future energy scenario

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Future Energy Scenarios

“Citadel” and “Patchwork” – two alternative futures to 2050 Reference Code: BI00035-001

Publication Date: September 2011

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Peter Franklin Peter Franklin has spent his whole career in energy utilities markets and spanning oil, gas, electricity, and

water. He was schooled in the disciplines of scenario planning and systems thinking during the 14 years he

spent with Shell between the late 70s and the early 90s. Peter then went on to be a leading figure in energy

market liberalization in the UK until the end of the 90s. Since 1999 Peter has been a consultant to the sector,

both to the players within the industry and to those seeking to expand their footprint in the energy and energy

services worlds. He is also a regular contributor to thought leadership in both UK and European energy and

utilities press.

Disclaimer Copyright © 2011 Business Insights Ltd

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or opinions expressed in this report by individual authors or contributors are their personal views and

opinions and do not necessarily reflect the views/opinions of the Publisher.

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Table of Contents

Peter Franklin 2

Disclaimer 2

Executive summary 9

Introduction to Future Energy Scenarios 9

Pre-determined elements 9

The energy system 10

The Citadel scenario 11

The Patchwork scenario 12

Issues raised 13

Future outlook 13

Chapter 1 Introduction to Future Energy Scenarios 15

Summary 15

Introduction 15

The aim of this report 17

The structure of the report 19

Chapter 2 Pre-determined elements 20

Summary 20

Introduction 21

Demographics 21

Population growth over the last 50 years 21

Looking forward to 2100 23

The urbanization of the world 29

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Social networking 30

Managing the trilemma 33

Chapter 3 The energy system 36

Summary 36

Introduction 37

The energy system 37

The economy 40

Energy demand 43

Fuel and electricity demand 45

Community generation and central electricity production 51

Hydrocarbon demand, energy prices and electricity production capacity 54

Hydrocarbon supply 56

Coal supply 61 Gas supply 63 Unconventional gas 66 China 70

Electricity storage and smart 72

The energy system and CO2 76

Chapter 4 The Citadel scenario 79

Summary 79

Introduction 80

Scenario drivers 80

Society 80

Policy drivers 81

Climate change policy 81

Cultural attitudes 83

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Social networks 86

Industrial and commercial markets 88

Transport 88

Residential 90

Utility structure 92

Industry character 93

Generation 94

Technology 95

Chapter 5 The Patchwork scenario 99

Summary 99

Introduction 100

Society 100

Social networks 101

Cultural attitudes 102

Climate change policy 103

Industrial and commercial markets 104

Transport 105

Residential 107

Utility structure 109

Industry character 110

Generation 110

Energy sourcing 112

Energy system implications 113

Chapter 6 Issues raised 118

Summary 118

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Introduction 118

CO2 119

Carbon and hydrocarbon pricing 121

Fashion and technology 122

Community power 124

Urbanization and EVs 125

Chapter 7 Future outlook 127

Summary 127

Reflections 128

Appendix 130

Acknowledgements 130

Scope of the report 130

Methodology 131

Glossary/Abbreviations 133

Bibliography/References 134

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Table of figures Figure 1: World Population, (millions), 1950 – 2010 22 Figure 2: World Population Scenarios, (millions), 1950 – 2100 24 Figure 3: World Population Medium Scenario, (millions), 1950 – 2100 26 Figure 4: Growth of Wikipedia, (‘000 English articles), 2001-2011 31 Figure 5: Crude Oil Prices, (2010$/bbl), 1950 – 2010 38 Figure 6: The energy system 40 Figure 7: Economy 41 Figure 8: Energy demand 43 Figure 9: Fuel and electricity demand 45 Figure 10: Community Generation and Central electricity Production 51 Figure 11: Electricity Generation, (mtoe), 1990 – 2035 53 Figure 12: Hydrocarbon Demand, Central Generation Capacity and Energy Price 55 Figure 13: Hydrocarbon supply 56 Figure 14: Peak Oil, Production of oil and gas liquids, (bln bbl/year),1930 – 2050 58 Figure 15: Estimates of Global Gas Reserves by region, (trillion cubic feet), 2010 68 Figure 13: Estimates of Global gas Reserves, (trillion cubic feet), 2010 70 Figure 17: Electricity storage and smart 75 Figure 18: Primary Energy CO2 Emissions, (million tonnes CO2), 1965 – 2010 77 Figure 19: Scenario drivers 80 Figure 20: Citadel – Society 82 Figure 21: Citadel – Market 87 Figure 22: Citadel – Energy Industry Development 92 Figure 23: Citadel – Overview 96 Figure 24: Primary Energy CO2 emissions, (million tonnes CO2), Citadel 98 Figure 25: Patchwork – Society 100 Figure 26: Patchwork – Market 104 Figure 27: Patchwork – Energy Industry Development 108 Figure 28: Patchwork – Overview 113 Figure 29: Primary Energy CO2 emissions, (million tonnes CO2) - Patchwork 116 Figure 30: Scenario Issues 119 Figure 31: Primary Energy CO2 emissions, million tonnes CO2, 1990 – 2050 120

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Table of tables Table 1: World Population Medium Scenario, (millions), 1950 – 2100 28 Table 2: % World Population, 1950 – 2100 29 Table 3: % Urban, 1950 – 2050 30 Table 4: GDP estimates, 2009 – 2050 42 Table 5: Energy demand bandwidth, (btoe), 2010 – 2050 44 Table 6: % electricity of total final consumption, 1990 – 2035 46 Table 7: Industry Final Consumption, (mtoe), 1990 – 2035 47 Table 8: Buildings Final Consumption, (mtoe), 1990 – 2035 48 Table 9: Transport Final Consumption, (mtoe), 1990 – 2035 49 Table 10: Total Final Consumption, (mtoe), 1990 – 2035 50 Table 11: World hydrocarbon reserves, (btoe), 2010 57 Table 12: Oil production and consumption, (mtoe), 1990 – 2030 59 Table 13: Oil Net Import/Export, (mtoe), 1990 – 2030 60 Table 14: Coal Consumption and Production, (mtoe), 1990 – 2030 61 Table 15: Coal Proved Reserves, (million tonnes), 2010 62 Table 16: Proved gas reserves, (trillion cubic meters), 1990 – 2010 64 Table 17: Gas consumption and production, (mtoe), 1990 – 2030 65 Table 18: Gas Import/Export, (mtoe), 1990 – 2030 66 Table 19: China % of world hydrocarbon reserves, production and consumption 71 Table 20: China hydrocarbon Production and Consumption, (mtoe), 1990 – 2010 72 Table 21: Citadel - hydrocarbon demand, (mtoe), 1990 – 2050 97 Table 22: Patchwork – hydrocarbon demand, (mtoe), 1990 – 2050 115

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Executive summary

Introduction to Future Energy Scenarios Scenarios are pictures of potential future worlds for testing strategies and policies.

Scenarios are not forecasts – we cannot know exactly which future we will encounter. The world that

actually comes about is likely to include elements from both scenarios.

The balance of this report comprises six chapters. The first looks at predetermined elements and the

second explores the energy system. The third looks at the Citadel scenario. The fourth develops the

Patchwork scenario. The fifth draws out the issues raised in the scenarios. And the final chapter reflects

on the choices facing the energy sector.

Pre-determined elements Between 1950 and 2011 the population of the world has grown from 2.5 billion to nearly 7 billion.

By the end of the century UN scenarios envisage Low, Medium, and High outcomes of 6.2 billion, 10.1

billion, and 15.8 billion people respectively. These outcomes depend principally on the levels of fertility

assumed in the various model runs. All three scenarios assume that as countries develop their fertility

rate drops to the long term rate of 2.1 children per female. It is interesting to note that if this did not

happen and fertility rates remained as they are today then the population in 2100 would reach a

staggering 26.8 billion.

For 2050 it is assumed that the UN Medium scenario will apply such that the population will grow to 9.3

billion at that time.

Population growth is fuelled by Africa which grows from 9% of the global population in 1950 to 24% in

2050.

The developed nations (Europe/North America/Oceania) shrink from 30% of the world population to

just 13% between 1950 and 2050.

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Asia’s share of the world population remains constant, at circa 55%, over the period although China’s

share decreases from 22% to 14%.

In 1950 only 29% of the world population lived in urban environments, by 2050 this will have risen to

51%.

Social networks have added a new dimension to human connectivity and collaborative activity. These

will be a feature of all scenarios moving forward.

Managing the trilemma of Climate change, Supply security, and Energy affordability is on the agenda of

all major governments and will remain there – although the balance struck between the issues will vary

across scenarios.

The energy system Crude oil prices have exhibited all the signs of being part of a complex dynamic system which can

exhibit both a wide variety of outcomes over time and significant volatility.

The energy system can be visualized as being made up of 12 building blocks spanning supply, demand

and system infrastructure.

GDP growth will drive up energy demand significantly. This demand will be manifest in a combination

of increased fuel demand, and increased electricity demand.

IEA projections – which are based on the expected policies of governments, as indicated by their

pronouncements to date, show electricity’s share of demand increasing as a share of total final

consumption between 2008 (27%) and 2035 (37% new policies scenario (nps) scenario).

Industry demand is expected to increase 45% over the period 2008 – 2035, Building demand by 31%,

and Transport by 41%.

The amount of centralized generation will depend on the amount of community generation - the latter

displacing the former due to the inherent inefficiencies in centralized generation.

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There is, and will be no long term shortage of hydrocarbon per se although traditional oil may well be

limited by the “peak oil” phenomenon, and traditional gas will become the province of the Middle East

and the former Soviet Union.

Asia Pacific will become a major importer of oil, and gas, by 2030.

China is building its economy on domestic coal, however reserves of this are limited with a production

to reserves ratio of only 35 years. An alternative hydrocarbon sourcing route looks inevitable in the

longer term. China is well placed in this regard with extensive shale gas reserves.

Global unconventional gas reserves are estimated to be 6x those of conventional gas.

Hydrogen and batteries both have the potential to provide energy storage within the energy system,

and energy storage has the potential to beneficially transform the shape of the load curves on both

nuclear and intermittent renewable electricity generation plant.

The Citadel scenario Top down decision making. Power retained by nation states and supra-national bodies such as the EU.

Lack of global consensus on climate change.

Major consuming nations’ efforts focused on reducing import dependency. This can incentivize coal to

liquids, and gas to liquids technology uptake, and/or wind, wave, solar developments.

Internet security (in the west) and Censorship (in the east) remove the power of social networks.

Major weather events post-2035 and changing societal attitudes trigger “better late than never”

reactions in the period 2040-2050.

CCS not adopted by China and India – seen as conferring a cost disadvantage on the economy.

Continued dominance of the Internal Combustion engine for personal transport, albeit with significantly

increasing bio-fuel use.

Late in the period China introduces an electric car-pooling scheme in major cities.

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Chinese involvement in Middle Eastern and North-African infrastructure development to try to protect

access to imports from these geographies.

Utility industry becomes a regulated, capital investment driven sector.

Primarily centralized generation.

High and volatile hydrocarbon prices. Absence of a global carbon price.

CO2 emissions from primary energy continue to rise till 2035 and then drop back slightly to levels which

are still 50% higher than 1990 levels.

The Patchwork scenario Patchwork quilt of initiatives on the energy stage.

Bottom-up decision making – enabled by effective and ubiquitous social networks linking both local

communities and shared interest groups.

Awareness in the Asia Pacific of the potential consequences of climate change – in particular the

aftermath effects of Himalayan glacier melting.

International accord reached on climate change. High global carbon price established which is used to

finance investments in CCS in China and India.

Vehicle mix contains significant shares of CNG, LPG, Electric, hydrogen and also traditional

hydrocarbon powered cars.

Innovation in residential markets. Hydrogen fuels cells, DC circuitry and PV solar, proto-cell paints,

heat pumps.

Fragmentation of the utilities sector with some players exiting retail and new players coming in with a

strong consumer market pedigree.

Hydrogen plant built in conjunction with nuclear and wind facilities. Initially to transform the load shape

of the plant – later on to provide hydrogen to the emerging residential fuel cell and H2 vehicle markets.

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Rapid exploitation of solar arrays in desert locations with DC interconnection to demand centers.

Rapid adoption of new bio/nano technologies - Bio-mining of shale gas, algae farming for biofuels.

Earlier and bigger nuclear and renewable generation build.

Significant distributed generation in local communities as well as in the home.

CO2 from primary energy peaks in 2015 and then steadily reduces to well below 1990 levels by 2050.

Issues raised 5 key issues identified and explored.

CO2 – achieving a low CO2 outcome with the same level of total primary energy demand but a different

mix, combined with CCS.

Carbon and hydrocarbon pricing – How a high carbon price, an international accord on climate change,

a reduction in import dependency, and a low carbon outcome are all self reinforcing and self-financing.

Fashion and Technology – How hydrogen has left the energy stage and might re-appear.

Community Power – the driver of political change and the infrastructure design of the energy system.

Urbanization – a strong pre-determined element which allows for rapid adoption of new technologies

where new build and first time ownership are the characteristics of the market as opposed to retro-fit

and replacement.

Future outlook When future generations look back at us, as the current custodians of their inheritance, how will they

judge us?

Will our place in history be the generation that failed future generations, or will we be seen as the

architects of a sustainable future?

Will we create a “Citadel” or a “Patchwork” world?

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As a player on the energy stage – the choice is yours.

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Chapter 1 Introduction to Future Energy Scenarios

Summary Scenarios are pictures of potential future worlds for testing strategies and policies.

Scenarios are not forecasts – we cannot know exactly which future we will encounter. The world that

actually comes about is likely to include elements from both scenarios.

The balance of this report comprises six chapters. The first looks at predetermined elements and the

second explores the energy system. The third looks at the Citadel scenario. The fourth develops the

Patchwork scenario. The fifth draws out the issues raised in the scenarios. And the final chapter reflects

on the choices facing the energy sector.

Introduction There is an old Arab proverb that goes: "He who foretells the future lies, even if he tells the truth".

That is to say that it is impossible to predict what the future will hold. That does not mean that we should not

try to understand what the future may hold, but that simply we cannot be certain what will happen. There are

many uncertainties, and interactions between them that can make a myriad of scenarios unfold.

What we can do however, is to create some internally consistent pictures of the future against which to test

our strategic thinking. These pictures of future worlds we call scenarios. They are not predictions of the

future, but are credible and internally consistent possible futures.

When looking at the future, we start by looking at the past. There are some trends and changes in the world

about us which are following an inexorable pathway from the past to the present and from the present to the

future. We call these trends and changes "predetermined elements". We take these as a given, a common

thread through alternative scenarios.

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We then have the key uncertainties facing the ecosystem, which can take the future one way or another. We

call these the “branching points”. By choosing sets of consistent branching points we can construct internally

consistent worlds depicting one of many possible futures. This consistent world is a scenario.

When looking ahead to the future it is important not to get trapped in the present. Over 30 years of

experience in the energy industry has confirmed that the human brain feels comfortable extrapolating the

current situation into the future. This is even when it is clear from looking at the past that very different

outcomes, for say oil prices, have been possible.

If this report had been written in 1971 looking forward to 2011, rather than 2011 looking forward to the advent

of 2051, it could have tried to imagine the following:

The oil shocks of 73 and 79;

The oil price collapse of the mid 80;

The gas price collapse of the mid 90s;

The decoding of the human genome;

The first cloned animals;

The advent of, and the demise of passenger supersonic flight;

The exponential growth of personal computing in terms of both penetration and power;

The fall of the Soviet Union;

The re-unification of Germany;

Female Prime Ministers and Chancellors;

A black president of the US;

China becoming the largest energy consuming nation on the planet;

The recognition, by many but not all, of the dangers of climate change;

The digitization of music from the birth of the CD to its replacement by the MP3;

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The digitization of photography;

The ubiquity of mobile telephony;

High speed broad-band;

Bullet trains;

The development of the hybrid car and its climb to become the no 1 selling car in the world;

The emergence of Microsoft and Google as the largest corporations;

Facebook – if it were a country it would be the 3rd largest in the world;

The world wide web;

Wikipedia;

Amazon;

And the list goes on and on….and on.

But how many of these would have been foreseen?

Just looking at crude oil prices it was only in 1972 that Pierre Wack, in Shell Group Planning, constructed a

scenario which demonstrated that an oil price shock was possible. Shell was the only company to see this

and gained significant competitive advantage by ceasing to build oil tankers. It was interesting to note that all

the other forecasters in the industry failed to spot something that was just two years away.

When we look back at 2011 from the perspective of 2051 we will be able to compile a similar list.

The aim of this report The aim of this report is to create two contrasting scenarios for the future which will enable policymakers,

management teams, researchers and analysts, and any other readers of this document to test the thinking

on what needs to be done for the world to be successful in managing its energy future between now and

2050 and beyond.

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When reading the scenarios try to keep in mind the enormity of change that has happened over the past 40

years. It is likely that the change that will be experienced over the next 40 will be greater than that

experienced over the last 40.

The scenarios that are developed in this report are called “Citadel” and “Patchwork”.

“Citadel” is constructed as a picture of what the world may look like in 2050 if the status quo is maintained.

“Patchwork” is a world where much more change happens – but where none of that change is something

that has not been seen, at least in embryonic form, by 2011.

Both are possible worlds – but very different in their outcomes from a climate change perspective.

“Patchwork” is a sustainable world, “Citadel” is not – and indeed changes its nature at the end of the

scenario period in response to experienced climate change impacts.

Normally, scenarios are presented as two equally plausible pathways to the future. The challenge for the

strategist is to find strategies that are robust to each pathway. In this case, however, the purpose of the

report is to highlight the tell-tale signs which tell us which of the two scenarios we are in.

It may well be that the actual future will hold elements of both scenarios but from a sustainability perspective

the outcome of the “Patchwork” scenario is a much better world for our grand-children and our great-grand-

children.

The challenge for the strategist is to think through what they can do to nudge the world into a “Patchwork”

like outcome.

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The structure of the report This report is divided into five chapters:

Chapter 1 – Introduction. This chapter looks at those trends and changes which look to be inevitable given

the experience of the past. These define the common threads going through the two scenarios.

Chapter 2 – Pre-determined elements. This chapter looks at those elements of development that are

common to both scenarios. It focuses on population growth, urbanization, social networking, and the

management of the “Trilemma”.

Chapter 3 – The Citadel scenario. This is the first of the two scenarios, and looks at the world that is primarily

centrally driven from both a societal and an energy perspective.

Chapter 4 – The Patchwork scenario. This is the second of the two scenarios, and looks at the world that is

primarily decentralized from both societal and energy perspective.

Chapter 4 – Scenario Issues. This chapter draws together the learnings that have come out of the

examination of the two scenarios and the issues that they have raised.

Chapter 6 – Future outlook. This epilogue to the report reflects on the choices now facing us given the

existence of these alternative scenarios.

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Chapter 2 Pre-determined elements

Summary Between 1950 and 2011 the population of the world has grown from 2.5 billion to nearly 7 billion.

By the end of the century UN scenarios envisage Low, Medium, and High outcomes of 6.2 billion, 10.1

billion, and 15.8 billion people respectively. These outcomes depend principally on the levels of fertility

assumed in the various model runs. All three scenarios assume that as countries develop their fertility

rate drops to the long term rate of 2.1 children per female. It is interesting to note that if this did not

happen and fertility rates remained as they are today then the population in 2100 would reach a

staggering 26.8 billion.

