Lesson 1 Overview

Overview

This lesson will discuss the way that energy decision makers and stakeholders look at development of new projects and technologies. We will define the motivation for the entire EME 801 Course. We will also hopefully allow students to be able to take a holistic view of energy markets and place them in a broader context to understand how various stakeholders will act in various situations. By training ourselves to ask these questions, we will be able to participate in and even help drive the energy transition.

Please note that we will be convening as a team to discuss this course's subject matter as well as any other energy transition matters the cohort would like to cover.

Learning Outcomes

By the end of this lesson, you should be able to:

• Discuss topics related to global energy markets
• Explain the importance of energy markets in an economic context, a geo-political context, and an environmental context
• Explain the placement of the current energy transition in a historic context
• Describe the sources and sinks of energy in the United States energy eco-system
• Develop a global list of stakeholders for energy decisions
• State your preference for the time/day of a recurring class Zoom call

Reading Materials

Each of the reading assignments below is meant to introduce the importance of -- and give a taste of -- the structure of global energy markets. While reading these, please think about how to describe how you think energy questions affect the near and long-term future of your business and our society.

• World Economic Forum (2022). 6 Ways Russian's Invasion of Ukraine Has Reshaped the Energy World [1]
• TheNationalNews.com (2022). BP Signs Long-Term LNG Contract with China's Shenzhen Energy [2]
• U.S. Energy Information Administration (2020). Nonfossil sources accounted for 20% of US Energy Consumption in 2019 [3]
• Bond, K, and Butler-Sloss, S. (2022). Peaking: A Brief History of Select Energy Transitions [4]
• World Economic Forum (2022). The 200-year History of Mankind's Energy Transitions [5]

What is due for Lesson 1?

This lesson will take us one week to complete. Please refer to the Course Calendar for specific due dates. Specific directions for assignments are in the Lesson 1 module in Canvas.

• Complete all of the Lesson 1 readings and viewings, including the lesson content

Questions?

If you have any questions, please post them to our Questions? discussion forum (not email). I will not be reviewing these. I encourage you to work as a cohort in that space. If you do require assistance, please reach out to me directly after you have worked with your cohort --- I am always happy to get on a one-on-one call, or even better, with a group of you.

The Importance of Energy to the Economy, the Environment, and the World

The Economy

As we walk through our daily lives, it becomes very easy to take for granted the almost complete dependence we have, as humans in a post-industrial economy, on the incredible supply of inexpensive and convertible energy. If we live in anything other than a tropical climate, we require heating so that we don’t freeze. We use energy to till our fields and harvest our food. We also use energy to provide light during non-daylight hours as well as power machines that allow for inexpensive manufactures such as clothing and other household items. We move about, except when walking or bicycling, through the conversion of some sort of potential energy into the kinetic energy of the plane, train, automobile, or boat. And finally, we use energy to communicate and store and manipulate data. This vast network of comfort, nourishment, nutrition, transportation and information would be utterly impossible without inexpensive and readily dispatchable energy. It is literally the life’s blood of the entire economic system.

The resemblance between the human circulatory system and the natural gas grid (or the electric transmission and distribution grid) is similar, and the energy delivery system is almost as crucial to the economy as the circulatory system is to the human.

Figure 1.1: The human circulatory system

Credit: Clker-Free-Vector-Images [6] from Pixabay [7]">Circulatory System by Clker-Free-Vector-Images from Pixabay

Figure 1.2: Map of U.S. interstate and intrastate natural gas pipelines

Credit: Map of U.S. interstate and intrastate natural gas pipelines. U.S. Energy Information Administration [8], Natural Gas Explained (Public Domain). For an accessible version contact EIA.

This chart shows the dependence on energy of various economies around the world. This is directly showing Tons of Oil equivalent to make $1,000 of GDP. A tonne of oil is equivalent to 7.44 barrels or 11,630 kWh. The implications are massive. Every 1,000 dollars of GDP in the US has at least 1 MWh or almost a barrel of oil embedded in it. More importantly, this offers no quantification of the risk to the economy should this energy supply be disrupted. Then the energy intensity would increase massively and whole supply chains and communication networks would be disrupted.

Figure 1.3: Total energy supply per unit of GDP for selected countries and regions, 2000-2020

Click for a text description of Figure 1.3.

Total energy supply per unit of GDP for selected countries and regions, 2000-2020

Year	USA	India	World	China	EU
2000	0.165	0.153	0.152	0.244	0.106
2001	0.161	0.148	0.149	0.233	0.106
2002	0.16	0.147	0.149	0.228	0.105
2003	0.156	0.14	0.148	0.237	0.106
2004	0.153	0.137	0.147	0.244	0.105
2005	0.149	0.132	0.145	0.242	0.103
2006	0.143	0.129	0.142	0.235	0.1
2007	0.143	0.127	0.138	0.222	0.095
2008	0.139	0.13	0.136	0.209	0.094
2009	0.136	0.131	0.136	0.204	0.093
2010	0.136	0.128	0.136	0.204	0.095
2011	0.132	0.126	0.133	0.2	0.09
2012	0.127	0.126	0.131	0.192	0.09
2013	0.127	0.122	0.128	0.184	0.089
2014	0.125	0.121	0.126	0.176	0.084
2015	0.12	0.115	0.122	0.165	0.083
2016	0.117	0.108	0.119	0.154	0.082
2017	0.114	0.106	0.117	0.15	0.081
2018	0.113	0.105	0.116	0.147	0.078
2019	0.111	0.101	0.114	0.145	0.076
2020	0.106	--	--	--	--

Credit: U.S. Energy Information Administration [9] (EIA). Licensed under CC BY 4.0 [10]

Energy Transition in Historical Context

The current energy transition away from fossil fuels is dramatic until it is placed in a historical context. Let’s look at the graph below for a great visualization:

Figure 1.6: Nonfossil sources accounted for 20% of U.S. energy consumption in 2019.

