Energy Demand and Economic Development
in the Industrial World since 1950
by
Karl Erik Björkman
Tutor: Sven Fritz
Stockholm 1992-11-03
Stockholm University Economic History Karl Erik Björkman
Energy Demand and Economic Development in the Industrial World since 1950 Introduction. The essay is a continuation of an essay in 1990. The essay is updated, data have been analysed with graphs and regression analysis adapted on the relation between energy demand and Gross Domestic Product. The oil embargo in 1973 and the large cost increase for oil that followed in 1973-74 and in 1979-80 caused world wide concern for energy supply and the growth of the economy that is dependent on energy. The dependency on oil has since then been reduced after substitution of other sources mainly coal and nuclear energy for oil. As 1973 is a break point in energy history the development before and after 1973 has also been studied separately. The Gross Domestic Product is the best documented data on economic development and contains a summary of all commercialised production in a country although the public sector is evaluated at cost and not a market price. The GDP will be set as the dependent variable in regression analysis with total energy, total electricity and total energy together with oil price as independent variables. This does not mean that there is an assumed directional dependency between energy and GDP, but GDP is the result of a lot of inputs and it seems natural here to make the regression this way. It is of great interest to see how firm the relation is between energy of different forms and GDP and how the relation has been influenced by the oil price rise. Objectives. The objectives are:
Methodology. Statistical data of energy consumption, Gross Domestic Product and population development has been collected from different sources and compiled to time series of annual data. Parts of the previous more descriptive essay have been included to give a background and to make the essay easier to understand by people less familiar with energy questions. Extracts are with as small changes as possible yet to give their essence. The extracts are chosen so as to stand without or only short comments. The graphs made on the very big data base represent much information and have also been commented to stress important changes and differences between countries. The author is experienced in the energy field which should warrant that the extracts are essential and commonly agreed on. Still the selection of the extracts from a very large background material, is a screening which reflects what the author considers important in this very vast field. The tables and graphs form a base of facts which should be totally free of personal judgement. The regression calculation is a statistical mathematical method for study of relations based on existing data and are objective as such. The interpretation may however become subjective if its validity is not made clear. The essay will give a perspective of the long term development of energy consumption since 1950 followed by a detailed study of 10 countries, in particular the effects of the oil shocks in 1973 and 1979. The 10 OECD countries selected represent a major part of the world's commercial energy demand. Data for a long period often must be taken from many sources. Data can be in different form which requires a transformation. So it has been in this case. One way to check the conversion is to find overlapping data. Differences should be looked into. Statistics, however, are often adjusted in later publications for different reasons. One reason can be the replacement of preliminary data with final data, another can be a change in calculation. Different organizations can use different calculations. The statistical base in a country can be weak. Exchange rates can change or the official exchange rate may differ from actual purchase power. For the industrial countries data are mostly rather accurate and reliable. For developing countries many problems arise. Lack of reliable GDP data for the Sovjet Union has prevented a regression analysis with GDP. The different statistical data have here been compiled to a consecutive row of data from 1950 to 1989 of the energy use in the world and in some selected countries Australia, Canada, France, Germany, Italy, Japan, Spain, Sweden, United Kingdom, the United States and the Sovjet Union, USSR. Primary data in different units like Mtoe, Mtce and TWh have been converted to the standard unit joule, J, with the prefixes k,M,G,T and P as the scaling factor 1000 for each prefix step. Data on GDP have been extracted from International Monetary Fund publications. UN publications have been used for data on population and for the last years OECD Main Economic Indicators being earlier published. The population growth rate has been calculated and GDP per capita calculated as GDP growth minus population increase. The main compiled data are shown in graph form as the best way to present the main streams of development. Comments on the graph explain findings. Population figures are midyear estimates and the population increase is the increase from the previous halfyear estimate. As the population increase changes very slowly it is of no significance that these figures refer to conditions half a year earlier than the GDP and energy values which refer to calendar year. The figures in tables and graphs are marked together with the year they represent, e.g. end of year. GDP at constant prices and GDP per capita data are often adjusted. Different publications have different ways of calculating money value variation and selecting the base year for price adjustments. Instead of adjusting series of GDP data to each other it was found better to use annual figures of the percent change of GDP and Population and from these figures calculate a GDP index for the regression analysis and for graphs comparing the growth of GDP with electricity and total energy demand, with base 100 for a recent year. Adjustment of data for a few years becomes easy and updated figures from publications that come out early can be easily added. The regression analysis of energy on GDP has been made on the whole period in most cases from 1951 to 1989 and this period split on two, one up to 1973 and another from 1974. The results have been summarised in tables. The price of oil has been added in some calculations to see if this factor improves the clarification degree substantially when total energy is the main independent variable and to see how the price may have contributed. The regression analysis and the graphs showing the relation between total primary energy use, electricity and GDP has been made on per capita data at inflation adjusted prices. This is considered necessary as otherwise the population growth and inflation would alone give a correlation which would hide the underlying more important relation of per capita development at constant prices. Regression analysis gives the average relation over the period between factors, the significance of the coefficients and the degree of explanation. It does however not say that the dependent factor is the cause of the independent factor. It might be the other way round or there may be no direction at all. If no time lag factor is present or can be expected it is not necessary to say that one factor is dependent on another. The factors can be closely linked like woven together. Regression does not say that the chosen independent factor is a decisive factor as this factor may depend on another important factor. There can be a common factor behind all factors causing the regression analysis to show a relation. A relation can be found but an important factor behind can be hidden. The time factor itself or general development may be such a factor. The important issue is however if there are certain firm relations, links between the factors. The more factors added as independent factors the better will the statistical material, limited as it is, explain the dependent variable. But the more factors used the larger becomes the distortion by the correlation between the independent factors. And it is likely that the significance of factors becomes too low. It can give a falsification of the influence of each factor. Therefore one or a few independent factors with little correlation should be sought. It is also important that there is some reason to believe of a relation otherwise the material can give quite wrong interpretation. There should be some theoretical reason for the selection of factors. The regression method does not confirm a theory but it can tell that the theory may be correct and it can also tell that a theory is no good or that the selected independent factors are not sufficient to explain the dependent factor. Autoregression is a method for checking if one variable shows a correlation with for instance the values in a following year. This does however not say that such a relation falsifies other relations. Here it can even be expected that there is a relation by the fact that there is a delay in adaption to changes which for a price increase is in the order of one year for households and several years for the industry. The inclusion of price as a factor may have to be time adjusted to give the correct picture. Many factors in the society are correlated with GDP as GDP is a conglomerate factor. As GDP growth can be a target for scenarios the relation with other factors can be used for prognosticising these other factors. Correlation between GDP and energy can be used for prognosticising the energy demand or specifically the electricity demand. Note also that changes in price relations influence the relation between energy sources in the same way as changes of the price relation changes the relation between energy, capital and labor do. Labor becomes a substitute for energy when prices of fuel increase and vice versa. Thus we can expect that the price increase of energy that occurred caused an increased demand for labor which caused inflation. And when the fuel prices fell the demand for labor would decrease. The increase in fuel prices also caused new investments to reduce the price effects and the increased