used foster innovation, as well as share to retrofit existing buildings. the costs and risks associated with developing new technologies.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 57 The Role of Collaborative Innovation in Energy Harnessing

Megatrends, changing consumption maximum creativity to develop best innovation takes advantage of out- patterns and an increasingly complex, solutions fast, and link idea creation of-the-box sources, such as online integrated global ecosystem require and evaluation. surveys, street interviews, university a new collaborate approach to forum discussions and journalistic innovation. Chemical companies and Collaborative innovation requires dialogues. their non-chemical partners are being cooperation along the entire process asked to cooperate across traditional of innovation management, from Personal relationships and meetings value chains and to apply their scouting/ idea generation, product/ might become crucial to establishing knowledge, capabilities and expertise service development and launch a trusted partnership and building a outside their usual areas of experience. of new offerings to continuous collaborative platform. Exploiting the full New value networks, such as Energy improvement. Cooperation also can potential of digital communication while Harnessing, offer signifi cant potential be restricted to certain steps in the continuing face-to-face interaction for those players able to leverage innovation management process. is, and will continue to be, a major approaches that are cross-industry and challenge for collaborative innovation. cross-value chain in order to develop Collaborative innovation targets the Establishing the right structures for advanced solutions to the energy best available and expected know- tomorrow must be started today. conundrum. how, resources and competences, the sharing of risks (and costs) of Collaboration is essential for future Collaborative innovation. innovation, and the securing of a growth in many industries, including Collaborative innovation requires competitive edge (through talent, chemicals. In Europe’s chemicals two or more players (e.g. industry, resources or intellectual properties) in companies alone, for example, government, academia, research order to enhance the effectiveness of collaboration could trigger additional institutes, customers, regulators and/ innovation and speed up the time-to- sales of more than US$ 30 billion or non-profi t organizations) to be profi t. annually, according to a recent market partners in developing new products, survey of A.T. Kearney.194 According to processes, services or even business This requires an open innovation the Chemical Customer Connectivity models that address an emerging approach and mind-set, as well as the Index (C3X), a regular market panel to consumer need. Collaborative right collaboration and legal framework assess short- to long-term trends at innovation often includes partners from to protect the interests of all partners. the interface between chemical players different regions and builds up into a Changing means of communication, and their direct customer industries, network. (Figure 29 shows an example e.g. the Internet and social media, 90% of the chemical manufacturers of a collaborative innovation network.) provide opportunities and risks that and 82% of their customers expect Compared to traditional approaches, need to be managed. Collaborative collaboration to intensify and become collaborative innovation mobilizes the most important value-lever in the next fi ve years.195

58 Energy Harnessing: New Solutions for Sustainability and Growing Demand Figure 29: Global Innovation Network: An Illustrative Example

Collaborative innovation in Energy These factors create opportunities for Ongoing pilot projects include Harnessing. In the Energy Harnessing industry to develop new solutions and E-Energy, a funding programme value network, innovation is required leverage new technologies to achieve of Germany’s Federal Ministry of to successfully transform the energy greater energy effi ciency. However, Economics and Technology and landscape, and meet the future companies contend with higher costs Federal Ministry for the Environment, challenges of sustainability and surging and risks of innovation, as well as Nature Conservation and Nuclear demand. The World Resources relatively long time-to-profi t. While Safety. The term “e-energy” stands for Institute characterizes the need for chemicals players have kept innovation the digital networking and optimization innovation in the energy sector as budgets almost at a comparable of the energy supply system, from follows:196 absolute level, innovation spend has generation and distribution to – Many opportunities to innovate exist gone down relative to revenues in consumption.198 The project’s goal is because technologies are nascent. recent years. to strengthen the effectiveness of the – Very large investments are required existing supply infrastructure, develop for innovations and can take a long Internet of energy. In the future, the use of renewable energy sources, time to pay off. more energy will be produced and reduce GHG emissions. To achieve – New technologies cannot using distributed sources, greater success, all value-adding parts of the charge a premium because they energy effi ciency will be needed, energy value network are covered and integrate with the mature power or and the generation, transmission different stakeholders mutually develop transportation-fuel sectors. and distribution of power will be solutions.199 – New entrants are few, and large increasingly decoupled. This calls for global players have a role. comprehensive communication and Six model regions in Germany have – Knowledge is often tacit and comes interaction between the different energy been selected for research and for from diverse sources such as stakeholders – utilities, industries and developing solutions for a future energy scientifi c research, suppliers and private households, among others.197 system based on ICT. Each region customers. The “Internet of energy” concept can will focus on a different aspect.200 – Innovators tend towards a provide solutions. New information For example, a consortium made geographic clustering, often near and communication technologies up of EnBW, ABB, IBM Germany, customers. (ICTs) offer an opportunity to boost SAP, Systemplan and the University communication between players to of Karlsruhe is working together to use energy more effi ciently and better develop a model house in MeRegio201 balance demand and supply. that generates power using a