Nonfossil sources accounted for 20% of U.S. energy consumption in 2019 [3]. From U.S. Energy Information Administration [15]. Public Domain licensed under CC0 1.0 [16]. For an accessible version contact EIA [15].

Make sure to read the following articles, which are all listed on the Lesson 1 Overview page:

• "Nonfossil Sources Accounted for 20% of US Energy Consumption in 2019"
• "Peaking: A Breif History of Slelect Energy Transitions"
• "The 200-year History of Mandkind's Energy Transitions"

Sources and Sinks (Or Supply and Demand)

Definitions:

• Source - a place, person, or thing from which something comes or can be obtained.
• Sink - a fixed basin.
• Supply - a stock of a resource from which a person or place can be provided with the necessary amount of that resource.
• Demand - the desire of purchasers, consumers, clients, employers, etc., for a particular commodity, service, or other item.

Please see the figures below to visualize the various sources and sinks of energy in the US economy. Both of these figures show the original source of energy, whether it be direct radiation from the sun, from combustion of natural gas, nuclear fission, or some other source. From there, we see how the sources "move" through the various conversion systems to provide energy services to the various sectors like transportation or residences (sinks):

Figure 1.7: U.S. Energy Flow, 2021 See an interactive version of this graphic [17] on the EIA website.

Credit: US Energy Information Administration (EIA) [18]. Monthly Energy Review (April 2022). https://www.eia.gov/totalenergy/data/flow-graphs/total-energy.php [17]

Figure 1.8: Estimated U.S. Energy Consumption in 2021: 100.2 Quads

Click for a text description of Figure 1.8.

The graphic is a flow diagram illustrating the estimated energy consumption in the United States for the year 2021, measured in quadrillion BTUs (quads). It uses colored arrows to show the flow of energy from various sources to their end uses.

The diagram visually represents the balance between energy production and consumption, highlighting inefficiencies where energy is rejected rather than used for services.

• Solar: 1.5 quads
• Nuclear: 8.13 quads
• Hydro: 2.27 quads
• Wind: 3.33 quads
• Geothermal: 0.206 quads
• Natural Gas: 31.3 quads
• Coal: 10.5 quads
• Biomass: 4.83 quads
• Petroleum: 35 quads
  • Residential: 11.7 quads
  • Commercial: 9.0 quads
  • Industrial: 26 quad
  • Transportation: 26.9 quads
  • Net Electricity Generation: 36.6 quads
  • Rejected Energy: 65.4 quads
  • Energy Services: 31.8 quads

Credit: Lawrence Livermore National Laboratory and the Department of Energy [19]

One of the most interesting sinks in the US economy is rejected energy. Rejected energy is that which does not provide useful work. Rejection is usually in the form of heat, but also in the form of transportation losses. What does this imply for the potential to decarbonize?

We discuss sources and sinks here to illustrate the level of energy consumption across the US and also how complex the overall market is.

We will discuss supply and demand in greater detail toward the end of the course. Understanding how these forces interact in the present as well as how they will interact in the future will help inform all the decisions we make in our professions.

Global Stakeholder Identification

What is the definition of a stakeholder?

A stakeholder is defined as, "a person or entity with an interest or concern in something.” Further elucidation might say “Individuals and organizations who are actively involved in the enterprise, or whose interests may be positively or negatively affected as a result of the enterprise.” An addition to this definition would also include those who believe their interest may be affected by the enterprise. This is a very useful definition as it allows us to cast a very wide net to make sure that all the people and institutions that will be affected by our decisions are considered.

On a global scale this is clearly a very “wide net.” It includes the entire earth and many different people and entities. And many entities will have more than one stakeholder identification. Below are some obvious energy stakeholders in the global market:

• Producers
• Consumers
• Local, State, and National Government
• Transporters of Energy
• Marketers
• Citizens

Please see if you can double or even triple the number of stakeholders globally as you consider the energy market.

Lesson 1 Summary and Final Tasks

Lesson Summary

Hopefully in this lesson you learned how energy decision makers and stakeholders look at development of new projects and technologies. We defined the motivation for the entire EME 801 Course. We also hopefully allowed you to be able to take a holistic view of energy markets and place them in a broader context to understand how various players will act in various situations. By training you to ask these questions, you are becoming able to participate in and even help drive the energy transition.

Reminder - Complete all of the Lesson 1 tasks!

Please double check the What is Due for Lesson 1? list on the first page of this lesson to make sure you have completed all of the activities listed there before you begin Lesson 2.