Conference and General Assembly of the Inter-Conference and General Assembly of the Inter-American Network of Academies of ScienceAmerican Network of Academies of Science

Conference and General Assembly of the Inter-Conference and General Assembly of the Inter-American Network of Academies of ScienceAmerican Network of Academies of Science

IDRC, Ottawa, CanadaIDRC, Ottawa, CanadaThursday 24Thursday 24thth August 2010 August 2010

Professor Anthony ClaytonProfessor Anthony ClaytonUniversity of the West IndiesUniversity of the West Indies

Energy management problems in a small Energy management problems in a small island economy: the case of Jamaicaisland economy: the case of Jamaica

Energy and the environmentEnergy and the environment

• Our current way of life depends on reliable, stable, affordable supplies of large quantities of energy, most of which is currently derived from hydrocarbons.

• Today, we face a combination of pressing energy-related challenges, including:

• Sharply rising demand for oil and gas in countries such as China and India, high prices & volatility, resource nationalism, increasing competition (and potential conflict) for resources, concerns about supply constraints and the possible approach of peak oil.

• Profound concerns about the carbon loading of the atmosphere and climate change.

Volatile pricesVolatile prices• Between 1999 and July 2008, the price of oil rose 15-

fold, from less than $10/barrel to over $147/barrel. Then the price slumped; oil lost nearly 80% of its value. It was trading at less than $34/barrel in December 2008.

• Dramatic shifts are destabilizing; high prices increase costs and slow growth in importing nations, low prices reduce investment in both oil and new energy technologies.

• As world oil production starts to decline (after peak oil), we will increasingly depend on high-cost sources. This will cause even more dramatic swings in market price.

Spikes not driven by fundamentals, but by politics

?

Population dynamicsPopulation dynamicsGlobal population will rise from 6.8bn to over 9bn by

2070, predominantly because of two factors; the continuing rise in world average life expectancy and the relatively high fertility levels in developing countries.

Population will then decline again; by 2100, it will be 8.4bn.

Conclusion: it will be necessary to provide energy, water, food, housing and clothing 2-2.2bn more people, as well as absorb them into labour markets.

DriversDrivers• Burning hydrocarbons (coal, oil, gas) are

responsible for about 2/3rds of the additional carbon loading of the atmosphere.

• 30% of world population still don’t have energy services; more energy will be needed in future as a result of population increase.

• Energy demand will grow 55% 2005→2030; developing countries will represent 74% of increase.

• With BAU, demand for oil will increase by 37% by 2030, coal by 73%. This will increase emissions of carbon dioxide, accelerating climate change.

Already largest consumer of energy, largest source of CO2

Are there limits to growth?Are there limits to growth? China cannot continue to follow a resource-

intensive path to industrial development without major global environmental consequences; if paper use/person in China were to reach the US level, China would consume > total world production.

This is not a transient problem; India’s economy is growing more slowly than China, but by 2050 India will be the larger of the two nations (1.6 to 1.4bn), so pressure on resources will continue to rise.

This is untenable; the productivity of 15 out of 24 key global environmental ‘services’ (water, fisheries etc.) are already declining as environmental resources are progressively depleted.

Responding to the crisesResponding to the crises• On the current trajectory, the world may face a

bleak future, with failing crops, dwindling supplies of energy, critical shortages of water and conflicts to control resources.

• We have to find the solutions for four problems simultaneously: strengthening economic growth, meeting energy needs, mitigating climate change and increasing food & water security.

• Failure to resolve these issues is likely to result in conflict; almost 70 countries have combination of high risk factors (including resource scarcity, population growth, predominantly young population).

Energy: investment opportunitiesEnergy: investment opportunities• The International Energy Agency estimates energy infrastructure

investments of US$1 trillion required over the next 20 years.• The UNCTAD World Investment Report 2010 estimates

investment requirement of ~US$440bn p/a in 2010-2015 to limit GHG emissions and keep temperature rise under 2°C.

