Alternative Energy – An Overview

 

Although alternative energies have huge potential, their growth, so far, has been hampered due to various reasons. Read on…

Amidst geopolitics, fear premium, and increasing volatility, governments across the globe are framing policies to promote more practical ways to handle oil-dependency, increasing efficiency and boosting alternative fuels. On the other hand, the official predictions on energy say the Persian Gulf’s share of the oil trade will grow rapidly over the next two decades. This warns that the risk of terrorist attacks, followed by economic shocks is bound to rise. Adding fuel to the fire, oil and gas resources are concentrated in a very few regions of the world, which lead to further delicate and volatile trading system and show monopolistic tendencies. Besides, the global warming is the most challenging constraint of all.

International Energy Agency (IEA) predicts that the global energy demand will increase by more than 50% by 2030, with 60% of that supply by oil and gas. It also forecasts a severe shortfall between demand and supply, as could become evident by 2010. Sooner or later, this gap will be filled by a mix of technologies ranging from alternatives, coal and nuclear. Especially, alternative or renewable energies (means anything other than deriving energy via fossil fuel combustion) are essential contributors to fill the gap and they also contribute to world energy supply security, reducing dependency on fossil fuel resources, and provide greenhouse gases mitigating difficulties. The ever increasing oil and gas prices are gathering momentum in alternative energy sources. According to Clean Edge Inc., a San Francisco-based research and strategy consultant, the total clean-energy market will grow to $92 billion by 2013 against the current $13 billion market size.

The impact of the growing demand from countries like India and China will be responsible for the future changes in the global oil demand against finite and depleting oil resources. With the global oil production expected to peak around the year 2010-15, it would result in a major crisis for the global economy, if preventive measures are not taken seriously. Against this, oil consuming nations with their voracious appetite for energy only accentuate the need for developing and using alternative sources of energy that are clean and help to keep the environment green. However, the biggest challenge is that green fuels do not have compellingly better utility than traditional petroleum products like gasoline. Going by this, fast adoption and acceptance of green fuels by the general public is a big hurdle to jump into green fuels. For instance, fuels like ethanol are cleaner, and greener, their overall utility does not compare to a fuel like gasoline, which is compelling when it comes to energy density, scalability and cost.

Nevertheless, in the coming days green energies will play a progressively more important role in the future energy mix of most countries. Although alternative energies have huge potential, their growth, so far, has been hampered due to various reasons. So far, the development of finding alternatives to replace oil has been slow, although alternative energy production has advanced going by the technology progression. Compared with oil-based energy, alternative energy sources have not been economically competitive. Some of the major barriers include distribution challenges, lower scalability, international trade barriers and powerful oil lobbies along with relatively higher production costs etc. Against these drawbacks, the alternative energy industry has to increase R&D investments to lower the production and distribution costs, while ensuring that the consumers have a smoother transition towards using alternative energies for all their needs.

In the days to come, oil demand is expected to grow phenomenally especially from developing countries rather than developed world. At the present oil consumption level, the average American consumes per year around 25 barrels of oil, whereas the Chinese consumers 1.3 barrels and is expected to triple between now and 2020, contribute 25% of the increase in oil demand. Against this backdrop, the world oil production capacity is already long-drawn-out to the limit; the future energy demand is very tricky to meet without oil shortages and higher prices. The answer lies in alternative energies and they will be able to fill the ever-growing demand for energy. To reverse the current energy demand trends according to IEA, far more technological breakthroughs would be needed a high priority to energy R&D.

India’s Energy Challenges

In the process of emerging as an economic giant, India is facing the critical challenge of meeting a fast increasing demand for energy. As the economy is on the growth path, the demand for energy over the next two decades will increase considerably. Though it has significant reserves of coal, it is relatively poor in oil and gas resources. The World Energy Outlook, published by the IEA, projects that India’s dependence on oil imports will grow to 91.6% by the year 2020. The country now focusing on smooth supply of oil, as the economy is more vulnerable to supply disruptions. To minimize the impact of global fluctuations and to ensure adequate supply of energy, it is building a strategic crude oil reserve facility on its southern and eastern coasts.

 

On the alternative energy resource front, the recent Kirit Parikh report Integrated Energy Policy says “From a longer-term perspective and the need to maximally develop options as well as the need to diversify energy sources, renewables remain important to India’s energy sector.” The report predicts that “Even with a concerned push of 20-fold increase in capacity, renewables can account for around 5-7% of India’s energy mix by 2031-32. While this is small, the distributed nature of renewables can provide many social benefits.” If the Indian government could implement all the recommendations made by the committee, the country can meet her energy requirements in an efficient manner and be on a path of sustainable energy security. On the whole, the days are not far off when the world’s energy consumption would be shifted significantly toward alternative energy.

N Janardhan Rao, Senior Economist.