labor costs. This investment boom was good for energy conservation but it caused inflation and made plants obsolete earlier than a foreseen gradual price increase would have caused. Here the ratio of relative energy and GDP has been sought for specified periods. The data base compiled for this study also allows a study of the change of relation between energy sources over the years and this is of special interest after the oil price shocks in 1973 and 1980. Information Sources. There are a number of organizations compiling statistics of different kind. United Nations compiles much information into statistical publications.The United Nations compiles yearly data, published annually in UN Energy Statistics Yearbook together with data mostly three years back. The publications have in the years changed names and other changes have also been introduced to follow changes in technology and other factors. Here the energy statistics used for graphs and regression analysis are from UN Yearbooks. Economic data are from the International Monetary Fund's publication International Financial Statistics,IFS. Much of the text and table information in comes from OECD/IEA publications. OECD consists of the major market economy countries. IEA, the International Energy Agency, has 21 members and is an autonomous body established in 1974 within the framework of OECD which in addition to the IEA countries comprices Finland, France and Iceland. OECD has been asked for permission to reproduce data from the report Energy Policies and Programmes of IEA Countries, 1986 and 1987 and has granted the author the permission provided that full acknowledgement is given to the author and to OECD, Paris as the original publishers and that the publication date is mentioned. An international symposium was arranged in Stockholm in 1984 on Energy and Politics and the proceedings were published by The National Energy Administration in Sweden, STEV 1985:4. This source has been used here to give an extended view on energy questions in general and historical aspects. Reference is often to research by Sam Schurr on the American Energy and Economy. Schurr is a background person in energy history research who made detailed scientific studies of the United States energy and economy. He has made the classic study Energy and the American Economy 1850-1975. There is no direct reference to Schurr in this essay and his study has been classified as background papers. Definitions and Energy Measurements. Energy can be measured at a primary energy level of thermal content of fuel or as final consumption in the form it is used. The calorific energy content mostly is net value by which is meant that heat recovery at vapor condensation is not included. The statistics and the general discussion use the term consumption of energy which should be considered as a practical economic term. Energy is stricly speaking not consumed. It is transformed from one form to another. Heat is often considered as a rest product without value. This is due to the normal use and evaluation of energy in its relative, practical measurements. It would be better to talk about use of energy than consumption of energy. In fact there is no production of energy either but the normal economic terminology has been used. UN statistics define consumption as production plus imports minus exports minus bunkers and minus stock change. Bunkers is fuel used in international transportation by ships and aircraft. For electricity there are different primary sources such as hydropower, wind energy, geothermal energy, renewables and nuclear energy. These primary energy sources can be added to the other commercial primary energy sources such as solid fuels, liquid fuels and natural gas to Total Primary Energy Requirements, TPER. The conversion from electricity output to TPER can be with different factors. The World Bank uses a notional efficiency of 34 percent which as the inverse gives a multiplying factor of 2.94 for conversion to primary energy thermal, calorific values. The UN statistics contain different tables one with electricity as electricity output others with an assumed primary source which is converted to electricity with 30% efficiency, corresponding to a factor 3.33. In this essay a multiplication factor 2.6 has been used corresponding to 38.5% efficiency as a closer adaption to todays state of the art for conversion and to IEA factors. Electricity is mostly not converted to heat energy so the conversion is only notional used for summation to total primary energy requirement. Liquid fuel is mostly used in the transport sector and need not be converted to electricity for final use so comparing the different sources of energy can never be quite satisfactory. Nuclear energy as primary thermal energy could be used for heating but is generally used only after conversion to electricity. The primary energy calorific content can be totally without interest and the efficiency in conversion of little interest except that a low efficiency means a larger heat pollution and may be a waste of resources. This is not seen as a prime problem. But so is carbon dioxide which indirectly causes a heat problem for the globe. When comparing energy consumption over years or between countries the way electricity from hydro, wind, nuclear, and geothermal energy is added to other forms must be noticed. Statistical data can differ in these conversions. OECD normally prefers to convert electricity in the above described way with a factor about 2.7. The larger this factor the larger seem the energy requirements shown as TPER for hydropower countries like Norway, Canada and Sweden. When electricity is not shown in conjunction with primary energy sources it is mostly given as output measured kWh in the electricity form. Primary Energy is often measured in million tons of oil equivalents, Mtoe, or coal equivalents, Mtce. In recent publications the energy can be given in the standard energy unit Joule, J. Fuels from different countries with different energy content per kg are converted to a quantity, coal or oil equivalents, with a specified energy content. For electricity the unit watthour,Wh, is commonly used with prefixes such as k=kilo, M=Mega or million, G=Giga or billion, T=Tera or a Million Million and P=Peta. The standard energy unit is J, joule, 1Ws e. g. 1W during 1 second. Thus 1J=1Ws and 1kWh=3600kWs=3.6MWs=3.6MJ and 1TWh=3.6PJ. A country like Sweden has a an electricity consumption at generation output level of about 140TWh or 500PJ a year. Electricity per capita is in the order of 60GJ a year. Measurements often used for primary fuels are Million tons of coal or oil eqivalents 1Mtce=0.7Mtoe=29.3076PJ. Coal and other fuels from different countries have been given certain values of energy content per ton for conversion of physical data to energy values. Energy can also be measured as total final consumption, TFC, which is the final consumption after deduction of losses in generation and distribution. The energy use and GDP development is here in regression analysis calculated on a per capita base. Energy Resources. There are different energy resources. In developing countries the dominating fuels can be wood and waste locally collected and not out in the market. That is called non-commercial energy. It is mostly not included in energy statistics as it is difficult to measure and can only be estimated very roughly. When people move into towns they also to a larger extent have to rely on commercial fuels like kerosine. In the developed countries almost all energy used is commercial energy. Oil is easy to transport and easy to use. It is the dominating fuel for the transport sector especially for road transports. The reserves are however limited and known resources will with the present consumption last less than 30 years and with the expected unknown reserves another 30 years. Coal reserves are much larger and would last well into the 22nd century. Expected unknown reserves can equal known reserves and that would double the time to depletion at the year 1980 consumption with 27% of total world primary energy requirement. Uranium may exist in quantities several times the proved reserves (National Geographic Special Report, February 1981) In graph form are here shown different forms of energy for the world as a whole and for 10 countries studied in detail. These 10 countries account for about half the world commercial energy consumption and the largest single energy consumer the United States stands for one quarter. The Role of Energy. The energy intensity in industry in the United States has been studied by Sam Schurr in Energy and the American Economy 1850-1975, and he has extended the study through 1981. He has noted that the energy intensity of production fell while both labor and total factor productivity rose. Since the quantity of both energy and labor inputs required for a given level of output has been reduced, technical change must be a critical explanatory factor. The character of technical change required an examination. This was motivated by the fact that from 1920 to 1955 the utilization of electricity had been expanded by a factor of more than ten, while consumption of all other forms of energy only doubled. One key feature of technical change was that the thermal efficiency of conversion of fuels into electricity increased by a factor of three, another was that the unusual characteristics of electricity had made it possible to perform tasks in altogether different ways than if fuel had to be used directly (STEV 1985,p40). Historical evidence suggests that much of the innovation in the twentieth century is electricity using. Innovation increases the share of electricity in the value of output for a given set of input prices. Although the inverse relationship between total factor productivity and energy intensity virtually disappeared during the 1953-1969 period it is still noteworthy that high rates of improvement in total factor of productivity were essentially not associated with increases in energy intensity (STEV 1985,p41). The key to understanding the role of energy in the advance of productivity is to analyze the growth of productivity at the level of