• About 2/3rd of hydro-generating capacity and almost 99% of wind energy remains untapped; most of these resources are in low-income countries.

• The Sahel has sufficient solar potential to supply all Europe’s electricity. East Africa has geothermal potential, which is ideal for providing base load. UNEP estimate that the geothermal potential of the Rift Valley is 14,000MW; only 200MW is currently captured. Geothermal power could supply 10-25% of the region’s energy by 2030.

• Problems? Technology, capital, political stability.

Solve one problem – by creating anotherSolve one problem – by creating another• From 1990-2005 there were 800-850m undernourished, but

world population grew by 1.2bn, so the proportion fell.• In 2009 >1bn were undernourished; the largest total ever.• But food output was rising at the same time. The 2008 grain

crop grew by 5.4% to 2.2bn tons, following a 6% rise in 2007; this was much faster than population growth.

• Between July 2007 - July 2008 wheat & maize prices >doubled, rice prices >tripled, due to:

Increasing consumption of meat in developing countries such as China (20 → 50kg/c/a since 1985), and

Switch to biofuels, which absorbed >100 million tons of cereals in 2008.

• Prices fell after July 2008, but the economic crisis reduced affordability even more rapidly.

Future trade-offs?The projected increase in human population

& changes in diet means that it will be necessary to approximately double agricultural production; and the move to replace fossil hydrocarbons with biofuels will create yet more pressure on available land.

This is likely to result in rapid losses among the remaining biodiversity unless agricultural production is made much more efficient and intensive, so that greater volumes of output can be generated on smaller areas.

Conclusion: need to solve more than one problem simultaneously

BiofuelsG 1: cane/corn derived ethanol. Energy balance ratio

for corn = 1.3/1, sugar = 8/1.G 2: cellulosic ethanol. EBR for cellulose = 12/1 to 16/1But – G1 and G2 biofuels cannot solve our energy problems;

if the US converted all its available biomass into ethanol, it could only displace 30% of its current gasoline demand.

G 3: Algae can produce 10-20,000 gallons of fuel per acre per year, so 85 billion gallons (sufficient for all US transport) could be produced on 15,000 square miles (4.5 million acres), about the size of the State of Maryland.

The US farms 938 million acres; fuel would take 0.47%.G 4: Synthetic biology/genomics: turn organisms into

bioreactors to make fuel.

Algae in high-density vertical bioreactors

Picture from Vertigro Global Green Solutions

Recent projectionsTrials suggest that it will be possible to develop

GM algae that produce long-chain hydrocarbons which can be refined into synthetic high-octane gasoline. This would be compatible with refineries, filling stations and cars, would not contain contaminants such as sulphur, nitrogen and benzene, would have higher energy density and offer more complete combustion than gasoline and diesel.

Algae production: use non-arable land, non-potable water, deliver *10-100 more energy/acre than cropland biofuels.

GM algae may grow faster (*2 mass in 1 hour), fix atmospheric nitrogen and carbon.

Production costs still high; cost-effective algae-based biofuels perhaps by 2012-2015, replace gasoline by 2020?

http://www.abc.net.au/science/news/stories/2007/2064607.htm

UK announces world's largest algal biofuel project

The UK wants algal biofuels to make a significant contribution by 2020, and has made an initial investment of £26m to allow scientists to develop better strains.

At present, it is possible to make algae with a high oil content, or algae that grows quickly. The goal is to combine these qualities. Research will also develop the optimal designs for culture and production.

Plants will then be scaled up. Most of the UK’s investment will be located in countries with year-round sunshine to maximize production.

Thursday October 23 2008

Investment flowsInvestment flows FDI in renewable electricity generation, recycling and

products such as wind turbines, solar panels and biofuels was US$90bn in 2009, plus more in other environmental sectors.

About 40% of low-carbon FDI (2003 – 2009) were by TNCS in developing countries.

Flows of FDI into SIDS fell by 35% in 2009. Half of the SIDS total FDI inflow went to Jamaica, Trinidad and the Bahamas.

The FDI into Jamaica was predominantly tourism-related.

