The Future of Energy

Although I’m extremely proud of the work I did in ‘Energy Consumption in the Developing World 2030‘, it’s really a baby step towards developing a global view on the future of energy for the planet.

Next steps for me are to extend the forecasting through to at least 2075 for the developing world and to start on the developed world thereafter. I’ve spent some time over the past month trying to understand the drivers of energy consumption in the developed world to try and get an intuitive feel of which way the cat is going to jump.

The ‘developed world’ as I use the phrase is limited to members of the OECD. This is merely a convention I use because international energy statistics are conveniently broken out between OECD and non-OECD nations and used as a proxy for ‘developed’ and ‘developing’ nations. But it’s relatively easy to identify subgroups within each category that don’t look like the rest of the members.

For example, within the 34 OECD nations we see that 4 countries–Chile, Mexico, Turkey and the U.S.–are slated to grow in different ways than the other members, in part simply because their population is projected to grow significantly over the first half of this century, while other OECD members will see either stable or declining population levels. This means that for some measures it will be a bit confusing to treat the OECD as a homogenous unit.

For example, while the 30 other members of the OECD are wealthy, stable and could perhaps best be described as the ‘reclining world’, the 4 countries I just mentioned actually account for 42% of the overall GDP for the OECD, mostly due to the inclusion of the U.S. as a developed-but-still-growing-country (Quick–someone think of a good acronym!). The same is true for population. The U.S., Turkey, Mexico and Chile account for 40% of the OECD’s population. To make it trickier, as new countries are added into the OECD club, there’s a good chance that they will look more like the 4 outliers than the recliners that have the most seats at the table.

In my paper, I differentiated between the non-OECD nations by noting that some (mostly in Asia and Africa and Latin America) were growing quickly, and I calculated a 5% annual growth rate for their energy consumption through 2030 (and speculated that that rate would hold through 2075). I suspect the same segmentation will be appropriate for the developed world as well, and I may end up abandoning the convenience of OECD vs. non-OECD nations and creating my own groups. (It would be nice if I could use just two groups, but I’m not an optimist about that.) And I’m pretty certain that I will find myself at odds with the Department of Energy’s Energy Information Administration again. I may be writing a similar paper saying that while the majority of OECD countries may follow their very-low-growth projections of 0.3% per year energy consumption, the countries that matter most will be growing more quickly.

But they play the game on the field and I’ll actually have to do the work before making the case. Feel free to chime in and help me construct the right framework for doing this. It’s going to take at least a month, so we all have time to think about it.

6 responses to “The Future of Energy

  1. I am just wondering, what kind of price developments do you see for different fuels and forms of energy?

  2. Hi Jarmo,
    I haven’t studied pricing carefully. My best guess is that electricity pricing will rise a bit above the rate of inflation, constrained by low prices of natural gas. I expect transportation fuels to rise more quickly, as demand continues to surge.

    The puzzle will be heating and air conditioning, especially in the developing world. With hundreds of millions moving into the cities and fitting out apartments for the first time, will appliances and transportation be a higher priority than heating and A/C? Will developers add units into new construction?

    My crystal ball gets cloudy on this–do you have any thoughts?

  3. I guess you’d have to get data from India, China and some other places and see what is happening. I know that A/C has a low penetration on Indian market but is expected to grow fast.

    One thing is for sure: these all depend on disposable income. This study here has some interesting curves on disposable income and the gadgets people in Asia acquire:

    https://www.clsa.com/assets/files/reports/CLSA-Mr-Mrs-Asia-2010.pdf?disclaimer=on&accept=+Yes%2C

  4. Hey Jarmo, thanks for that link! That’s a really cool report.

  5. Thanks Tom,

    Are you planning to use different growth scenarios? These are extremely long-range forecasts and just a small change in CAGR will make a big difference, as you well know.

    Btw, I agree with you on China. The forecasts that say China’s energy use will level off soon…. not likely.

    • Hi Jarmo

      Well, if they’re coherent enough I’ll use the different scenarios put forward by agencies like the DOE. If they fall apart, I probably will do it. But look what happened with the IPCC SRES–they had, what, 145 of them? And all anybody talks about is two of them. Lotta work making assumptions…

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