individual industrial sectors and special attention must be devoted to the substitution of electricity for other forms of energy (STEV 1985,p43). The Role of Electricity. Countries that have a big hydro potential also have a large part of energy supply in the form of electricity. Countries that have abundant conventional commercial fuels have a lower degree of electricity in use. Electricity can be easily distributed and converted to different other forms of energy and is suitable for industrial mechanization and automation. It is strongly correlated to the growth of GDP, the Gross Domestic Product. The conservation of energy does not necessarily mean a reduction in electricity use since in many applications the electrical application route is more efficient than the direct fuel one. In general, the more efficiently energy is utilized the better the competitive position of electricity. If coal and nuclear power are to enter the society in an environmentally acceptable way, this in many situations is best achieved via efficient use of electricity. Electricity is often criticized on the grounds of its overall thermal efficiency in primary energy conversion. Primary energy arguments presuppose that one fuel can be substituted for another which is not the case. In general the low grade fuels used in many cases for electricity generation can not be used economically in other situations. The concern for long term effects from nuclear waste, accidents and radiation increase took different forms in public opinion. The accident in Harrisburg in 1979, although with limited effects on the surroundings, pointed at weaknesses in the operation of plants. In 1986 came the far worse Chernobyl accident, which was caused not only by mistakes by the operating staff, as in the Three Mile Island accident, but also on less safe construction of the plant. The accident caused large radioactive deposites from precipitation of large areas in the wind direction especially in parts of Sweden. The global fear today is the greenhouse effect to which coal would contribute essentially. And coal is one of few realistic alternatives. The introduced taxes on carbon dioxide at use of fossil fuels will favor other sources than coal and gas. So called renewables like energy forests are exempted on the grounds that the carbon dioxide from these sources is part of a recirculation process. An increase of nuclear use in developed countries and financial support of hydropower in developing countries could ease the carbon dioxide problem. The Swedish energy policy as expressed in political decisions is contradictory to global environmental concern. In the last years, however, there seems to have been a shift in opinion in favor of relying on nuclear power also past 2010. Sweden has about 50 % of the electricity generation from nuclear power. A referendum in 1980 has by people opposing to nuclear power been interpreted as a wish to phase out nuclear power by 2010, althogh formulations and reservations in two of the three alternatives given in the referendum, could be interpreted rather differently. This essay covers a 40 year period with a large increase in energy demand. Electricity has increased its share substantially. Hydropower potential has been utilized for hydropower electricity almost to the limit accepted by public opinion in most developed countries. In the 1960s nuclear power stood as the alternative that would also allow saving some rivers in their natural wild condition for future generations. Nuclear generation of electricity was increased in countries with an industrial capacity to build nuclear plants and with small resources in oil and coal. Energy Demand Growth in Different Economies. Energy consumption is increasing in the developing countries and the centrally planned economies. Only in the other industrialized countries, mainly the OECD countries, there has been reductions in the demand leading to a fall in the world energy consumption in 1980 and 1981. The only kind of energy for which there has beeen a reduction in demand is oil. At global level, oil consumption decreased in 1974,1975 and 1980-1983 but was as high in 1983 as in 1973 (STEV 1985,p15). Graph 2 shows the use of different sources of commercial energy in the world. The world energy use was in 1979 almost three times that in 1955. The OECD demand was more than half of the total. The annual energy consumption growth rates in 1955-1973, 1973-1979 and 1979-1983 in different economies are shown in table 1. The developing countries have had a larger increase which however to a large extent can be explained by a transition from non-commercial fuels to commercial fuels only the latter being measured here. Comecon have also increased the consumption but this is certainly due to inefficient use of energy. Oil consumption levelled out in the 1970s and the increase came on the other sources with nuclear energy increasing much. Liquid fuels, mainly oil, passed solids, mainly coal, in 1967 at global level see graph1 and in 1951 in the United States as graph 3.10 shows. Electricity has continued to grow. Electricity from Hydro and Nuclear power has increased the most. In the graphs on total energy use hydro and nuclear generated electricity has been included with electricity output times 2.6. The lowest curve in the graphs shows electric energy from hydro and nuclear and in most countries the second curve from below shows total electricity. It must be noted that electricity by this measure of electricity output looks small compared with the heat value of the other fuels. If a magnifying factor of 2.6 is adapted it comes to the level of coal which to a large extent in fact is used for electricity generation, which in the graphs comes out as the difference between total electricity and the electricity generated from hydro and nuclear energy. A further study of the graphs 2 and 3 shows the rapid growth of liquid fuels up to 1974, in Sweden, graph 3.8, to 1970 and the decrease in most developed countries thereafter as effects of the oil shocks in 1973 and 1980 see graph 1. Natural gas accompanied the oil increase. In U.K. there was a large increase in the 1970s with the development of fields in theNorth Sea. The use of gas is very small in Sweden. The coal consumption has grown at world level, graph 2, but decreased in Germany, graph 3.4, France, graph 3.5 and very markedly in the United Kingdom, graph 3.9. Hydro and nuclear power stands for a large part of electricity generation in Canada, graph 3.2, France, graph 3.3 and Sweden, graph 3.8. The per capita rise in energy consumption stopped and changed to a decrease in the United States in 1973, graph 4.10. The decrease in gas and oil has been large. There was an interruption of the rise or a decrease also in the other 9 countries to 1982-83 when total energy per capita started to grow again. Electricity has continued to grow apart from a few interruptions. The rest of the world continued to increase total energy consumption. For the world as a whole the oil and gas consumption per capita decreased about 1 toe and the total was unchanged at 1.5 toe (STEV 1985, p19). The total electricity figures represent measured electric energy at the generation plants. If electric energy is multiplied by 2.6 it will show the same magnitude as total coal consumption which mainly goes to electricity generation. Electricity has increased its share of final consumption. Total Final Consumption is mostly much less than Total primary Energy requirement. Electricity is a form of energy close to final consumption as only losses in distribution have to be deducted and these losses generally are small. As the importance of electricity grows one might assume that instead of increasing the electricity value for comparison the other sources could be reduced to an assumed useful level of 38 percent. The regression analysis has been made with both 2.6 and 1 as weight factors of hydro and nuclear electricity when total energy to GDP growth has been analysed. The explanation degree has increased with the higher weight factor. Electricity alone gives a still better explanation. The use of heat pumps can illustrate the problem in weighing, comparing and measuring different energy forms at a primary level. Heat pumps take the major part of the energy used for heating of buildings from the surronding air or from water which is not given a commercial value and which is not considered as a natural resource but can be utilised after transformation to higher temperatures. The heat pump uses compressors driven by motors preferably electric motors to get a cold side which can absorb heat from the surrounding air or water and a hot side which can heat a house directly or via distributed water. The heat energy output may be three times the commercial energy input. This would mean an efficiency not only 100 percent which normally means no losses but 300 percent. Energy is generally not measured from an absolute zero level but from a normal temperature level. This points at the problems in comparing energy forms. Often heat is waste energy in a process but it can also be useful. Converting household wastes to heat and then heat to electricity is one way of making use of wastes which otherwise would be just waste. Before the 1973 energy crisis the energy growth to GDP growth ratio was 1-1.2 in developing countries and 0.9-1 in developed countries. It increased in developing countries and Comecon in 1973-79 and it increased more in developing countries in 1979-83 when the GDP growth decreased but the use of commercial energy continued to grow. It decreased in the OECD countries and was decreasing much in 1973-83 when the energy demand decreased and the GDP growth was low (STEV 1985, p20). In the regression analysis the relation GDP growth to energy growth, e.g. the inverse of the above, has been calculated and shown in tables. After 1983 the energy to GDP average growth ratio has increased and may return to about 1 with 1983 as the base when relative price changes of productive factors and different energy forms even out. There has been an energy conservation in OECD countries and changes in industrial processes. The decrease in energy/GDP growth