The changing world energy economy

By |2017-11-02T11:21:18+00:00November 2nd, 2017|Guest Insights|7 Comments

By James E. Smith and Alex Hatch

In recent years, particularly in the United States, we have seen substantial a change in public opinion regarding the production and distribution of energy, as well as its associated costs in the marketplace.

A good deal of that opinion can be attributed to publicity behind the push for Green energy, coupled with misunderstandings of how energy is provided and paid for. However, the actual market changes that are occurring are more related to general business considerations, not public opinion.

For example, according to a recent report from Bloomberg, the United States economy has begun to grow steadily despite falling oil consumption. Up until the last decade, this phenomenon was unthinkable. Indeed, oil consumption and gross domestic product (GDP) were perfectly synchronized in their trends for many years – and the same trend was observed for overall energy consumption in both the United States and the world. For decades, energy consumption and GDP were linked and synched globally with economic growth.

According to the International Energy Agency (IEA), energy demand grew by only 0.8% in 2015, whereas the total GDP of Organization for Economic Cooperation and Development nations grew by 2.7% – over three times the rate of energy demand. The OECD includes 35 countries in North America, Australia, and Europe that are among the world’s most developed.

This marginal energy increase also flies in the face of population growth, another factor that has historically tracked with energy consumption. In 2015, the world population grew by roughly 1.2%, again showing that we are somehow supplying energy for more people while simultaneously consuming less per capita.

The IEA calculates that total final consumption (TFC) of energy decreased by 3.3 Exajoules (1018 Joules) between 2013 and 2015. That amount is roughly equal to what Australia consumed during the same period. So how are we providing energy for growing numbers of people while using less per person? The answer is due in part to steadily increasing efficiencies, and is also buried in the value that energy brings to survival and societal growth.

In recent years, through more efficient appliances on the consumer side and industrial equipment on the commercial side, we have been able to produce goods in higher quantity and at higher quality, while consuming energy at low enough levels per unit to essentially negate the energy use of the entire continent of Australia.

We also build more energy efficient homes and businesses that require fewer raw materials and consume less energy in their operation. We are traveling more but in more energy-efficient vehicles, both privately and commercially. Moreover, given the choice, many consumers will opt for short- or long-term energy cost savings – while others will realize their savings through sharply lower fuel prices and select larger or more powerful vehicles that meet their other needs.

This indicates that future energy need and use conundrums may not be solved simply with alternative “green” energy technologies. Instead, they may more likely be resolved first via wider acceptance and advancement of newer, more efficient energy systems, and second through a wider array of pricing choices for consumers.

Energy acquisition and accessibility is an appreciable portion of the costs of living in any culture. Because cultures require growing levels of technological sophistication in order to advance, costs associated with energy must be kept within a range that allows the social order to mature to a point where personal survival becomes less of a full-time requirement.

America has created a culture that values energy efficiency and the economic savings that it generates.  We are also learning to value the accessibility and reliability of energy, while understanding that the value and cost of energy are not necessarily linked. The true value of dependable, accessible, low-cost energy can best be understood by looking at the billions of people living in developing countries.

A brief study of their child mortality, adult longevity, and the diseases, deprivations, and environmental conditions they are forced to endure speaks volumes to why low cost, freely accessible, reliable, and environment-friendly energy is so essential. “Free” energy will never be achievable, but reducing the burden of energy costs against total income is an essential goal for any nation or world that intends to mature and progress as a productive society.

Future efficiency improvements will be seen most in the developing world, especially in India and parts of Southeast Asia, which have begun to rapidly industrialize in recent years, primarily thus far by using coal to generate electricity to power homes, hospitals, businesses, and communities. As these newly developing countries begin to adopt modern consumer electronics, it is likely that their average consumer will look not only at up-front costs of appliances, but also at their efficiency and long-term costs.