Energy Harnessing: New Solutions for Sustainability and Growing Demand 59 photovoltaic or mini combined heat and power (CHP) system. The power generated is then either fed into the grid or used to charge the electrical vehicle parked in the garage. If needed, the car’s battery can also feed power into the grid. ICT interlinks the house with a smart-grid platform and the consumer can view the process via an Internet portal.202

The model regions illustrate how a collaborative approach can work across industries and stakeholders in Energy Harnessing. However, sustainable cooperation (especially between companies without governmental support) is needed, as is the development of business models and ICT solutions.

Other examples. The ADELE project is another example of a partnership between different companies and research institutes. It was launched in 2010 by RWE Power, a German utility company; General Electric, a US conglomerate; Züblin, a German technologies. Intel Capital, managed the partners have similar corporate contractor in the field of building by Intel Corporation, is one of the cultures that support innovation. construction and civil engineering; and largest such funds in the world. Since A lack of real openness among Germany’s National Research Centre 1991 it has invested US$ 10 billion in different stakeholders, often due to for Aeronautics and Space. The goal 1,200 high-tech companies, most of potential intellectual property conflicts, is to develop an adiabatic CAES plant which were small businesses at the can hinder development of new 204 for electricity supply, with a storage time. Among them was Grid Net, technologies. capacity of 1 GWh and electrical a US-based smart-grid company. power of up to 200 MW. 203 In ADELE, Together, the two companies have Four elements are vital for positive companies across the entire value created a smart energy meter using collaborative innovation: network are working together with Intel’s processing chip and Grid Net’s –– Trust among collaborators. a public-funded research institute to software. To launch the meter, they The various parties should trust develop an efficient and suitable grid- have joined a consortium (along with one another and have a clear scale energy technology. Trans Grid, IBM, EnergyAustralia understanding of what each and others) to support “Smart Grid, offers to, and seeks from, the Numerous other collaborations exist. Smart City”, a demonstration project collaboration. It was recently announced that Tesla in Australia to test the smart grid and –– Stable and contractually fixed Motors of the US would develop an smart meters across at least 30,000 legal framework. An agreed- 205 electrical powertrain for Daimler’s households. upon framework should define the B-Class electric drive vehicle, after both roles of each of the collaborators companies had worked together on the As the examples show, collaborative as well as the common goal that electrified Smart car. In a joint venture, innovation is gaining importance. unites them. This gives clarity to Samsung and Bosch collaborated on However, more value network ventures the development arrangement and lithium-ion batteries – two suppliers and partnerships are needed. goals. Each collaborator should cooperating to develop new products. bring a unique advantage in terms Joint ventures between OEMs and Key success factors. To be of networks, expertise, resources or suppliers also exist, such as the successful, collaborative innovation customers. partnership between A123 Systems, requires aligned objectives and –– Clarity around how the results a US lithium-ion battery maker, and substantive commitment from all of the collaboration will be used SAIC Motor, a Chinese state-owned parties, as well as a willingness to and divided. Upfront negotiating automotive manufacturing company, to equitably share risk and reward. of intellectual property rights, costs, cultivate new solutions to tap China’s Customer-supplier relationships targets and key functionalities market for hybrid and electric vehicles. provide benefits for both sides, but allow partners to collaborate freely. solving arduous problems necessitates Terms for use of the collaboration’s Many large companies have venture deep levels of trust and commitment. benefits by each partner, within or capital funds that invest in new Collaboration is most effective when outside a defined field, should be clarified.