ratio however also was affected by a decrease in output from energy intensive industry and a close down of plants with high oil consumption. It should be noted that a change from other fuels to electricity in most cases means a reduction in final energy use. When calculated as primary energy with a low conversion efficiency factor the reduction becomes lower. Electricity however also can be used to drive heat pumps which can convert low temperature energy to useful higher temperature energy for heating and then the "efficiency" becomes very high as input of commercial energy is lower than the output of energy. A larger part of the energy is taken from rather cold air or water. This shows only the danger in using efficiency in conversion by itself. The important thing is how to get the best overall benefit/cost relation and use of resources. Industrial processes have a time lag to react on changes in factor costs as equipment can often not be replaced upon a change in one factor cost until there is a need for a major reinvestment. The larger impact caused by the 1979-80 oil price increase was larger as the cost of oil had become important. The industry also was prepared to meet the new oil cost increase with changes in production processes that were better adapted to higher oil costs. There was a great uncertainty as how the prices would develop and the industry was prepared for changes better than earlier. TPER to GDP Ratio in Absolute Measures In table 2 is shown TPER/capita in tons of oil equivalents to GDP/capita in 1000 USD at 1980 prices. The regression analysis later on is in relative measures e.g. relative to the factor itself. Canada has a high consumption both in relation to GDP and total per capita. Canada and Sweden have a large energy intensive pulp and paper industry. The US also has a high consumption in both measures but has improved its efficiency considerably from 1973 to 1985. Electricity Intensity The electricity intensity in kWh divided by GDP in 1980 USD has increased in most countries except Japan and UK between 1973 and 1985. In Canada the increase was from 1.26 to 1.40 a moderate increase at the highest level in the world and in Sweden from 0.72 to 1.00 as the second highest among the selected 10 countries. Australia and Spain had an increase with 40% from lower levels. Australia has large fossil fuel resources and the energy intensive industry has increased. In Sweden electricity, mainly nuclear power generated, became a substitute for oil. Electric heating of small houses is common. Self-Sufficiency Table 4 shows that the production of primary energy has increased and improved the relation to total requirement in IEA-countries from 67% in 1973 to 79% in 1985. For oil the improvement is from 38% to 55% reached by a reduction in use and an increase in production. Primary Energy and Final Consumption Primary energy from different sources, solids mainly coal, liquids mainly oil, Gas mainly natural gas, Nuclear mainly converted to electricity but as primary energy often measured as input heat energy, Hydro sometimes as primary energy evaluated as if it was produced from thermal energy converted in a steamturbine to mechanical energy and then to electricity. Heat can be produced together with electricity in thermal plants. Energy balances for 1973,1979 and 1985 are shown in tables 5.1-5.3 for total IEA and for North America separately. It can be seen how primary energy of the different sources sum up as Domestic Production + Imports - Exports - Marine bunkers - Stock increase to Total Primary Energy Requirement. It is then converted into electricity, Manufactured Gas, Petroleum Refinery and Losses and secondary energy summing up to Total Final Consumption which is distributed to Industry, Transportation and Residential/Commercial sectors. It can be seen that electricity comes from the thermal sources with Solids increasing, Oil decreasing, Gas unchanged, Nuclear increasing and Hydro somewhat increasing between 1973 and 1985. It can also be seen that the electricity column showing electricity production in its output form, 342Mtoe in 1973, requires a much larger input from fuels, 930Mtoe, corresponding to a conversion efficiency of 36.8% and the conversion losses are seen as a consumption in the last column -587Mtoe. It can be seen that transportation to a very large extent uses oil. Electricity increased within industry mainly in 1973 to 1979 and in the resisdential/commercial sector much more and did so in the whole period 1973 to 1985. Oil Prices. Saudi Arabia, the largest producer, next to the USSR, is the largest single exporter of oil and the prices reflect the international trade prices. A crude oil index at constant prices compiled from different series is shown in graph 1. The oil prices rose rapidly in 1973-1974 and in 1979-1980. The first rise was at the oil embargo imposed by the oil producing countries of the third world cutting a large part of the oil supplies to the industrialised world. In 1980 the world market price for crude had soared from $3 to more than $32 a barrel in 7 years (National Geographic 1981 p2). In current dollars the price was eight times as high in 1975 as in 1970 and 2.7 times as high in 1980 as in 1975. The prices increased another about 10 % in 1981 but then went down 20 % til 1985 and plummeted to half the 1981 level in 1986. In the winter 1989-1990 which was very cold in the United States the prices again rose substantially. The oil prices are much more volatile than the gas and coal prices although there is a correlation in the long range. The impact of the first oil crises on economic growth was very severe. Growth in the OECD countries as a whole plummeted to 2.6 percent per year from 1973 to 1979. Germany expanded at 5.4 percent per year in 1960-1973 and the rate fell to 2.4 percent for the period 1973-1979 (STEV 1985,p44). An index of GDP per capita is shown in graphs 4.1 to 4.10 together with indexes of TPER and electricity. GDP per capita at constant prices has been used as the dependent factor in the regression analysis. The oil price index in graph 1 has also been used in the regression analysis. Sectoral Productivity Growth. An econometric model, which contained many factors in a mathematical matrix form, was some years ago used in a study to assess the role of energy in stimulating productivity growth. Inputs were capital, labor, electricity, non-electrical energy and materials. It also encompassed substitution among productive inputs in response to changes in relative prices. It included a pattern of technology in the sector. It also determined the growth of sectoral productivity as a function of relative prices (STEV 1985,p48). The study found that technical change was electricity using for twentythree of the thirtyfive industries included in the study. For twentyeight industries technical change was non-electrical energy using and energy saving for seven of the thirtyfive industries. A decline in the price of electricity as well as of non-electrical energy stimulates technical change in most of the industries (STEV 1985,p51). Over the period 1920-1953 energy intensity of production was falling while productivity was rising. Between 1953 and 1973 energy intensity was stable at a slower real energy price decrease while productivity continued to grow as a result of substitution of energy for other inputs. Real energy prices began to rise in the early 1970s increasing dramatically after the first oil shock in 1973 and again after the second oil shock in 1979. These price increases resulted in the substitution of capital, labor and material inputs for electricity and non-electrical energy thereby reducing the energy intensity of production. At the same time the energy price trends contributed to a marked slowdown in productivity growth (STEV 1985,p52). The price increase substituted labor for energy. In Europe this resulted in an increase in real wages since labor supply was inelastic with respect to price. In the United States the increase in labor demand led to unprecedented increase in employment (STEV 1985,p56). In the transport sector oil use continued to grow for six years after 1973. Its share of the OECD oil use rose from 38 % in the early 1970s to about 50 % in 1983. Oil use represents some 99 % of total energy use in the transport sector and substitution potential is very modest (STEV 1985,p91). In the industrial sector oil use is concentrated in five major industries iron and steel, chemical, petroleum, non-metallic minerals and paper and pulp. These industries account for 70 % of OECD industrial oil use in 1979 and 93 % of the 91 Mtoe decline in industrial oil use between 1979 and 1981 (STEV 1985,p92) Price Effects in IEA Countries. In 1981 the average annual oil price paid by IEA importers was a high $36.25 per barrel. It decreased to $27.56 in 1985 and to a low point of $10.69 per barrel increasing again to an average $14.12 per barrel in December 1986. This fall in the crude oil price yielded general economic benefits to the OECD countries as a whole and to oil-importing LDCs, less developed countries, mainly through terms of trade effects and through a further dampening of inflation (IEA 1987,p12). The IEA coountries imported 705 Mtoe of oil from outside the IEA in 1985 against as much as 1206 Mtoe in 1979. IEA oil production in 1985 was 809 Mtoe, 15 % higher than the 704 Mtoe in 1979. Production increased in the North Sea. It was reduced in the United States due to price control with subsidies taken from domestic production of imported oil. Later these were replaced by taxes which when world market prices went down became higher on imports and acted like an import duty putting the GATT agreements under discussion. The "windfall profit" tax was reduced to zero at 1986 oil prices. When prices went down adjustments were also made on royalties and taxes in Australia, Canada, Germany and Norway. In the Neatherlands and the UK advance payments of taxes were repaid earlier and in all such changes ameliorated the impact of falling oil prices on production levels. But some projects in the planning stage have been delayed (IEA 1987,p15). The economic stimulus of lower oil prices in 1986 was