This will create markets that are eager to get electronics which couple modern efficiency with low life cycle and operating costs. It is up to today’s designers and engineers to face and meet the growing demand for these higher efficiency technologies, in order provide more responsive economic paths toward widespread energy use at lower energy intensities.

The efficiency increases that will likely come about within the next few decades are certainly not the final answer to all the world’s energy problems. However, it is already apparent that we have momentarily satiated our growing hunger for energy through these recent advancements, with the expectation that more will come in the near future.

During the next few decades, even marginal efficiency improvements could greatly offset growing overall global energy use. Such improvements could largely eliminate the need to add any new overall energy production capacity. That would allow us to focus on the important development of new energy technologies that may not yet even be on the drawing boards, or even in our imaginations.

By using these efficiency increases as a stopgap measure, we can expand research and development into next generation high-efficiency systems – including wind, solar, oil, natural gas, coal, and nuclear. Using these newly developed technologies could, in turn, lead to more a reliable, lower cost, more sustainable energy future for the USA and the world.

That world would mean energy accessibility is a given, and not a line separating the haves from the have-nots. It would mean the only thing limiting our future progress and comity is our imagination and ingenuity.


James E. Smith, Ph.D., is professor of engineering in the West Virginia University Department of Mechanical and Aerospace Engineering in Morgantown, WV. Alex Hatch has a B.S. in Mechanical Engineering from WVU and is studying for his Master’s Degree in engineering at the university.


  1. pkwz November 2, 2017 at 2:40 PM

    Here’s a GREAT example of new renewable electricity generation from California:

    “A total of 539 MWh of gross electrical energy has been generated at Sierra during the period Aug 1, 2010 and July 31, 2011. This is approximately 12.6% of the expected power generation of the initial estimate of 4270 MWh.”

    • Brin Jenkins November 3, 2017 at 4:25 AM

      It says that photovoltaic will see the demise of Sun tower technology as its cheaper to install, operate and maintain. The problem remains one of storage and load balancing with such devices. Demand in the UK varies between 30 to 60 Gw Summer to Winter, we have no storage systems even close to this. Solar is the most productive when demand is least so its better to concentrate on efficiency and systems that can operate 24 7 consistently and the recovery of wasted energy.

      • pkwz November 3, 2017 at 12:53 PM

        I live in the high desert part of the Mojave desert. Where there used to be lovely pristine endless desert for miles, now there are ugly and environment destroying black solar panels. Miles and miles of them.

        Before, countless land use projects were routinely rejected because they harmed some minor native plant or turtle. That’s not the case today. Every one of these destructive solar projects gets approved.

        And the electricity they produce is MORE EXPENSIVE than all forms of conventional power. And they don’t produce any energy during the night or cloudy days.

        They are worse than nothing. So if solar is an economic and operational failure in the middle of the Mojave Desert, how will it ever succeed in Europe? Last time I looked, there aren’t any deserts in Europe. And it’s too far north.

        • MichaelR November 5, 2017 at 6:20 AM

          The plant cited in California was a demonstrator. It was not built as a mature production plant. It is hardly suprising that an R&D exercise has not performed to spec. That is what R&D is for. And this field is moving very quickly. It would be a better exercise to look at what plants that were built in 2016/17 are doing.

          Re the solar plants in the desert, well, this is where they are most likely to go. The land will be cheap, won’t have many other commercial uses and these projects can generate jobs and investment quickly. I would be interested to know if you have proof that they have side stepped prevailing environmental regulations.

          The issue of visual impact is always one that comes up, but this applies to almost all public infrastructure projects. No one wants a big highway built near them, or a wind farm, or a coal mine or a fracking site, or a waste dump etc etc. There are always individual losers but those costs always have to be weighed against the public goods, in this case, lots of clean energy, jobs erecting and maintaining the plant and the experience gained on this project that can be used on the next one to make it more efficient and cost effective. In the long run, the impact of erecting solar panels is far less destructive than boring deep oil wells, contaminated water supplies, surface spills of hazardous chemicals and the emissions of methane and CO2 that accompany fossil fuel extraction.

