The changing world energy economy

Paul Driessen

West Virginia University engineering professor Jim Smith and his student, Alex Hatch, have written an interesting examination of the reasons why economic growth now outpaces the US and world growth in energy consumption. After decades of operating almost in tandem, energy use per unit of output has shrunk. In 2015, they note, energy demand grew by just 0.8 percent, whereas the total GDP of OECD nations grew by 2.7 percent.

The primary reason is the rapidly improving efficiency of equipment and facilities that are powered by oil, natural gas, coal and other fuels. Those efficiency gains are likely to continue, which bodes well for the world in numerous areas.

The changing world energy economy

Ingenuity and efficiency are reducing links between economic growth and energy consumption

James E. Smith and Alex Hatch

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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