lower than the dampening effect of higher oil prices in the 1979-1981 period mainly because of lower volume of oil imports (IEA 1987, p12). Energy Conservation. Energy conservation through improvements in efficiency has made a major contribution to reducing oil imports and easing energy markets in general. It has also reduced the need for new investments in production facilities such as electricity generation and it has made a positive contribution to the quality of the environment. The 20 % drop in energy intensity, the ratio of energy use to GDP, from 1973 to 1985 is a rough indicator of past progress. This decline in energy intensity translates into about 880 Mtoe per year, which is equal to rather more than the total 1986 annual oil production of IEA Member countries (IEA 1987,p17). The consumption of coal in the IEA countries has increased steadily reaching 786 Mtoe in 1985 or 22 % of IEA primary energy requirements. IEA countries taken as a whole are virtually self-sufficient in the production and use of coal. In 1986 the world steam coal trade exceded the metallurgical coal trade for the first time (IEA 1987,p19). Gas has maintained a broadly constant share of about 20 % of all energy consumed in the IEA between 1973 and 1986. Given the existing sectoral structure of gas consumption little change in gas market share is anticipated at the aggregate IEA level despite increasing substitution of gas for oil in some countries, especially those where large-scale natural gas is at a relatively early stage. Fuel cell technology has advanced and may offer some scope for new market opportunities (IEA 1987,p23). Electricity. Electricity demand in final consumption has risen strongly. Input of fuels rose by 40 Mtoe from 1984 to 1985. Nuclear power provided an incremental 36 Mtoe and coal a similar amount whereas the amount of oil used in IEA power stations fell significantly by 25 Mtoe to 108 Mtoe. Since the first oil crisis in 1973 electricity increase was in 1985 40 % corresponding to an input increase of fuel of more than 300 Mtoe. Coal, nuclear and hydroelectric power increased sufficiently also to substitute for more than 100 Mtoe as well (IEA 1987,p23). IEA fuel inputs in Mtoe to electricity generation
(IEA 1987,p24) Note that nuclear,hydro and geothermal here is in TPER oil equivalents with an input assuming less than 40 % efficiency at a fictive conversion to electricity. In view of the importance of electricity for future social and economic development and the lack of available substitutes in many uses there is a clear indication of the continued growth in the relative importance of electricity in IEA countries (IEA 1987,p24). Electricity is to a very large extent generated in each country as needed. More consideration is given to the possibilities of importing electricity between utilities and across national borders as a means of making better use of existing capacity (IEA 1987,p25). More international trade in electricity can be expected. France, member of OECD but not of IEA, had in 1985 electricity accounting for an equivalent 32 % of total primary energy requirement and has an extensive nuclear power program, which allows for exports. Between England and France there is a High voltage Direct Current link over which 2000MW can be transported and UK can purchase at low prices a large yearly quantity. In West Germany the electricity share was 17 % and in UK 14 % calculated as equivalent primary energy requirement. Nuclear power accounted for 18 % of electricity generation in 1986. The construction activity was high in the late 1960s and in the mid 1970s. Since 1977 the rate of new construction has been more modest. The nuclear power accounted for about 240 Mtoe of primary energy in 1986. Canada, Germany, Japan, UK, and the US have restated their commitment to nuclear power as an attractive long term option for electricity generation. Following the Chernobyl accident some countries have imposed further delays on decisions about nuclear programs, Italy and the Neatherlands. A number of Governments have confirmed in 1986 their already established intention not to produce nuclear power Australia, Austria, Denmark, New Zealand and Norway. One country, Sweden with 50 % of electricity from nuclear, has taken decisions aiming at phasing out nuclear use (IEA 1987,p25). Hydropower contributed 19 % of the fuel input for electricity generation in IEA in 1985. For individual countries the importance of hydropower is much greater especially for Norway. Several countries still have unharnessed hydropower capacities Canada, New Zealand, Sweden, Turkey and the United States. In some of these countries hydropower development meets growing environmental opposition (IEA 1987,p26). The World Energy Conference and the Greenhouse Effect. The World Energy Conference in Montreal in 1989 with 3500 delegates from 87 countries was dominated by environmental issues. The theme was Energy, Economy, Ecology. The forecast presented to the conference assumed double coal burning in year 2010 compared with 1985. That would mean a large increase in carbon dioxide contributing to the greenhouse effect. A warning was raised by former defence and energy minister in the United States for a new increase in dependency on oil from the Middle East. The new chairman Gerhard Ott from Germany admitted that the development was not what could be desired. The increase in energy use was worrisome. Coal burning gives 0.7-0.9 kg carbon dioxide per kWh electricity. With gas fired combiplants the emissions could be reduced to less than half. Methods to take care of the carbon dioxide also start to come forward (Ny Teknik 1989:40 p12). In the developing countries there is a big potential for hydropower but financing is a hindrance. Sun and wind is still considered not to give any larger contributions to the energy supplies although some promising examples were given (Ny Teknik 1989:40,p12). Several delegates spoke for more nuclear power. The WEC forecast estimates the nuclear power to have increased in year 2020 to 2.5-3.5 times the 1985 level (Ny Teknik 1989:40,p12). Lord Marshall of Goring a heavy man on the British energy scene gave a risk analysis. He compared what nature did and what man did and found that man was considerably worse at letting out sulphur dioxide, chlor-fluor-carbons and carbon dioxide but not so with nuclear radiation. He showed that the natural radiation from the earth shell is immensely larger than that from a nuclear power plant. He admitted that enough consideration had not earlier been taken to the human factor and that the accidents at Three Mile Island and Chernobyl both were examples on that. A new organization WANO, World Association for Nuclear Operators will stimulate exchange of experience between countries to increase the safety. Voices were also raised on how to avoid plutonium from being used for nuclear weapons (Ny Elteknik 1989:40,p13). The Swedish goal to phase out nuclear power, not build more hydropower and not increase the carbon dioxide emissions was met with great wonder to say the least, and the world will keep an eye on Sweden with interest (Ny Elteknik 1989:40,p13) Energy and GDP Development in 10 Countries The picture received by looking at the aggregate of all IEA countries hides interesting differences between countries. In the following some major and selected countries will be studied more in detail. Australia. Australia continues to be concerned with making the best use of its abundant energy resources, particularly coal and natural gas and with ensuring the availability of liquid fuel supplies at internationally competitive prices (IEA 1987,p103). Australia is the world's largest coal exporter. Substantial gas reserves offer the opportunity for an export industry besides providing its own requirements. There are also reserves of low cost uranium. Coal and oil are expected to remain Australia's most important sources of energy through 2000. It is unlikely that the present high level of oil self-sufficiency can be maintained and the Government considers the appropriate response to this expected shortfall in liquid fuels one of its most important energy policy problems (IEA 1987,p113). Between 1973 and 1984 the TPER/GDP ratio did not change substantially. The TFC/GDP ratio, Total Final Consumption to Gross Domestic Product, decreased by about 10 %. Even with relatively high growth rates of energy intensive industries these figures suggest a rather modest progress in energy efficiency improvement compared to most other IEA countries. Energy use in the transport sector accounts for almost 40 % of TFC and 70 % of oil consumption. Electrification of Australian railways to reduce reliance on diesel fuel is being undertaken (IEA 1987,p108). Australian exports of uranium is considerable and in 1985-1986 it amounted to 3225 metric tons U308. Australia has considerable uranium reserves 465 000 metric tons U308 representing 29 % of those of IEA. Final electricity consumption accounts for 16.5 % of TFC. Around 53 % is generated by black coal, 21 % by brown coal, 12 % by hydro, 10 % by natural gas and 4 % by oil (IEA 1987,p114). Approximately 60 % of the available hydro potential has already been developed. Apart from development projects in Tasmania no further projects are expected (IEA 1987,p115). Nuclear power is precluded by the policy of the Commonwealth and most State Governments. Nuclear power can not compete with coal-fired plants close to coal fields (IEA 1987,p115). The role of renewables is small and likely to remain so until the next century. The major contributors are wood, mainly residential with some industry, bagasse in sugar industry and solar mainly for water heating (IEA 1987,p115). The Australian energy sector is regulated in many areas. The level of regulation, however, has not prevented Australia from becoming a major energy producer and exporter (IEA 1987,p116). Graph 3.1 shows primary energy and electricity consumption. Noteworthy is the increase in use of solids, but also gas has increased. Most of the electricity generation, the difference between total electricity and that from hydro and nuclear, originates from coal and gas. Most of the oil goes