Conclusion: capital is there, but in wrong areasConclusion: capital is there, but in wrong areas

Case study: biofuels in JamaicaCase study: biofuels in Jamaica

Jamaica was the world’s largest sugar producer in the period 17th - early 19th centuries.

Today, Jamaica’s share of world production is just 0.1%, the tonnage of sugar slumped from 514,450 tonnes in 1965 to 124,206 in 2005, the contribution to export earnings has fallen from 49% in 1952 to 1.8% in 2006, the contribution to GDP has fallen from 9% in 1953 to 0.8% in 2006.

The industry still occupies 53,294ha (of which 46,000ha producing, for quota) = 30% of agricultural land in Jamaica; 41% of permanent crop land.

It became uncompetitive, in part because it was protected from competition by EU trade preferences, so was profoundly threatened by phasing-out of trade preferences.

The Great Sugar Disaster

Jamaica: energyJamaica: energyJamaica is a heavily-indebted middle-income country.Domestic demand (not including bauxite sector) is

~800 megawatts, will increase by 210 megawatts by 2012.

93% energy demand met with imported crude oil.Import bill peaked at nearly US$2bn.This was equivalent to entire value of exports.Developed countries have become less sensitive to

price of oil as GDP/oil ratio has risen.Jamaica’s energy productivity in mid-1980’s was ~3.5

barrels of oil per US$100 of GDP, in real terms; it now takes ~5 barrels of oil to generate the same output. Reasons: low growth, plus increases in energy-intensive consumption (cars, air-conditioning).

Jamaica was dependent on imported oil for about 93% of energy demand.

Jamaica had a sugar industry that needed complete re-engineering.

Solution to both problems: convert moribund sugar industry into dynamic ethanol industry, thereby:

Saving jobsGenerating revenueReducing dependence on imported oilReducing carbon emissions

But the Government did not have the cash to convert the industry. The Sugar Corporation of Jamaica was losing J$1 billion p.a., had accumulated J$20 billion in financial losses. Jamaica had a debt to GDP ratio of 130%, the bauxite/alumina industry was being mothballed, the national airline was failing, the tourist industry was demanding subsidies.So the main priority was to stem further financial losses.

•Sell industry to Brazilian firm BioInfinity, manufacture ethanol for domestic market, but most for export to USA under CBI.•Government mandates E10, creating demand for 70 million litres ethanol. This requires ~16,000/46,000ha of cane to be switched into ethanol production + 13,000 additional ha of cane. Output would need to double (150,000 to 300,000 tonnes), productivity increase by 35% (5.92 to 8.0 tonnes/ha), production costs fall by 30%, all over three years. In the interim, wet ethanol would be imported from Brazil. The total cost would be €555.7 million over 2006 to 2015.•Environmental impact: depends on quality of plant, probably positive.

Analysis of the planThe real plan: the US has a tariff of

US$0.54/gallon on ethanol from Brazil. Ethanol from Jamaica can enter the US at a zero tariff under the CBI system, up to 7% of US demand. So Brazil can supply wet ethanol to Jamaica, blend it, dewater it, then export anhydrous ethanol to the US.

This plan depended on 3 variables (price of oil, CBI renewal, US tariff on Brazilian ethanol).

So policy had (½ * ½ *½) = 1/8 chance of working.

ConsequencesPrice of oil fell – between July and December

2008 oil lost nearly 80% of its value. Ethanol was then more expensive than gasoline.

CBI was renewed, via an earmark by Congressman Charlie Rangel (subsequently charged with 13 ethics violations)

Tariff on Brazilian ethanol remains – for now.Brazilian investors withdrew.Greater part of Jamaica’s sugar industry

now sold off to Complant, an investment arm of the People's Republic of China.

ConclusionsEven if there is a viable transition

strategy..And the technology is available, or in

development…And the capital is available…

Short-term political considerations and constraints can still preclude best available outcomes.

Cannot afford to be naïve about these problems.

Thank you !Thank you !Thank you !Thank you !