60 Energy Harnessing: New Solutions for Sustainability and Growing Demand –– Clear structures, processes and Time for action. Collaborative The Role of Collaborative Innovation resources. It is critical to allow for innovation is important throughout in Energy Harnessing Summary creativity as part of the process. the entire Energy Harnessing value But once a concept is proved, network. New technologies and –– In the chemicals and industrial- the partners should have a well- solutions – hence collaborative products sectors, traditional defined, well-resourced plan for innovation – are urgently needed in innovation approaches usually are development and completion. production of shale gas from difficult no longer suitable to mitigate the Success requires a disciplined geographical formations, creation of current and future challenges of commitment to the plan and more efficient solar panels, smart-grid Energy Harnessing. dedicated personnel who can applications, and advanced grid- –– Collaborative innovation is an carry out the project to conclusion, scale and e-mobility energy storage alternative solution in which two or with enough flexibility to adapt to solutions, among other areas. To more entities cooperate to research changing requirements of the value innovate quickly in these fields will be and develop products, and share network. important, for companies to stay ahead costs, risks and rewards. of the curve, for governments to ensure –– Successful collaborative innovation All collaborators should be active energy security, and for communities requires trust among partners, a participants, instead of mere reviewers to protect the environment and climate. clear definition of the cooperative of the results of a partner’s efforts. arrangement, goals, use and Some relationships become formal division of results, and focused business arrangements over time; processes and resources. others run their course and the collaborators part ways.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 61 Conclusion

The future of Energy Harnessing To satisfy the world’s hunger for limited) and their domestically available is fundamental to global economic energy, more innovative solutions are resources. Distributed solutions (e.g. growth and sustainability. It will needed. The energy demand of the solar panels on rooftops or distributed determine how societies live and developed world will grow relatively energy storage solutions) will be will profoundly affect the world. slowly over the long term, but that of important for all countries to establish Several megatrends, such as climate the emerging economies will surge. a sustainable new energy landscape. change, growing energy demand and This extraordinary increase in demand To balance supply and demand, limited resources, will urge people will have profound implications for stakeholders in each region will need to to adjust their energy landscapes the energy landscape; meeting the inventory available resources, develop and address future energy needs. demand will require a global effort. sustainable energy sources and Developing an energy background Part of the solution will come from increase energy efficiency. that is economically, socially and growing supply, but fulfilling demand environmentally sustainable is essential. will be impossible without substantial Despite the local nature of solutions, Renewables must dominate the global gains in energy efficiency, not only in the importance of global cooperation energy landscape because traditional developing countries such as China must not be ignored. Technologies sources such as coal, crude oil and but also in developed regions such as and best practices developed in one natural gas are not only harmful to the Europe. region can, and should, be leveraged environment but also are finite in the in another. For example, solar-powered long term. Additional technological In the coming decades, industries such electronics created in the developed developments, new business models, as construction and manufacturing will world can, and should, be applied financial capital and, most importantly, provide the next generation of energy- in emerging countries with limited political will are crucial to make efficient products for consumers. infrastructure. Collaboration, however, renewable energy a success story that From increased fuel economy to must be more regional – it should subsequently transforms the energy solar-powered cell phone chargers, involve governments, industries, landscape. products will focus on improving non-government organizations and energy efficiency at multiple levels from academia across the value network. In the short term, the energy vista personal power to national grids. Only by working together, regionally will change because of, for example, and across industries, will solutions the discovery of abundant shale-gas Energy storage is one link between be developed to address current and reserves. The energy outlook and rising demand and supply of renewable future energy challenges. economic projections for the US energy. Verified storage techniques already have fundamentally altered such as pumped hydro storage, The urgency to transform the due to shale gas. The country is now cutting-edge battery and super- world’s energy landscape – and positioned to become a major natural capacitors will be required to integrate develop solutions to mitigate the gas producer, reduce its dependence renewable energy into the electrical challenges along the way – cannot be on foreign oil and develop a significant grid, power buildings and houses, overemphasized. Time is running out to energy cost advantage over other and fuel vehicles. Energy storage will prevent a climate change that will have nations. The United Kingdom, too, is solve several problems, ensuring the a potentially tremendous impact on determined to use shale gas to restart technical substitutability of renewable global society and the planet. It is time its economic engine. It remains to be energy sources and enabling wide for action. seen what kind of shale-gas story other distributed generation. countries such as China, Mexico and South Africa will have. Natural gas In the absence of these advances, without doubt will be vital for the shift however, the short-term future of from a high- to low-carbon energy Energy Harnessing must be examined, landscape, and will be the “transition” given the current technological fuel. Two main reasons behind this: landscape. Because of the costs of first, flexible gas-fired power plants are transportation and/or transmission, the backup for intermittent renewables; Energy Harnessing will always be and second, gas is the fossil fuel with a global issue with regional or local the lowest emission intensity. Hence, solutions. Fundamentally, countries gas could replace storage solutions can be distinguished based on the until emerging technologies are fully state of their energy infrastructure (for feasible. example, developed, developing and