to transports. Graph 4.1 shows per capita TPER, GDP and Electricity. There is a nearly 1 to 1 relation between TPER and GDP growth. Electricity has grown faster and with no disturbance by the oil shocks. Table 6.1 shows the regression results. It can be seen that total energy growth is strongly correlated with GDP growth with explanation R2=0.992 stronger than electricity growth with R2=0.972 up to 1973. The corrlation is still good after 1973 with R2=0.760 and 0.689 respectively. GDP/TPER growth is for that period 0.95. For the whole period to 1989 the ratio is 0.960 but for 1974-1989 only 0.802. This might point at a decrease in efficiency of use of energy or an inrease of energy intensive industry. As Australia has abundant energy resources energy conservation may have been of too little interest and it may also be so that energy intensive industry finds a competitive advantage in Australia. Adding the oil price factor does not improve the clarification see table 6.2 The ratio GDP to Electricity growth decreases from 0.450 for all years to 0.294 after 1973. This means electricity grows more than GDP and more so after 1973. Regression analysis with a weight factor 1 instead of 2.6 for hydro and nuclear electricity in TPER considerably reduces the clarification except for Australia where it is of almost no importance as these forms of energy sources are of little importance. For all other countries electricity alone better explains GDP than TPER does. Canada. Canada is one of the few IEA countries that has abundant supplies of indigenous energy and it is a net exporter of all major forms of energy and it has the potential to continue to contribute to the needs of IEA countries IEA 1987,p157). The oil and gas sectors are deregulated which means the consumers receive unimpeded signals sent by world oil market prices (IEA 1987,p169). Almost all the electricity in Quebec and British Columbia is hydropower generated. Nuclear is the main source in Ontario. In Alberta electricity generation is based on natural gas and very cheap indigenous coal (IEA 1987,p167). Electricity is exported to the United States (IEA 1987,p168). Canada is active in developing synthetic liquid fuels given its vast resources of coal, heavy oils and tar sands (IEA 1987,p165). Canada is one of the most energy intensive countries of IEA and little progress has been achieved in energy efficiency since 1973, except for 1986, compared to the United States and other IEA regions. The potential for energy conservation is high (IEA 1986,p224 and 1987,p162). Canada passed the United States in TPER per capita in 1973-1974. Graph 3.2 shows a decrease in oil use only in 1975 and in 1980-85 Graph 4.2 shows that per capita GDP has grown more than TPER but less than electricity. Table 6.1 shows good clarification of GDP with TPER and still better with electricity also after 1973. The ratio GDP/Electricity growth ratio is 0.7 for the whole period 1951-89 and 1974-89. GDP/TPER ratios over the periods 1951-89, 1951-73 and 1974-89 are 1.159, 0.924 and 1.909. Also the last coefficient is significantly different from zero with t=coefficient/standard deviation=8.3 much more than 3. Adding an oil price factor increases the clarification for 1974-89 from 0.831 to 0.891 but the coefficient 0.062 is with t=2.68 not quite certain. France France, a member of OECD but not of IEA, early decided to have an independent nuclear program both for military and energy demands and now has a very large part of the energy demand supplied from nuclear energy converted to electricity. Graph 3.3 shows that oil passed coal as primary energy in 1965 and continued to rise to 1973, declined in 1973-74, increased in 1976 and then has gone mostly down. Electricity is almost totally produced with hydro and nuclear sources since 1985. France has a very large nuclear program and now also exports electricity. Graph 4.3 shows the rapid growth of electricity consumption per capita in 1984-87. Total TPER per capita is somewhat higher in 1989 than in 1973. The explanation R2=0.996-0.997 before and after 1973 for regression of electricity on GDP is very good. TPER also gives a good explanation before but not after 1973. After 1973 the coefficient for electricity is as low as 0.416 and for TPER a rather high 1.387. The change from previous values points at a substitution of electricity, mainly nuclear generated, for other energy forms. Germany. With very small oil production Germany has had to rely on imported energy, 50 % of TPER in 1985, and especially on oil imports 40 % as well as on its indigenous coal and gas reserves and nuclear power. Germany relies mainly on free market mechanisms to achieve its energy policy objectives with the exception of subsidies to the domestic hard coal industry. The energy intensity, TPER/GDP = 0.31 toe per thousand 1980 USD in 1985, is only two thirds of the average of the IEA as a whole(IEA 1987,p189). Energy pricing is generally free except for the domestic hard coal sold to the iron and steel industry and that approval is required for increasing electricity tariffs for customers paying standard rates, households, agriculture and small firms. Electricity and gas prices for large consumers are mostly based on individual contracts and not published. The electricity generated from indigenous coal is compensated for the higher than world market cost by a levy collected from electricity consumers (IEA 1987,p193). Nuclear energy is an important source of electricity. After the Chernobyl accident there were proposals to phase out nuclear power plants. The decision of the Federal Government to continue with the nuclear program is of the utmost importance for German energy economy and has positive effects on energy security of other European countries as well. The German legislation to combat air pollution will most likely entail certain cost increases for these fuels which generate a high amount of emissions, in particular coal and heavy fuel oil (IEA 1987,p201). Graph 3.4 shows that solids, coal, was the by far most important primary energy i 1950-55. In the 1960s liquid fuels increased and passed coal in 1968. In 1974-75 the use of oil dropped rapidly. Gas increased in 1968-74 and in 1978-79 and has since stayed at the 1980 level. Graph 4.4 shows that electricity increased fast in 1968-74 and since then increased at the same pace as GDP. TPER has dropped in 1974-75, increased in 1976 and has remained at that level. Regression of electricity on GDP is very good R2=0.990-0.995 with coefficients 0.606 up to 1973 and 0.888 after, see table 6.1. TPER shows very good correlation except after 1973 when the correlation virtually disappeared. Adding the oil price factor improved the clarification after 1973 but not satisfactorily, see table 6.2. Italy. Italy is highly dependent on energy imports. In 1985 only 20% of total primary energy requirements, TPER, were domestically produced. Of total oil requirements 97% were imported and net oil imports accounted for 59% of TPER. Natural gas was 19.8% of TPER (IEA 1987,p241). Electricity imports were 24TWh or 12% of total electricity demand. Hydropower electricity acconts for 24%. The nuclear power program has been delayed by a moratorium (IEA 1987 p247 and 248). There is some government intervention in energy pricing. Electricity tariffs are controlled by the Interministerial Pricing Committee and influenced by political decisions (IEA 1987,p243). Japan. Japans energy objective is to ensure a secure supply of oil, promote the development and use of alternative energies and promote energy conservation (IEA 1987,p259). Nuclear power will be developed as the main baseload source for electricity increasingly so in the next century, because of its advantages in terms of reliability of supply and economic viability. The first priority in nuclear power will be safety (IEA 1987,p264 and 269). The Japan Atomic Energy Commission reviewed "The Long-Term Programme for the Development and Utilisation of Nuclear Power to become the long-term guideline over the next five years from 1987. Emphasis will be given in the medium term to the improvement of existing types of light water reactors. The program of using plutonium in thermal reactors is also proceeding and development of advanced-type reactors such as fast breeding reactors is proceeding because these types of reactor will be able to use plutonium in the most efficient way. To complete the fuel cycle the Government will encourage the industrialisation of uranium enrichment in Japan, promote the construction of commercial spent nuclear fuel reprocessing plants and establish a radioactive waste management and disposal system (IEA 1987,p264). Hydroelectric power follows nuclear power as the biggest source of indigenous supply in Japan (IEA 1987,p265). When oil prices decreased in 1986 the electricity and gas tariffs were reduced to transfer part of these "windfall profits" to the final consumer. It was understood that the utilities would spend their share of profits on additional investments especially to improve the reliability of supply. Japan also took decisions to stockpile oil in 1986 and took advantage of the lower price level (IEA 1987,p262 and 260). Spain. Spain depends on imported energy to supply over half of its TPER. The share of oil in TPER was reduced from 68% in 1973 to 52% in 1985. Much of this improvement came from increased use of nuclear and solid fuels. In 1985 coal was the main fuel 44.5% to electricity production followed by hydro 24.2% and nuclear 21.5%. Spain's domestic coal production in 1985 13.7Mtoe represented 72% of total coal needs (IEA 1987,p353). The basic principle of the government's pricing policy is that prices should reflect production and distribution costs including the long-term marginal cost of supply (IEA 1987,p358). Sweden. In 1985 net oil imports amounted to 31% of energy demand (IEA 1987,p373). Parliament in 1985 approved a Government Bill reconfirming the phase-out of nuclear power by 2010. Of the electricity generation half is from hydro and half from nuclear in a normal year at a total of about 130TWh. Hydroelectricity generation can vary more than 10% dependent on the weather. Swedish authorities consider