For 2050 it is assumed that the UN Medium scenario will apply such that the population will grow to 9.3

billion at that time.

Population growth is fuelled by Africa which grows from 9% of the global population in 1950 to 24% in

2050.

The developed nations (Europe/North America/Oceania) shrink from 30% of the world population to

just 13% between 1950 and 2050.

Asia’s share of the world population remains constant, at circa 55%, over the period although China’s

share decreases from 22% to 14%.

In 1950 only 29% of the world population lived in urban environments, by 2050 this will have risen to

51%.

Social networks have added a new dimension to human connectivity and collaborative activity. These

will be a feature of all scenarios moving forward.

Managing the trilemma of Climate change, Supply security, and Energy affordability is on the agenda of

all major governments and will remain there – although the balance struck between the issues will vary

across scenarios.

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Introduction This chapter looks at number of predetermined elements. These are trends and changes which we can

define as inevitable given they are grounded in events that have already happened.

The clearest of these, is demographics. From what we know of the current population, of trends in mortality

and fertility, we can be pretty certain of the likely trajectory of population growth in the short and medium

term.

Other predetermined elements covered in this chapter are the urbanization, the rise of social networking, and

government policies across the globe, which are aimed at managing the risk of climate change, assuring

supply security, and maintaining affordability.

Demographics The first predetermined element is the growth of the population. This report draws on the work done by the

United Nations Department of economic and social affairs' population division in their 2010 revision of

population outlook for the world up to 2100.

Whilst the scenarios only look at the world up to 2050, it is useful to look at the longer term view to place the

assumptions made regarding population growth to 2050 in context.

Population growth over the last 50 years

Figure 1 below shows population growth from 1950 to 2011. In 1950 the world's population was

approximately 2.5 million.

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Figure 1: World Population, (millions), 1950 – 2010

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Source: Source: United Nations, Department of Economic and Social Affairs,

Population Division (2011). World Population Prospects: The 2010 Revision,

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BUSINESS INSIGHTS

Between 1950 and today population has grown nearly threefold to just under 7 billion.

The fastest-growing region to date has been Africa which has grown from 230 million to just over 1 billion

people between 1950 and 2010. This is a four and a half-fold increase over the period.

Latin America and the Caribbean experienced a 3.6 fold increase in population rising from just under 170

million to just under 600 million in 2011.

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Close behind we get Asia including India, Indonesia, and the rest of Asia, with the exception of China. In

these regions the ratio of the population in 2011 to that in 1950 is between 3.2 and 3.4. China's growth rate

has been slightly less at 2.5 times over the period, no doubt due to its one child per family policy. Between

1950 and 2011 the population in China, India and the rest of Asia grew from 1.4 billion to 4.2 billion, taking

their share of global population from 55% in 1950 to just over 60% in 2011.

Oceania also exhibits high growth over the period with its population increasing 2.9 fold.

North America saw a doubling of its population over the period. Whilst not quite as fast as Asia or Latin

America, North America's growth rate was much higher than Europe's where the ratio of population in 2011

compared to 1950 was only 1.3.

Looking forward to 2100

The population scenarios developed by the United Nations' population division examined four pathways to

2100. These four scenarios are shown in Figure 2 below.

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Figure 2: World Population Scenarios, (millions), 1950 – 2100

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BUSINESS INSIGHTS

The figure looks at four potential trajectories of population growth between now and the end of the century.

The differences between the scenarios are driven by differing assumptions on fertility rates in different parts

of the world. Underpinning the UN's analysis of fertility is an assumption that countries will move to a long-

term value of 2.1 children per female, the steady-state necessary to maintain one surviving female per

female.

If fertility rates were to stay as they are today then the population of the world would rise from just under 7

billion today to over 27 billion in 2100. This is more mathematical construct rather than a plausible scenario

since we know that fertility rates within populations change as countries develop. That said it is interesting

that the population will display exponential growth unless fertility rates drop – as they are expected to do as

countries become wealthier.

More realistic are the low, medium, and high scenarios which look at alternative fertility rate change

pathways over the time in question.

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In the low scenario, population peaks at just under 8.1 billion people in 2046 and declines thereafter to 6.2

billion at the end of the century.

In the medium scenario the growth of world population flattens after 2050 where the population reaches a

plateau of just under 10.1 billion people.

In the high scenario population continues to grow reaching 15.8 billion at the end of the century.

If we look at 2050 rather than 2100 we see that the world population is set to grow from just under 7 billion

people today to 9.3 billion in the Medium Scenario with a bandwidth of uncertainty of between 8.1 in the Low

Scenario, and 10.6 in the High Scenario.

This report uses the medium scenario as the source of population assumptions across both The Citadel and

Patchwork scenarios. In effect, population is assumed to be a predetermined element which is the same in

both The Citadel and Patchwork scenarios.

Figure 3 shows the regional detail of world population growth in the medium scenario.

What is striking about the graphic is that whilst we continue to see significant growth in the population of

Africa over the entirety of the period, the population of China peaks in 2027 and then starts to decline over

the rest of the century. The populations of India, the rest of Asia, and Latin America peak around 2050 and

then also start to decline towards the end of the century.

Whilst North America and Oceania continue to show some growth over the entirety of the period, both

Europe and Russia are stable to declining from today onwards.

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Figure 3: World Population Medium Scenario, (millions), 1950 – 2100

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BUSINESS INSIGHTS

Table 1 below shows some snap shots of the world population in 1950, 2011, 2050, and 2100.

Table 2 below shows the percentage of the population accounted for by the major regions.

Clearly the snapshot Table made up of absolute numbers mirrors the graph of population over the period.

However, if we look at the percentage breakdown of regional populations an interesting picture emerges.

The growth of Africa continues to dominate, with the continent growing from 9% of world population in 1950

to 35% by the end of the century. Whilst China's population has shown great growth between 1950 and 2011

its share of total world population has in fact dropped from 22% to 19% and is expected to drop to 14% by

2050 and thereafter to just 9% by 2100. Between 1950 and 2011 India grew from 15% of the global

population to 18%. It remains at this level until 2050 and then the declines to 15% of the end of the century.

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If we look at a combined total of China, India, Indonesia, and other Asia, in 1950 this represented 56% of the

world population. By 2050 this will have decline marginally to 55%, and by the end of the century will be

down to 45% of the global population.

If we look at another growth region in the world, Latin America and Caribbean, this area is has grown from

7% of the world population to 9% in 2011. From here on in however its share of the global population drops

first to 8% in 2050 and then down to 7% in 2100.

Perhaps most dramatic of all, if we look at the combined totals of Russia, the rest of Europe, North America,

and Oceania, this group represented 30% of the world population in 1950 but will only represent 13% of the

population in 2100.

Whilst political power is driven by a combination of population and economic prosperity it is clear that

population alone will not shift the balance of power in the world. However with a growing affluence of China,

Asia, and India it is clear that the balance of power has already shifted between 1950 and the present-day,

and is likely to shift further as the century progresses.

Whilst The Citadel and Patchwork scenarios look at the world between now and 2050, the attitudes and

perceptions of the citizens of the world in 2050 will to some extent be shaped by their perception of the future

development of the world population together with their experience of the history they have lived through.

To look at what may happen between 2050 and the end of the century it is important to consider how people

in 2040 and 2050 may think. How attitudes may shift, and the impacts these may have on behaviors and

energy demand will be explored further in this report.

28

Table 1: World Population Medium Scenario, (millions), 1950 – 2100

REGION 1950 2011 2050 2100AFRICA 230 1,046 2,192 3,574CHINA 553 1,355 1,306 952INDIA 372 1,241 1,692 1,551INDONESIA 75 242 293 254OTHER ASIA 404 1,368 1,851 1,839RUSSIA 103 143 126 111REST OF EUROPE 445 596 593 564LATIN AMERICA AND THE CARIBBEAN

167 597 751 688

NORTHERN AMERICA 172 348 447 526OCEANIA 13 37 55 66WORLD 2,532 6,974 9,306 10,125



CD-ROM Edition

BUSINESS INSIGHTS

29

Table 2: % World Population, 1950 – 2100

REGION 1950 2011 2050 2100AFRICA 9 15 24 35CHINA 22 19 14 9INDIA 15 18 18 15INDONESIA 3 3 3 3OTHER ASIA 16 20 20 18RUSSIA 4 2 1 1REST OF EUROPE 18 9 6 6LATIN AMERICA AND THE CARIBBEAN

7 9 8 7

NORTHERN AMERICA 7 5 5 5OCEANIA 1 1 1 1WORLD 100 100 100 100



CD-ROM Edition

BUSINESS INSIGHTS

The urbanization of the world

Table 3 shows the United Nations, Department of economic and social affairs, data on the urbanization of

society by region between 1950 and 2050.

Back in 1950, less than 30% of the world population lived in towns and cities. By 2100 the picture will have

changed dramatically with over two thirds of the population living in towns and cities. This trend towards

greater and greater urbanization is reflected in all regions of the globe. Of particular note is China, where in

1950 90% of the population lived in rural areas, by 2050 80% of the population will live in urban areas.

In terms of The Citadel and Patchwork scenarios the shift towards urban society is a predetermined element

in both scenarios – but one with a significant impact on the energy system.

“Literally taking millions of people every year and moving them from rural poverty - low energy using lives, to

urban - much more energy intensive lives.” Paul Appleby, BP

30

However given the decentralized nature of the Patchwork scenario it is assumed that the degree of

urbanization is slightly lower in the Patchwork scenario than it is in Citadel.

Table 3: % Urban, 1950 – 2050

REGION 1950 2010 2050AFRICA 14 40 56CHINA 12 48 80INDIA 17 30 52INDONESIA 13 43 65OTHER ASIA 22 48 69RUSSIA 44 72 76REST OF EUROPE 53 72 82LATIN AMERICA AND THE CARIBBEAN

41 79 86

NORTHERN AMERICA 64 84 90OCEANIA 63 69 70WORLD 29 51 68


Population Division, World Urbanization Prospects: The 2009 Revision

BUSINESS INSIGHTS

Social networking In the last decade of the last century (i.e. the 1990s) we had the advent of the world wide web which

transformed the way in which information is published both in terms of the medium for its dissemination and

in broadening the author base to anyone with access to a PC.

In the first 10 years of this century the phenomenon of Social Networking has taken hold and changed the

human communication landscape – at least for that part of the global population with access to the internet.

In 2001 Wikipedia – the online encyclopedia was formed. Authored, edited and read by contributors across

the globe, it embraced the new model of collaborative interaction in which the resource was built through the

voluntary contribution of authors, which in turn created a resource containing the expert knowledge of

31

thousands of individuals across the globe. The value contained in this resource then attracts more individual

participants which then increases the level of contribution to the resource thus allowing it to grow

exponentially.

Wikipedia started on the 15th January 2001 and in 10 years the English edition has grown to contain more

than 3.7 million articles. See Figure 4 below.

Figure 4: Growth of Wikipedia, (‘000 English articles), 2001-2011

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Gro

wth

of W

ikip

edia

, (‘0

00 E

nglis

h ar

ticle

s)

Source: www.en.wikipedia.org BUSINESS INSIGHTS

This phenomenon is however global in nature, with Wikipedia now containing over 19 million articles in 200

languages.

32

Contributors and users alike have recognized the power of “give and take”. If you give a little of your own

information to enhance the library you encourage others to do the same which then allows this collaborative

resource to thrive and grow.

Another example of where an enlightened sense of selflessness has led to the creation of a valuable

community resource is Trip Advisor. On this site, people who have traveled to a hotel or restaurant leave

their reviews as a guide for future travellers. Only by embracing the concept of "if I give a little I'll be able to

benefit from the shared resource" are such resources enabled to flourish and grow to the benefit of all who

use them.

If you buy a book or electronics online on Amazon or most other competing e-shops, you will be asked to

write a review of both the merchant and the product you purchased. People around the world have embraced

this collaborative opportunity by writing reviews in the belief that others will do the same, and that when they

need to consult a review there will be plenty of other contributors to help them make their purchase

decisions.

Within the sphere of collaborative reviewing, be that in Wikipedia or online shopping, the individual

contributor is talking to anonymous audience. We have also seen the growth of online communities in which

active communications have flourished between people. The most famous example of this is of course

Facebook which started operations back in February 2004. Facebook now has more than 750 million

participants around the globe. In some universities the favored communication medium is now the social

networking site rather than e-mail.

In the professional sphere we have LinkedIn which now has the community of over 100 million business

people around the world. Never before has it been possible to access knowledge and people on such a

global scale.

Whilst the institutions that dominate the market today may or may not be the institutions that dominate the

arena in the decades to come, it appears inevitable that online communities will flourish and thrive. The

extent to which these types of communities will supplant and replace traditional community organizations,

33

from local groups through national governments to international bodies is uncertain. The continued existence

of social networking at scale is taken to be a pre-determined element. However, the impact on the world of

social networking is taken up as a branching point underpinning the two scenarios. In Citadel the dominant

communities are the traditional off-line communities, in Patchwork on-line communities have a much stronger

influence both at the local level and at the shared interest level internationally.

Managing the trilemma Governments around the world are finding themselves having to balance three issues, all of which are vital to

the well-being of the societies they serve. These issues are as follows:

Averting the impacts of climate change;

Ensuring energy supply security;

Delivering affordable energy supplies.

This trilemma affects every nation around the world. To a greater or lesser extent all governments appear to

have embraced the belief that they need to do something to avert the negative impacts of climate change.

The desire to move to a low carbon economy appears in political doctrines in all the countries of the

developed world. Indeed China, and India, and many other Asian countries have also acknowledged the

need to find a low carbon pathway to economic development.

Energy importing countries are acutely aware of the supply disruption and price risks they face. Anything

they can do to switch to home produced sources of energy, particularly renewable forms of energy is seen as

positive. This is leading to state support, and subsidies for, new sources of energy in which wind energy

would be a clear example. Demand-side measures are also evident as governments look to tax energy

sources based on their carbon content, as well as supporting initiatives to drive up energy efficiency.

“Around climate and energy policy, the attempt to decarbonize fuels is also interwoven with energy security

concerns - the rising importance of energy policy in shaping energy markets - its always been important but it

34

seems even more important now particularly with this focus on decarbonization and at the same time trying

to become more self-sufficient.” Paul Appleby, BP

However, initiatives to combat climate change and to ensure energy supply security come at a price. They

inevitably, and inexorably, lead to energy price increases. These in turn lead to problems with affordability

which can either cause social problems by disproportionately impacting on the poor and vulnerable in

society, or can negatively impact on economic growth, or indeed both. This third element of the trilemma is

the balancing item. In the US one could argue it is the dominant feature of the trilemma such that concerns

about climate change or supply security are seen as less important than securing economic prosperity today.

Given that economic prosperity has been built on cheap energy, keeping energy prices low is seen as a

prerequisite to assuring continued economic growth and prosperity.

If we look at China we can see the same prerogative for economic growth. However, one can also see some

signs of China looking to manage the other two elements of the trilemma. In terms of climate change China

would be extremely adversely affected by the melting of the Himalayan glaciers and this is recognized by

their own meteorogical service. In addition the Chinese government is mindful of the social unrest that comes

from inner-city pollution which is recognized as the main driver of social unrest in the country.

There is a realization that the low carbon pathway needs to be found for the long-term and therefore China is

destined to become one of the leading players in wind, solar, and nuclear energy in the future. These

developments will also ensure that China minimizes its energy import bill and its security of supply risks. In

the short term however, economic growth is priority since this is what creates affordability for the hitherto

poor rural communities which are now migrating into the rapidly growing cities. If we look at the Indian

subcontinent the same logic applies as it does in the rest of Asia.

So this report considers the management of the trilemma as a predetermined element. The extent to which

economic growth and affordability are played off against averting climate change and assuring supply

security of the differentiators between the two scenarios developed in this report.

35

In the Citadel scenario economic growth and affordability are the stronger concerns, in the Patchwork

scenario the avoidance of climate change impacts is the stronger feature.

36

Chapter 3 The energy system

Summary Crude oil prices have exhibited all the signs of being part of a complex dynamic system which can

exhibit both a wide variety of outcomes over time and significant volatility.

The energy system can be visualized as being made up of 12 building blocks spanning supply, demand

and system infrastructure.

GDP growth will drive up energy demand significantly. This demand will be manifest in a combination

of increased fuel demand, and increased electricity demand.

IEA projections – which are based on the expected policies of governments, as indicated by their

pronouncements to date, show electricity’s share of demand increasing as a share of total final

consumption between 2008 (27%) and 2035 (37% nps scenario).

Industry demand is expected to increase 45% over the period 2008 – 2035, Building demand by 31%,

and Transport by 41%.

The amount of centralized generation will depend on the amount of community generation - the latter

displacing the former due to the inherent inefficiencies in centralized generation.

Asia Pacific will become a major importer of oil, and gas, by 2030.

China is building its economy on domestic coal, however reserves of this are limited with a production

to reserves ratio of only 35 years. An alternative hydrocarbon sourcing route looks inevitable in the

longer term. China is well placed in this regard with extensive shale gas reserves.

Global unconventional gas reserves are estimated to be 6x those of conventional gas.

Hydrogen and batteries both have the potential to provide energy storage within the energy system,

and energy storage has the potential to beneficially transform the shape of the load curves on both

nuclear and intermittent renewable electricity generation plant.

37

Introduction This chapter looks at the world of energy and utilities as a system. Within the system there are a number of

issues which impact on one another and determine how the world will evolve. The system is first introduced

in its entirety and then each component part is examined in terms of the issues raised and their interaction

with other elements of the system.

The understanding of the system, which looks both at today and the view the IEA takes of the impact of

policies that governments appear to be following today on demand in 2035, provides the baseline for an

examination of the two scenarios.

The energy system When looking forward to 2050, and trying to imagine what the world of energy may look like, we need to

keep in mind the diversity of outcomes which have already been seen in the past.

Over the last 15 years, a very narrow span of time in the context of our view from 1950 to 2050, if we use the

UK as an example, we have seen wholesale gas prices tumble from 22 pence per therm, to 8 pence per

therm, and then to rise to over 60 pence per therm.

Looking globally at crude oil, Figure 5 below shows crude oil prices in 2010$s from 1950 to 2010. The figures

shown are annual averages and thus smooth out daily, weekly, and monthly volatility in the market place. It

is clear that since the early 1970s the market has been extremely volatile.

Energy market forecasters in the 1960s found it very difficult to entertain the thought that the 1970s might

prove to be radically different. Only Pierre Wack – the founder of scenario planning in Shell managed to

conceive of an imaginary world in which the underlying pressures in the external world could combine to

create OPEC and an oil price shock. This was the start of the Scenario movement in Shell group planning,

and provided the back-cloth for Shell management to think through what they should do given this world

could occur. Having understood the scenario they knew to look for the signs that this outcome may manifest

38

itself, and in so doing were ahead of the competition in not purchasing tankers for the transport of crude as

prices shot up and demand dipped.

The alternative outcomes that may occur in the two scenario worlds will be explored in the chapters

examining the Citadel and the Patchwork scenarios. However, we can take the existence of, and the nature

of the energy system itself to be a pre-determined element.

