Energy economics can be defined as “the field that studies human utilization of energy resources and energy commodities and the consequences of that utilization1 “. We assume the definition of “energy” as “the power from something such as electricity or oil that can do work, such as providing light and heat2 “. Additionally, we have to distinguish between energy resources and energy commodities.
Energyresources are the ones that can be harvested to produce energy commodities, such as crude oil, natural gas, wind, sunlight, etc. Whereas energy commodities can be used to provide energy services, some examples are gasoline or electricity. Energy economics studies whatmakes economic agents to supply energy resources, to use them, etc. This study aims to analyze also the environmental impact of the different sources of energies on which the energetic model relies nowadays as well as what has been done in order to solve the problem thatsupposes the contribution of humans to the Global Warming. Besides, I will try to give a possible solution to the carbonized energetic system preponderant worldwide. 2. Methodology The tools required to carry out an original paper regarding this topic are a constraint since a very deep investigation should be done and an undergraduate student does not have the means and technique to perform such study.
That is the reason why this paper pretends to be a description of the current situation referring to energy resources and energy commodities as well as some conclusions that can be inferred. First of all, I will introduce the difference between energy resources and energycommodities and describe briefly the most important ones. But the most important part will be the one concerning the environmental issuesof the sources of energy and the problem of the global warming externality. 1 James L. Sweeney (Stanford University): “Economics of Energy” 2 Cambridge dictionary 3 3.
Energy resources & commodities When we talk about energy resources we refer to the resources that can be harvested to produce energy commodities and that are found on the environment. These resources can be both renewable, if their use does not imply its depletion, or non-renewable, that are limited and its consumption diminishes the total amount available of that resource. Here comes the most important classification when comes to energy resources: renewable energy and non-renewable energy.Nevertheless, this is not the only important classification, energy resources can also be classified as storable or non-storable. On the other hand, the energy commodities are used to provide energy services for human activities, and they are produced by harvesting the energy resources. To describe the different types of energy resources and commodities I will focus on the 11 principal commodities and their sources using the distinction between renewable and non-renewable3 .
3.1 Renewable – Hydropower: power derived from the energy of “run of river”, where electricity is generated through the flow of a river; “reservoir”, that consists on collecting energy from the controlled release of stored water; and “pumped storage”, where the stored water is recycled by pumping it back up to a higher reservoir in order to be released again.The energy resource for this commodity is water.
Hydropower is the leading renewable source of electricity globally, accounting the 71% ofall renewable electricity and the 16.4% of global electricity from all sources. Furthermore, hydropower is the most flexible renewable energy because it does not depend on natural factors such as the solar radiation or the amount of wind. The top hydropower producing countries and their production are showed in the figure 1, and it is expressed in MTOE, that is an acronym for “million tones of oil equivalent”. 3 For this classification i will use the data from www.worldenergy.org 4 Figure 1 – Bioenergy consists the transformation of organic matter into a source of energy, this is, the materials of biological origin that are not fossilized.
The energy commodity in this case is the biomass, that can be used in its original form as fuel, or be refined to different kind of biofuels. The biomass is produced from agricultural, forestry and municipal wastes and residues, and from some crops. The biggest use of biomass is in the form of heat in rural areas and developing countries. – Solar energy is radiant light and heat from the sun that is harnessed using two main types of technologies, that are: photovoltaic and thermal collectors. Whereas the latest absorbs sunlight to collect heat, the former convert solar radiation directly into electricity without the use of any heat engine. A lot of hope is deposited on solar energy to reduce carbon emissions and make energy consumption more sustainable.
The main goal for solar energy producers in the last years has consisted on increasing exponentially its installed capacity for solar-powered electricity. In the figure 2 we can observe the PV (photovoltaic) capacity in the main solar power producers. 5 Figure 2 As we can observe, the principal solar energy producers are countries with relatively low solar resources, whereas other countries with potential high resources, like African and Middle East countries, are not producing solar power. Another interesting fact that we can extract from the figure 2 is that the additions made in 2015 constitute an important part of the total capacity these countries have. This responds to the drop in the costs of producing this energy. The prices are falling due to the improvement in the technology that allows being more productive; and because of policy and regulatory incentives. – Geothermal energy comes from the natural heat of the Earth, and requires a carrier (hot water or steam) at a shallow depth that can be drilled and pumped to generate heat or electricity through a turbine. There are two main types of geothermal resources: convective hydrothermal resources and hot dry rock resources.
The first consists on carrying the earth’s heat by hot water or steam to the surface; the second is when there is no possibility to extract using water or steam and another method has to be used. The earth’s natural heat reserves are huge, but we can find that geothermal energy contributes only 1% to the electricity generation worldwide. The reasons are various, the most important are: the high installation costs and long development periods; and legal issues concerning conservation legislation. The figure 3 shows the main producers of geothermal energy and the yearly MTOEs produced by each.
We can observe that the amount produced is much lower than the amounts showed by figure 1, that corresponds to the production of hydropower. 6Figure 3 – Wind energy is the use of air flow through wind turbines to mechanically power generators for electric power. Wind energy is available practically everywhere on Earth, but there are important variations in strength and consistency. Nowadays, the vast majority of the wind energy obtained onshore, but offshore wind farms are becoming very popular. In this context, a game changer could be the wind floating foundations because offshore wind farms tend to be faster than on land and steadier (that means more reliability). World wind power generation capacity constitutes around 7% of total global power generation capacity.
7 Figure 4 The main wind power producers and the quantity produced yearly by each of them is shown in the figure 4 and expressed in MTOEs. – Marine energy can be exploited by three different ways: from the tides, from waves and from the ocean’s natural temperature variance. The energy from the tides is extracted through tidal barrages, that use the ebb- and-flow of the tides to release water through turbines.