that in order to avoid higher electricity prices the electricity generation has to be kept within the limits of existing power production system (IEA 1987,p375). A comment to this would be that this is disregarding the reality of the unpleasantly high cost of new generation if the commonly accepted principle of using long range marginal cost as a price guide will be used, else if seriously meant it will result in a lower GDP growth or require a lower GDP growth. The Swedish energy policy is also in conflict with global environmental consideration. Nuclear power is environmentally the best alternative and suitable for use in developed countries. If global quota are necessary for carbon dioxide, as large share as possible should be allocated to developing countries. Developing countries having hydropower resources should get help in financing the construction of hydropower plants. When the oil prices were reduced in 1986 the taxes were adjusted upwards on fuel oil, coal and Liquidized Petroleum Gas, LPG, but not on natural gas (IEA 1987,p377). A comment on this is that it is very difficult for the industry and the power companies to make calculations of future energy cost as taxes can not be foreseen. United Kingdom. The abundant supplies in UK of oil, gas, coal and nuclear power are instrumental in the achievement of the Government's energy policy, whose main objective is to ensure adequate and secure energy supplies at the lowest long-term cost. UK mainly relies on market forces in implementing its energy policies (IEA 1987,p423). Coal has a predominant share in electricity generation or about 80% in 1985 to power from The Central Electricity Generation Board, CEGB. In 1985 20.5% of electricity available from the British public sector supply system was provided by nuclear power. However 75% of CEGB's nuclear generation was from 11 Magnox plants with a regular decommissioning that would start in the early 1990s and be finished by shortly after 2000. The safety of these reactors has been kept under review. There have been some problems with three of the five advanced gas-cooled reactors. New plants will be built firstly of PWR-type. The need for more new plants could come quickly. Also coal fired plants are to be built (IEA 1987,p429). The CEGB and the Nuclear Installations Inspectorate have pointed out that there are gross qualitative differences in safety between the reactors operating in the UK and the Chernobyl reactor (IEA 1987,p430). UK imports about 1500 MW over existing High Voltage Direct Current links from France at reasonably advantageous terms to CEGB. The capacity for the transmission is about 2000 MW (IEA 1987,p430). This would allow for a maximum import of about 16 TWh per year. The United States. The United States produces and consumes more energy than all other IEA countries combined. It is the IEA's largest net oil importer (IEA 1987,p445). The basic energy policy is to secure an adequate supply of energy at reasonable cost. Subsidiary objectives require further attention including reducing regulatory barriers, diversifying resources and increasing alternative energy sources. The ability of State Governments to assume a greater role in energy conservation has been increased by the availability of the so called "oil-overcharge" funds. Court cases led to the large settlements against certain oil companies, totalling $5.7 billion. The majority of these funds some $3.2 billion have been distributed to the States for spending on conservation programs. The Department of Energy, DOE, is required to monitor this expenditure (IEA 1987,p445 and 450) Nuclear power Research and Development, R&D, is focusing upon a new generation of advanced reactors with enhanced safety features and high degree of modularity. Modular sizes range 100-300 MW electricity, minimize capital investment exposure, construction lead times and minimize risks related to forecasting demand growth (IEA 1987,p452). Comments on the Tables and Graphs Table 1 shows the annual energy consumption growth rate. In the OECD countries the growth decreased from 4.0 % per year in 1955-1973 to 1.1 % in 1973-1979 and to a decrease with 2.4 % in 1979-1983. The growth decrease was much less in Comecon-countries and China than in the developing countries. Coal continued to increase but oil and natural gas decreased in OECD-countries in 1979-1983. The growth rate decreased in 1973-1979. Nuclear power electricity increased with almost 19% per year in 1973-1979 and 10% per year in 1979-1983. Coal showed about the same increase 1-2% a year for OECD and the total world. Graphs 2 and 3.1-3.10 show for the world and for 10 OECD-countries the different forms of energy development in a long perspective. From 1973 the oil requirements have remained almost constant. Hydro and nuclear are shown as electrical energy and both as electricity multiplied by 2.6 in the upper TPER curve and as electricity in the curve just below. The importance of electricity is larger than the relations show and for comparison with solid and liquid fuel electricity might be multiplied with 2.6. Table 2 shows Total Primary Energy requirement, TPER per GDP in 1000 USD and shows also TPER per capita. Canada has about twice as high TPER/GDP-ratio as Sweden. This ratio decreased considerably more in the United States in 1979-1983 than in Canada and Sweden. Both Canada and Sweden have a large pulp and paper industry which is energy intensive and has been operating at a high level of production , which should explain part of the different pattern. Canada and Sweden have also experienced a large increase in electricity use. Energy conservation has been successful in the U.S. Japan had a constant TPER between 1973 and 1986 but a dereasing TPER/GDP-ratio which can be explained by a large GDP growth. It can be assumed that a large part of the GDP growth is in non-energy intensive sectors. Spain has increased the TPER/capita at almost constant TPER/GDP-ratio and this may be explained by a large GDP growth. Sources to graphs:compiled data with conversion to energy unit J
Table 3 shows TPER and production within IEA of different fuels and the degree of self-sufficiency. It can be seen that oil has been reduced with about 15% from 1973 to 1985 and the self-sufficiency increased from 37.6 to 54.9%. Natural gas has remained at the same volume. Coal and hydropower increased with 20-25% over the period. Nuclear power was almost 6 times as large in 1985 as in 1973. Nuclear was at TPER equivalent level about as large as hydropower in 1985. Table 3 shows the electricity intensity in kWh/GDP in USD. Canada is also here at the top but Sweden is catching up. Sweden followed closely the US electricity production per capita from 1950 to 1972 but since then, Sweden has increased the electricity production per capita and the electricity/GDP ratio. This is more likely a result of increased activity in energy intensive industries and a substitution of electricity for oil for small house heating than bad energy conservation. Also the introduction of heat pumps is electricity consuming although energy conserving. Table 5.1 to 5.3 show the energy balance for different sources of energy for the years 1973,1979 and 1985. The balance starts with primary energy requirement, continues with the conversion to electricity and a summing up of final energy consumption and is finally split up on use in industry,transportation and commercial/residential sectors. The oil price increase caused a substition of labor for energy. In Europe this resulted in an increase in real wages since labor supply was inelastic with respect to price. In the United States the increase in labor demand led to unprecedented increase in employment (STEV 1985,p56). In the transport sector oil use continued to grow for six years after 1973. Its share of the OECD oil use rose from 38 % in the early 1970s to about 50 % in 1983. Oil use represents some 99 % of total energy use in the transport sector and substitution potential is very modest (STEV 1985,p91). In Sweden oil is used almost entirely for road and air transports and a further reduction means that this sector must face reductions. There are no good alternatives and raising the costs with more taxes will not have any essential effects more than increased taxes. Oil for electricity generation is only at peak load and in dry years. Coal is the main alternative fuel for electricity generation if nuclear power is not to be increased or still more if it is to be reduced. Emissions of dust, sulpher and even Nitrogen oxides can be highly reduced but to prevent the carbon dioxide from being emitted into the atmosphere is difficult and yet it should be done not to cause tremendous global climate effects. If the ice at the Antarctic melts by say a 7C increased temperature large areas of the world would be flooded and other serious effects would come forth. Hydro resources are still not utilized in parts of the world and maybe should energy intensive industries to a larger extent move to these locations. The electricity demand will however grow in these mainly less developed countries and they may soon face up with energy shortage too. The use of hydrogen fusion for energy supply still is far into the future and as breeder reactors that make better use of uranium are readily available there is no immediate need to have still more advanced reactors. It is important to overcome peoples fear of nuclear power to avoid much worse alternatives. Telecommunications continue to be developed and this reduces transports of people. Still people have to meet. Goods and food has to be transported and ships and railroads take large parts but road and air transports still increase. There is no immediate shortage of energy in the world but environmental aspects play an increased role in the way energy resources can be used. The modern society also the post industrial one will require energy in different forms and electricity is one major form easy to distribute and use. It will continue to increase its share of energy use. Graphs 3.1-3.10 show the use of different energy forms in 10 countries. Graphs 4.1-4.10 show the development of TPER, GDP and Electricity per capita in relative