Figure 5: Crude Oil Prices, (2010$/bbl), 1950 – 2010

0

20

40

60

80

100

120

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

Cru

de O

il Pr

ices

, (20

10$/

bbl)

Source: BP Statistical Review of World Energy 2011 BUSINESS INSIGHTS

Indeed, the volatility in the energy ecosystem would suggest that we are dealing with a complex dynamic

system. Such systems exhibit chaotic behavior in which a small change in one part of the system can lead to

a large change somewhere else in the system. The often quoted example of a chaotic system is the weather.

A hummingbird flapping its wings in the Amazon forest can move the molecules of air and change the overall

weather patterns in North Europe.

39

The reason we can believe that the energy ecosystem is a chaotic system is that there are many feedback

loops and time delays which are the characteristics of complex dynamic systems. The diagram below

illustrates a high-level picture of the energy ecosystem.

If anything the energy system is about to become more complex rather than simpler over the coming

decades and this will bring with it the potential for even greater volatility.

Figure 6 shows a diagrammatic representation of the Energy system.

The picture is in the form of an influence diagram such that where elements of the system impact on other

elements of the system these interactions are denoted by arrows between the elements. A black arrow

indicates that more of the element at the source of the arrow leads to more of the element at the tip of the

arrow. A red arrow indicates that more of the element at the source of the arrow leads to less of the element

at the tip of the arrow.

So for example, more “energy demand” leads to more “fuel demand” and more “electricity demand”. The

degree to which this is split between "fuel demand" and "electricity demand" will depend on the nature of the

increase in “energy demand”. For example, an increase in freight by commercial road transport would likely

create an increase in demand for hydrocarbon fuels and biofuels, whereas an increase in demand for electric

vehicles would lead to an increase in electricity demand.

Not only do elements impact on other elements positively and negatively, they do so over different time

frames so, for example, less “hydrocarbon supply” leads to higher "energy price". This is a relatively short-

term reaction. It is also true to say, that a high “energy price" leads to more investment in “hydrocarbon

supply" which in turn leads to an increase in "hydrocarbon supply". This latter influence, however, is of a

much longer duration. Having both short-term and long-term influences between energy price and

hydrocarbon supply can cause instability in the system and volatile pricing as we have seen over time.

The snapshot shown in Figure 6 is too complex to absorb in a single glance. The remainder of this chapter

will look at each element of the energy system such that we can build up a picture of the system from

digestible building blocks.

40

Figure 6: The energy system

Peopletransport

Coal Supply Gas Supply

Oil Supply

CommercialBuildings

Industrial

Population

HydrocarbonPrice

CarbonPrice

DemandManagement

Freight

EconomicProductivity

Modal splitResidentialBuildings

EnergyEfficiency

Local GenOwn use

Hydrocarbonsubsidy

Hydrocarbon demand

Assetchoice

Assetusage

Hydrogen

H2Vehicles

Export

NuclearHydrocarbonGen

Hydrocarbon No Carbon

Renewables

Thermal

CentralGeneration

Fuel CellH2

HydrocarbonDemand

ElecDemand

Bio-fuels

Elec Price

Batteries

Geological

Info

Elec Demand

HydrocarbonDemand

Elec Storage

Central ElecProduction

Smart

CommunityGen

Fuel DemandEconomy

Energy Demand

Hydrocarbon SupplyEnergy price

Central GenerationCapacity

Source: Enstra Consulting BUSINESS INSIGHTS

In the following two chapters which describe the "Citadel" and "Patchwork" scenarios, we will use the energy

system model to both define and explain the energy outcome of each scenario.

The economy

The driving force behind the energy system is the growth of the economy as illustrated in Figure 7 below.

Over the next 40 years it will be the size of the global population times per capita GDP which will determine

the demand for goods and services. Factor into this the likely energy intensity of the world economy and we

can determine the extent to which the economy will drive growth in energy demand.

41

Figure 7: Economy

EconomyPopulation

EconomicProductivity


In last year's report by Peter Franklin, The Post Carbon Landscape – Alternative Pathways to a Low Carbon

Landscape, published by Business Insights - GDP per capita was estimated for 2050. The results of this

analysis, adjusted to be consistent with the medium scenario of population growth from the UN, are shown in

Table 4 below.

42

Table 4: GDP estimates, 2009 – 2050

Country 2009

GDP US$’000/

person

2009 GDP

trn US$

Growth % pa

2050 Ratio

2050 GDP

trn US$

2009 Population

2050 Population

2050 GDP

US$’000/person

North America

46 16 3 3 43 341 447 96

Oceania 29 1 3 3 3 36 55 60Europe 27 19 2 2 47 737 719 65Latin America

8 5 5 8 35 584 751 47

China 4 5 7 12 60 1,342 1,306 46India 1 1 7 15 18 1,208 1,692 11Rest of Asia

7 12 6 9 100 1,570 2,144 47

Africa 1 1 4 5 5 999 2,192 2World 9 60 4 5 312 6,818 9,306 34

Source: GDP per capita, IMF 2009 and Enstra Consulting estimates,

Population UN

BUSINESS INSIGHTS

“There are some clear trends that we are seeing today. Global population is growing. Energy consumption

per capita is growing incredibly fast in developing countries.” Marcello Contestabile, Imperial College

Taking the estimates in the Table above as fixed predetermined elements of the two scenarios we can see

some features arising.

By 2050 China and the rest of Asia will account for just under 50% of global GDP.

GDP per capita in Latin America, China, and the rest of Asia in 2050 will be at the same level as GDP

in North America today.

India, and particularly Africa, will show significant increases in population but these regions will not

achieve the level of per capita wealth seen in the developed world today.

43

“The big one (emergent threads) is the rise of China and other industrializing and developing countries. That

whole shift of the weight of the global economy to these countries. This is the major driver of energy growth

and will continue to be for some time.” Paul Appleby BP

Energy demand

Figure 8 below shows the “energy demand" element of the system. Within it we have a number of yellow

hexagons each of which depicts the issues which determine what the exact level of energy demand will be.

So if we take "people transport" and “freight" energy demand will be determined by the modal split which

pertains to each of these categories.

Figure 8: Energy demand

Energy Demand

Peopletransport

CommercialBuildings

Industrial

Freight

Modal splitResidentialBuildings

EnergyEfficiency

Assetchoice

Assetusage


For "people transport" energy demand will be determined by how people decide to meet their needs for

"mobility". The choices range from walking through bicycles, electric bikes, hydrocarbon fueled scooters and

bikes, traditional cars and electric cars as well as bus, tram, rail, boat and plane options.

Within the "people transport" we have the issues of “asset usage” and "asset choice". How these play out

over time will determine how congested cities will become. It is likely that the developing world in Asia

(excluding the Indian sub-continent) will have the same GDP per capita in 2050 that the US has today. If that

means that the people of Asia will both own the same number of cars per head, and drive the same number

44

of miles per capita then the new megacities of the Asian world are destined to be gridlocked. If on the other

hand, they still wish to own the vehicle assets but to do not drive them to anything like the same extent as

current US citizens then the development pathway for transport in Asia will be much more manageable.

The energy demand outcome for freight will be determined by the modal split between commercial road

transport, rail, marine and aviation.

We then have the energy requirements of "residential buildings", "commercial buildings", and "industrial"

applications. If we look at the developed world, this will reflect the degree to which “energy efficiency" can be

retro-fitted into the existing housing stock. For the developing world it is more a case of what will the "energy

efficiency" of the residential housing stock and the commercial building stock that will be created during the

urbanization of these countries be.

Table 5: Energy demand bandwidth, (btoe), 2010 – 2050

Sector 2010 2050 Low 2050 HighHousehold 2.0 2.6 4.5Transport 1.8 2.3 4.5Marine 0.2 0.3 0.6Aviation 0.3 0.7 1.3Industrial 2.3 4.6 9.2Commercial 1.7 1.7 3.4Total 8.3 12.2 23.5

Source: 2009 IEA World Energy Outlook; 2050 Enstra Consulting estimates BUSINESS INSIGHTS

Table 5 shows the bandwidth of uncertainty in energy demand in 2050. This Table summarizes the analysis

contained within the Business Insight report "The Post Carbon Landscape – Alternative Pathways to a low

Carbon Landscape" published in 2010. That report examined what the lowest and what the highest outcome

energy demand might be in 2050. This report will look at what the demand outcome might be for each of two

scenarios, “Citadel” and “Patchwork”.

45

One thing is certain – energy demand will grow. Where the outcome will be in the range from a 50% increase

in demand to a trebling of demand is the question.

Fuel and electricity demand

Figure 9 below illustrates that total energy demand then manifests itself in either an increase in “Fuel

Demand” or an increase in “electricity” demand depending on the application.

Figure 9: Fuel and electricity demand

Elec DemandFuelDemand

H2Vehicles

HydrocarbonDemand

ElecDemandBio-fuels

Energy Demand

Economy


The extent to which “Energy Demand” is transformed into either “Fuel Demand” or “Electricity Demand” is

one of the major uncertainties facing the energy system as it evolves over time.

The IEA in its World Energy Outlook 2010 developed a number of scenarios for how energy demand might

grow and how it might be split between “Electricity” and “Fuel Demand”. The IEA work breaks demand down

into 3 sectors; Industry, Transport, and Buildings.

They examine each within three scenarios.

Current Policies (cps): The continuance of government policy initiatives as enshrined in current legislation.

46

New Policies (nps): Adoption of new policies following the Copenhagen accords.

450: Adoption of more aggressive environmental policies that deliver a CO2 concentration in the atmosphere

of 450 ppm.

The next set of Tables look at the IEA perspectives on the potential development of Energy Demand and its

split between “Fuels” and “electricity”.

Table 6: % electricity of total final consumption, 1990 – 2035

Scenario nps cps 450Year 1990 2008 2035 2035 2035TFC 13% 17% 23% 23% 23%Industry 21% 26% 32% 33% 33%Transport 1% 1% 2% 2% 4%Buildings 18% 27% 37% 38% 35%

Source: IEA WEO 2010 BUSINESS INSIGHTS

As shown in Table 6 above, the share of electricity of total final consumption has been rising since 1990. All

three scenarios see this trend continuing across all sectors. However, the IEA scenarios still only envisage

electricity penetration in the Transport sector reaching at maximum 4% of energy demand in the most

extreme scenario.

Looking at each of the three sectors we can the shift between the fuels over time.

47

Table 7: Industry Final Consumption, (mtoe), 1990 – 2035

Scenario nps cps 450 Growth Year 1990 2008 2035 2035 2035 NPS/2008Total Industry 1,808 2,351 3,409 3,716 3,110 45%Coal 470 646 837 972 730 30%Oil 326 332 337 382 301 2%Gas 366 466 666 696 604 43%Electricity 379 603 1,099 1,227 1,012 82%Heat 150 113 132 144 114 17%Biomass and waste 117 191 338 294 347 77%Other renewables 0 0 1 1 1


The split of Total industry consumption between the various energy sources is shown in Table 7 above.

Total industry demand grows by 45% between 2008 and 2035 in the New Policies Scenario. Electricity

becomes the dominant source of energy in all three scenarios growing by 82% between 2008 and 2035.

Oil’s share of demand declines although total volumes remain constant in the growing market. Gas and Coal

both grow significantly at 43% and 30% respectively.

Whilst biomass also grows vigorously (+77%) it does so from a small base thus only reaching 10% of total

demand by 2035.

48

Table 8: Buildings Final Consumption, (mtoe), 1990 – 2035

Scenario nps cps 450 Growth Year 1990 2008 2035 2035 2035 NPS/

2008Total Buildings 2,247 2,850 3,729 3,893 3,364 31%Coal 237 125 97 115 82 -22%Oil 331 344 327 374 264 -5%Gas 431 617 787 839 654 28%Electricity 404 781 1,379 1,468 1,165 77%Heat 173 142 159 178 131 12%Biomass and waste 668 827 891 855 917 8%Other renewables 4 14 89 65 151 536%Other 657 923 1,167 1,197 1,137 26%


Table 8 shows how the energy consumption of Buildings (both commercial and residential) is met by the

various energy sources in the three scenarios. Again the electrification of demand is apparent with electricity

growing by 77% over the period driven by both a growth in building use of electricity for power and the

electrification of heat.

Coal use declined significantly between 1990 and 2008 and continues to decline in all scenarios.

Oil volumes remain broadly stable and gas shows growth of 28% in the New Policies Scenario, although this

growth is significantly more muted in the “450” scenario.

Table 9 shows how the energy consumption of Transport is envisaged changing over time.

49

Table 9: Transport Final Consumption, (mtoe), 1990 – 2035

Scenario nps cps 450 Growth Year 1990 2008 2035 2035 2035 NPS/2008Total Transport 1,576 2,299 3,244 3,433 2,850 41%Oil 1,483 2,150 2,864 3,102 2,202 33%Bunkers 199 335 463 475 374 38%Electricity 21 23 57 53 128 148%Biofuels 6 45 204 163 386 353%Other fuels 67 81 120 114 134 48%


It should be noted that Bunker fuel (Marine) is included within Oil.

In these scenarios whilst electricity does show significant growth (148%), it does so from such a small base

to only reach a 4% share of demand in the most radical scenario (“450”).

In the “450” scenario, in 2035, 28% of new passenger car sales are still internal combustion engine sales,

and 29% are hybrids where an on-board battery is used to capture energy which otherwise would be wasted.

27% are plug-in hybrids which can run on both electricity and hydrocarbon fuel and only 14% are full electric

vehicles. The remaining 2% are gas powered vehicles.

Fuel cell vehicles powered by hydrogen are only just being commercialized by 2035 in this IEA scenario.

Biofuels are seen to undergo rapid growth in all scenarios accounting for 14% of total transport fuels in 2035

in the most radical scenario.

“Biofuels - so we are looking towards second and third generation biofuels - second and third generation

biofuels use different source crops, effectively waste vegetation that grows on wasteland rather than

competing with food.” Paul Appleby, BP

Table 10 shows the overview of Total Final Consumption in the three scenarios.

50

Table 10: Total Final Consumption, (mtoe), 1990 – 2035

Scenario nps cps 450 Growth Year 1990 2008 2035 2035 2035 NPS/200

8TFC 6,289 8,423 11,550 12,239 10,460 37%Coal 763 823 994 1,152 868 21%Oil 2,608 3,502 4,314 4,662 3,521 23%Gas 950 1,308 1,794 1,875 1,596 37%Electricity 835 1,446 2,608 2,831 2,376 80%Heat 333 258 295 325 248 14%Biomass and waste 796 1,070 1,449 1,325 1,692 35%Other renewables 4 15 96 69 159 540%


Roughly extrapolating the IEA estimates of Total Final Consumption by taking the growth in consumption

between 2020 and 2035 and adding this to the 2035 Figure gives us a set of total demand figures ranging

from 11.1 billion tonnes of oil equivalent to 14.3 billion tonnes of oil equivalent.

These values are very much aligned with the low end of the bandwidth of uncertainty shown in Table 5 –

which is logical given that the IEA “450” scenario is based on what needs to happen if the 450 ppm CO2

target is to be achieved rather than being based on what might reasonably happen.

However, this is only half the story.

Whilst scenarios with significantly lower demand volume may not be plausible, those with very different

balances between the energy sources may well be. In particular the role of electricity in transportation could

be very different to that envisaged in the IEA scenarios. In addition the potential role of hydrogen in all parts

of the energy system could also have a significant outcome on the eventual fuel mix in 2050.

51

Community generation and central electricity production

In the previous section the growing share of electricity in Total Final Consumption was highlighted.

Figure 10 below looks at how that electricity demand can be met.

Figure 10: Community Generation and Central electricity Production


CommunityGen

Local GenOwn use

Export

Hydrocarbon No CarbonCentralGeneration

Fuel CellH2

Elec Demand


For each application the choice will be to produce electricity locally either in the home or in the local

community, or to import it from a central facility.

The hexagons shown in the “community generation” ellipse illustrate technologies such as micro-gas-fired

combined heat and power, and gas fed fuel cells in the home which could produce electricity for "own use"

and could potentially "export" to the grid. The 2010 Business Insights published report on "The Post Carbon

52

Landscape" highlighted the subsidy being given by the South Korean government for gas fed fuel cells which

comprise of a natural gas reforming unit to produce hydrogen, and a fuel cell to generate electricity from

hydrogen.

A complementary technology is the high temperature fuel cell which could provide a community source of

electricity and heat.

“I could see high temperature fuel cells being used for community generation, possibly using the heat as well for CHP applications” Marcello Contestabile, Imperial College

This potentially could lead to much lower carbon architecture by dropping out the reforming process and

building the infrastructure to deliver hydrogen directly to households. If this hydrogen was to be produced by

the electrolysis of water then it would be true to say, as is illustrated in the diagram, that increased

penetration of hydrogen fuel cells would lead to increased central electricity production as each quantity of

hydrogen would require the use of centrally generated electricity to create it. This is not necessarily the case

since the hydrogen could come from the reforming of natural gas or from the gasification of coal.

Looking at central electricity production itself, that is the production of electricity in traditional power stations,

and in remote wind-farms which feed into a national grid, this can either be carbon-based with oil, gas or

coal-fired generation, or could be zero carbon in the case of nuclear generation, wind powered generation,

wave or solar.

Figure 11 shows historical and future global electricity production. In 2008 power generation (4,605 mtoe)

accounted for 37% of primary energy demand (12,271 mtoe).

Electricity production has grown by 50% between 1990 and 2008 and, according to the scenario forecasts

made by the IEA is expected to continue to grow up to 2035. The highest growth is seen in the “current

policies” (cps) scenario, and the lowest in the “450” scenario. The “new policies” scenario lies between the

two.

In all three scenarios renewables, and biomass and waste are seen to grow dramatically – albeit from a

small base between now and 2035.

53

It is interesting that EDF has started deploying tidal turbines off the cost of northern France in August 2011.

Figure 11: Electricity Generation, (mtoe), 1990 – 2035

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1990 2008 2035 2035 2035

Electricity Generation, (mtoe)

Other renewables

Biomass andwasteHydro

Nuclear

Gas

Oil

Coal

0

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Other renewables

Biomass andwasteHydro

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Coal

cpsnps 450

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ctric

ityG

ener

atio

n, (m

toe)


“As electricity gets used for transport, and more and more in buildings, overall demand will grow and the

demand profile will change” Marcello Contestabile, Imperial College

Looking towards the second half of the scenario period we could well see carbon capture and storage (CCS)

transforming hydrocarbon-based generation into zero carbon emissions generation.

When considering like for like technologies in the “central” and “local” contexts the red arrow linking

“Community Generation” and “Central Elec Production” indicates that more “Community Generation” will tend

to lead to less “Central Elec Production”. The reasoning behind this is that if capacity is available both locally

and centrally that it will always be cheaper to utilize the hydrocarbon locally rather than process it centrally

54

due to the energy losses inherent in “Central electricity generation” and the losses incurred in the

transmission and distribution of electricity.

Hydrocarbon demand, energy prices and electricity production capacity

“Fuel Demand” creates “Hydrocarbon Demand”, as does increased gas-fed “Community Generation” and

gas, oil, or coal fired “Central electricity production”. These influences are shown in Figure 12.

All other things being equal, increases in "hydrocarbon demand" will lead to an increase in hydrocarbon

"energy price".

Increases in electricity demand will also raise "energy price".

