In March 2020, the average price of a barrel of crude petroleum which was around US$ 60 mark for the past three years plunged suddenly to US$ 21, the lowest level in 18 years. The drop was as a result of the COVID-19 outbreak beginning to show its effect and it appeared against a background of slowed down economic activity. The easing of the COVID-19 induced crisis led to a steady increase in prices of crude petroleum surpassing pre-pandemic levels by late 2021. Again the Russian invasion of Ukraine in February this year resulted in oil peaking at US$ 117 in June and plunging thereafter. This roller-coaster price volatility reflects the economic uncertainty the world faces and brings to the surface an underlying energy crisis which affects both the economy and the wellbeing of Planet Earth.
Between 1981 and 2021, global primary energy consumption increased almost linearly doubling from 87,700 terawatt hours (tWh) to 176,400 tWh. As populations expand and people grow prosperous the demand for energy increases especially in developing countries. The fastest energy consumption growth has come from the Third World as advanced countries shift their high-energy consuming industries to developing countries in order to deflect environmental concerns from themselves directly as well as in order to avail themselves of the cheaper labour available in the Third World countries. The slowdown in global economic activity after the 2007-8 Global Financial Crisis (GFC) resulted in a slowing of the growth in energy consumption. However, as European and North American companies sourced more product to the Third World, in newly-industrialising countries in Asia, such as China, India, Indonesia, Bangladesh, Iran, Thailand and Vietnam the use of energy grew rapidly. A mid-2019 survey by quality control service provider QIMA found that 80% of US companies and 67% of European firms had either switched their product sources to other countries or intended doing so. In the ten years prior to the COVID-19 pandemic half of new global investment went to Asia with a third of that concentrated in China alone.
This rapid rise in industrialisation exerted pressure on the energy infrastructure of these countries as they strained to cope with the demand from factories and processing plants. China, for example, had no option but to opt for coal power in order to meet demand with most of the coal supplied by its own coal mines and a significant component imported as well. Also in China Petroleum imports more than doubled in 2010- 20, rising from 5.9 million barrels per day to 12.9 million. Natural gas demand also rose rapidly, and China is due to replace Japan as the world’s largest LNG importer this year.
The outbreak of the Covid-19 pandemic in December 2019 resulted in widespread lockdowns and, consequently, a collapse in production and transport sectors. This led to a steep drop in energy consumption worldwide. Electrical power demand dropped to holiday levels as higher residential use compensated partially for the loss in industry and services. A rise in commerce due mainly to increases in online purchasing and home delivery led to a surge in industrial production, which in turn put a strain on energy infrastructure particularly on fossil fuels, as energy source facilities forced to close down due to COVID-19 concerns had to be dragged back to work. The inability to match primary energy consumption is calculated by converting figures for non-fossil energy into the energy inputs required if they had the same conversion losses as fossil fuels, thereby taking account of the inefficiencies in producing the latter) supply to demand led to a hike in oil prices. The Russian invasion of the Ukraine, and the consequent sanctions placed on that country’s energy sector exacerbated the situation further driving up fossil fuel prices and causing an energy crisis.
Fuelling regime change
The increase in Sri Lanka’s energy consumption was far less spectacular than that of other industrialising countries of Asia. As an example, Vietnam’s energy consumption per person soared from 5,370 kWh in 2009 to 12,496 kWh in 2021 an increase of 133%. During a similar period in Sri Lanka per capita energy consumption rose from 3,203 kWh to 5,073 kWh – a rise of just 58% while electricity consumption per capita increased from 448 kWh to 774 kWh. These low figures reflect the country’s the lack of industry. The absence of significant industry in the country resulted in a single peak of private consumption from around 6 p. m. to 9 p. m. that consumed double the daytime power usage instead of the daytime electricity-use peaks caused usually as a result of factories and plant and machinery functioning.This phenomenon forced authorities to discourage solar power generation, since the country lacked adequate storage for generated energy. Interestingly, crude petroleum imports remained steady for over a decade being 1.93 million tonnes in 2009 and 1. 86 million tonnes in 2019 with the refinery at Sapugaskanda operating at full capacity. However, it is noteworthy that during the same period the Petroleum Corporation’s imports of the balance requirement of refined petroleum doubled from 1.45 million tonnes to 3.05 million tonnes. The bulk of this increase was due to the unregulated inflow of vehicle imports during this period.
The total vehicle population between 2015 and 2019 surged from 6.3 million to 8.1 million and of the latter motor cars represented 11% while trishaws and motorcycles comprised 72%. The growing inadequacy of public transport contributed to this rapid rise as commuters switched from buses and trains to motorcycles, taxis or private cars Thus, when petroleum prices tripled as a result of the war in the Ukraine the country found itself short of foreign exchange to finance its increased petroleum imports and transport ground to a halt. The preponderance of private energy consumption in Sri Lanka meant that the country’s energy crisis took on a slightly different look from elsewhere globally. The reduction in man hours did not affect energy utilisation as demand remained high. But with global energy shortages kicking in supply ran low. Also the lack of adequate generation capacity especially of renewable energy meant that power cuts had to be instituted. And as these cuts grew worse as the country’s import-heavy economy lacked the financial capacity to import fossil fuels required to fuel our thermal power plant. The situation deteriorated even further as the country lacked foreign exchange to purchase liquid petroleum gas (LPG). The middle classes who had long ago switched from firewood or kerosene to LPG, found they were unable to cook or buy food and long queues formed at times for days together in order to purchase LPG. The power cuts ensured that time slots were allotted for cooking affecting the working population severely. The urban poor who cooked using kerosene or LPG found themselves in the same position, kerosene being in very short supply. The energy crisis literally hit home providing the incentive for thousands of ordinary people to join demonstrations which eventually ended in a regime change.
