This article is being run in two parts, the first of which outlines the problem today and some of the possible solutions, while the second part will address specific opportunities for the local I&C industry and indeed industry in general. It will become obvious that the future will see increased demands for electrical power, generated conventionally or through use of renewable resources. This demand will translate into a general boom for the I&C industry.
Looming oil crisis?
Do current oil reserves foretell a bleak future for the world's economy - is there an impending crisis that will affect us all? A study of recent literature on the subject does not provide a simple answer. The optimists (the oil industry) forecast that there will be enough natural oil to last throughout the 21st century, while the independent pessimists predict that global oil production could peak as early as 2010 with disastrous effects on the economies of all industrialised nations. The most gloomy predictions suggest that as oil supplies decrease then prices will exponentially increase and this will have a knock-on effect in terms of pricing of other power supplies such as electricity.
An article published in Scientific American (1998) forecast radical increases in oil prices and concluded that about 1000 billion barrels of natural oil remains. World oil consumption in 2001 was 76 million barrels per day (bpd) and is increasing annually so these figures suggest a shortage by the end of this decade. The oil price increase predicted is a reality but this was not driven by global shortage but by the OPEC quota system that artificially restricts output. Although the oil price based in dollars has increased, an article in a recent Sunday Business Times indicated that the price of oil adjusted for [South African] inflation is only half what it was in December 1979.
The oil crisis of the '70s was artificial and was fuelled by events such as an Arab embargo, the dethroning of the Shah of Persia (Iran) and manipulation of the oil price by the OPEC nations. The flow of oil from new resources such as Alaska and the North Sea saw a weakening of the stranglehold and a collapse of the oil price.
I am an optimist and believe that new technology will allow exploitation of previously inaccessible reserves and that new oil fields will be found. The US Geological Survey estimates that the amount of natural oil still to be found at about three trillion barrels. What is often not taken into account in reserve determination is the world's largest oil reserve, the oil sands in Alberta, Canada. Estimated at 2,5 trillion barrels of crude, at least 300 billion is extractable using existing technology. A drawback was the cost of extraction ($18 a barrel), but a world shortage and current prices make further development of this venture profitable and it is expected that will exceed 2 million bpd by 2010.
Russia is always a mystery country but another recent article (April 2004) indicates that its proven oil reserves are three times higher than previously thought, being equivalent to 180 billion barrels, or about 2/3 of that of Saudi Arabia. Add to this the massive investment in oil exploration in Africa and the bleak picture becomes rosier.
However there is no doubt that whether it is 10 years or 100 years the world must adjust away from its current dependency on natural oil and potentially other non-renewable resources. Another recent trend that must be factored in is wars and potential terrorist attacks. The initial invasion of Kuwait by Iraq saw the loss of 2 billion barrels; the USA is still trying to restore the oil output of Iraq to pre-war levels while the Saudi oil industry has been a subject of terrorist attacks.
What can be done?
In terms of immediate actions the first must be to reduce the world's dependency on liquid fuels. This could see the closure of oil-fired power stations (a once popular and cheap source of electricity) and greatly reduced use of liquid fuel for domestic heating. Neither of these is appropriate for South Africa where oil-generated power is limited and heating when required is based on other fossil fuels or electricity. Liquid fuel is of course essential for the transportation industry and while increased oil prices may reduce domestic consumption it will not affect the movement of goods, as increased costs will merely be passed on to the consumer. From the local point of view what we need to see is massive investment in our rail system and the shift of freight from road to electrified railway routes.
As for South Africa, we still have vast reserves of coal - but government (and Eskom) must take the opportunity now to invest in new coal-fired power stations to ensure that we have the energy necessary to ensure that the wheels of industry continue to turn when the crisis deepens. The continued availability of low cost electricity should see further investment in new power intensive industries such as aluminium smelting (as in Maputo, Richards Bay and possibly Coega) and all of these initiatives will benefit the I&C industry.
Renewable energy
Over the last decade this has become a focus of attention worldwide and the main focus has been on the development of wind power and use of solar energy.
Hydroelectric power is currently the world's largest renewable source of electricity accounting for about 15% of the world's electricity and 6% of the total energy supply. Taking Canada as an example, hydroelectric power supplies some 60% of the country's needs. The first hydroelectric power plants were installed in the 19th century shortly after the development of the incandescent light bulb. While a renewable energy source, the major impact of the creation of dams is the flooding of vast areas of land. (China's Three Gorges dam will displace nearly 2 million people). The theoretical limit of hydropower is estimated to be about four times that being currently exploited with much of the remaining potential existing in Asia and Africa.
Less well known than conventional hydroelectric power where a dam is required is run-of-river projects. These are widely used as a source of power in India and Canada. In India the many hydro plants range from about 100 kW to 6,9 MW, while Canada's largest run-of-river plant has an installation of 3 x 4,5 MW generators. In Europe Austria possesses the second largest run-of-river plant in the world with an installed capacity of 293 MW and closer to home the envisaged Grand Inga run-of-river project will tap the mighty Congo and could produce up to 39 000 MW.