The conceptual model also shows that an increase in electricity price will lead to the creation of more "central

generation capacity". This is of course a long-term influence given the time it takes to plan and build

additional central generation capacity. Feeding back the other way, more "central generation capacity" will

put downward pressure on electricity price within "energy price" as any surpluses in capacity will tend to

bring prices down to marginal cost levels rather than long-term full cost levels.

55

Figure 12: Hydrocarbon Demand, Central Generation Capacity and Energy Price

HydrocarbonDemand


Energy price

HydrocarbonPrice

CarbonPrice

Local GenOwn use

Hydrocarbonsubsidy

Hydrocarbon demand

H2Vehicles

Export


Hydrocarbon No Carbon

Renewables

CentralGeneration

Fuel CellH2

HydrocarbonDemand

ElecDemand

Bio-fuels

Elec Price

Elec Demand


CommunityGen

Fuel Demand


The model shows that a higher "energy price" will tend to increase "community generation". The logic behind

this is that central generation is by its very nature inefficient, losing 50 to 60% of its primary energy inputs to

heat loss and mechanical energy loss. In addition transmission and distribution of electricity loses another

10% of energy. Taking gas to the point of demand and converting it to electricity locally, and thus making use

of the heat created during the conversion process means that energy losses, and consequent CO2

emissions, can be reduced by up to 50%. The higher the carbon or the gas price the greater the cost of

56

energy losses and/or CO2 emissions and hence the greater incentive to move towards "community

generation".

Hydrocarbon supply

Figure 13: Hydrocarbon supply

Hydrocarbon Supply

Coal Supply Gas Supply

Oil Supply

Energy price


The “Hydrocarbon Supply” ellipse shown in Figure 13 above has within it hexagons representing coal supply,

oil supply, and gas supply. As “energy price” rises so does investment in exploration, production, and

infrastructure which in turn leads to increased hydrocarbons supply. This aspect is a long-term effect given

the time it takes to get approvals, put plans in place, and to implement these investments. In the short term

any surpluses in hydrocarbon supply can quickly drive down "energy price". This short-term impact is

denoted by the red arrow in the diagram.

Before examining each of the sources of hydrocarbon individually an overview of global resource availability

is shown in Table 11 below.

Coal represents just over half of the global hydrocarbon resources with the balance split relatively evenly

between oil and gas. (Note this analysis excludes non-commercially proven unconventional gas).

It is also worth noting that historically, in the cases of oil and gas, as the reserves become depleted through

production of hydrocarbon higher cost reserves tend to be brought on stream keeping the reserves to

57

production ratio relatively constant. This is the manifestation of the black arrow between “Energy Price” and

“Hydrocarbon Supply” in the energy system map.

Table 11: World hydrocarbon reserves, (btoe), 2010

Type Reserves to production ratio Reserves %Oil 46 181 23Gas 59 169 21Coal 118 442 56Total 791 100


Oil supply

Figure 14 below shows a view of the on-set of “Peak-Oil” in which the natural decline in the production

capacity of existing reservoirs once they reach 50% depletion states causes production to decline rapidly

unless other sources of oil are found and exploited to fill the gap.

This particular analysis would indicate that we have reached “Peak-Oil” today and therefore will have

significant issues with the increased oil demand requirements coming from China, India and the Rest of Asia,

as these countries develop, should their increase in passenger car numbers per head, and commercial road

vehicle transport per unit of GDP mirror that of the developed world.

58

Figure 14: Peak Oil, Production of oil and gas liquids, (bln bbl/year),1930 – 2050

0

5

10

15

20

25

30

3519

3019

3519

4019

4519

5019

5519

6019

6519

7019

7519

8019

8519

9019

9520

0020

0520

1020

1520

2020

2520

3020

3520

4020

4520

50

Peak

Oil,

Pro

duct

ion

of o

il an

d ga

s liq

uids

, (bl

n bb

l/yea

r)

Source: Association for the study of peak oil and gas, 2007 BUSINESS INSIGHTS

However, the view from BP is rather less catastrophic as shown in Table 12 below.

“For oil little top line growth - most of the work is involved in replacing the decline of existing fields. For every

barrel of top line growth we have probably got to replace 4 or 5 barrels of declining fields” Paul Appleby, BP

BP’s view is that production and consumption will both be able to rise significantly over the period to 2030,

with biofuels production assisting in balancing supply and demand by making up circa 5% of production and

consumption in 2030.

59

Table 12: Oil production and consumption, (mtoe), 1990 – 2030

1990 2010 2030Consumption 3,151 3,943 4,671Production Hydrocarbon liquids 3,172 3,907 4,448Bio fuels 7 58 235Total 3,179 3,964 4,683 Source: BP Energy Outlook 2030: January 2011 BUSINESS INSIGHTS

Looked at on a regional level, it is possible to see the shift in import and export requirements over the years.

Table 13 shows Net import/export figures from BP’s analysis. A positive Figure indicates that the region is a

net importer. A negative Figure indicates that the region is a net exporter.

Whilst North America’s import requirements have increased over the last 20 years they are expected to

decline over the next 20. Europe’s import requirement has declined significantly over the last 20 years and

will continue to decline marginally.

The Asia Pacific region is where the dramatic growth is expected, which with it will bring a highly significant

increase in oil import dependency from 851 mtoe today to 1,446 mtoe in 2030.

This oil is expected to come from increased production in the Middle East (net exports rising from 829 to

1,153 mtoe i.e. +324 mtoe over the period) and increases in net exports from Africa (333 to 346 mtoe i.e.

+13 mtoe) and Central and South America (115 to 183 mtoe i.e. +68 mtoe).

“Within oil it’s obviously getting much harder to find and develop conventional oil and that's restricted to a few

places. Going further and deeper offshore. It’s much more the unconventional sources, and the more

expensive sources of oil. It is the arctic, it is oil sands, we can include biofuels. Lots more enhanced oil

recovery - a lot more technology being applied to getting oil out of the places where we already know it is

there.” Paul Appleby, BP

60

Table 13: Oil Net Import/Export, (mtoe), 1990 – 2030

Net Import/Export 1990 2010 2030North America 272 359 194S and C America -68 -115 -183Europe and Eurasia 339 48 30Middle East -683 -829 -1,153Africa -226 -333 -346Asia Pacific 338 851 1,446Total Fuels -28 -21 -12 Source: BP Energy Outlook 2030: January 2011 BUSINESS INSIGHTS

Whether Middle East production can ramp up to meet the Asia Pacific production deficit is the big question.

Should “Peak-Oil” be reached during the period from 2011 to 2050 it may be that price spikes and supply

disruptions come into play.

“If you look at the (Middle East) reserves position in the 1980s there was a sudden jump and that was around

the time when they started using reserves as one of the ways of setting quotas. There is clearly a link. The

question is, were the reserves numbers they had previously - were they good estimates or were they simply

numbers that were left over, rolled over. They didn't really care what the reserves were. When they did care

about them they revised them upwards. And we are still in a world where it is hard to really verify a lot of

those Middle East reserves.” Paul Appleby, BP

However, in the long term it is likely that the demise of oil will come not from a drop off in production capacity

but from a shift to alternative forms of energy for transport. This can be through modal shift e.g. to electrified

rail or through a switch to biofuels or through the adoption of electric or hydrogen vehicles.

Sheikh Yamani, the former Saudi Oil minister summed this up appropriately when he said:

"The Stone Age came to an end not for a lack of stones, and the oil age will end, but not for a lack of oil.''

Sheikh Ahmed Zaki Yamani

61

Coal supply Table 14 shows the breakdown of Coal Consumption and Production by region.

Coal production and consumption is dominated by the Asia Pacific region. Indeed 1,713 mtoe of the regional

consumption total of 2,312 mtoe in 2010 was accounted for by China. China produced 1,800 mtoe in the

same year according to the BP statistics.

Table 14: Coal Consumption and Production, (mtoe), 1990 – 2030

1990 2010 2030Consumption North America 514 570 458South and Central America 17 25 35Europe and Eurasia 790 473 404Middle East 3 9 10Africa 79 107 162Asia Pacific 830 2,312 3,343Total 2,234 3,496 4,412Production North America 609 596 510South and Central America 18 54 72Europe and Eurasia 713 430 410Middle East 1 1 1Africa 105 145 210Asia Pacific 801 2,272 3,264Total 2,247 3,499 4,468

Source: BP Energy Outlook 2030: January 2011 BUSINESS INSIGHTS

However if we look at the Coal reserves positions of the various regions and the major reserve holding

countries within them it can be seen that China accounts for only 13% of world reserves. This is illustrated in

Table 15.

62

Table 15: Coal Proved Reserves, (million tonnes), 2010

Countries/areas Total Share of Total R/P ratioUS 237,295 28% 241Other North America 7,793 1% Total North America 245,088 28% 231Total South and Central America 12,508 1% 148Germany 40,699 5% 223Kazakhstan 33,600 4% 303Russian Federation 157,010 18% 495Ukraine 33,873 4% 462Other Europe and Eurasia 39,422 5% Total Europe and Eurasia 304,604 35% 257South Africa 30,156 4% 119Other Middle East and Africa 2,739 0% 8Total Middle East and Africa 32,895 4% 127Australia 76,400 9% 180China 114,500 13% 35India 60,600 7% 106Other Asia Pacific 14,343 2% Total Asia Pacific 265,843 31% 57Total World 860,938 100% 118

Source: World Energy Council 2010 (BP Statistical Review 2011) BUSINESS INSIGHTS

China’s share of world coal consumption in 2010 is a staggering 48%. Whilst this is today matched by a

similar level of coal production,the limited reserves position, with a reserves to production ratio of just 35

years, makes long term reliance on coal a risky strategy for China.

All the indications are that China’s dependency on coal will increase over the next 20 years with coal

consumption expected to grow by close to 50%.

Globally coal is in plentiful supply with a reserves to production ratio of 118 years.

63

“Coal - no particular resource constraint - its just a matter of investment to bring the coal to market. The

constraint on coal is much more at the market end.” Paul Appleby, BP

The future of coal will not be determined by global coal availability. It will be determined by whether Chinese

production can be sustained – and whether an environmentally acceptable, but economic, means of using

coal can be found. Carbon capture and storage is the key technology that could come into play here.

Gas supply

Looking internationally there are plentiful gas supplies with proven reserves equal to nearly 60 years of

production. In fact proven reserves themselves have grown by 50% between 1990 and 2010 (from 126 to

187 tcm) as shown in Table 16.

“gas, there is no particular shortage of resources, its an issue of linking them up with markets. The shale gas,

potentially huge resources, requires the technology to get in there and make them economic. There are large

amounts of what we call stranded gas, big deposits, a long way from markets. That needs LNG or big

pipelines to move it to market. We see gas growing but with a lot of work behind it.” Paul Appleby, BP

Reserves are however highly concentrated in the countries comprising the old USSR (in particular the

Russian Federation) and the Middle East. The old USSR accounts for 31% of global reserves of which the

Russian Federation represents 24%. The Middle East accounts for 41% of global reserves.

Whilst Norway and The Netherlands (included within the Other Europe and Eurasia totals in Table 16) are

both known as gas producing countries they both only hold circa 1% of global reserves and both have less

than 20 years supply remaining.

64

Table 16: Proved gas reserves, (trillion cubic meters), 1990 – 2010

1990 2000 2010 Share of

total R/P ratio

Total North America 10 8 10 5% 12.0Total S. and Cent. America

5 7 7 4% 45.9

Russian Federation - 42 45 24% 76.0Other old USSR - 8 14 7% 81.1Total old USSR 49 51 58 31% 77.2Other Europe and Eurasia

5 5 5 2% 35.8

Total Europe and Eurasia

55 56 63 34% 60.5

Iran 17 26 30 16% -Qatar 5 14 25 14% -Saudi Arabia 5 6 8 4% 95.5United Arab Emirates 6 6 6 3% -Other Middle East 6 6 7 4% -Total Middle East 38 59 76 41% -Algeria 3 5 5 2% 56.0Nigeria 3 4 5 3% -Other Africa 2 4 5 3% -Total Africa 9 12 15 8% 70.5Total Asia Pacific 10 12 16 9% 32.8Total World 126 154 187 100% 58.6


Table 17 shows the regional consumption and production. Over the last 20 years gas consumption has

grown by 60%. Over the next 20 years BP expect gas consumption to grow by another 50%.

“The rise of gas has been a pretty consistent theme over the past 30 years. The rising share of gas. Its

gradually becoming more international, more flexible, from a very fragmented regional market. Its not a fully

open market but it is more linked up than it used to be because of LNG” Paul Appleby, BP

65

Gas consumption is expected to continue to grow as is production in all areas of the world. However the

differential rates of change will lead to a shifing in the import export balances in the different regions. As

consumption grows the world will become more and more reliant on exports from Russia and the countries of

the ex-Soviet Union, and the Middle-East. This in turn increases the level of political risk and could well lead

to increased price volatility

Table 17: Gas consumption and production, (mtoe), 1990 – 2030

1990 2010 2030Consumption North America 579 757 864South and Central America 52 131 246Europe and Eurasia 877 1,005 1,233Middle East 86 347 739Africa 35 94 186Asia Pacific 139 493 1,044Total 1,769 2,828 4,312Production North America 584 741 851South and Central America 52 144 267Europe and Eurasia 865 933 1,088Middle East 91 426 837Africa 62 192 448Asia Pacific 136 423 840Total 1,790 2,859 4,331


Within Asia Pacific, China represents 98 mtoe of consumption, 20% of the region, and 87 mtoe of production.

The expected growth in Asia Pacific demand will, with all other things being equal, create a strong import

dependency on the region.

66

Table 18 shows the development of imports and exports in the various regions of the world between 1990

and 2030. A positive number indicates a net import balance, a negative number a net export balance.

Table 18: Gas Import/Export, (mtoe), 1990 – 2030

Region 1990 2010 2030North America -5 17 13South and Central America 0 -13 -20Europe and Eurasia 12 72 145Middle East -5 -80 -98Africa -26 -97 -263Asia Pacific 3 70 204


The switch for the Asia Pacific region from a balanced position in 1990 to a significant net import position in

2030 is particularly evident, as is the growth in African and Middle East exports.

Unconventional gas

Over the last 10 years the world has been taken by surprise by the development of unconventional gas in the

US which has grown from 15% to 58% of US gas production over this period.

Unconventional gas is made up of Tight gas, Coal-bed methane, and shale gas.

Tight gas. This is gas which is in a reservoir of low permeability leading to low gas flow rates using

traditional vertical drilling. Whilst the gas is there it had previously been uneconomic to extract it. In

order to extract this gas, water, chemicals and sand are injected into the formation at very high

pressure to crack open (fracture hydraulically) the rock formation to expose a large surface area which

allows the gas to flow to the well.

Coal-bed methane. This is methane found in coal seams. The coal deposits are normally too deep or

too poor quality to warrant commercial mining but recently developed techniques of hydraulic fracturing

and horizontal drilling have made it economic to extract the gas. Significant quantities of water are

67

injected into the coal bed and this has to be pumped out before the gas can be produced. Having

access to the quantity of water required, and the environmental impact of dealing with the enormous

quantities of waste water produced are both challenges which need to be met if Coal-bed methane is to

be successfully developed.

Shale gas. This is natural gas found in shale deposits which are abundant in both the US and in many

other locations around the world. Unlike traditional reservoirs the shales are rich in organic matter and

are both the source and the storage medium for the gas. Shales can often exist above already explored

oil and gas reservoirs, so information on them is readily available from previous exploration activity. In

order to extract the gas the shale formation also needs to be hydraulically fractured. The fracturing is

again carried out using high pressure fluid injection – although the quantities of water and the

pressures needed are much greater than for tight gas. Again access to water and a means of disposing

of the waste water are environmental challenges which need to be met. There are also concerns in

urban communities regarding the fracturing process and its potential impact on buildings above the

reservoirs. This may impede shale gas’s development in highly populated areas as New York (this also

applies to Western Europe where significant shale gas deposits are to be found). It is interesting to note

that the production profile of shale gas is very different to conventional gas. Typically a single rig able to

drill a large number of horizontal wells and a multi-stage fracturing process is used. As each well is

formed (by fracturing) and accessed (by the horizontal drill) it gives up its gas rapidly (over 2/3 years)

and production from the well declines precipitously. Wells operate independently from one another so

production from the field is dependent on the pace of well drilling. This rapid return on investment

means that shale gas exploitation can follow market pricing trends with development activity rising and

falling with market prices.

68

Figure 15: Estimates of Global Gas Reserves by region, (trillion cubic feet), 2010

0

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Estim

ates

of G

loba

l Gas

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erve

s, (t

rillio

n cu

bic

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)

Shale

CBM

Tight

Conventional

Source: The “Shale Gas Revolution” Hype and Reality, Paul Stevens

A Chatham House Report, September 2010

BUSINESS INSIGHTS

69

Figure 16 shows that total global gas reserves are estimated to be circa 40,000 tcf, this is nearly 6 times the

quantity of proven conventional gas reserves. Figure 15 shows the distribution of this gas in various regions

of the world.

North America and the former Soviet Union are particularly rich in Coal Bed Methane reserves, with North

America and China being particularly rich in Shale Gas reserves.

There is no shortage of gas molecules – the question is will it be economically and environmentally viable to

exploit these reserves in the way they have been in the US.

“There is certainly a large potential resource (of shale gas) out there. Places like China, Russia and parts of

Europe. It’s the pace that is the issue. How fast can a new technology be applied across these geographies.

It’s not as simple as taking the technology that has worked in the US and just plonking it down and hoping it

will work. It’s got to be customised to some extent. And also the regulatory environment is very different in

Europe compared to the US. So it is going to take time. I think it will happen, but in Europe in particular it will

take a long time to take-off. In China, things can happen quickly in China. If they decide to go for it they can

do things very quickly.” Paul Appleby, BP

It is interesting to note that whilst conventional gas is concentrated in just two regions (The Middle East and

the Former Soviet Union) – all regions have significant unconventional gas reserves. This has the potential to

change the geo-politics of gas significantly by offering gas consuming nations an alternative to imported

supplies from the countries that control the conventional gas reserves.

Figure 16 below shows the split in gas reserves between the various gas source types.

70

Figure 13: Estimates of Global gas Reserves, (trillion cubic feet), 2010

6,750

7,600

9,300

15,700

0

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Estimates of Global Gas Reserves, (trillion cubic feet

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Estimates of Global Gas Reserves, (trillion cubic feet

Shale

CBM

Tight

Conventional

Est

imat

es o

f Glo

bal g

as R

eser

ves,

(tril

lion

cubi

c fe

et)

Source: The “shale gas Revolution” Hype and Reality, Paul Stevens

A Chatham House Report, September 2010

BUSINESS INSIGHTS

China

Given the importance of China on the development of the energy system an analysis of the country’s use of

hydrocarbon relative to its reserve base is shown below in Table 19.

China accounts for 1.1% of the world’s oil reserves and 1.5% of global gas reserves. Its reserves position in

coal is much stronger with over 13% of global coal reserves.

By 2010 China’s consumption, measured as a share of global consumption, far exceeds its share of global

reserves which will lead to China depleting its reserves much faster than other nations. China’s reserves to

production ratio in 2010 is just 35 – that is to say reserves will be exhausted in 35 years at the current level

of production. This compares to a reserves to production ratio of 118 for the world as a whole.

