157,000 TWh – The New Language of World Energy

157,000 Two

Big picture from BP’s latest Statistical Review of World Energy.

Primary energy grew by 2.2% in 2017 to 157,000 TWh (Terawatt hours) growing faster than the decade average of 1.7%.

BP, an oil company, measures world energy consumption in million tonnes of oil equivalent (13,511 to be precise, or 259 million barrels/day).

But as electricity now dominates energy consumption, we’ll switch language and start to talk more in terms of TWh (if 157,000 TWh seems abstract, think of it as 65 x 40W light bulbs shining 24h a day all year around every human).

Indeed, BP’s review shows electricity is not only the largest element of energy consumption, but also the largest element of energy growth – electricity accounts for 43% of all global energy consumed, and 55% of new energy consumption.

And as energy retools toward electrification, demand for energy sources are shifting to the fuels that best fit electricity production.

To visualize this it’s best to use something like this Lawrence Livermore laboratory flow diagram here – this is the example of the US, but typical of world usage.

 

But let’s focus on energy use growth, not the past consumption pattern.

And here the BP Review provides some interesting data.

It usefully assigns both primary energy and electricity demand by fuel type for both 2016-2017 allowing insight into the latest changes.

Given this we can allocate the world’s energy sources to their main purpose with some simple arithmetic.

Here is the scheme we used.

It is a simplification, but a reasonable one given that the main fuels are focused on distinct end uses as the LL diagram shows.

After we assigned the growth in electricity to each fuel as per BP’s data, we placed the remainder of the growth/ decline of each fuel as follows:

• Coal – the balance was assigned to heat (where it declined)
• Oil – transport fuels allocated to transport, and the remainder to heat/other
• Gas – the remainder to assigned to heat / other (assumes gas in transport is small at the aggregate level)
• Nuclear, hydroelectric, wind/solar and other renewables were designated 100% electricity (as per BP using the substitution method).

That analysis provides the following chart:

Growth in World Energy Consumption By Fuel and End-Use, 2016-17 (TWh) – source BP

The chart confirms the world’s energy move to electrification.

Electricity grew by 55%, transport by 25% and heating 20%.

Electricity’s growth was fuelled mainly by wind, solar and coal;  transport remains dominated by oil, heating increasingly by gas.

This focus on electricity is forcing the world of energy to change: and the beneficiaries will be wind and solar, with fossil fuels having to cede ground.

Here’s why.

Electrification Favours Scalable Energy, Which Favours Wind and Solar

Although as the data show electricity generation growth was dominated last year by coal as well as wind and solar, wind and solar generation grew by 22%, whereas coal grew at 3%.

As China and India now break strategically toward solar and wind for power production, the wind and solar growth rate looks set to continue and now squeeze out coal as well as the other fuels already at the margins.

China alone installed over 50GW of generating capacity from solar in 2017, and that generation level will come on-line this year, pushing out other forms especially coal.

As wind and solar costs decline, they become a much more viable form of electricity generation. They can be added in increments to the grid, avoiding the need to invest in new thermal power plants, or keep older inefficient ones going.

And as wind and solar (and battery storage) are deployed more, their costs reduce further in a positive feed-back loop – because they are a manufactured, not extracted, form of energy.

These rapid returns to scale for a major energy source are unprecedented  – as we have discussed in detail here and here.

Fossil fuels , nuclear, hydro and biomass all depend either on complex extraction processes or equally complex project-based construction ones – neither of which exhibits learning curve benefits. Their costs therefore tend to stay flat or increase over time.

(Note – with one major exception, US shale oil and gas – proving the general rule of manufacturing style dominance).

As a result, wind and solar together already provide over 7% of global electricity generation (just behind nuclear), and over 3% of primary energy supply.

And with growth rates of about 20% pa, wind and solar will be able to supply all world electricity growth requirements by 2021 or 2022.

Using arithmetic once more this means the future for fossil fuels in electricity generation must be one of decline.

Taking each one in turn.

Coal’s Electrical Renaissance Is Over, and it’s Decline Could be Abrupt

The Review’s top-line analysis includes a chart that shows how the percentage of coal used in world power generation has barely changed in 20 years.

Cut the data another way however and a clear counter-narrative emerges.

That stasis is the combination of two massive countervailing forces: huge growth in power generation in China and India negated by massive declines in the OECD.

See below and in this excellent summary piece here.

Coal’ Percentage of Global Electricity Generation 

source: BP, Carbontracker (Kingsmill Bond)

The main problem for coal is that the positive forces of Asian consumption are now reversing as China and India embrace alternatives such as wind, solar for electricity and gas for heating.

A decline in Asian consumption will now conjoin with the general decline of the OECD.

The result: coal’s apparent stability is a volatile equilibrium about to break sharply negative.

This can be abrupt: in the the UK, coal, following a reverse S-curve, dropped from 40% of electricity generation to 7% in under five years.

Gas has a strong future in Heating – Electricity, not so much

Gas has often been perceived to be the most resilient of fossil fuels due to its prospects in high-growth economies such as China who are attempting to move from coal and oil dependence.

However, as the first chart shows it is vulnerable to a squeeze between stubborn coal generation and the sudden rise of wind and solar, blunting its growth in power generation.

In 2017, whilst gas grew overall at 3% pa, well above it’s 2.3% pa growth rate the previous decade, it’s growth rate in electricity production was only 1.4%.

This means that most of its growth, about 75%, was non-power related, mostly in heat production and other uses such as petrochemicals.

The evidence for this seems to be playing out in supply chains: whilst LNG activity is growing strongly to support heating and other activity, both GE and Siemens are succumbing to a slump in orders for gas turbine equipment for thermal power plants.

As wind and solar force gas and other fuels from the power sector, gas’s  future growth looks to be dependent on the heating sector, and not power generation.

Oil – Playing no part in electricity’s future

Outside all of this energy interplay stands oil, alone.

Oil plays practically no part in electricity demand, and is in fact in decline in this sector – by as much as 350,000 barrels a day last year, leaving it with a dwindling 3% of the global electricity market.

As road transport technology in both private cars and metropolitan public vehicles moves rapidly toward electricity, oil will lose out twice: through negligible access to electricity demand growth, and from the loss by direct substitution as electricity leaps the species barrier into transport.

Oil is dominant in, and dependent on, a declining sector – thermal transport fuels.

The shift in world energy

Electricity’s growth and technological preference for wind and solar is forcing a shift in energy patterns.

In 2017, global electricity generation from fossil fuels fell from 65.2% of the total to 64.7%, perhaps reflecting a peak of market share in power generation as wind and solar take the majority of growth.

Wind and solar’s impact on the electricity mix has wider implications: these growth rates will also force fossil fuels as a percentage of total global primary energy demand into decline: the remorseless logic of incremental growth.

Oil, gas and coal provided a dominant 85.5% of total global energy in 2016.

Yet in 2017, even as world energy consumption grew by 2.2%, fossil fuels provided a slightly lower 85.2%, as wind and solar captured the lion’s share of growth in the fastest growing segment – electricity.

Point forward, these trends will continue, with the happy consequence that they should induce a peak in CO2 emissions almost immediately.

The world energy transition continues – perhaps why BP has just bought the UK’s largest electric vehicle charging company.

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