Wind power, once mainly for agricultural use, is today a reality and there are more than 10 manufacturers of large utility-scale systems ranging from 200 kW to 1,5 MW. Europe by 2001 had an installed wind power capacity of over 10 000 MW and a study conducted in the USA that year showed that the cost of energy from larger utility type installations could fall to less than $0,025 per kWh with the new large capacity turbines (these figures are relevant for better wind regimes where wind speed exceeds 30 km/h and the capacity factor is better than 0,4). The capital cost of wind turbines has fallen below that of the conventional power plant.
Solar power seems to be an ideal source of renewable energy for South Africa with our high levels of sunshine. To date it has found successful applications in smaller communities (power for schools, clinics etc) and in remote cellular base-stations, conventional batteries being used to store power for night use. Solar power however is being increasingly used in this country to heat geyser water. Here it has been successfully implemented in several low cost housing projects and a well-insulated geyser ensures that hot water is available 24 hours a day. Elsewhere in the world solar power is now used to feed the grid and Sacramento in North America is a good example. Here the local utility (the fifth largest in the USA) installed its first 2 MW photovoltaic (PV) power plant in 1984, ironically on the site of a decommissioned nuclear power plant. Today the utility has 5 MW of PV power and claims to be the world's largest distributor of PV power.
The major problem of energy storage is being addressed by new technology and Eskom is involved in one of the most successful power storage systems, this being covered later in this article.
Nuclear power
Whether we want to accept it or not nuclear power still provides an answer for long-term generation of electricity. Although out of favour as a result of the accidents that occurred at Three Mile Island and Chernobyl, countries such as France have proved that it is a reliable, cost-effective, and safe way to generate power. There are huge resources of uranium in the world and power could be generated using conventional technologies for centuries to come. New technologies such as the Pebble Bed Modular Reactor (PBMR) of which more will be said below, offer inherently safe and flexible power generation close to the point of use, obviating the huge power losses we experience in this country through transferring electrical power over vast distances. From an environmental viewpoint an outstanding issue is what to do with nuclear waste. No country has as yet established a safe repository for this, but perhaps a solution is to make use of the many nuclear test sites (eg, Easter Island) that have already been rendered uninhabitable for centuries to come.
Private transportation
This is the area that will be hardest hit by any decline in oil production and higher costs. Alternative power technologies, fuel cell, battery power etc, have been investigated and have been introduced to some extent where pollution was the driver. High-density batteries (such as the South African developed ZEBRA battery) have been around for some time but range of the vehicle on a fully charged battery still remains problematic. It could however be a solution for our mass transportation taxi industry and our pre-payment metering solutions should allow these vehicles to recharge in off-peak periods.
With the expansion of Sasol's GTL technology worldwide (see Part Two) more diesel will become available and we may see a further increase in economical diesel powered vehicles. Cities like London have introduced levies on private vehicles entering the CBD, initially to reduce congestion with the spin-off of less liquid fuel being used. Such strategies are only appropriate in cities where there is an excellent mass transportation infrastructure.
The future for transportation at this point in time appears to lie in the field of hydrogen fuel cell technology. The fuel cell operates like a battery but does not run down or require recharging. It produces electrical energy as long as fuel is available. As the fuel cell relies on simple chemistry and not combustion, emissions are minimal. Hydrogen itself is the simplest and most plentiful gas on earth but it is never found alone in nature and is always combined with other elements such as oxygen (eg, H2O or water) or carbon. Hydrogen can be extracted from virtually any hydrogen compound but as a light gas it is difficult to store a large amount in a small space. The objective of today's research is to match the range of conventional vehicles and options include compressed or liquefied hydrogen or new techniques where metal hydrides are stored and release hydrogen as required. While hydrogen was once considered dangerous (the Hindenburg airship disaster), today it is produced, stored, shipped, and used by many industries worldwide. Since the 1970s NASA has used hydrogen to propel the space shuttle and other rockets into space. The size of the fuel cells can be adjusted to suit every type and size of vehicle and studies in the USA have indicated that by 2005 the technology should deliver a pump price of $3 per gallon petroleum equivalent, reducing to $1,50 by 2010.
Unfortunately the hydrogen itself still has to be produced and that requires power. In principle it can be produced from many traditional energy sources including natural gas, gasoline, diesel and propane, but many of these are already in short supply or the reserves are committed to other applications. In terms of renewable energy solar power, methanol, bio-mass, solar power etc, have been mentioned but despite all these options the favourite energy source at the moment is nuclear, with great emphasis being placed on the PBMR as a dedicated energy source.
In Part Two McDowell will discuss the implication for SA's industries.
Dr Maurice McDowell has many years' experience as a technical journalist, editor, business manager and research scientist. His third party analyses of world-class companies and processes, as well as his insight into industry and technology trends, are well respected.
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