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Table 19: China % of world hydrocarbon reserves, production and consumption

Global reserves Production ConsumptionChina 2010 1990 2010 1990 2010Oil 1.1 4.4 5.2 3.6 10.6Gas 1.5 0.8 3.0 0.8 3.4Coal 13.3 24.8 48.3 23.7 48.2


The rapid growth of the Chinese economy has caused the nation to move from having hydrocarbon

production greater than demand in 1990 to a significant deficit in 2010. With the continued growth in demand

this deficit can only be expected to grow.

“They (the Chinese) are very wary of becoming too dependent on imported energy, and their impact on

global energy markets. They understand that what they are doing could be potentially disruptive to global

energy markets which could result in higher import prices. They take energy efficiency very seriously.” Paul

Appleby, BP

Table 20 below shows production, consumption and the deficit or surplus created. By 2010 China has

become in oil deficit for over 50% of its requirements and 11% in respect of its gas requirements. Coal is

broadly balanced but is running at a rate of production and consumption far in excess of China’s share of this

global resource. Over the next 20-40 years this may well become a problem if the demand growth forecasts

are correct but new reserves do not appear to replace the diminished reserves.

72

Table 20: China hydrocarbon Production and Consumption, (mtoe), 1990 – 2010

1990 2010Type Production Consumption Net Production Consumption NetOil 138 113 25 203 429 -226Gas 14 14 0 87 98 -11Coal 562 525 37 1800 1714 87Total 714 652 62 2091 2240 -150


As illustrated previously in Figure 15 previously China has significant reserves of unconventional gas which

has the potential to remove its import dependency over time. The IEA report China having made CBM (Coal-

bed methane) one of the top 16 projects in its 11th Five Year Plan.

“The Chinese are definitely looking at shale gas, thinking about it. Also there is a lot of Coal-bed methane in

China.” Paul Appleby, BP

Electricity storage and smart

The final elements of the energy system to be reviewed are the impacts of “smart” and “electricity storage”.

“smart” applies to both the introduction of smart metering and smart technologies in the home, and to the

development of smart grids. The ways in which these impact on the energy system are through the provision

of information (as denoted by the “Info” hexagon in Figure 17) which was hitherto not available to either the

consumer or the grid operator, and through enabling demand response and demand management (as

denoted by the Demand Management hexagon in Figure 17.

Storage will become an intrinsic part of the energy system of the future and could take many forms.

Geological – electrical energy can be stored by pumping water up into a natural reservoir and then releasing

it through turbines when the electricity is needed. This is used in a number of locations around the globe for

peak balancing to cover unexpected outages in supply. An example of this type of storage would be the

73

Dinorwig facility in Snowdonia, UK which has been operating since 1984. This facility can provide 9GWh of

energy, which is enough to run the whole of the UK for 15 minutes (BBC Focus magazine article Issue 233

Sept 2011). It is used for meeting sudden requirements since it can brought on stream at full capacity within

16 seconds. Work is now underway to build such a facility in the Canary Islands (on the island of El Hierro) to

manage the intermittency of wind to enable the island to remove its dependency on fossil fuel imports.

Thermal – hot water tanks in residential and commercial premises could be used to store electrical energy

produced at times of low demand as heat energy at the point of hot water consumption. Materials which can

absorb heat can be used in a similar fashion as night storage heaters. The ability to do this has been in place

for more than 30 years – what will be different in the energy system of the future is that the switching controls

needed to ensure that the storage medium is available when the cheap electricity is available (for example

when the wind is blowing in the middle of the night) are likely to be available as part of the implementation of

“smart”.

Batteries – large scale battery stores within the grid are now beginning to appear. An example would be the

Golden Valley Electric Association (GVEA) BESS storage system in Alaska which commenced operation in

2003. This solution to providing back-up power was implemented due to the fact that in the absence of power

water pipes will freeze within 15 minutes in the Alaskan climate which can get down to -50 degrees C.

Maintaining power supplies to the regions 90,000 residents is seen as an essential. The BESS (battery

energy storage system) was built by ABB using racks of Ni-Cd batteries developed by Seft. The system can

provide 27MW of power for 15 minutes – which gives GVEA the required window to bring back-up generation

on–line.

The anticipated growth of electric vehicle brings with it some interesting policies for the development of

batteries in the energy system. Electrical vehicle batteries offer the potential for electricity storage either in

the vehicle, on the grid, or in the home.

The battery in the vehicle, in a smart world, offers the possibility for the grid operator to draw on its power

when it is plugged into charging point as well as delivering power to it. There are issues in terms of

74

degradation of battery performance through repeated charging and drawdown cycles – which would impact

on the economic value of the battery to the owner of the vehicle. However, technically this would be possible

provided suitable commercial arrangements could be put in place.

Once the battery is past its useful life in the vehicle, it will still be functioning but not able to deliver enough

power to provide the travel distance desired by the motorist. These batteries could be retired and then

reused either in community based storage facilities or potentially in the home.

Hydrogen – 15 years ago “The Hydrogen Economy” was at the forefront of the energy industry’s mind.

Companies like Shell had a very senior manager as the “Head of Hydrogen”. Fashion has changed. The “in-

technology” is now battery technology. However, academic experts and innovators in the field of hydrogen

see both technologies as playing a potentially major part in the energy system future.

Hydrogen can be sourced from either the electrolysis of water, the gasification of coal or biomass, or the

reforming of natural gas or biogas. The hydrogen can then be burned or turned back into electrical energy in

a fuel cell. Clearly if the hydrogen is made from the electrolysis of water using energy provided from a

nuclear or renewables source this offers a near zero carbon route to producing electrical power or heat.

“In the case of hydrogen vehicles, hydrogen just like electricity is an energy vector, so you would have to

produce the hydrogen from primary energy sources and those would be very much the same that we use

today for electricity” Marcello Contestabile, Imperial College

One could envisage hydrogen production plants being sited at grid landing locations for off-shore wind or on

on-shore wind-farms thus turning an intermittent electricity production facility into a dispatchable unit with

guaranteed availability.

A hydrogen plant attached to a nuclear power station would allow the plant to offer variable supply to the grid

whilst keeping nuclear production at full load 24 hours a day – i.e making hydrogen in demand troughs.

Hydrogen could also be made using concentrated solar energy.

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Figure 17: Electricity storage and smart

Elec Storage

SmartDemand

Management

Hydrocarbon demand

Hydrogen


Renewables

Thermal

Batteries

Geological

Info

HydrocarbonDemand



A hydrogen plant could also be sited in communities or indeed in homes. Hydrogen vehicles are under trial in

many countries around the globe including London and Beijing.

“We have 5 hydrogen buses in London this year, next year we will have 8. This is not a commercial project

as such because the buses are more expensive than conventional buses but its not pure demonstration

either, because plans are being made to gradually increase the size of the fleet in future years. These plans

involve the joint procurement of fuel cell buses across various cities worldwide, London being one of them.”

Marcello Contestabile, Imperial College

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Just as hydrogen came into fashion and then went out of fashion. Over the next decades it is probable that it

will come back into fashion once again – potentially at various points in the energy system.

The red arrow between “Elec storage” and “Central Generation Capacity” represents the probability that

storage media will obviate the need for constructing peaking plant in the system.

The red arrow between “Smart” and “Central Generation Capacity” reflects both the improvements in energy

efficiency achievable in households and business through a better understanding of their energy usage as

well as from the possibilities opened up through active demand management. The former reduces total

demand for energy, the latter reduces the peaks in energy usage.

The impact of “Storage” on “Hydrocarbon Demand” can either be positive or negative depending on the way

in which the technologies are deployed. If storage enables more wind or nuclear generation to operate than

otherwise would have, this will reduce the amount of hydrocarbon fired electricity required. Utilising hydrogen

created from zero carbon energy would have the same effect.

However, if hydrogen is created from coal gasification or from the reforming of natural gas this would lead to

an increase in hydocarbon demand.

The energy system and CO2 Figure 18 below shows the increase in CO2 emissions from the deployment of primary fuels.

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Figure 18: Primary Energy CO2 Emissions, (million tonnes CO2), 1965 – 2010

0

5,000

10,000

15,000

20,000

25,000

30,000

35,00019

6519

6819

7119

7419

7719

8019

8319

8619

8919

9219

9519

9820

0120

0420

0720

10

Prim

ary

Ener

gy C

O2

Emis

sion

s, (m

illion

tonn

es C

O2)

Total Asia Pacific

Total Africa

Total Middle East

Total Europe & Eurasia

Total S. & Cent. America

Total North America


There is a broadly held view (in the scientific community and the IEA) that a sensible approach to climate

change should aim to limit emissions to reduce the CO2 concentration in the air to 450 ppm. IEA analysis

would indicate that the world needs to reduce this to 20,000 million tonnes by 2035 to meet this target. The

meeting of this target, by this date, is the basis of its “450” scenario as published in the World Energy

Outlook 2010.

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Whilst the BP figures in the chart are not strictly comparable it is reasonable to assume that the current level

of emissions need to be reduced to around this level (20 Giga tonnes) if the 450 target is to be reached and

temperature rise kept to under 2 degrees Centigrade.

Clearly the world is heading to overshoot that target substantially if nothing changes.

The two scenarios developed in the report look at one world in which the target is missed (Citadel), and one

where good progress is made in achieving it (Patchwork).

“If the scientists are right that a 450 ppm level gives you a 2 degrees rise in temperature versus pre-industrial

times we are certainly not on a path that avoids that. The impact of that - I don't think that even the scientists

entirely agree on what the impact of that will be. Because the global climate energy system itself is

potentially chaotic at certain points - there are potential large effects from small changes that maybe there or

maybe not. We will certainly see changes in sea level, changes in weather patterns. The question is whether

we are going to have catastrophic events, which will really make a difference or will it be a gradual change

that people can adapt to.” Paul Appleby, BP

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Chapter 4 The Citadel scenario

Summary Top down decision making. Power retained by nation states and supra-national bodies such as the EU

Lack of global consensus on climate change

Major consuming nations’ efforts focused on reducing import dependency. This can incentivize Coal to

Liquids, and gas to liquids technology uptake, and/or wind, wave, solar developments

Internet security (in the west) and Censorship (in the east) remove the power of social networks

Major weather events post-2035 and changing societal attitudes trigger “better late than never”

reactions in the period 2040-2050

CCS not adopted by China and India – seen as conferring a cost disadvantage on the economy

Continued dominance of the Internal Combustion engine for personal transport, albeit with significantly

increasing bio-fuel use

Late in the period China introduces an electric car–pooling scheme in major cities

Chinese involvement in Middle Eastern and North-African infrastructure development to try to protect

access to imports from these geographies

Utility industry becomes a regulated, capital investment driven sector

Primarily centralized generation

High and volatile hydrocarbon prices. Absence of a global carbon price.

CO2 emissions from primary energy continue to rise till 2035 and then drop back slightly to levels which

are still 50% higher than 1990 levels

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Introduction This chapter looks at one possible pathway to 2050 by considering the set of scenario drivers depicted in

Figure 19 below. It goes on to examine what outcome the energy system may have produced in this

particular scenario environment.

Figure 19: Scenario drivers


Scenario drivers

Society

This section of the scenario narrative looks at four facets of the world related to developments in society.

Policy drivers

Climate change policy

Cultural attitudes

Social networks

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Policy drivers

The Citadel scenario is one in which decisions are, in the main, made top-down rather than bottom up. The

architects of the energy industry in 2050 are the national and supranational bodies responsible for the

creation and implementation of energy policy. Environmental policy is centrally driven.


As was the case in the first 10 years of the new century, between 2011 and 2030 the world saw a

continuation of the absence of a strong global consensus on the need to tackle climate change. The need to

assure affordability of energy supply to maximise economic growth was the dominant arm of the “Trilemma”.

“Destroying the world might not necessarily be a big concern at the moment (for China), its more where do

we get all the energy we need to keep developing the way we are developing” Marcello Contestabile,

Imperial College

Climate change policy could be termed a “compromise”.

“In the UK and generally Europe there is relatively strong political commitment to these (CO2 reduction)

targets, but other countries such as China and the US are not so commited. That is one major hurdle that we

have to overcome” Marcello Contestabile, Imperial College

That said where nations found themselves facing major energy supply deficits actions were taken to correct

these. Two examples of this were China’s rapid expansion of coal to liquids and gas to liquids technologies

to eliminate its growing dependency on imported oil, as well as its exploitation of its shale gas resources in

order to counter its growing dependency on imported gas.

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Figure 20: Citadel – Society


Coal to Liquids technology was first used industrially during the second world war and then used by Sasol in

South Africa to obviate the impacts of the oil embargo on the country at the time. The Sasol plant

commenced operation in 1955. There are several ways of converting coal into liquid hydrocarbons. At the

turn of the century the most popular of these was the gasification of coal to produce “syngas” a combination

of hydrogen and carbon monoxide. This “syngas” is then turned into a liquid fuel, typically a high quality

diesel, using the Fischer-Tropsch process, which was first used during the Second World War and which in

2010 was still used by Sasol in its South Afirca plant. An alternative is to turn the “syngas” into methanol and

the methanol into gasoline. This technology was demonstrated as workable in New Zealand by Exxon/Mobil.

There is also the direct route in which coal is reacted with hydrogen in the presence of a suitable catalyst to

produce liquid hydrocarbon which can be processed in a conventional refinery.This was the route used by

the Shenhua coal company in China at its plant in Inner Mongolia in the first decade of the new century.

The expansion of coal to liquids production brought some environmental benefits with it in that the plants

using the indirect process needed to separate out the CO2 from the syngas as part of the process such that

the cost of installing CCS was minimal and thus implemented. In addition biomass was added as a feedstock

to the plant such that on a well to wheels basis a 20% reduction in CO2 emissions could be achieved versus

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conventional oil fuels. Those plants which went the direct route produced their hydrogen from carbon free

sources of electricity and also reduced CO2 emissions whilst at the same time reducing the oil import

requirement.

The years 2025 – 2035 saw a number of gas to liquids projects come on stream as China developed its

shale gas resources.This technology is similar to the indirect route for creating liquid hydrocarbons from coal.

The natural gas is mixed with steam and oxygen to form a “syngas”. Then Fischer-Tropff synthesis is then

used to create high quality diesel and naphtha or alternatively the “syngas” can be turned into methanol and

the methanol into gasoline as is the case for coal to liquids.

In the US little progress was made in the years up to 2035 in shifting the nation’s priorities from economic

well-being to climate change mitigation. There were exceptions in states with abundant renewable resources

such as Texas harnessing wind power, and California’s development of solar farms.

Europe continued with its programmes of climate change mitigation and showed some progress in tightening

up and broadening the European emissions trading mechanism. State subsidies for renewables continued

and enabled these technologies to flourish. Countries with significant intermittent renewables based power

needed to put in place stand-by generation facilities in order to meet the times when the wind did not blow

and the sun did not shine. The vast majority of the facilities built were gas fired power stations whose project

finance was secured on capacity payments mechanisms put in place by governements to encourage these

investments.

Around the world, by 2035 some hydrogen facilities had been built in coastal locations to provide a buffer

energy store for the off-shore wind farms. The hydrogen is produced through the electrolysis of water, and is

held in a chemical slurry rather than in compressed liquid form since there is no need to transport it over long

distances – thus enabling the plants to operate cost effectively.

Cultural attitudes

Just as in the west there are discernable differences in the attitudes of generations, generational differences

emerge across Asia. These attitudes are a reflection of the experiences and observations of the world the

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child and then teenager encountered – which are always different – and sometimes very different from those

of the previous generation.

“Out to 2030 we expect people to carry on behaving much as they do now. Which is probably fair enough out

to 2030. Going out to 2050 you can allow people to behave differently. You can allow for different

generations having different values. You can imagine that by 2050 it could be very different - in the way that

people have now turned against smoking, you could imagine that type of shift in attitudes might affect use of

energy. That kind of social change is possible by 2050 but not by 2030.” Paul Appleby, BP

In the West the baby-boomers, those born in the 15 years after the second world war, grew up with a mental

model that “the powers that be”, be that the state or the organisation they worked for would look after them.

The next generation saw the rules of the game change with organisations focusing on efficiency and

“personnel” departments being renamed “human resources”. The individual became a cost rather than a

member of the firm’s family. This next generation, born in the 1960s and 1970s lived through this transition

and suffered its consequences with a personal value system out of synchronization with the values of the

workplace they found themselves in. Generation X had to become adept with IT technology. The following

generation – generation Y – born in the years up to the end of the 20th century are the tech savvy generation

who no longer expect their organisation or the state for that matter to look out for them. They see a new

bargain in the workplace – their commitment in return for interesting work, self-fulfillment and self-

improvement/marketability. The millennials – those born after 2000 were born with an internet connection

and a mobile phone. They expect anything to be available any time anywhere on-line.

The attitudes of later generations are coloured by what they see happening in the previous regime. The

attitudes of society shift as each generation becomes older and takes hold of the strings of power in both the

affairs of enterprise and those of the state.

In Asia and China the experience of the different generations is markedly different. Industrialisation and the

economic well-being form one part of the tapestry of life, as does the crushing of political opposition to

central authority. An attitude similar to the baby-boomers in the west becomes the dominant paradigm.

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This paradigm persists till 2035 as the governments in the east manage to ensure that internet access to the

rest of world is effectively censored. In the West governments become more and more concerned about the

unwanted dissemination of materials, and viruses, and introduce privacy and security protocols which serve

to limit the internet freedoms offered to the population in the first 10 years of the century. This effectively

neutralises any drive to make information more available to the global community.

By 2035 the “compromise” on climate change policy is being perceived as having led to significant instability

in weather patterns around the globe. Carbon dioxide concentrations in the air are continuing to rise and the

world seems to be heading for a 2-4 degrees C rise in temperature by the end of the century. The melting of

the Himalayan glaciers gathers pace – increasing the agricultural fertility for the countries in the surrounding

foothills. This is good news in the short term for the 1.5 billion people in India, Pakistan, Bangladesh,

Thailand and China who depend on the agricultural productivity of this area. However, emergency plans are

developed to cope with the anticipated devastation which will occur once the glacial melting reaches its

tipping point. At that point the rush of water in spring will destroy the crops and the summer and autumn will

be a period of extended drought as all the water has been emptied during the floods. What was an ever

improving agricultural haven was threatened with being transformed into an arid desert – and in 2050 this

looks like an unavoidable inevitability.

Those born between 2015 and 2035 develop very different cultural attitudes to their previous generation. No

longer is the unrelenting pursuit of industrialisation seen as the way forward. The disparity of wealth in the

mega-cities, the poverty in the residual agricultural communities, and the failure of the past generations to

act as responsible stewards of the earth for future generations takes its toll.

As this generation takes over the positions of power at the end of the scenario period, simply through the

passage of time and the ageing of the old guard, they look to move towards a much more decentralised form

of government with policy objectives that put sustainability at the heart of the agenda.

In the US, there is a shift in attitude with the generations. The more and more regular serious weather events

become perceived as being linked to the rising levels of CO2 in the atmosphere. By 2035 New York had

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been seriously flooded three times and New Orleans and Miami had endured death and destruction on

repeated occasions after repeated hurricanes and tornadoes.