The US Energy Information Administration (EIA) projects that 2050 consumption levels will increase 47% over 2020. On the other hand, the UN-accredited sustainable energy forum, the World Energy Council (WEC) predicts 2010-2050 growth at between 27% and 61%, depending on two socioeconomic scenarios. McKinsey, one of the “Big Three” international management consultancies, went even deeper using five scenarios and concluding that while total energy growth would flatten out electricity demand, it could actually triple. The discrepancies between projections highlights the uncertainties the future holds.
Significantly energy demand projections indicate that developing countries consume about 57% of global energy at present and will go on to increase its use by 67% by 2040. These projections forecast China as using the most energy while the fastest growth of energy use is predicted to be from India with a somewhat slower growth in the rest of developing Asia and Africa. This pattern reflects the shift of industry away from the advanced metropolitan countries to the Third World. Even China, considered as the global factory will see a repetition of this trend with a reduction in energy consumption growth as its economy converts from energyhungry industries to lower energy manufacturing and service sectors.
The projections envisage more energy-intensive industries relocating to the rest of developing Asia including India and especially Africa. In the immediate future the effects of the energy crisis may die down as an impending recession cuts down production. However, at the end of the downturn a rapid increase in production may cause a renewed shortage of energy much as the revival of production after the COVID-19 pandemic. This is a challenge for which the global energy sector as well as that of Sri Lanka should prepare.
In the short term the post-pandemic energy crisis can provide lessons and one such lesson is the need to stockpile fuels. Even with decarbonisation, it is predicted that following the Paris Climate Accord fossil fuels would provide the bulk of global energy needs as late as 2050. By then the EIA projects that renewables would reach levels of liquid fossil fuels however, the latter along with natural gas is expected to increase, albeit at a slower pace than the former. Even coal consumption will increase even though at a very much slower pace. The EIA estimates that with the adoption of the electric vehicle global numbers of petrol or diesel vehicles will peak only around 2038. In terms of this scenario as fossil fuels continue to dominate storage, the same should continue. On the other hand, the McKinsey projection estimates that liquid fossil fuels will peak before 2030, and decline in energy applications – although they will be used increasingly for non-energy purposes, such as chemicals and plastics. Renewables will account for 80-90% of electricity generation, with green hydrogen playing a large part in energy storage. In this scenario green hydrogen could also be stockpiled. For a start Sri Lanka could rehabilitate the Trincomalee tank farm to stock fossil fuels, to be supplemented by new tank farms which must be constructed. This in turn could make Sri Lanka into a key fossil fuel hub, much as Singapore became in the 1960s. Storing hydrogen would be more challenging but would provide an excellent method of absorbing unused renewable energy.
This would enable Sri Lanka to store renewable energy to be released during the evening peak hours of electrical use thereby drawing upon its large insolation resources which have only been exploited to a very slight degree. A major problem lies in harnessing renewable energy sources. The majority are in inaccessible areas of low population. For example, the best places for solar power are the Sahara and Arabian Deserts. Accommodating fluctuating inflows of energy from intermittent renewable sources is another. Chinese President Xi Jinping provided a solution to both of these issues when he proposed the Global Energy Interconnection (GEI), to link the electrical grids on all the continents into one clean “supergrid”, an energydominant, electric-centric, globallyinterconnected, jointly-constructed modern energy system that is mutually beneficial to all. Essentially, the concept combines clean energy with a smart grid and ultra-high voltage (UHV) transmission. At present Europe is connected thus. So when the renewable sources fail to provide energy to Germany’s grid it can almost instantaneously switch over to a supply source in, say France. Extending this system with the use of ultra-high voltage direct current (UHV-DC) cables would enable, say India to get energy supplies from Central Asia. It also provides the opportunity to balance the load. Were Sri Lanka to connect to this super grid it would be enable us to export unused electricity as well as import power in periods of insufficient domestic generation. UHV-DC systems have the added advantage of being able to “iron out” issues regarding power supply fluctuations. Methods of conserving power and increasing efficiency provide a third solution to the energy crisis. This would entail ensuring buildings are energy-efficient, improving efficiency in machinery and equipment, and improving energy efficiencies in institutions, through judicious use of energy audits. Sri Lanka could make much progress in these areas, in which very little has hitherto been achieved. Modern internet-based systems exist which could be applied to these issues. However, the government must have a will to do so and to follow up until the successful completion of these projects. Of course finding a will to carry out a green, far-seeing programme to increase energy efficiencies may be the most difficult task.
By Vinod Moonesinghe