          The overall cost of renewables is falling steeply is projected to keep doing so as roll out expands. Being able to create jobs and prosperity in previously undeveloped areas without damaging the environment, and avoiding pollution, (even if you do affect the view) seems like a good thing to me.

          • pkwz November 5, 2017 at 11:04 AM

            You haven’t provided an ounce of proof or evidence to back up your claims that green energy is “more efficient and cost effective” than fossil fuels. If green energy is so competitive then why does Southern California Edison charge more for it? See this:
            Why would anyone voluntarily pay 3.8 cents per kWh for electricity? Is this what you mean by “more efficient and cost effective”?

            Like I keep saying, “green energy” only exists because of expensive to the tax payer subsidies. If it was such a good idea, we would have had it decades ago.

            And what do you do when the sun goes down? Use that magic Pixie Dust to power turbines?

            The fact is, is that for every kWH of wind or solar power you need a back-up source which is either coal, gas, oil or nuclear fueled. There is no such thing as a green grid in a modern industrial society.

            Green grids only exist in green propaganda.

            • MichaelR November 5, 2017 at 11:34 AM

              I didn’t actually claim that green energy was more efficient and more cost effective than fossil fuels in the terms you said. You did not read what I said. I said that one of the goods of each new project was “experience gained on this project that can be used on the next one to make it more efficient and cost effective.“

              In fact, the cost effectiveness of renewables vs fossil fuels is a very tricky calculation given that fossil fuels have such huge implicit subsidies. These were estimated in a recent paper in the peer reviewed journal Global Development to be $5.3 Trillion annually. So when you look at the up front cost of renewables vs fossil fuels, the cost for fossil fuels is excluding huge costs that you pay in taxes and healthcare, and in degradation of the environment and opportunity costs to make those low prices possible.

              As for dealing with intermittent supply, this is an engineering challenge, it is clearly doable. This is where storage technology, large very high voltage interconnects and smart grids come in, distributing power from areas of surplus to areas of demand, and maintaining storage across the whole grid at large and small scales. I agree that nuclear has a long term future (even though it is pricey) and some gas and oil will be needed in the short term, but to throw your hands up and say it’s not possible is just Luddite and defeatist. I used to be an engineer. This is the kind of thing that fires up engineers more than anything else. The technologies are already there. As they are rolled out they will get better and cheaper. It’s a bit tragic to be locked in a 20th century model of power generation and distribution when our engineering and computing capabilities our sooo much more superior. And this is all gold in terms of highly skilled highly paid manufacturing and installation jobs that cannot be exported.

              As to your question about what to do when the sun goes down, there are straightforward answers to that. Switch to in-house or local batteries plants (like Tesla deploy), use local or distant wind power or other low-emissions tech like biomass etc, have other storage tech like pressurised gas, gravity storage, hydro pump storage, or switch to base load nuclear. There are a LOT of options. I agree that it is not trivial but it is totally do-able.

              As for why we haven’t done this before, there are two clear answers. Firstly, the fossil fuel industry controls politicians, especially in the US and has had the power to suppress any progress in this area. Like I said, industry vested interests have form in this regard.
              Secondly, there has not been a pressing impetus to overcome the initial R&D investment and costs to replace large parts of the power infrastructure. And markets tend to use the lowest cost, highest profit way to solve a problem. But once the tipping point is passed (an we are very nearly there already) yes, low emissions sources and more powerful and efficient grids will be the way to go.

  2. MichaelR November 5, 2017 at 12:37 PM

    Thanks for an informative and interesting review of this topic. Energy efficiency is a really important factor that is often underestimated when looking at the future of energy markets and how technology will change the face of power generation, distribution and usage. Engineers will be a vital in this transformation, so as usual, we need to train more of them if we want to stay in the game globally for nex gen technologies. I think the likes of Elon Musk are a great inspiration to the next generation of potential engineers.

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