“If things started to happen (climate change impacts) sooner that could have a dramatic impact on policy and

response.” James Cavanagh, RWE npower

“A wake up call in terms of a disaster could be the wake up call that gets China and the US thinking that they

have got to do something” Paul Appleby, BP

The younger generation sees the impotence of the political establishment as leaving a legacy for the young

and the generations that follow them to clean up. Whilst there had been much democratic rhetoric – there

had been staunch republican opposition to the implementation of effective climate change mitigation policies.

The older generation remained convinced that markets would deliver the solution – their economic rational

leaving no space for considering externalities such as the costs to future generations of inaction. The narrow

economic model of the 20th century was seen, by the younger generation, as having failed spectacularly.

“Some kind of natural catastrophe that convinces people that climate change is real and that they have to do

something about it. Or resource conflicts. Some really big either natural or social disaster could shift

consciousness” Paul Appleby, BP

By 2050 a much more active dialogue has developed between the west and the east as the new generation

look to recover from the legacy of the past.

“If there was a general perception change that we needed to move faster (on climate change mitigation) then

that would lead to all sorts of policy initiatives. The more seriously this is taken the more likely they are to be

ones that are less concerned about the free market, shareholder value and market efficiency and more

worried about just solving the problem and getting something done” James Cavanagh, RWE npower

Social networks

The phenomenon of Facebook and collaborative information sharing sites such as Trip Advisor continues,

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“Looking at the customer relationship, with social networks like Facebook, energy user groups, we can see

customers being cleverer in the way they go about their purchasing and the way they share information and

understand what products and propositions are out there.” James Cavanagh, RWE npower

but the names and organisation which are the focus of attention change as new functionality makes the

alternative kid on the block becomes the “must go to” on the web. Whilst social networks continue to thrive

they migrate onto propietary platforms which protect users from viruses and can assure their privacy and

security (with the exception that law enforcement agencies have ubiquitous access).

This change in the nature of the internet enables the status quo to persist till the end of the scenario period.

Figure 21: Citadel – Market


This section of the scenario narrative deals with energy markets and how they evolve between now and

2050. The narrative looks at three areas:

Industrial and Commercial (I&C) markets

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Transport

Residential

Industrial and commercial markets

Market demand for energy to meet the requirements of industrial and commmercial users follows trends in

population and GDP. By 2050 China has the same GDP per capita that US citizens enjoyed in 2011 – and

market demand for products and services booms accordingly.

In addition the trend towards outsourcing energy intensive manufacturing to regions of the world with access

to energy resources and cheaper labour continues such that there is a continued exodus of manufacturing to

China, India and other Asian countries, the former Soviet Union and Eastern Europe.

The anomaly that carbon emissions are tagged to the country of manufacture rather than the country of

consumption means that China comes in for more criticism for its emissions performance than it deserves

given it is using the energy to meet the demands of consumers in the west. This creates one more point of

dissonance in the climate change debate which sees no move towards substantive international accords.

Even though China recognises that its coal resources are finite it sees it preferable to use domestic energy

production to fuel its economic growth. Carbon capture and storage (CCS) is proven as a technology in

Europe but fails to gain penetration in China since it is seen as putting the Chinese economy at a competitive

disadvantage in the absence of any accords to mandate the technology internationally. Furthermore since

the lifetime of coal resources is seen to be short (10 -15 years) the investment in CCS is seen as an

investment in a “to-be” stranded asset.

Transport

In the west the dominance of the internal combustion engine persists with advances in engineering design

making significant improvements to the fuel efficiency of the car stock. The cost of batteries and the lack of

significant government subsidies and support for both vehicles and infrastructure hamper the development of

electric vehicles.

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“Is there a breakthrough battery technology that makes it a lot cheaper and a lot more cost effective to use

batteries, primarily in vehicles but there are of course a number of uses. That would be the biggest

technological change.” Paul Appleby, BP

That said the drive towards increasing biofuels use continued with 15% of liquid fuels being biofuels by 2050.

In the east the challenge is coping with the urbanisation of the population. The Chinese government

recognises that adoption of a US style solution to individual mobility is simply not viable in China without

subjecting the citizenry of the emerging mega-cities to constant gridlock and intolerable levels of urban air

pollution.

By the end of the period, the solution that has been put in place is a multi-faceted public transport solution

with different modes of travel for different journey types. Long distance travel is focused on a high speed

electrified rail network rather than aviation in order to limit the requirements for oil product imports. Within

cities a well-developed public transport infrastructure is put in place including trams and metros together with

a government sponsored electric vehicle rental scheme akin to the zip car and street car schemes which

started up in the west in the early years of the new millennium. This scheme ensured that the increased per

capita income did not translate into the car ownership and usage levels experienced in the US – indeed

levels were maintained well below EU levels. Local commuting was supported through electric bikes which

even in 2010 were outselling electric cars by a factor of 3 to 1. Counting electric bikes, China had the largest

number of electric vehicles of any country in the world in 2010 and becomes the dominant force in EV

markets globally by 2050.

The growth of electrically powered cars was assisted by the development of a magnetic resonance

recharging infrastructure in the 2030’s which enabled kerbside charging of electric vehicles through the

roadway beneath the parked car thus obviating the need for wires and posts.

Hydrogen had however made no in-roads.

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“Hydrogen itself is a nice clean fuel - but how do you produce the hydrogen. So you probably have to solve

the CCS problem at that end of the chain to get hydrogen to work or have it produced from solar power or

something” Paul Appleby, BP

“Hydrogen does not feature in our 2030 projections at all” Paul Appleby, BP

“Hydrogen is not going to be taking over the world in 2050 - to do that it would have had to start off now” Paul

Appleby, BP

Residential

Residential developments will fall into two camps. In one camp there will be the countries with existing

housing stock that could be retro-fitted to improve its energy efficiency performance, and those countries

going through the urbanisation process that could choose new models for the development of their urban

dwellings.

In the first camp a number of countries decide to embark on major retro-fit programmes to capitalise on the

smart meter roll-out between 2011 and 2020. The focus of attention is in countries with high energy demand

per household, typically those with a high heating requirement in winter. In Western Europe, with its focus on

EU driven carbon reduction targets, the activity is directed toward renewables and nuclear where public

opinion supports it.

National programmes succeed in delivering 5-10% reductions in residential energy use through a mix of

smart energy management, better insulation, and deployment of heat pumps. This brings with it an

increasing demand for electricity, but this is sourced from renewable/nuclear resources to the maximum

extent possible. In Western Europe, France and Germany represent the extreme archetypes. France opts for

the primarily nuclear solution – continuing its energy policy established at the end of the 20th century.

Germany, avoids nuclear but develops its renewables – although it becomes a major importer of French,

nuclear sourced electricity.

Nation states make technology choices, and these differ around the globe.

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As described above, France opts for a nuclear future, Germany for a renewables one. Between 2000 and

2025 the UK opts for the electrification of transport and heating - although finds the uptake of EVs limited and

the use of heat pumps problematic when deployed in densely populated urban areas. In the latter half of the

scenario period the UK switches it attention to developing its plentiful unconventional gas reserves

associated with its historical coal industry and offshore gas activities – for which in both cases production of

conventional coal or gas is no longer economically feasible.

China opts for maximising short term use of existing resources – primarily coal in the period 2010 to 2025.

Thereafter the focus shifts to the development of its unconventional gas reserves in order to minimise the

country’s import dependency.

In the interim, China becomes involved in both North African and Middle Eastern reconstruction initiatives in

order to secure access to the liquid hydrocarbon and gas imports which growth at the beginning of the

millennium have made a feature of the Chinese energy balance.

Given China’s build of new city environments as part of its urbanization programme, the country becomes a

leading proponent of integrated PV in the fabric of buildings. The developments in the beginning of the

second decade of the century in the fields of PV paints (Mitsubishi), PV tiles, and PV windows enable

Chinese city environments to be 20% less energy intensive than older cities around the world.

India takes the lead in solar farms as a natural complement to its IT services industry. With datacentres using

the same amount of energy as aviation, access to low cost energy conveys a distinct competitive advantage

on an IT services provider. In order to gain clients in the western European and US markets a “Green” seal

of approval is a business asset and this solution provides just that.

In this world nation states adopt policies which suit their own circumstances – they make the technology

choices for better or for worse.

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Figure 22: Citadel – Energy Industry Development


Figure 22 depicts how the structure of the Utility industry evolves over time in the Citadel scenario.

Utility structure

This world is characterised by large centrally driven capital projects and the utility industry is shaped to meet

this decision making format. Large integrated companies, often operating internationally are the norm. Even

countries with a more fragmented structure, such as Germany, undergo restructuring to a more concentrated

industry structure as small companies find they cannot finance the large investments required in smart

meters, smart grids, and new generation assets.

The energy and energy services markets remain in the hands of the energy utilities, which suits national

governments who wish control of the industry whether it is in private or public ownership. Energy companies

are key instruments in the implementation of social policy with respect to subsidising vulnerable groups in

society for both their energy and energy services requirements. Governments find it very convenient to

blame the industry publicly for causing prices to rise, whilst at the same time insisting that the industry make

the investments which are causing the prices to rise.

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Industry character

The industry becomes more and more regulated as governments recognise that investors need certainty of

returns to finance the investments needed in energy infrastructure.

“If we move to costly expensive forms of renewables, and nuclear in time to meet the low carbon agenda

and security of supply now then that's a way (fully regulated in the same way as distribution networks) that it

may well go which is very different to the way it has been over the last 20 years…..

We will attract funding from pension funds and sovereign wealth funds under current proposals for CFDs. If

you take nuclear for example at the moment it would be very difficult to get it financed because of all the

many risks that surround it. At the start of the program something like Japan happens and it is put back

another two years because another safety standard has to be brought in or it is stopped altogether, or the

costs escalate - territory that infrastructure investors who are mindful of pension fund returns would not want

to go to. But once it is up and built and its got a 20-40 year tariff set by the government - that sort of

regulatory model - then it is potentially a very attractive investment for an infrastructure investor…….

It could mean that the early stage bit, the developer bit, when you are taking risks and getting a better return

for it will stay with the utility. I cannot imagine anyone else doing it.

Once it is built (the nuclear generating station) it is refinanced with the infrastructure investors and we churn

the money through and keep on going.

If you are continuously releasing capital all the time you can have an on-going programme over 25 or 30

years.

If we are now looking at 2030 or 2040 one scenario could be a fully regulated model - a CEGB type

approach” James Cavanagh, RWE npower

With this comes a culture of a regulated rather than a competitive market. Standardisation of offerings to

minimise costs, and inertia in decision making are the hallmarks of the industry. The Utility industry can be

described as solid and safe.

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Generation

In the Citadel world generation remains a centralised activity, with the growing amount of renewable

generation being backed up with spinning gas fired reserve – new OCGTs (open cycle gas turbines) are built

to provide this capacity. Whilst relatively inefficient compared to a CCGT (Combine cycle gas turbine) the

lower capital costs and low utilisation make this the most economic option.

“How will we see the intermittency of renewables being managed. Will it be through demand side

management - aggregation services for example - or are we going to be looking at the need for reserve

services and building OCGTs (Open cycle gas turbine stations)? These are the cheapest way of providing

peaking plant. They are much cheaper per megawatt capacity but more expensive in terms of fuel usage per

megawatt hour…… In an OCGT you just burn the fuel in it (could be aero derivative engines) and take the

power off it. And that is what you would use to meet your peaking requirement where you just run it a few

hours per year through a contract with National grid (STOR - short term operating reserve).” James

Cavanagh RWE npower

The European Union is the only region in the world which implements carbon capture and storage for coal

fired plant. Whilst bringing CO2 benefits, this hastens the departure of energy intensive industries to the east

where CCS is not mandated.

“I think there is a big question over CCS. Will it work technically, and will it work financially. We still don't

know enough about that” Marcello Contestabile, Imperial College

Up to 2035 both world electricity demand nearly doubles from 20,000TWh to 35,000TWh with 50% of this

increase accounted for by China (3.5 => 9.6TWh) and India (0.8 => 3.1TWh). Both China and India rely on

coal to fuel this increase, at least at the beginning of the period with China using coal for 79% of its

generation and India 69% in 2008 (source IEA WEO 2010). By the end of the scenario period China’s coal

dependence had dropped to 45% and India’s down to 47%.

Nuclear exhibits modest growth over the period.

“How far and how fast will nuclear come on post the Japanese crisis” James Cavanagh, RWE npower

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Energy sourcing

Post 2035, with its coal resources dwindling China turns to the exploitation of its unconventional gas

resources which are estimated at 5,250 trillion cubic feet, more than 35x the size of its conventional gas

reserves.

This move from coal to gas brings with it the opportunity to offer CO2 reductions as part of the international

climate change accord which now emerges.

In keeping with its desire to minimise its exposure to imported hydrocarbon China drives ahead with its

commitment to wind power which grows to 15% of electricity production by 2050.

With its new commitment to reducing CO2 emissions, and the technological advances made in the field of

concentrated solar, China builds the world’s largest solar array in the Gobi desert.

Technology

Smart metering has become ubiquitous by 2025 and with it has come the ability of utilities to use demand

response to balance the electricity system with its increasing renewables component. By 2050 more than

25% of the world’s electricity is being produced from renewable resources.

The hoped for breakthrough in battery technology has proven to be elusive, which has kept the capital cost

of electric vehicles relatively high with the battery costing typically 50% of the total cost of the vehicle. Even

in 2050 electric vehicle and plug-in hybrid sales are less than 20% of new car sales.

Energy system implications

Fig 23 summarises the elements of the “Citadel” scenario.

In essence this is a world in which the “Trilemma” priorities are affordability and supply security. Climate

change effectively only appears on the EU agenda as China and India expand their economies on the back

of coal fired generation.

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Looking at the energy system which was explored in Chapter 3 we can see that the global increase in GDP

drives up energy demand which translates into both increased hydrocarbon demand and increased electricity

demand. This increased demand for electricity is met through central generation resources.

The status quo is maintained in terms of the fuels used for transport, industrial and commercial use, and

residential. Electric cars hardly make any impact and hydrogen does not come in to any significant extent to

play either at the generation level (as an energy storage vector) or as an end use fuel.

Figure 23: Citadel – Overview


This scenario is akin to the new policies scenario developed by the IEA in their World Energy Outlook 2010.

Hence, the quantifications carried out by the IEA have been used up to, and including 2035. It has then been

assumed that action is taken, following the weather event shocks, to try and remedy the climate change

situation, although by then it is too late to avert significant consequences. In the following years there is a

switch away from coal and into gas (based on the exploitation of un-conventional gas resources). There is

also some diminution in oil demand from the slow but steady take up of electric vehicles.

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Table 21 shows the energy outcome in terms of hydrocarbon demand.

Table 21: Citadel - hydrocarbon demand, (mtoe), 1990 – 2050

Product 1990 2008 2035 2050Coal 2,233 3,315 3,934 2,950Oil 3,222 4,059 4,662 4,602Gas 1,674 2,596 3,748 4,500Total hydrocarbon 7,129 9,970 12,344 12,052

Source: IEA WEO 2010, Enstra Consulting estimates BUSINESS INSIGHTS

In this world, with strong hydrocarbon demand, we can foresee that hydrocarbon prices will be high –

providing the stimulus for continued investments in supply. However, oil and gas supply is highly dependent

on Middle East stability – a region going through many perturbations over the scenario period. Hence, while

oil and gas prices remain high they are also highly volatile leading to price peaks as events unfold in the

region. Supply disruptions and price peaks take their toll on global economic growth leading to a bumpy

profile of hydrocarbon demand in the years between the snapshots shown in Table 21.

With the lack of international agreement on Carbon reductions no strong carbon price emerges.

Utilising BP’s global conversion factors the CO2 impacts of this hydrocarbon demand can be calculated. The

result of this calculation is shown in Figure 24 and clearly demonstrates the climate change pressures

associated with this scenario with CO2 concentrations peaking in 2035 before mitigating policies get put in

place triggered by a series of extreme weather events.

In this scenario the world fails to get anywhere near the 20,000 tonnes CO2 emission level needed to keep

global warming less than 2 deg C.

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Figure 24: Primary Energy CO2 emissions, (million tonnes CO2), Citadel

0

5,000

10,000

15,000

20,000

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1990 2008 2015 2020 2025 2030 2035 2040 2045 2050

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Source: IEA, BP statistical review and Enstra calculations BUSINESS INSIGHTS

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Chapter 5 The Patchwork scenario

Summary Patchwork quilt of initiatives on the energy stage

Bottom-up decision making – enabled by effective and ubiquitous social networks linking both local

communities and shared interest groups

Awareness in the Asia Pacific of the potential consequences of climate change – in particular the

aftermath effects of Himalayan glacier melting

International accord reached on climate change. High global carbon price established which is used to

finance investments in CCS in China and India.

Vehicle mix contains significant shares of CNG, LPG, Electric, hydrogen and also traditional

hydrocarbon powered cars

Innovation in residential markets. hydrogen fuels cells, DC circuitry and PV solar, proto-cell paints, heat

pumps.

Fragmentation of the utilities sector with some players exiting retail and new players coming in with a

strong consumer market pedigree

Hydrogen plant built in conjunction with nuclear and wind facilities. Initially to transform the load shape

of the plant – later on to provide hydrogen to the emerging residential fuel cell and H2 vehicle markets

Rapid exploitation of solar arrays in desert locations with DC interconnection to demand centers

Rapid adoption of new bio/nano technologies - Bio-mining of shale gas, algae farming for biofuels

Earlier and bigger nuclear and renewable generation build

Significant distributed generation in local communities as well as in the home

CO2 from primary energy peaks in 2015 and then steadily reduces to well below 1990 levels by 2050

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Introduction This chapter looks at an alternative pathway to the future that resembles a patchwork quilt of initiatives and

developments on the energy stage. Again the scenario is explored by looking at societal developments,

market developments, and industry developments.

“I think the biggest issue is to what extent we respond to the low carbon agenda” James Cavanagh, RWE

npower

The outcome is then quantified by difference with the “Citadel” scenario.

Figure 25: Patchwork – Society


Society

In the “Patchwork” scenario policy making is very much influenced by grass-roots thinking and

communications. Social media means that community of interest groups can club together spontaneously

and organise their lobbying activities. Within nation states, cities and regions expect and grasp more

autonomy.

However, not all communities want the same, and in “patchwork” there is great diversity in the chosen

solutions to issues facing communities.

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Social networks

Since their inception at the beginning of the century social networks have formed an increasingly powerful

coagulating force for groups of common interest. They have also provided the medium for organisation of

shared interest groups.

Their reach is global and their scale is astounding.

In the second decade of the century we saw these networks being used to organise protest which led to

regime change in a number of countries in the Middle East. They were also used by dis-affected members of

the community in the UK to organise riots and looting in a number of major cities.

As the decades passed social networks became part of the political and sociological infrastructure enabling

nearly real-time feedback to organisations and governments on the ground-swell of public opinion on the

issues of the day. Not only was public perception to organisational initiatives and public policy made visible, it

led to the shaping of those initiatives and policies themselves.

In “Patchwork” the collaboration potential of communities of shared interest was unlocked by the advent of

this many to many communications medium.

China resisted this facet of 21st century society for the first 15 years of the new century but eventually relaxed

internet access controls.

This change came about from the seeds of change sown in the last century.