62 Energy Harnessing: New Solutions for Sustainability and Growing Demand Endnotes

1 US Energy Information Administration, International Energy Outlook 2011.

2 Ibid.

3 Rockström, J et al, Planetary Boundaries: Exploring the Safe Operating Space for Humanity, Ecology and Society, 2009.

4 The nine planetary boundaries are: the stratospheric ozone layer; biodiversity; chemicals dispersion; climate change; ocean acidification; freshwater consumption and the global hydrological cycle; land system change; nitrogen and phosphorus inputs to the biosphere and oceans; and atmospheric aerosol loading.

5 US Energy Information Administration, International Energy Statistics 2010 and International Energy Outlook 2011.

6 United Nations, File 1: Population of Urban and Rural Areas and Percentage Urban, 2011; World Urbanization Prospects, the 2011 Revision, 2012. US Energy Information Administration. http://esa.un.org/unpd/wup/CD-ROM/Urban-Rural- Population.htm.

7 International Energy Agency, World Energy Outlook 2011.

8 Ibid.

9 US Energy Information Administration, International Energy Outlook 2011.

10 Murray, J, King, D.A. Oil’s Tipping Point has Passed. In Nature, 2012, 481, 443.

11 Inderwildi, O.R. Oil Price Volatility – A Fundamental Barrier to Economic Growth. In Financial Sense, May 2013.

12 Ebrahim Z., Inderwildi O.R., King D.A. The Macroeconomic Impact of Oil Price Volatility. In Energy Policy, 2013. [In press]

13 Energy-Water Nexus Overview, 2005. Sandia National Laboratory. http://www.sandia.gov/energy-water/nexus_ overview.htm.

14 NaturalGas.org, “Water Requirements of Shale Production”, 2011. http://www.naturalgas.org/shale/waterrequirements. asp.

15 UN Water, Statistics: Graphs & Maps: Water Use, 2011. http://www.unwater.org/statistics_use.html.

16 Ibid.

17 For an expanded discussion of the relationship between energy and water, see Thirsty Water: Water and Energy in the 21st Century, World Economic Forum.

18 Sandia National Laboratory, Energy-Water Nexus Overview, 2005. http://www.sandia.gov/energy-water/nexus_ overview.htm

19 US Government Accountability Office, Testimony Before the Subcommittee on Energy and Environment, Committee on Science and Technology, House of Representatives: Energy and Water – Preliminary Observations on the Links Between Water and Biofuels and Electricity Production, 2009.

20 NASA, Omega: Offshore Membrane Enclosure for Growing Algae, 2012. http://www.nasa.gov/centers/ames/research/ OMEGA/index.html.

21 International Energy Agency, Energy for All: Financing Access for the Poor, 2011.

22 Ibid.

23 Ibid.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 63 24 United Nations, World Urbanization Prospects: The 2011 Revision Population Database. http://esa.un.org/unpd/wup/ CD-ROM/Urban-Rural-Population.htm.