terms. Table 6.1 gives the results of regression of per capita values of TPER and of Electricity on GDP. The regression is with the values in logaritmic scale, which directly gives the coefficient of relation between the factors. The correlation, here its square R2 is given, is very good for electricity both before and after 1973 in Canada, France, Germany, Italy, France and Sweden less good in Australia, Spain, U.K. and the U.S. For TPER the relation is strong up to 1973 then strong only in Australia, Canada, France and Sweden. Adding the oil price as independent factor, table 6.2, does not improve R2 much and the sign of the coefficient for the price in logaritmic scale, is dubious as the t-factor shows. Only if the whole period 1951-1989 is considered the price gives an improvement. Instead of taking the oil price we might have added for the total period the period after 1973 as a period of higher oil prices. The prices rose strongly in 1973-74 and 1979-80 but dropped considerably in 1986. Splitting the periods up gives the new relations which are of greater interest. Giving electricity from hydro and nuclear generation a lower weighting factor as in table 6.3 reduces the correlation except for Australia which has almost no hydro and has no nuclear generation at all. For all other countries the correlation becomes extremely weak, R2 less than 0.43, for the period after 1973. The autocorrelation, table 6.4, shows a very firm connection between consecutive years of TPER, GDP and electricity which is not surprising as the investments are of long duration nature and can only to some extent adapt rapidly to changes. The production as well as the consumption systems need both a long planning lead time and a long implementation time for changes. U.K. shows a low autocorrelation for TPER. The decline in production and use of coal and the exploitation of the North Sea oil and gas fields have caused large changes in the British energy supplies. Summary The essay covers a 40-year period of strong economic development. The energy development is shown in graphs and regression analysis has been adopted on the relation between per capita energy and GDP, the gross domestic product seen as a measurement of economic development. The graphs show the consumption of different forms of energy in the world and in 10 major countries. The slowdown in total energy use in 1974 as a consequence of the oil price increase is very clear. The oil consumption made a halt in the world as a whole and decreased in the 10 countries in the study for some years before growth was resumed in some of these countries. A per capita index on total energy, GDP and electricity shows the rapid growth of electricity to 5 to 12 times the 1950-level, the total energy in Australia, Canada, France, Germany and Sweden to 2-3 times, in Italy, Japan and Spain 5-8 times, in U.K. only 25 percent and in the U.S. 50 percent. The GDP per capita has increased to 2.5-3 times in Australia, Canada, France, Germany, Sweden, U.K., more in Italy, Japan and Spain less in the U.S. The general role of energy and of electricity in particular has been explained. Energy becomes a substitute for labor in industrialisation and automation. The transport sector is more dependent on liquid fuels than industry and electricity generation and can pay a higher price. Electricity generation can use almost any primary energy form and electricity is very flexible in its use. In countries without easily available hydro power potential electricity is generated via steam with coal, oil, gas, nuclear energy and wastes as fuel. The efficiency at normal conversion is some 35-38 percent, somewhat more in more expensive combined cycle plants and much higher if the thermal waste can be included as useful energy, such as for heating. The heating demand normally is limited and not close to big generation plants. Coal, oil and gas can be measured in physical measures such as ton or kg per capita. Fuels are of different energy value and therefore the physical values for each country or quality must be converted to common energy units such as coal eqivalents or oil equivalents or the standard joule,J. All energy data used for graphs and regression analysis have been converted to J. Nuclear energy is used almost entirely to generate electricity and it is measured in electricity form. Hydro power is also measured as generated electricity. These two sources are in the statistics separated from solid, liquid and gas fuels, which to a large extent are used to generate electricity. In order to add to a total primary energy requirement hydro and nuclear power in the form of electricity often is given a higher input value as if generated in a steam plant. Here a factor 2.6 times the electricity has been used corresponding to 38.5 percent efficiency at a notional conversion. In the graphs the electricity energy values are shown without factor of increase. Consumption is defined as Domestic production + Imports - Exports - Marine bunkers - Stock increase Energy balance tables show how primary energy is used down to final consumption and split on the three sectors industry, transportation and residential/commercial. In these tables secondary energy, losses and use in refinery are shown. Marine bunkers is fuel used for international transports. An example of difficulties in using common definitions of efficiency is given by the heat pumps which taking heat from the surrounding air or water which by normal definition is not considered as a source of energy and has no defined value. It should be remembered that energy measurements in general are relative and should be used with care. We must be careful defining our references and what we consider useful energy and what is not from case to case. Used, not destroyed, maybe wasted. The regression analysis has been made on the logaritm of Energy, GDP, Electricity and Price. This is to get relative relations independent of the level. We can say it is in a percentage scale at any point. We will get the coefficient of the relation between factors. Here the regression has been of energy on GDP and the constant, the intersection of the Y-axis of the regression line has been calculated, different from zero, but as it is of less interest its value has not been shown in the tables. Mostly used is the relative Energy/GDP which here with only two factors is approximately the inverse of the coefficient received by regression. GDP is often assumed and other factors forecast with its relation to GDP. Regression gives not only the relation between the factors but also how well the equation explains the dependent variable. In this case it is the same as the square of the correlation. If R2 is close to 1 it is a very good correlation. The same method can be used to test if each variable has an autocorrelation. An autocorrelation shows that the next year depends on the previous year. So it is here to a very large extent. This makes it more difficult to state the correlation between the factors. It is obviously so that autocorrelation of both factors automatically gives a correlation between the factors. In this case we can say that there is a correlation but we can not say that there is not a common factor behind both. And we may consider a factor such as general technical development. We can not so easily quantify such a factor. We might make an assumption that it contributes to the long range development and deduct this average development from the factors we want to study. Here we stop at finding that there is a correlation. The regression of total energy on GDP for the period after 1973 does not give reliable results. If electricity is used instead the clarification becomes better. The countries show different relations. U.K. seems to deviate much. The energy situation has changed much in U.K. From the regression results the inverse of the coefficients are shown here as per capita relative relation Electricity/GDP for time before and after 1973 and the same for total energy.
We can see that Australia and Spain have increased both electricity and total energy used for each percent GDP growth. Australia has abundant energy resources which can be used as a comparative advantage for energy intensive industry. Spain has increased the nuclear energy generation and also use of coal. The economic development has been very large in recent years and a theory may be that energy constraints have been eliminated. Canada, Germany, Japan and the U.S. have decreased both electricity and total energy use. Successful energy conservation is likely to be the main cause in the U.S. but from a very high consumption level. U.K. has decreased electricity use and increased total energy use most likely as an effect of the inflow of oil and gas from the North Sea fields. France and Sweden have substituted electricity generated from nuclear energy for other forms foremost oil. The concern today is the greenhouse effect due to carbon dioxide. Countries like Bangladesh have reason to be afraid of the rise of the sea level. The increase in use of coal is a threat to the carbon dioxide balance. Those who favour use of crops and so called renewable energy sources say that the carbon dioxide from burning these are part of the carbon dioxide cycle as the plants also take up carbon dioxide and so it has been in a long steady state history. But carbon dioxide from burning oil and coal is different as this frees carbon that has been solidly bound in earth and therefore increases total carbon dioxide in the atmosphere. Can we expect the energy/GDP to decrease more in the future. It should be so per capita as we leave the industrial phase and enter the post-industrial society. Better telecommunication can reduce transports and travels, but when does the world come into this stage. The majority of people are just in the beginning of the industrial phase and the population increase seems to be out of control. Is use of nuclear energy required all over the world or will technology give a better solution? Table 1. Annual Energy Consumption Growth Rate in percent
List of references. IMF, International Financial Statistics, Wa D.C. 1988
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