Lecture #1

Global Energy System

• Energy chain (primary, 0inal, end-use energy)
• Energy de0initions and units
• Energy production, consumption, emissions, resources
• Energy-climate coupling
• Tool 1: Hotelling rule for depleting resouces
• Tool 2: IPAT model for assessing environmental impacts

Aalto University Peter Lund 2017 - PHYS-C6370 Lecture #1

 For what do we need energy?
Energy conversion chain from energy resources to services
Steps of the

Each step associated with an efficiency

energy chain:
§ Primary energy
§ Conversion
§ Final energy
§ Transmission/
Distribution
§ Energy end-use
(conversion)
§ Energy service
Aalto University Peter Lund 2017 -
PHYS-C6370 Lecture #1
 From primary to secondary energy
(=final energy) to energy sectors
Primary Energy:
Fossil fuels (coal, gas, oil)
Nuclear (uranium, lithium, tritium)
Renewable Energy
(biomass, wind, solar, marine)
Geothermal
Where is energy used (globally)?

transpor house-
Final Energy: t holds
Fuels(25-30%);Heat(50%);Electricity(20-25%) 26% 16 %
services
9%

industry
49%
End-use Energy Sectors:
Transport;Industry;Services; Housholds

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 Cities are important for
energy use
§ ½ of world population lives in cities (70% by 2040)
§ 65% of energy is consumed in cities (80% by 2040)

§ Final energy use in cities dominated by thermal

energy use (50-80% heat or cold); electricity
20-30%; transport 25-30%

EU-27 household final energy consumption

Space heating
Appl&Light 4%
14%
Hot water
Cooking 15%
67%

UNEP, 2010 Aalto University Peter Lund 2017 -

PHYS-C6370 Lecture #1
Example of energy chain for pumping
- huge opportunties for energy efficiency improvements
Primary energy Final energy Energy End-use

Other examples: lighting, house insulation, etc.

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 Energy efficiency in ‘macro-scale’
• Three factors affect energy demand in the society
– Economic growth (=Activity)
– Structure of Economy (=Structure)
– Goodness of technology (end-use) (=Intensity)
Energy Demand =
Activity x Structure x Intensity

• Enegy efficiency typically relates to the

technology ’Intensity’-factor

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PHYS-C6370 Lecture #1
 Energy’s units
• Primary energy often in Mtoe or PJ
• Electricity kW, MW or GW (power), kWh, MWh, TWh (elec.energy)

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Energy conversion factors
(IEA)

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Energy content of primary energy

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Key numbers of global energy
system

www.iea.org

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World primary energy supply (IEA)
§ Oil >30 % of all energy
§ Fossil fuels 81% of all energy
§ Renewable energy ca 14% of primary energy
§ Emerging economies > western economies

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Distribution of global energy use (BP)

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World electricity production (IEA)

• Coal is the dominating fuel (41%)

• Emerging economies 54 % of all electricity

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 Global CO2 emissions(IEA)
• SpeciPic emissions (gCO2/MJ): peat 102-106, coal 95, oil 75-79, natural gas 55
• Oil and coal 80% of CO2-emissions

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 Specific emission factors
(alternative presentation in units of tC/toe)

• wood 1.25
• coal 1.08
• oil 0.84
• natural gas 0.64
• new energy 0...+
(excl. indirect emissions, e.g. when constructing)

Observe that when comparing emissions from power

production, the conversion efPiciency from fuel to electricity
need to be considered.

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 Unit costs of reduction CO2-
emissions (€/tCO2)

European Emission
Trading System
(ETS) trades on
CO2 allowances
based on “cap and
trade” principle

EEX exchange
price 9.9.2016 was
4.08 €/tCO2

Source:
Vattenfall, McKinsey
Aalto University Peter Lund 2017 -
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Defining (RE) energy potentials

Aalto University Peter Lund 2017 - PHYS-C6370 Lecture #1

 Energy resources and reserves
• From just an energy resource point of view, there is adequately
traditional energy for 1-2 centuries or even beyond
• Dilemma : Much “dirty” energy less “clean” energy
• The resource base of the new energy sources is huge

Adequacy of traditional energy with Availability of renewable energy

present energy use sources ~ technical potential

Oil (non-conv) Efficiency

Coal
Hydro
Uranium
Natural gas Wind

Oil (conv) Biomass

Gas (old)
Solar
1 10 100 1000
0.1 1 10 100
Years
Aalto University Peter Lund 2017 - x present energy consumption
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Fossil fuel reserves
(BP)

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 The Sun is the largest energy
source we have

Ref: Science
• solar radiation on earth equals to 5,000 x all energy demand
• one square = world energy use
Aalto University Peter Lund
2017 - PHYS-C6370 Lecture #1
Oil reserves – two different views
How much do we have oil left ?

• Old oil Pields depleting

• New oil mainly from non-
conventional sources
àPEAK OIL
IEA (2005)

• Resources versus price à IEA

reserve estimates from 3000
to 5500 billion barrels (3-5 x
oil used so far)
New oil
Pindings
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Shale gas – increasing gas reserves

Aalto University Peter Lund 2017 - PHYS-C6370 Lecture #1

 Shale gas resources
• Shale gas resources may be 4-5 ×proven NG resources
• Geography of SG: Russia (480 PWh); (389 PWh), Australia (121 PWh), USA
(740 PWh); Poland & France