25 Madlener, R. The Impact of Urbanization on Urban Structures and Energy Demand in Emerging Countries, 2011.

26 In countries with a relatively high standard of living, a de-coupling of GDP growth and energy use can be observed. On a global scale this effect is hard to discern with certainty, as the global supply chains shift energy consumption to other countries.

27 Compare: International Energy Agency, Golden Rules for a Golden Age of Gas, 2012.

28 Levlized cost of energy or LCOE is the price at which electricity must be generated from a specific source to break even over the lifetime of a project.

29 Chatham House, The Vulnerability of Energy Infrastructure to Environmental Change, 2009.

30 Ibid.

31 Ibid.

32 Ibid.

33 International Energy Agency, World Energy Outlook 2010.

34 Greenpeace, A Sustainable World Energy Outlook, 2010.

35 International Energy Agency, Medium-Term Oil & Gas Markets, 2010.

36 International Energy Agency, Medium-Term Oil & Gas Markets, 2010; DTTL Global Manufacturing Industry group analysis.

37 International Energy Agency, IEA Journal, 2012 Issue 3. http://www.iea.org/media/ieajournal/Issue3_WEB.pdf.

38 US Energy Information Administration, International Energy Statistics, 2011.

39 Morgan, M.G. et al. Regulating the Geological Sequestration of CO2. ENVIRONMENTAL SCIENCE & TECHNOLOGY (42) 8 2718-2722.

40 US Energy Information Administration, International Energy Statistics, 2011.

41 International Atomic Energy Agency, IAEA Annual Report, 2010.

42 For more information see: http://forumblog.org/2013/02/top-10-emerging-technologies-for-2013/.

43 Ibid.

44 Economist Intelligence Unit, World Economic Outlook, 2011.

45 Compare: European Photovoltaic Industry Association, Unlocking the Sunbelt Potential of Photovoltaics, 2011.

46 Compare: SunEdison, Enabling the European Consumer to Generate Power for Self-consumption, 2011.

47 National Renewable Energy Laboratory, Wind Energy Basics: How Wind Turbines Work, 2012.

48 BP, BP Statistical Review of World Energy, 2011.

49 Inderwildi, O. R.; King, D. A. Quo Vadis Biofuels? In Energy & Environmental Science 2 (4): 343.

50 Bloomberg New Energy Finance, Global Renewable Energy Market Outlook, 2011.

51 Ibid.

64 Energy Harnessing: New Solutions for Sustainability and Growing Demand 52 European Commission, EU Energy Trends to 2030 (2009 update).

53 Pimentel, D. Corn Ethanol as Energy: The Case Against US Production Subsidies. In Harvard International Review. 2009

54 National Algae Biofuels Technology Roadmap, 2010, US Department of Energy.

55 The National Energy Education Development Project, Hydropower, 2011.

56 Ibid.

57 Hot Rocks and High Hopes. In the Economist Technology Quarterly. 2010.

58 Ibid.

59 Ibid.

60 Ibid.

61 Marwick Head, ScottishPower Renewables, 2012, http://www.scottishpowerrenewables.com/pages/marwick_head. asp.

62 Sound of Islay Demonstration Tidal Array, ScottishPower Renewables, 2010.

63 A.T. Kearney analysis, based on data from US Energy Information Administration, Oil and Gas Journal and www. energyfromshale.org, 2011.

