2. Sun - Energy - Food - Life
The Sun provides our energy in three major “cycles”:
• The Long Cycle: Fossil fuels, fossilized organic matter,
essentially fossilized solar power, stored for million of
years
• The Fast Cycle: Solar power for the water transport, from
ocean evaporation to inland precipitation
• The Slow Cycle: The storage of fast cycle energies in
aquifers, icebergs, locking water for future use,
maintaining forests and topsoils
Why is it important?
• We are increasingly using Long Cycle energy (fossil fuels)
just to feed and water ourselves, this is not sustainable
3. Our Usage of Long Cycle sources
Global mix of primary energy in the last 150 years
12
Nuclear 5.5%
Natural Gas 21%
Gtoe/yr = billions of toe per year
10 Hydroelectric 5.4% Nuclear
Oil 33%
Biomass 11%
8
Coal 24% Gas
Solar 0.1%
Hydro
“Big Three”
Oil
6
Oil
4
Biomass
Gas,Coal
2
= 78%
Coal
0
1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
P. Beretta
50% of the Oil ever produced has been consumed in the last 25 years
4. The Peak Oil Debate
• More than 50% of all the oil ever produced has been consumed in the last 25 years
• Production has exceeded discoveries every year since 1984
• Peak discovery was in 1965, we were consuming 5bbl per year and discovering
20-30 bbl. We now consume 40bbl and discover 5-8bbl
• Overall production seems to have peaked in 2006, exports of top 5 exporting
countries fell 4.5% in 2007
• North Sea fields are down 40-80% in the 10 years past peak production, Mexico’s
Cantarell field is down 24% in the past 12 months, Saudi’s giant Ghawar field will see
an estimated production fall 17% between 2009 and 2013
• One of the largest recent finds, Brazil’s Tupi field is estimated at total life capacity of
40bbl, this is equivalent to one year’s worth of world consumption
8. Cost of switching over
• Globally we have invested 330Bn in the last three years in alternatives, yet
“renewables”, like solar/wind, don’t have a visible market share
• More than 1/2 of the world’s installed solar capacity is in Germany, yet that
generates less than 1/2% of Germany’s electric production
• The IEA estimates that by 2030 the US will have 5Bwh per year from solar, less
than 1.5% of what will come from coal
• At $1/3 Trn for 1% of “new” energy it takes $50 Trn of investment to replace fossil
fuels. This correlates with IEA’s estimate of $ 45 Trn to slow CO2 emissions
The main routes open to us, globally, are solar and nuclear, wind in
certain markets
9. Cost of switching over - Solar
• Photo Voltaic (PV) is relatively inefficient (low energy density)
only 26% of the Sun’s energy is converted in single-crystal PV
• 40% conversion can be achieved in multi-layer semiconductors,
but these are expensive and limited to space applications
• Most of the cost of manufacture is in the silicon itself, which
today uses the scrap from the semiconductor industry
• There are estimates that a massive building out of solar over
the next 20 years is going to require at least 5 years worth of
fossil fuel production
10. Cost of switching over - Nuclear
• Nuclear is a relatively new source of energy, but it has taken 40 years
to reach 6% of global energy production
• There are 435 operating reactors worldwide, 29 under construction.
USA has 103, France 59, Japan 55 (+1 in construction), Russia 33 (+7)
• Of 30+ countries with nuclear plants the percentage of power
generated ranges from a high of 78% in France, 54% Belgium, 39%
Korea, 37% Switzerland, 30% Japan, 19% USA, 16% Russia
• India aims at 26% share from nuclear by 2052, a 10% growth per year.
China has 4 plants, plans a five-fold increase by 2020 and yet will
achieve only 4% share
• USA has potential for 15-20 new plants by 2020, it takes 10 years to
bring a plant to operation
12. Global Financial Impact
• World oil expenditure is now 8% of GDP. It was 4% last year and 1% in 1998
• Energy inefficient countries will suffer more, particularly those operating with a
predominant low capital to labor ratio (low wage, low productivity)
• Asia is vulnerable, higher energy prices reduce trade surpluses. Indonesia has
said that at $140 bl internal subsidies will use 56% of in FX reserves
• According to the IEA China will overtake US energy consumption in 2010.
Energy demand is growing 5% faster than GDP, decreased coal production
(expected -40% over 20 years) will cost $100B in energy imports
• Since July 2008, Oil exporters hold more US Treasuries than Japan. There is
a transfer of wealth from Asia to the Middle East / Russia
13. Global Financial Impact
Asia’s predicament, increase in standard of living increases energy
consumption faster than GDP
14. Global Financial Impact - Developed economies
• US Debt at 500% of National Income is unsustainable and will slow down
investment in new energies. One bright spot is the US’ ability to pay energy
imports with grain exports (44% of world’s grain exports, 2008 best crop ever)
• Japan still the 5th largest trade surplus (after Germany, China, Russia and
Saudi Arabia) and by far the most energy efficient country, should be able to
afford energy investment
• Europe relatively well positioned, Germany and France combine surpluses and
“fossil fuel efficiency”, should be able to afford new energy grid. UK wind power
potential. Complications: Spain’s 9.5% current account deficit, Germany’s
unwinding of Nuclear.
• Scandinavia, already well on renewables (60% in Norway)
15. Global Financial Impact - Oil Exporters
• Middle Eastern oil consumption growing fast, 4.7% in 2007
• Saudi Arabia now biggest oil consumer per capita at more than 38 barrels per year
• 22% of Saudi Arabia’s production stays home, up from 16% in past seven years.
• Over the next 5 years, 4% pa domestic demand growth and 2% production decline
are expected to reduce Russian exports by 50%
• ROW ( World - OPEC and former Soviet Union) peaked in 2003, accounts for
13.7% of world reserves but has to make up for 41% of world production, at
increasingly higher production costs
16. Cost of switching over
• The scale of investment is not unprecedented:
• Manhattan project 0.25% of GDP
• NASA peaked at 0.75% of GDP
• Vietnam war cost 9% of GDP, Korean war 14%, WW II 38%
• Estimate for alternative new energy is an investment similar to
Vietnam but over 10-20 years
• Level of social effort is comparable to German reunification that
was paid with a 2.25% surtax
17. Summary
• The debate between near term (pessimistic) and long term (optimistic) fossil
fuels peak is irrelevant in the world’s time scale, we’re “there”
• We can expect major macroeconomic trends towards:
• Gradual shift of manufacturing towards energy efficient consumers
• Continual transfer of wealth to energy exporters
• Gradual shift of spending from consumer discretionary to energy trades
• The problem is large enough, potentially a 25% hit on GDP, to require an
uncommon level of leadership and social involvement
18. A Role for New England
• The country is clearly taking consciousness of the energy challenge
• Progress towards a solution will come from the private sector as much as from
the public sector
• Massachusetts is among the most advanced states in energy policy
• Universities, Government funded Research and Venture Capital in the Boston
area are very active in new energy, example of Biotech industry
Look for opportunities in: Regulatory affairs. Semiconductors.
Intelligent controls. Systems integration. Information and
Communication technologies in: Smart grids (networking), road
transport, smart building. Energy efficiency, “behind-the-meter”…..
Pierre Jean
TechPoint Ventures
pjean@techpointventures.com
