The energy crisis
Ujjayant Chakravorty, Professor at Canada’s University of Alberta in Edmonton, discusses how the changing face of global energy is impacting on the economy.
Ujjayant Chakravorty, Professor at Canada's University of Alberta in Edmonton, discusses how the changing face of global energy is impacting on the economy.
Oil prices have fallen from their stratospheric levels, but it is clear that the energy crisis is far from over. First the issue of scarcity remains on the front burner. The current global recession may have depressed demand for energy some, but demand will jump up possibly within a year. There have been no major discoveries of oil in recent years – only a few isolated finds. There is abundant oil, such as in the oil sands of Alberta, but they are costlier than existing sources and present bigger environmental challenges.
The energy crisis, thus, is not only an issue of supply vs. demand, but also the issue of supplying clean energy. However much our politicians promise a smooth transition to a clean energy future, the reality is that there is no viable clean energy source. Clean energy, by definition, is costly, and not suitable for mass production.
As we recently saw with biofuels, yes, we can reduce our dependence on Middle East Oil but the costs may be high.
Last year’s dramatic increase in food prices was mainly blamed on the shift of valuable agricultural land to biofuel production, although other factors such as droughts had something to do with the rise in global food prices. Many scientists have also suggested that a shift to biofuels will raise food prices, which in turn will lead to a conversion of marginal forest lands in developing countries to agriculture, thereby increasing carbon emissions globally.
The story can be repeated for electricity generation. Although renewable power generation has been growing at a fast rate, albeit from a low base, it is not clear what fraction of global electricity can be generated by clean sources. Wind energy is now a $37bn business and solar is about half of that. A significant portion of new power generation in the developed economies is from renewables, yet the long∞term prognosis is far from clear. The only realistic source that can supply large volumes of base load power to replace coal burning is nuclear power.
Nuclear capacity is growing at rapid rates, especially in the developed economies of Asia. The construction of new nuclear power plants is being actively debated in Europe, which aims to reduce its dependence on natural gas supplies from Russia.
Many environmentalists have recognised the difficulty of finding a good substitute for coal and have embraced nuclear power. But the prospects for new nuclear plant construction in developed countries are still not very bright.
The global financial crisis may have alleviated the need for an immediate solution, by dampening energy demand. On the other hand, by lowering the price of energy, it has also helped postpone much-needed policy attention in looking for ways to increase the supply of clean energy. This is especially true as a new administration takes up the reins in the United States, the world’s major energy consumer.