U.S. Power
Production

Left: U.S. market growth of natural gas power; Right: Shale gas regions in Europe
REF: EIA:Aalto
WorldUniversity
Shale GasPeter
Resources :An Initial Assessment of 14 Regions Outside the United States, 2011; P.D. Lund, Energy policy
planning Lund
near to2017
grid-parity
- PHYS- a price-driven technology penetration model, To be submitted, 2013.
using
 Tool 1: Economics of nonrenewable
resources
• Harold Hotelling (1931)
– “Net price or marginal cost must rise at the rate of interest in
nonrenewable resource markets, or, the percentage change in net-price
per unit of time should equal the discount rate in order to maximize the
present value of the resource capital over the extraction period”
• Hotelling rule
– In equilibrium the net present value of proPit/unit is constant

Pt − C
t
= constant
(1 + r )
Pt= price of the resource year t ; C=cost of exploiting the resources, r= interest
rate

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PHYS-C6370 Lecture #1
 Derivation of Hotelling rule
• ProPit (net present value) for the supplier of the nonrenewable resource:

Year 0 = P0-C
Year1 = (P1-C)/(1+r)
Year 2 = (P2-C)/(1+r)2
Year n = (Pn-C)/(1+r)n

• The present value of proPits the same from year to year means
that (Pt-C)/(1+r)t =P0-C
(Pt-C)= (1+r)t ×(P0-C)

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 Example of the Hottelling rule
• Hypothetical demand Year Price= Profit= Demand ∑Qt
function Q = 100-Pt Pt 2 Pt-C = Qt
• Marginal cost C=10
• Interest rate r =10%
T-0 =end 99
3 89Divide 1 1 1
T-1 91 81by 1.1 9 4 10
• Resource based R=153
• At the end QT=1 T-2 84 74 16 26
T-3 77 67 23 49
• Start from the end: T-4 71 61 29 78
– How many years will the
resource last? à 6 years T-5 65 55 35 113
– What is the right price at
t=0? à $60
T-6=start 60 50 40 153
– ProPit increases by r-%, i.e.
net present value of proPit
is constant over time
Aalto University Peter Lund 2017 -
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How would does the price of a limited
resource increase (example)?
r=3%, P0=1
100
90
(1+r)t
80
70
60
50
40
30
20
10
0
0 50 100 150

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Link between human actions,
energy and emission
Environmental impacts

Nature Economy Humans

Products

Raw materials
and resources Needs

Waste
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Aalto University Peter Lund 2017 -
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 Current trend in carbon emissions
Paris Climate Agreement (Dec 2015): 1) limit global temperature rise
to 1.5 oC (trend 4-6 oC), 2) around mid of 21st century, CO2 sources
= CO2 sinks, negative emissions may be required?

CO2

45
Gt
22 Gt

20 1990 2035

Aalto University Peter Lund 2017 - PHYS-C6370 Lecture #1

Tool 2. Assessment of environmental
impacts from energy
• Ehrlich & Holdren (1971): IPAT model
– I=P×A×T
– I=impact, P=population, A=afPluency, T=technology
– T represents the goodness of the technology (e.g. speciPic
emissions or waste production) ; A represents the economic
activity

• Applying to emissions:
– Total emissions [kgCO2]= pop × GNP/pop ×kg CO2/GNP

• Simple model ! (doesn’t account for relationships

between the 3 factors)

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 IPAT-CO2- model

• How to apply IPAT to global climate change mitigation:

– P(now)= ca 6 bill, +1.3%/y, P(2050)=7.3-10.7 bill, min. +50%

from present
– A ? ; GNP/cap = α × CO2/cap ; e.g. USA x 100 Mosambik
– T ? ; speciPic energy demand (MJ/GNP) reduced 1-2%/yr

• I(2050) = ? x I(2010)

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 Your Work for # 2
• In preparing for Lecture #2
– Background reading is found in Noppa; #2=read the lecture notes,
– Discussion session material can be found at the end of the lecture notes

• Prepare for discussion session #2 (10 min)

1. (How) Can you reduce the global emissions to zero?
2. How much would cutting emissions by 100% cost you personally a day?
3. How is primary energy and electricity produced in your country (draw to
pie charts)?

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 Extras

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Physical model for oil/gas production

−t / a F k ∂P
q ( t ) = q0 × e =− ×
A µ ∂t
• F= Plow
• A= area
• k= porosity
Oil or gas field • µ=viscosity
• P= pressure
(very stiff) • q= production/yield
• t= time

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Relative production of an oil
or gas field over time (yrs)
1
0.9
• reserve= area under
0.8 the ”red” curve
0.7
• first ½ comes quicker
0.6
0.5 out than the second ½
0.4 • production is not
0.3
0.2
constant but drops over
0.1 time with a long tail
0
0 20 40 60 80 100 120

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• Stern (June 2008): maximum
allowed emission level in 2050
would be 2 tCO2/capita

à emissions need to be
reduced in Europe by 80%
(see Table)

§ Cumulative investments needed

30.000 billion €

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 The cost of shifting to sustainable
energy
• Stern: costs from climate change << cost of damage
• Estimated costs 1%/yr of GNP
• Assume a reduction cost of 30$/
tCO2; exclude developing
Example: what does a 50% CO2 countries with < 2000$/capita
reduction mean to countries?
100 Global % of % of
Ratio of carbon CO2 partic. world
to energy costs
reduction GNP GNP
10 CO2 cost % of
30% 0.7 0.65
% of GDP

GDP

TPES % of GDP 50% 1.2 1.1

1
70% 1.7 1.5

0.1 • But what about the wealth

100 1000 10000 100000
creation of the new technologies
GDP/cap and industries needed to realize
the change ?
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The Energy Ladder – energy demand
increases with welfare
400 US

350
Primary Energy per capita (GJ)

300
Australia
250
France
200 Russia S. Korea UK Japan
Ireland
150
Greece
100
Malaysia
50 Mexico
China Brazil
0 India
0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 lähde: BP,
GDP per capita (PPP, $1995)

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PHYS-C6370 Lecture #1