64 Talisman Energy Inc., Investor Open House, May 2010, North American Operations, 2010

65 US Energy Information Administration, US Natural Gas Imports & Exports 2011, 2012.

66 US Energy Information Administration, Annual Energy Outlook 2012.

67 US Department of Energy, Summary of LNG Export Applications, 2012.

68 A.T. Kearney, Gas-fired Power Generation - Putting All Eggs in One Basket, 2012.

69 BBC, Bulgaria Bans Shale Gas Drilling with “Fracking” Method, 2012.

70 AEA Technology, Climate Impact of Potential Shale Gas Production in the EU, 2012.

71 EU Commission, Environmental Aspects on Unconventional Fossil Fuels, 2012.

72 AEA Technology, Climate Impact of Potential Shale Gas Production in the EU, 2012.

73 International Energy Agency, Golden Rules for a Golden Age of Gas, 2012.

74 Compare: UK Parliamentary Office of Science and Technology, Carbon Footprint of Electricity Generation, 2006.

75 Greenpeace/ WWF/ Öko Institut, Strengthening the European Union Emission Trading Scheme, 2012.

76 The current EU ETS carbon prices can be found at http://www.pointcarbon.com/.

77 European Photovoltaic Industry Association, Unlocking the Sunbelt Potential of Photovoltaics, 2011.

78 CCGT = combined cycle gas turbine

79 SunEdison, Enabling the European Consumer to Generate Power for Self-Consumption, 2011.

80 Klaus Novy Institut, 2012.

81 PEW Charitable Trust, Who is Winning the Clean Energy Race, 2012.

82 DB Research, Moderne Stromspeicher, 2012.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 65 83 Ibid.

84 The Economist, World Energy: Packing Some Power, 2012.

85 Sandia Report, Energy Storage for the Electricity Grid: Benefits and Market Potential Assessment Guide,2010 .

86 The Economist, World energy: Packing some power, 2012.

87 The Engineer, Researchers Seek to Improve Efficiency of Hydrogen Fuel Cells, 2012.

88 Neue energie, Der unsichtbare Speicher, 2011.

89 The Engineer, Researchers Seek to Improve Efficiency of Hydrogen Fuel Cells, 2012.

90 Sandia Report, Recent Applications of NAS Battery System in the United States and in Japan, 2011.

91 Ibid.

92 Sandia Report, Energy Storage for the Electricity Grid: Benefits and Market Potential Assessment Guide,2010 .

93 Offshore Grid, Offshore Electricity Grid Infrastructure in Europe, 2011.

94 A.T. Kearney, Powertrain 2025, 2012

95 Renault, The Electric Vehicle, a Global Strategy, 2012.

96 European Commission press release: Further CO2 Emission Reductions from Cars and Vans: A Win-win for the Climate, Consumers, Innovation and Jobs, 2012.

97 A.T. Kearney, e-Mobility: The Long Road to a Billion-Dollar Business, 2011.

98 Ibid.

99 Ibid.

100 World Energy Council, Interconnectivity: Benefits and Challenges, 2010.

101 The World Bank, Statistical Data Base, http://data.worldbank.org/indicator/EG.ELC.LOSS.ZS.

102 The Nexight Group for the US Department of Energy, Electric Power Industry Needs for Grid-Scale Storage Applications, 2010.

103 International Energy Agency, Technology Roadmap: Smart Grids, Paris. 2011.

104 International Energy Agency, World Energy Outlook 2011, 2011.

105 Pike Research, Worldwide Revenue from Micro-grids Will Reach US$17.3 billion by 2017. 2012. http://www. pikeresearch.com/newsroom/worldwide-revenue-from-microgrids-will-reach-17-3-billion-by-2017.

106 Ibid.

107 Venkataramanan, G. and Marnay, C., A Larger Role for Micro-grids: Are Micro-grids a Viable Paradigm for Electricity Supply Expansion? In IEEE Power and Energy Magazine. May/June 2008: 78-82.

108 Ibid.

109 Ibid.

110 Ibid.

111 Ibid.

66 Energy Harnessing: New Solutions for Sustainability and Growing Demand 112 World Energy Council, Interconnectivity: Benefits and Challenges, 2010.

113 The World Bank Group and the Energy and Mining Sector, Operational Guidance for World Bank Group Staff: Public and Private Sector Roles in the Supply of Electricity Services, 2004.

114 World Energy Council, Interconnectivity: Benefits and Challenges, 2010.

115 Ibid.

116 Ibid.

117 World Energy Council, Interconnectivity: Benefits and Challenges, 2010.

118 Ibid.

119 International Energy Agency, Worldwide Trends in Energy Use and Efficiency, 2008.

120 International Energy Agency, World Energy Outlook, 2012.

121 International Energy Agency, 25 Energy Efficiency Policy Recommendations - 2011 update, 2011.

122 For more information compare the chapter on “The European and the Chinese Future Energy Landscapes”.

123 “Buildings” include residential and services. “Other” includes agriculture and non-energy use.