The one child per family policy had the unintended consequence of increasing the number of males in

society as female foetuses were aborted by families wising a male heir. By 2010 there were 50 million more

Chinese males than females. This led to significant numbers of Chinese males travelling abroad in search of

a mate – and bringing back with them attitudes and perceptions coloured by other societies. Since, it was the

richer members of society that had this greater mobility the impact on Chinese society was particularly strong

since this group of individuals were disproportionately represented in the management and political cadres of

society. One of the observations this group brought back with them was the beneficial power of the internet

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and social media. The benefits were seen to arise from the ability to rapidly engage in product development

based on real time feedback from consumers across the world. Being able to communicate directly with the

global consumers was something that China’s competitors took for granted and was something that as time

passed was putting the People’s Republic at an ever-growing competitive disadvantage. With China

exporting more and more on the basis of quality rather than price this becomes a more and more significant

determinant of economic success – and this in turn caused policies on censorship to be relaxed.

Cultural attitudes

Anyone born after 1990, with access to the internet, thinks that social networks are as natural a means of

communication as the mobile phone. Both are central to their lives and have been from childhood. When,

due to the passage of time, this generation takes over the reins of power they insist that the voices of the

community are listened to.

Even the generation before is very much influenced by the issues facing its community. Their views however

are coloured by the issues in play in their own community. In Europe there is a shared belief in the risks of

allowing man made CO2 emissions to grow together with a realisation of the supply risks, both in terms of

supply disruption and high prices, of becoming ever more reliant on energy imports. In the southern and

eastern seaboards of the US the increasing frequency and severity of weather events causes public opinion

to err on the side of accepting the climate change thesis that man-made carbon dioxide emissions are a real

threat to humankind. This view is however not shared by the west of the country where oil is central to the

economy. In contrast Californians – who experienced the full force of energy supply disruption during the

black-outs at the turn of the century, continue to be strong advocates of the need to mitigate climate change

risks.

In China, the relaxing of internet censorship brought together groups of common interest and political

pressures which drove policy measures. In the growing cities urban pollution made life intolerable for many

who were effectively economic prisoners – having to live in the polluted urban environment in order to

survive from an economic perspective.

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In the west of the country the consequences of glacial melting of the Himalayas was a true local issue of life

and livelihood threatening proportions .The Chinese government, as well as the population in the west of the

country, were well aware of the potential for human catastrophe of the melting of the Himalayan glaciers

which could ruin the livelihood of 1.3 billion people in the affected countries. The social and political

upheavals that could arise thereafter were seen as a “must to avoid”.


The desire to curb urban pollution as well as avoid the impacts of climate change becomes part of grass

roots thinking in most parts of the globe. The ability of people to express these views and influence public

policy causes the governments within the international community to reach a binding accord on climate

change in 2017.

“Whether there will be global agreement, or not, on binding global targets will put us on somewhat different

trajectories” Marcello Contestable, Imperial College

An international agreement on carbon pricing is agreed, with the proceeds from carbon being fed back into

the energy system to pay for carbon reduction investments such as the installation of CCS on Chinese and

Indian coal fired generation plant.

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Figure 26: Patchwork – Market


Industrial and commercial markets

By 2030 the nature of commercial and industrial markets had changed radically. The need to be able to

evolve new products in months to meet changing consumer tastes both in the home market and

internationally becomes paramount. The traditional manufacturing organisations who would take years to

develop and launch a new product, such as car, find themselves unable to compete with more nimble and

fleet of foot competitors.

Two developments have brought about this change.

1. The diversity in products available within a given market-space has grown enormously. Looking at

passenger cars we have cars that run on petrol, diesel, methanol and various bio-blends. We have

hybrids with auxiliary battery power drawn from the capture of waste energy. We have LPG and

CNG vehicles. Hydrogen sterling engine vehicles and hydrogen fuel cell vehicles. Full electric cars

and plug in hybrids. The markets have become much more diverse and fragmented.

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2. New manufacturing techniques whereby many products are now “grown” rather than manufactured.

The technology was developed during the 1990s and used by the mobile telephony industry to

design new hand-sets. A computer aided 3D design is used to create the desired shape from a vat of

the desired material and the product is formed molecule by molecule as the finished article is drawn

out of the vat. For a market driven by design and speed of product development this technology

allows for low production run manufacturers to compete effectively.

With respect to energy supply to this sector some of the industry fragments as customers disaggregate their

needs.

“In another (scenario) we could see much more fragmentation, a lot more modular businesses. If we take an

I&C customer you might take your energy from here, your services from there, and your risk management

services from somewhere else.” James Cavanagh, RWE npower

Transport

“Technologies that enable the batteries and fuel cells to take over completely from the internal combustion

engine are all technologies that were in the lab already 30 years ago.” Marcello Contestabile, Imperial

College

Diversity is the order of the day in this scenario, but that diversity is focused on low emission vehicles and on

a portfolio of mobility solutions for each individual.

“There is an IEA scenario where you have almost an equal share of electric vehicles, biofuels, and hydrogen

fuel cells. That to me is more realistic (than an essentially electric vehicle world) “ Marcello Contestabile,

Imperial College

With increasing urbanisation car travel in the major cities is slow and painful at peak times of day. For short

commutes between home and work the e-bike becomes the mode of choice. This form of transport

originated in China at the beginning of the century where by 2010 more than 20 million electric bikes were

being sold each year in China. Over the following 10 years the population of electric bikes in China had risen

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to 500 million and China had established itself as a global provider of electric powered personal bike

transport.

With hydrogen being manufactured at scale (see generation below), investments in distribution infrastructure

followed leading to hydrogen powered vehicles achieving a significant share of the market by 2035.

“If you live in California or Japan you can lease a hydrogen fuel cell car and drive it around for $600 a month

- which is not cheap but this includes the fuel and the maintenance.” Marcello Contestabile, Imperial College

Electric vehicle uptake also showed strong growth. Both forms of transport made attractive by the high

carbon price applied to traditional hydrocarbon fuels.

“By 2030 we had quite a lot of the new car sales being hybrid, if not fully electric, but a relatively small part of

the fleet by 2030 due to the lifetime of vehicles. 2030 seems to be a tipping point - thereafter things start to

change very rapidly. By 2050 you could easily have over half the fleet electric.” Paul Appleby, BP

“For 35% of vehicles to be fuel cell we would need a full scale hydrogen infrastructure - which would not be

significantly different from what we have today for petrol and diesel. You would also need to have dedicated

hydrogen production” Marcello Contestabile, Imperial College

Battery technology improves dramatically in terms of both performance and cost in the second decade of the

21st century on the back of advances in design at the molecular level pioneered in the University of Illinois in

2010. This in turn shifts the economics of electric and plug-in hybrid vehicles by removing in excess of 25%

of the vehicle cost. Penetration of electric vehicles and plug-in hybrids soars.

“In 2050 there will still be internal combustion vehicles around but potentially running on biofuels or other

synthetic fuels. We could be producing liquid synthetic fuels from renewable energy - that is possible,

technically possible. There would also be obviously (in 2050) batteries and fuel cells - this is not a prediction

it is what we would need to deploy in order for us to be able to decarbonise transport” Marcello Contestabile,

Imperial College

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Commercial road transport also exhibits diversity with a balanced portfolio of technologies taking their share

of the vehicle park by 2035. Again spurred on by the heavy carbon tax on hydrocarbon fuels the vehicle park

consists of a mix of hydrogen, CNG, and diesel vehicles. Many short range light vans are either plug-in

hybrids or fully electric by 2035.

China is leading the innovation in the transport sector on the back of strong and growing demand in its home

market.

“The Chinese could leapfrog technology in automotive. They are already the world's largest manufacturer of

wind turbines and solar panels. So yes, they would be certainly happy to go for a world market that wants to

go green. Yes, they would be quite happy to do that. However, you have got to get the demand for green

vehicles first, and that is not there today” Paul Appleby, BP

Residential

With investment in improving the energy using infrastructure being an agreed outlet for carbon price

revenues, housing schemes around the world are able to take up technologies that reduce energy

consumption and combat carbon emissions. In the residential sector these include improved insulation, the

installation of PV tiling and windows and DC circuitry to run electronic equipment.

“In the European context solar is interesting. In particular it has taken off in Germany as a result of the tariff

structures they have brought in there.” James Cavanagh, RWE npower

Externally the use of proto-cell paints becomes standard in the ever growing cities of the world. These paints,

which became available in the second decade of the century, react with CO2 in the atmosphere to create an

insulating cladding on the building thus both reducing energy consumption and mitigating the climate change

impacts of CO2 in the atmosphere at the same time.

Again diversity is the order of the day and a broad array of energy solutions takes their share of the

residential stage. Hydrogen fuel cells are adopted by countries with an established natural gas distribution

network to provide both electricity and heating. In the first implementation these run on natural gas which is

converted to hydrogen in the home or in the local community energy plant through reforming. This is seen as

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a positive step in managing carbon emissions as it avoids the 50% losses of energy inherent in traditional

centralised CCGTs and in the transmission and distribution of the associated electricity. As hydrogen

infrastructure becomes more commonplace the hydrogen is delivered directly to the home or the community

generating station to provide a carbon free solution (with the hydrogen being made from a zero carbon

energy source).

Off gas-grid heat-pumps are particularly popular and are classed as a renewable resource for carbon taxing

purposes.

In the home, battery stores are commonplace by 2025. These enable the excess production of electricity

from micro-generation, typically the fuel cell and PV combination to be stored thus minimising imports from

the grid.

Figure 27: Patchwork – Energy Industry Development


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Utility structure

A number of divergent characteristics emerge in the utilities sector.

On the one hand there is the need for major infrastructure investments. In electricity infrastructure that is for

generation, transmission and distribution. There is also a significant investment requirement for the

exploitation of unconventional gas reserves.

On the other hand there is the need to meet ever changing customer requirements in terms of the energy

products and services being offered to consumers for their residential and transport needs.

The electricity infrastructure business has the character of a regulated utility. The gas infrastructure business

the nature of an oil and gas company….. and the energy services market has become a typical consumer

goods environment.

“A really interesting question is the degree to which the UK markets will be regulated on both the retail side

and the generation side” James Cavanagh, RWE npower

The retail part of the business is so different from the infrastructure side that many traditional utilities decide

to exit their retail operations and concentrate on delivering capital projects. This allows in new players who

come from consumer facing businesses such as the telecommunications and media businesses.

“To what extent will we be selling core energy in the future, as we do now, and how much will we be moving

to an environment where there is a longer term relationship with the customer where we don’t just supply

energy, but we also supply other energy services; for example demand management and insulation. Will the

industry be there simply pushing out energy in some sort of regulated regime or are we more fleet of foot and

doing all sorts of interesting things such as a range of services into the home with say Sky or Virgin, a deal

with Renault for your electric car and a charging post in the home” James Cavanagh, RWE npower

Effectively the value chain fragments.

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Industry character

The “Patchwork” world is much more innovative and vibrant compared to the “Citadel” world. The retail part

of the sector is transformed by the changing cast of players – all fighting for the attention of the consumer

who has unparalleled access to product and service performance information, from other consumers given

the ubiquity of social networking.

The infrastructure part of the business is also innovative and vibrant. Not because of the need to beat the

competition in meeting the needs of individual consumers but in terms of the diversity of technological

solutions becoming available.

Generation

With the international accord on climate change comes an acceleration in the build of nuclear, wind and solar

generation. A number of infrastructure developers build hydrogen plant as part of their overall deployment.

“Will the US and China agree a common approach on climate change” Paul Appleby, BP

For a wind farm this enables wind generated electricity to be stored when demand is weak enabling the total

facility to offer a dispatchable electricity service akin to that of a traditional generating station. (The hydrogen

is stored in a slurry and converted back in to electricity in a fuel cell). Over time the hydrogen becomes the

raison d’être for a significant number of developments where it is stored as pure hydrogen such that it can be

transported to meet the needs of the transport, community and residential sectors.

For a nuclear facility this allows the energy produced during periods of low demand to be stored effectively

turning a base-load generator into a production facility that can perfectly match supply and demand thus

promoting the installation up the merit order.

With over 1/3rd of the earth’s surface a desert with very high levels of solar irradiation during the day the logic

for the development of large scale solar farms becomes compelling as developments in solar PV cells lead to

yields improving from 10% to 20% of incident energy being converted to electricity. This electricity is then

transported by DC cable to the demand centres.

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“DC connectors are technically possible, and economically feasible. It will be a question of energy security

and country to country relations” Paul Appleby, BP

Two of the major project completed in 2025 and 2030 respectively were the North Africa to Spain link and the

“Silk Road Genesis Plan” first conceived of in 2006 to link a concentrated solar facility in the Gobi desert to

the regions of China and neighbouring countries.

In the urbanising nations, given the need for new build rather than retro-fit housing, houses are built with

separate AC and DC circuits to enable them to take the DC feed from the desert solar installations without

the (5%) losses in energy associated with the inversion of the current from DC to AC. This circuitry can then

also utilise in-home solar built into roof tiles and windows.

Later in the period wave-power becomes economic and again is associated with hydrogen production

facilities to match supply and demand.

Utilities also find that the total investment required to provide sufficient capacity in the system is reduced as

peaking capability is built into the low carbon generating units via the inclusion of the hydrogen option.

Due to the international accord on climate change countries such as China and India find they can subsidise

(out of the international carbon price revenue fund) the retro-fit of CCS (carbon capture and storage)

enabling carbon emissions to be substantially reduced without impacting on the economic competitiveness of

the country’s economy.

“In a 40 year time scale we may potentially see CCS (carbon capture and storage). It is difficult to know the

time that will take since we don’t really have anything to work from” James Cavanagh RWE npower

“With CCS there is a lot of policy uncertainty and therefore uncertainty regarding how much of a return you

will get on your investment - but can we meet our targets without it - I don't think so.” Marcello Contestabile,

Imperial College

The high carbon price, together with the desire of local communities to have a say in, and a significant

influence on, the energy choices being made in their communities spur on the developments of community

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generation. As was the case when comparing in-home generation to a CCGT, community schemes are

much more energy efficient since the waste heat can be utilised by the local community and the electricity

transmission and distribution losses avoided.

“With the kind of smart grid technology that will be available then, by 2050 we could see a much more

distributed network of generation (electricity). In places that haven't industrialised yet, like parts of China

where they are not yet urbanised, maybe they will leapfrog to this more decentralised pattern” Paul Appleby,

BP

So from both an economic and community preference perspective the balance between centralised and

distributed generation shifts dramatically over the period.

“Distributed decentralised energy is probably compatible with batteries and hydrogen - and in fact I would

argue that hydrogen would essentially support and bring in more decentralised energy generation. This is

because - whilst you do need dedicated hydrogen production facilities these would not be at the same scale

as a traditional power station otherwise they would be massively under-utilised. Furthermore transporting

hydrogen is more expensive than transporting liquid fuel so the production sites would probably be nearer

the demand than for example oil refineries.” Marcello Contestabile, Imperial College

Energy sourcing

In the innovative, rapidly advancing world that is the Patchwork” scenario advances in bio-engineering and

nano-technology enable bio-mining technologies to become available for the fracturing of geological

formations containing gas in a much more controlled and effective manner than the high pressure water and

chemical injection technologies deployed to extract US shale gas at the turn of the century. These

technologies are pioneered by a joint venture between the Chinese and US government as part of the

climate change accord and allow both governments to dramatically reduce the environmental impact of

extracting unconventional gas resources.

Developments in the field of algae farming provide for both large scale carbon absorption capacity (the algae

absorbing CO2 as they grow) as well as a ramping up in biofuels production.

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Figure 28: Patchwork – Overview


Energy system implications

In “Patchwork” a diversity of energy supply and energy use technology abounds. This world is one in which

innovation thrives both at the consumer end of the value chain and in the realm of energy sourcing and

generation. Communities exert their influence on the body politic and are pivotal in spurring on governments

to both reach an international accord on climate change, but also to allow individual communities much

greater control of their own energy system which then leads to a pluralistic mix of central and distributed

generation to emerge.

The more rapid build of nuclear and renewable capacity, the more rapid take up of electric vehicles, the

emergence of hydrogen vehicles at scale, the growth of gas, and then hydrogen, home and community

micro-generation together with solar PV embedded in the fabric of new build housing leads to a significant

reduction in hydrocarbon demand compared to the “Citadel” scenario.

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This in turn leads to reductions in hydrocarbon prices relative to the “Citadel” scenario as well as to a

reduction in the volatility of those prices as the world has sufficient hydrocarbon production capacity to be

able to withstand any oil and/or gas supply disruptions in particular countries.

Consumers do not feel the economic benefit of these cost reductions directly since they are compensated for

by the high carbon price which is used to channel funds to energy and carbon saving measures such as

CCS on coal-fired generation or community based generation schemes. The economic benefits will accrue to

future generations as the costs of climate change remediation are avoided – and this is a situation that

communities support in this scenario.

To illustrate, rather than calculate, the potential energy outcomes of “Patchwork” scenario the following

assumptions were made relative to the “Citadel” scenario.

From 2015 the year on year increase in nuclear generation doubles

“Nuclear, we have it growing in our projections. Clearly there is a bit of a question mark against it now

following Fukushima. But we don't think that will stop the Chinese and the Indians from building nuclear

plants.” Paul Appleby, BP

From 2015 biomass and waste increase by 15% vis a vis the Citadel assumptions.

From 2015 other renewables double – reflecting large scale solar implementation

“I can see the prices of silicon wafers continuing to come down and can see a much bigger take up of

that (solar power) in the future” James Cavanagh, RWE npower

Hydro – same as Citadel – limited by availability of natural resources

“Big hydro still growing - but there are limited opportunities now to grow that” Paul Appleby, BP

Gas – same as Citadel. Although a significant proportion of the gas that was due to be burnt in CCGTs

will now go to community or home generation. However, with high carbon prices it will be coal fired

generation that is abated rather than gas due to the higher carbon content of coal. For this reason gas

assumptions are held constant. In both scenarios unconventional gas is exploited toward the end of the

scenario so gas assumptions are the same in both.

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Oil – 10% drop in demand relative to Citadel in 2020, rising to 40% in 2035. Thereafter a steady 10%

decline per annum.

Coal – 150 mtoe less than Citadel in 2020, 200 less in 2025, 250 less in 2030, and 300 less in 2035.

Thereafter 200 mtoe decline year on year. This reflects the displacement of coal by zero-carbon

electricity and to some extent gas.

CCS implemented from 2025 onwards. Driving the CO2/mtoe coal ratio gradually down from 3.96 in

2010 to 0.2 in 2050 as non-CCS plants are retro-fitted or retired.

Table 22 below shows the outcome for hydrocarbon demand based on the assumptions above.

When comparing the two scenarios, total hydrocarbon demand in 2050 in Citadel was 12,052 mtoe, whereas

in “Patchwork” it is 9,573 mtoe. Much of the difference is taken up by oil which in the “Citadel” scenario

accounted for 4,602 mtoe in 2050, and in “Patchwork” drops to 2,039 mtoe reflecting a much higher

penetration of electric and hydrogen vehicles.