Wave energy is created as winds pass over open bodies of water, transferring their energy to form waves. Finally, Ocean Thermal Energy Conversion (OTEC) uses the temperature difference between the warm tropical surface water and the cooler, deep water in the ocean to generate energy. Marine energy’s immaturity is due tothe high costs of these technologies.
The environmental impact of renewable energies is quite low, it consists mainly on the visual impact of wind turbines or solar panels, the side effects of dams, etc. and their use is sustainable because these sources of energy are unlimited, that is the reason why in the last decades the investment on renewable energy has been encouraged mainly through subsidies and tax incentives. In any case, this renewable sources of energy are not enough developed to substitute fossil fuels 8 yet, but the main goal for some countries is to totally substitute fossil fuels, but we will talk about this later.
3.2 Nonrenewable – Nuclear power is the use of nuclear reactions that release nuclear energy to generate heat, then used in turbines to produce electricity. Nuclear power is generated using Uranium, a chemicalelement weakly radioactive. Uranium is mined in a lot of countries, but over 80% of the global production comes from five countries: Kazakhstan, Canada, Australia, Namibia and Niger, as we can observe in the figure 5. Figure 5 Nuclear power is a non renewable source of energy because the uranium reserves are limited. In fact, according to the International Atomic Energy Agency and the Nuclear Energy Agency, the supply of uranium based on current requirements will last for no longer than 100 years. Nuclear power, at the end of 2015, generated around 11% of the world electricity and 65 reactors were under construction.
Nevertheless, the concern in the last decades is that, besides that the fact that nuclear energy produces radioactive wastes that are difficult to eliminate, sometimes accidents occur within nuclear installations, and the consequences are disastrous, as it was seen in Chernobyl and Fukushima, for example. This concern has made that in the last years the growth 9 of nuclear power has suffered a stagnation as it can be seen in the figure 6, that shows the world nuclear electricity production expressed in TWH (terawatt hours). Figure 6 4 It is important to point out that having abundant quantities of uranium does not guarantee being an important producer of nuclear power, this is, countries such as Kazakhstan or Namibia that are top producersof uranium, on the other hand they are not among the biggest producers of nuclear power. And the other way round, some countries with lower uranium production have bigger nuclear installed capacity, such as the United States or France.
– Peat, also known as turf is the surface organic layer of a soil, consisting of partially decomposed organic material, that has accumulated under conditions of waterlogging, lack of oxygen, acidity and nutrient deficiency. Peat is used as fuel for electricity and heat generation, as a compost, or as a source of chemicals and medical products such as resins or antibiotics. According to estimations, around 3% of the global landmass is peatland. Peat emissions are similar to coal emissions, however, peatlands have the capability of becoming “carbon sinks”, this is, storing used carbon and therefore, mitigate its environmental impact.
4 International Atomic Energy Agency, Power Reactor Information System 10 – Coal is the most abundant of fossil fuels. It is a combustible rock found in layers or veins called coal beds or seams. The coal is converted into electricity through a process consisting on the combustion of the coal. The whole process is illustrated in the figure 7.
Figure 7 5 Coal is used by avariety of sectors: power generation, iron and steel production, cement manufacturing and as liquid fuel. But the majority is used in power generation. Currently, coal constitutes the 40% of the electricity production worldwide. We can see that the dependence on coal is still very important.
The most important coal producers can be observed in the figure 8. As we can see, China is the biggest producer, very far from other countries. Even though the Asian country is trying to reduce its dependence on coal in the last years because of their concern with environmental issues, coal is still their main source of energy. Actually, China contributes 50% to global coal demand. Afterwards the environmental impact of coal (and the rest of the sources of energies) will be analyzed. 5 Source: www.worldcoal.org 11 Figure 8 – Crude oil consists of hydrocarbons that have formed from sediments rich in organic matter.
Oil reservoirs are created when these hydrocarbons migrate from the source rock into permeable reservoirs, where they are trapped by a layer of impermeable rock. Then, the crude oil can be extracted and refined to produce usable products such as gasoline, diesel and different types of petrochemicals. Since it is a nonrenewable resource it is limited. Oil is the dominant fuel for transportation and the trend is expected to continue, among other things, because the growth of population and consumer class in Asia will increase oil demand. Nowadays oil accounts for 32.9% of total global energy consumption.
Although some efforts are being done to increase the spread of the electric car, it does not seem like an imminent change, andis not expected to reach more than 5% of the transport sector in the next five years. The main oil producing countries are concentrated in the Middle-East, but some of the most important producers are not in this area, such as the United States, Russia, Canada and some others that we can observe in the figure 9. Among the 5 largest producers (Saudi Arabia, United States, Russia, Canada and China), account almost half of the world production of oil. 12 Figure 9 – Natural gas is a mixture of hydrocarbons, and often contains a small amount of non-hydrocarbons. It can exist either as a gas or in solution with crude oil, where producers can then separate the two in the production process. It is the cleanest and most efficient of the fossil fuels.
In fact, it is the only fossil fuel whose share of the primary energy is expected to grow and has the potential to play an important role in the world’s transition to a cleaner energy future. It represents a 22% share of the power generation worldwide. When a natural gas deposit is found the process to follow consists on digging deep into the Earth’s crust to release the natural gas. Advances in supply side technologies have changed the supply scenario and created new prospects for affordable andsecure supplies of natural gas. Nowadays the technology allows to extract the gas in a more efficient and successful manner.
The main producers of natural gas are represented in the figure 10 below.