124 Odyssee, Energy efficiency trends for households in the EU27.

125 Compare: US Energy Information Administration, First results from EIA’s 2009 Residential Energy Consumption Survey (RECS), 2011.

126 European Environmental Agency, Energy efficiency and energy consumption in the household sector (ENER 022), 2012, http://www.eea.europa.eu/data-and-maps/indicators/energy-efficiency-and-energy-consumption-5/assessment.

127 GFK Group press release: Energy Efficiency Called for in Europe, 2011.

128 International Energy Agency, World Energy Outlook, 2013.

129 Compare: International Energy Agency, Energy Management Programmes for Industry, 2012.

130 World Energy Council, Specific energy consumption of steel, 2012,http://www.eea.europa.eu/data-and-maps/ indicators/energy-efficiency-and-energy-consumption-5/assessment.

131 US Department of Energy, Superior Energy Performance, 2012, http://www1.eere.energy.gov/manufacturing/tech_ deployment/ sep.html.

132 US Department of Energy, ISO 5001 Energy Management Standard, 2012, http://www1.eere.energy.gov/ energymanagement.

133 International Energy Agency, Worldwide Trends in Energy Use and Efficiency, 2008.

134 Data do not consider aviation transportation.

135 International Energy Agency, Worldwide Trends in Energy Use and Efficiency, 2008.

136 A.T. Kearney, Plastics. The Future for Automakers and Chemical Companies, 2012.

137 Ibid.

138 US Department of Energy, October 2012, http://www.fueleconomy.gov/feg/atv.shtml.

139 Compare: International Energy Agency, Worldwide Trends in Energy Use and Efficiency, 2008.

140 European Commission, Eurostat, 2011.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 67 141 EEA, ‘Towards a Green Economy in Europe”- EU environmental policy targets and objectives 2010-2050, 2013.

142 European Commission. Eurostat Statistical Database, 2011, http://epp.eurostat.ec.europa.eu/portal/page/portal/ statistics/themes.

143 European Commission, Climate Action, 2012, http://ec.europa.eu/clima/policies/package/index_en.htm.

144 Compare: European Commission, Competition, Energy, 2012, http://ec.europa.eu/competition/sectors/energy/ overview_en.html.

145 Compare: European Parliament, Buzek and Delors Declaration on the Creation of a European Energy Community (EEC), 2010.

146 Compare: European Parliament, Buzek and Delors Declaration on the creation of a European Energy Community (EEC), 2010.

147 European Commission, Single Market for Gas & Electricity, 2012, http://ec.europa.eu/energy/gas_electricity/index_ en.htm.

148 Ibid.

149 ERGEG: ERGEG 2010 Status Review of the Liberalization and Implementation of the Energy Regulatory Framework, 2010.

150 Compare: European Commission, Competition, Energy, 2012, http://ec.europa.eu/competition/sectors/energy/ overview_en.html.

151 For more information compare the previous chapter on renewable energies.

152 European Commission, Climate Action, http://ec.europa.eu/clima/policies/package/index_en.htm, 2012.

153 Compare: European Commission, EU Action against Climate Change [presentation], 2008.

154 European Commission, Climate Action, http://ec.europa.eu/clima/policies/package/index_en.htm, 201.

155 Ibid.

156 Ibid.

157 Compare: European Commission, Ensuring Safe Use of Carbon Capture and Storage in Europe, 2012.

158 Compare: European Environment Agency, EU Greenhouse Gas Emissions Estimated to Increase in 2010, but Long- term Decrease Expected to Continue, 2011.

159 European Commission, EU Energy Trends to 2030, Update 2009, 2010.

160 European Commission, Renewable Energy: A Major Player in the European Energy Market, 2012.

161 European Commission, Climate Action, 2012, http://ec.europa.eu/clima/policies/package/index_en.htm.

162 Total contribution = installed capacity, gross electricity consumption.

163 European Commission, National Renewable Energy Action Plans, 2010, http://ec.europa.eu/energy/renewables/ action_plan_en.htm.