“By 2050 having 90% of vehicles running on electricity is not realistic but 50% could be” Marcello

Contestable, Imperial College

Table 22: Patchwork – hydrocarbon demand, (mtoe), 1990 – 2050

Product 1990 2008 2035 2050Coal 2,233 3,315 3,934 2,950 Oil 3,222 4,059 4,662 4,602 Gas 1,674 2,596 3,748 4,500 Total Hydrocarbon 7,129 9,970 12,344 12,052

Source: Enstra Consulting estimates BUSINESS INSIGHTS

The CO2 outcome is also markedly different due to the reduced hydrocarbon demand, and even more

importantly the introduction of CCS on coal fired power stations.

Figure 29 shows the CO2 outcome in the “Patchwork” scenario.

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It is interesting that whilst primary energy demand is very similar in the two scenarios (2035 Citadel 16.7

btoe, Patchwork 16.1 btoe) switching between energy sources and installing CCS can deliver a radically

different outcome.

“Carbon capture and sequestration. If the world really gets serious about climate change it is going to have to

do something on CCS.” Paul Appleby, BP

In “Patchwork” CO2 emissions peak in 2015 and fall below 1990 levels in 2045.

Figure 29: Primary Energy CO2 emissions, (million tonnes CO2) - Patchwork

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“If we are going to get anywhere near our 2050 targets the change needs to start now - and fast. This is

partly because the lifetime of the components of the energy system is quite long, like with vehicles.

Moreover, changing people's attitudes and preferences takes time. Finally, regulation also needs to evolve in

order to accommodate new technology. So, if you want to have fuel cell vehicles with a share of 35% of the

market in 2050 they need to be cost competitive and appealing to customers by 2030 at the latest otherwise

you just won't get there” Marcello Contestabile, Imperial College. In the Patchwork scenario the 2050 target

of 20,000 tonnes of CO2 emissions is reached.

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Chapter 6 Issues raised

Summary 5 key issues identified and explored.

CO2 – achieving a low CO2 outcome with the same level of total primary energy demand but a different

mix, combined with CCS.

Carbon and hydrocarbon pricing – How a high carbon price, an international accord on climate change,

a reduction in import dependency, and a low carbon outcome are all self reinforcing and self-financing.

Fashion and Technology – How hydrogen has left the energy stage and might re-appear.

Community Power – the driver of political change and the infrastructure design of the energy system.

Urbanization – a strong pre-determined element which allows for rapid adoption of new technologies

where new build and first time ownership are the characteristics of the market as opposed to retro-fit

and replacement.

Introduction In essence, the “Citadel” scenario is a picture of the current state of play extrapolated into the future.

“Citadel” can and may well happen if change is limited in the energy system.

However, the “Patchwork” scenario is another possible outcome.

From a climate change perspective clearly the “Citadel” scenario is not sustainable whilst the “Patchwork”

scenario is.

If you believe that climate change is a real risk, and is probably related to man-made CO2 emissions, then

the challenge is how to nudge the world from “Citadel” to “Patchwork”.

This chapter looks at the questions posed by the scenarios.

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Figure 30: Scenario Issues


Figure 30 shows the 5 main issues highlighted in the scenarios which are:

CO2

Carbon and hydrocarbon pricing

Fashion and Technology

Community Power

Urbanization

CO2 The CO2 emission outcomes in the two scenarios are very different as shown in Figure 31 below.

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Figure 31: Primary Energy CO2 emissions, million tonnes CO2, 1990 – 2050

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1990 2008 2015 2020 2025 2030 2035 2040 2045 2050

Prim

ary

Ener

gy C

O2

emis

sion

s, m

illion

tonn

es C

O2

Citadel

Patchwork


“Although scientific evidence suggests that we need to stick to those targets in order to avert the

catastrophic consequences of climate change. Practically achieving them is going to be a massive

challenge.” Marcello Contestabile, Imperial College

What is particularly noteworthy is that whilst CO2 outcomes are dramatically different, primary energy

demand is broadly the same in the two worlds – indeed it might be somewhat higher in the Patchwork

scenario if the electrification of transport and heat causes more losses in the system and thus leads to higher

total energy use outcome.

The factors that drive the Patchwork outcome vis a vis the Citadel outcome are:

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1. A significantly different mix of technologies for transport and heat – with a much faster penetration of

electric vehicles and hydrogen vehicles on the transportation front, and of fuel cells and heat pumps

on the building heating front.

2. The combination of nuclear and wind power with hydrogen production facilities which in turn

supports the development of hydrogen fuelled markets (see 1 above).

3. The earlier development of major solar farms in desert areas.

4. And perhaps most importantly the introduction of CCS on coal fired plants – specifically in China and

India – in the Patchwork scenario.

“(If we had met our carbon reduction targets in 2050) we would be using lots of renewable energy, and also

CCS and nuclear probably. I cannot see us achieving these targets relying mainly on just one of these

options” Marcello Contestabile, Imperial College

Carbon and hydrocarbon pricing In the Citadel scenario, oil prices are expected to be high and volatile due to the rapidly growing demand for

hydrocarbon based fuels and the continued political instability in oil producing areas. Carbon prices are non-

existent on the international plane – and are weak on the European plane.

In the Patchwork scenario, the diminution of demand for hydrocarbon based transport fuels, supported by a

high carbon price which is driving the switch to electric and hydrogen vehicles leads to an oil price which is

much lower, and less volatile (less sensitive to political troubles in the middle-east).

In the Citadel scenario, China and India do not install CCS on their coal fired plant – perceiving the

investment as a drain on their cost competitiveness. In Patchwork the international accord on climate change

creates a high carbon price which is deployed as a hypothecated tax whose revenues are used to fund CCS

installation in China, India and the US – all of whom are significant coal fired generators.

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“How do you get all the commercial frameworks (for CCS) around that to make it work. That is a big issue”

Paul Appleby, BP

What is interesting is that the energy price to consumers is broadly the same in the two worlds. In Citadel the

consumer pays a high hydrocarbon price and a low carbon price, in Patchwork a low hydrocarbon price and

a high carbon price. However, in Patchwork this differential pricing at the total energy level (i.e. hydrocarbon

plus carbon) incentivizes the switch to low carbon technologies in both generation and end use, which in turn

keeps the hydrocarbon price low. This is a reinforcing loop in the energy system.

Looked at geo-financially, in Citadel Middle East producers reap the benefits of high oil prices over the

scenario period, in Patchwork those funds are diverted to investments in low carbon outcomes in generation

and end-use in consuming countries.

In the chapter on the energy system it was evident that Asia Pacific would become significantly import

dependent (see Table 13) by 2030. This may well lead China and its Asia Pacific neighbors to prefer to adopt

policies which cause the energy system to produce lower hydrocarbon prices and reduce import

dependency.

To make this happen these countries would need to reach an international accord on climate change which

puts in place an effective high carbon price across the globe. This price could then generate the funds to pay

for the low carbon technology investments in generation and end-use.

The Patchwork scenario would be such a world.

Fashion and technology If this report had been written 15 years ago, even 10 years ago, it would have been written in a world where

the energy industry had high hopes for the hydrogen economy. Shell, at that time had a global head of

hydrogen – but no longer.

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Fashion, it appears, is alive and well in the energy and utilities sector. From the author’s vantage point in the

UK (which granted may be somewhat limited) it seems to be the case that the two fashion movements

holding sway at the moment are the “improvement of the internal combustion engine” and the “electrification

of transport and heat”.

If the IEA “new policies” scenario is a good reflection of government thinking around the world – and there is

no reason to believe they are not, the “electrification of transport” will remain a dream rather than a reality for

the next 25 years at least.

Patchwork requires that fashion changes – which it does in the clothing arena. Whether it will in the energy

arena will determine which scenario comes about.

“Hydrogen - comes and goes. It seems to come into fashion and then goes out again. It is very much out of fashion at the

moment but I am sure it will come back.” Paul Appleby, BP

In Patchwork the technology blinkers are removed and a much broader range of solutions appears in the

world. Taking the fashion analogy further - the range of garments on offer is broadened significantly allowing

consumers more choice and the ability to select the solution that suits their community the best.

“There was a lot of hype around hydrogen 10 years ago, so expectations were unrealistically high. At the

time we thought we could make it happen in a relatively short period of time - in a time frame that attracts the

attention of politicians - a 5 year time frame. But then as time passed and the progress that was being made

was clearly not as fast as politicians and investors were expecting then there was a sense of disappointment

with hydrogen. At the same time biofuels came in as the solution so for some time it was all about biofuels.

There then followed the discovery that biofuels can have some unpleasant unintended consequences, such

as indirect emissions due to change in land use. Then finally batteries, which were high on the agenda in the

1980's - which again had the hype and disappointment cycle - but that is now in the past so people have

forgotten about that and so batteries have come back up the agenda.” Marcello Contestabile, Imperial

College

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Community power Community power is an issue that manifests itself in two different manners in the two scenarios.

On the one hand we have the power of communities to impact on the political process. On the other hand we

have the mix between centralized and distributed generation (the latter being either in local communities or in

the home).

Let us consider the political power issue first. In the Citadel scenario the development of social networks into

a politically dominant force never happens. The political power base remains firmly fixed with nation states

and supra-national institutions such as the EU. For China this means that access to the global internet is not

implemented – as is the case today.

In Patchwork, the arrival of social networks changes the way in which communities of interest can exert

political power. They become a catalyst for change and a greater focus for politicians. The ability to organize

and galvanize communities both within geographical regions within nation states and between communities

of shared interest across the globe is the mechanism by which consumers select the energy products and

services they purchase (through consumer reviews) and influence the decisions on the local energy

infrastructure that is put in place to meet their needs. For China, this means that a controlled releasing of

controls takes place which leads to an orderly transition to a more federal system of power with less power

concentrated in the center.

Whether, it is possible to have a world in which local communities and communities of common interest are

denied effective representation is a very relevant question. It could well be that the Citadel scenario is

unsustainable and that what would happen is the uncontrolled fragmentation of the centralized power base

as the pressure for change builds to breaking point. Perhaps, a controlled release of the pressure, as could

be the case in a Patchwork world is actually the key to the longevity of the central political organization itself

– albeit operating in a much more federalized style.

Looking back at the last 25 years we have seen the collapse of the USSR, the falling of the Berlin wall, and

more recently the changes in government in the Middle East all brought on by community action – and

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certainly in the more recent events underpinned by the ubiquity of mobile telephony and the growth of social

networking on the internet.

On the energy front we have cities, such as Munich and London, who are taking an active role in determining

the shape of the energy infrastructure put in place to meet their needs.

Should the growth of community power really be a pre-determined element rather than a facet of a particular

scenario?

Urbanization and EVs Last but not least, we have urbanization. What is clear from the UN population statistics is that over the

coming 40 years we are going to see a radical transformation of the world in terms of the balance between

rural and urban.

“The big social change relates to China and India, and that is the move from rural lifestyles to urban lifestyles

- and that is going to continue - urbanization of the population. This will increase energy use quite

dramatically as people move into cities.” Paul Appleby, BP

In 1950 (see Table 3) only 29% of the world population lived in urban area. By 2010 this had grown to 51%.

In 2050 this will have reached 68%.

What this means for the developing world is that there is the opportunity to leap-frog the west in terms of the

introduction of new technologies in the home, or indeed in terms of vehicle technologies on the roads. The

developing world will be looking at much more new build – whilst the developed world will be looking at retro-

fit.

The consequence of this is that the developing world could create the electrical infrastructure of their new

building to have both AC and DC circuits to allow a much more efficient uptake of solar power (avoiding the

need for inverters, and their associated energy losses, to convert the power to AC, and indeed then back to

DC for electronic equipment).

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“Cities could be designed differently - could have more public transport - could be better planned from the

point of view of energy use. But if you let cities evolve by themselves they don't go that way. So it does

require some positive public policy push to get cities to develop in a more environmentally friendly fashion”

Paul Appleby, BP

Again if we look at the growth of the vehicle population over the next 40 years, we can envisage that the

current stable of vehicles, circa 750 million, will grow to somewhere between 1.5 and 3.0 billion. The

mathematics of this means that in countries where growth of the vehicle park, rather than its replacement, is

the order of the day that alternative technology vehicles can gain a much higher percentage of the

established fleet much more quickly.

Thus urbanization is a good foundation to build a Patchwork type world.

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Chapter 7 Future outlook

Summary When future generations look back at us, as the current custodians of their inheritance, how will they

judge us?

Will our place in history be the generation that failed future generations, or will we be seen as the

architects of a sustainable future?


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Reflections “We do not inherit this land from our ancestors; we borrow it from our children.” Haida Indian saying

When future generations look back at us, as the current custodians of their inheritance, how will they judge

us?

Will our place in history be the generation that failed future generations, or will we be seen as the architects

of a sustainable future?


Certainly the history textbooks will look at 2011 and see a world of rapidly rising CO2 emissions, the absence

of an international accord on climate change, high and rising hydrocarbon prices, growing hydrocarbon

import dependency across a rapidly developing Asia, and a US committed to the internal combustion engine.

They will record that organizations and governments at the time, with a few notable exceptions such as the

Stern report, used an economic calculus which failed to account for the future costs associated with

environmental impacts.

The snapshot of 2011 will be very similar to that described as the “Citadel” world in this report.

Will that world simply develop to its postulated conclusion – changing course too late when the damaging

impacts of climate change come to pass be that in 2035 (as envisaged in the Citadel scenario), 2050, or

possibly even 2100?

This could come about if the overwhelming priority in the body politic is successful short-term economic

development, and that incurring additional costs to reduce emissions is seen as futile since it is not proven

that man-made emissions of CO2 will cause significant damage to the planet.

Alternatively, the world might move to a “Patchwork” style scenario.

This could happen if:

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The win-win of lowering hydrocarbon import dependency and combating climate change becomes the

paradigm of the developing world;

The body politic comes to see the costs of inaction being greater than the costs of action (as in the

Stern report);

Nations come to see the costs of moving from “Citadel” to “Patchwork” as limited given the lower

hydrocarbon costs associated with the “Patchwork” outcome;

Those who drive this transformation see the “costs” as “economic opportunities” rather than “economic

threats”, just as one person’s purchase is another person’s sale.

As a player on the energy stage – the choice is yours.

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Appendix

Acknowledgements The foundation of this report is a model of the energy system which looks at the issues in play, and the

interactions between them.

In order to construct such a model, it is necessary to understand the universe of potential developments in

the energy ecosystem. In order to gain this understanding the author of this report was fortunate to be able to

interview three experts in the field of energy and energy futures.

Paul Appleby – Head of energy economics at BP

James Cavanagh – Head of strategic analysis at RWE npower

Marcello Contestabile – a researcher focusing on batteries and fuel cells, and their commercial development

at Imperial College London.

Throughout this report, the thoughts and ideas of the three experts named above have been used to

highlight and illustrate the issues in play in the energy ecosystem. The author wishes to thank each of the

experts for their insight and opinions which have enriched the model in respect of the breadth of potential

developments contained within this report.

Scope of the report This report examines the demand for, and supply of energy within the global energy system historically and

as forecast to develop over the next 20/25 years by two expert institutions in this field, the IEA and BP.

The report places these forecasts in the context of a conceptual map of the energy system which can be

used to look at how population, economic growth, demand, price, and supply can interact together.

131

Two scenarios are then developed using the qualitative logic of the energy system. An illustrative

quantification is made by reference to the existing work of the IEA and assumptions on difference.

The report does not seek to provide bottom up detailed quantification of the alternative futures faced by the

world of energy – but looks to highlight the main issues in play with a view to enabling the reader to build the

issues raised into their own models of the future.

That said, the quantified outcomes of the scenarios produced in this report are logically consistent with the

developments predicated in each of the scenarios - thus the directional implications are believed to be

robust.

Methodology 1. One on one interviews were conducted with three experts in the field of energy and the utilities:

o Paul Appleby – Head of energy economics at BP

o James Cavanagh – Head of strategic analysis at RWE npower

o Marcello Contestabile – a researcher focusing on batteries and fuel cells, and their

commercial development at Imperial College London.

These interviews were conducted using a set of trigger questions aimed at drawing out the issues facing the

world of energy as it develops from the present day to 2050.

Using the UN Population analysis, IEA World Energy Outlook 2010, and BP’s Statistical Review of World

Energy and 2030 Outlook as a starting point the historical and current development trends in energy were

identified.

A conceptual model of the Energy System was then developed and used to explore the issues in play as

identified in the interviews, together with the extensive experience of the author from both his work in the

sector over 30 years, and his on-going literature research.

132

Two scenarios were then developed. The first, Citadel, was based on the status quo being maintained. The

narrative for the scenario was then illustrated quantitatively by taking the IEA new policies outcomes and

extrapolating them to 2050 based on the Citadel logic. The second, Patchwork, was again first built as a

narrative and then illustrated quantitatively by working through a number of difference assumptions relative

to Citadel.

The two scenarios were then reviewed and the key issues and learnings extracted as a discussion in the

final chapter.

133

Glossary/Abbreviations bbl: barrel

btoe: billion tonnes of oil equivalent

CCS: carbon capture and storage

cps: current policies scenario

DC: direct current

GDP: gross domestic product

IEA: international energy agency

mtoe: million tonnes of oil equivalent

nps; new policies scenario

tcf: trillion cubic feet

TFC: total final consumption

trn: trillion

TWh:TeraWattHour

134

Bibliography/References The Post Carbon Landscape – Alternative Pathways to a low carbon landscape – by Peter Franklin.

Published by Business Insights 2010

The ‘shale gas Revolution’: Hype and Reality: A Chatham House Report by Paul Stevens, Sept 2010

http://www.chathamhouse.org/publications/papers/view/109468 (Aug 2011)

IEA World Energy Outlook 2010

(http://www.iea.org/weo/ )

BP Statistical review of world energy 2011

BP Energy Outlook 2030

(http://www.bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481)

A Study of Very Large Solar Desert Systems with the Requirements and Benefits to those Nations Having

High Solar Irradiation Potential, July 2006,Peter Meisen and Oliver Pochert, President, Global

Energy Network Institute (GENI)

(http://www.geni.org/globalenergy/library/energytrends/currentusage/renewable/solar/index

.shtml)

Battery energy storage system for Golden Valley Electric Association by Tim DeVries, Jim McDowall, Niklaus

Umbricht, Gerhard Linhofer

(http://www05.abb.com/global/scot/scot271.nsf/veritydisplay/627968be8161966fc1256e3f004e0366/$file/38-43%20m848.pdf)

Clean hydrogen from CANDU® nuclear power by AECL

(http://www.aecl.ca/Assets/Publications/Fact+Sheets/hydrogen.pdf)

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Generating hydrogen through Water Electrolysis Using Concentrator Photovoltaics by R. McConnell,US

National Renewable Energy Laboratory, and J. Thompson, Howard University. Presented at the 2004 DOE

Solar Energy Technologies Program Review Meeting October 25-28, 2004, Denver, Colorado

(http://www.nrel.gov/docs/fy05osti/37093.pdf)

The Future of the Internet – Jonathan Zittrain, Professor of Internet Governance and Regulation, Oxford

University

Inevitable Surprises – Peter Schwartz, Chair, Global Business Network

The Stern report on the economics of climate change 2006

(http://www.direct.gov.uk/en/Nl1/Newsroom/DG_064854)

Socialnomics – how social media transforms the way we live and do business by Erik Qualman

The Stern Report 2006.

(http://www.direct.gov.uk/en/Nl1/Newsroom/DG_064854)

future energy scenario

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