164 Ibid.

165 More information about the DESERTEC Foundation and its concept: www.desertec.org.

68 Energy Harnessing: New Solutions for Sustainability and Growing Demand 166 According to the Reference Scenario of the EU Energy Trends to 2030 report: The measures include policies adopted between April 2009 and December 2009 and assume that national targets under the Renewables directive 2009/28/EC and the GHG Effort sharing decision 2009/406/EC are achieved in 2020. The Reference scenario includes the mandatory emission and energy targets set for 2020.

167 European Commission, Energy, 2012, http://ec.europa.eu/energy/efficiency/eed/eed_en.htm.

168 European Commission, Energy Efficiency Plan 2011, 2011.

169 European Commission, Energy Efficiency Plan 2011, 2011.

170 European Council, 2009.

171 European Commission, Energy Roadmap 2050, 2011.

172 Ibid.

173 World Bank country data, 2012.

174 BP, Statistical Review of World Energy, 2012.

175 World Nuclear Association, Nuclear Power in China, 2012.

176 BP, Statistical Review of World Energy, 2012.

177 Ibid.

178 Gies, E, Can No-Water Fracking Quiet Critics?

179 Oxford Institute for Energy Studies, Will there Be a Shale Gas Revolution in China by 2020?, 2012.

180 CUBM is now a joint venture between CNOOC and China Coal.

181 Deloitte Center for Energy Solutions, Deloitte reSources 2011 Study, 2011.

182 Patt, J.J, and Banholzer, W.F., Improving Energy Efficiency in the Chemical Industry. The Bridge. Volume 39 No. 2, 2009.

183 BP, BP Statistical Review of World Energy 2011, 2011; Bulletin of the Atomic Scientists, The Limits of Energy Storage Technology, web edition, 2009; Deloitte Touche Tohmatsu Limited Global Manufacturing Industry Group analysis.

184 Deloitte Touche Tohmatsu Limited, The Power to Transform: US Power and Utilities Sector’s Role in Cleantech Development, 2012.

185 Ibid.

186 International Energy Agency, Clean Energy Progress Report, Update June 2011.

187 Electric Power Research Institute, Electricity Energy Storage Technology Options: A White Paper Primer on Applications, Costs and Benefits, 2010.

188 IBISWorld, Global Car & Automotive Sales, 2011.

189 BMW Group, Product Responsibility, Sustainable Value Report 2010, 2010.

190 US Department of Energy, World Primary Energy Consumption and Population, by Country/Region, Buildings Energy Data Book, 2012.

191 Ibid.

192 Ibid.

Energy Harnessing: New Solutions for Sustainability and Growing Demand 69 193 Patt, J.J, and Banholzer, W.F., Improving Energy Efficiency in the Chemical Industry. The Bridge. Volume 39 No. 2, 2009..

194 A.T. Kearney, Collaboration: A New Mantra for Chemical Industry Growth, 2012.

195 Ibid.

196 World Resources Institute, Two Degrees of Innovation – How to Seize the Opportunities in Low-carbon Power, September 2011.

197 BDI, Internet of Energy: ICT for Energy Markets of the Future, 2010.

198 German Federal Ministry of Economics and Technology & German Federal Ministry of the Environment, Nature Conversion and Nuclear Safety, E-Energy - Smart Grids Made in Germany, 2012, www.e-energy.de/en.

199 Ibid.

200 Ibid.

201 MeRegio or Minimum Emission Regions is a model region of Baden-Württemberg

202 Ibid.

203 RWE, ADELE to store electricity efficient, safely and in large quantities, 2010.

204 Bruck, R.E., Prepared Statement of Intel Corporation for the Committee on Small Business of the US House of Representatives on Large and Small Businesses: How Partnerships Can Promote Job Growth, Intel Corporation, 2011.

205 About Smart Grid, Smart City, 2011, http://www.smartgridsmartcity.com.au/About-Smart-Grid-Smart-City.aspx.

70 Energy Harnessing: New Solutions for Sustainability and Growing Demand

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