The World in 2050: Four Forces Shaping Civilization's Northern Future

Storing excess electricity is challenging. One way is “pumped storage” using water. If excess electricity becomes available, it is used to pump water uphill, from a reservoir or tank, to another one at higher elevation. When electricity is wanted, the water is released from the upper to lower container again, flowing by force of gravity over turbines to make electricity. Pumped storage is relatively efficient, inexpensive, and has been around for a long time, but requires lots of water and reservoirs.¹⁶³

An exciting storage idea is to tap into the batteries of millions of parked electric cars whenever they plug into the power grid. By communicating with the grid, car owners can elect to charge up when electricity demand is low, and discharge back into the grid when demand is high. Google Inc. is actively developing such a “V2G” (vehicle-to-grid) technology through their RechargeIt initiative.¹⁶⁴ In effect, a city’s entire motor pool becomes a giant collective battery bank, helping to buffer fluctuations in electricity supply and help protect against brownouts. In return, cars earn a profit by buying electricity when it is cheap and selling when it is expensive. Thus, the notion of a “cash-back hybrid.” Jeff Wellinghoff, commissioner of the U.S. Federal Energy Regulatory Committee, estimates that if millions of cars were made available to the grid, cash-back hybrids could earn their owners up to two thousand to four thousand dollars per vehicle.

Solar power is an exciting, fast-evolving field, and is positioned for technological breakthroughs on multiple fronts.¹⁶⁵ With transmission line investments CSP technology has good potential to bloom in well- placed deserts, for example tapping the northern Sahara to supply electricity to Europe. Globally, the solar power industry is over USD $10 billion per year and growing 30%-40% annually, even faster than wind power. ^166,167 Depending on the choices we make,¹⁶⁸ world electricity production from solar sources is expected to grow anywhere from fiftyfold to nearly two thousandfold by 2050, cornering some 0%-13% of the world’s electricity market.

That zero was not a typo. This is all very exciting and will surely inspire many investor fortunes in the stock market. But if you’ve been adding up the numbers as we went along, you’ve already figured something out: Fast- growing as they are, the blunt truth is that the clean, renewable energy sources we’d all love to have—wind, solar, hydro, geothermal, tidal, and (sustainably grown) biomass—are in no position to replace nonrenewable sources by 2050.¹⁶⁹

Despite blistering growth, by 2050 solar energy will just be starting to substantially dent our energy needs. It takes time to grow from a base of near-zero. Our present capacity is so minuscule that a fiftyfold increase of solar power in the next four decades will still supply about 0% of the world’s electricity. Even the most aggressively modeled expansion of solar sources suggests they can meet just 13% of the world’s electricity demand by 2050. So buy the stocks if you wish, but in forty years where will the bulk of the world’s energy be coming from? Very likely from the same sources they come from today. There is simply no realistic way to eliminate oil, coal, and natural gas from the world’s energy portfolio in just forty years’ time.

Natural Gas versus the Dirty Temptation

As oil supply tightens we will harden our gaze more than ever upon coal and natural gas, until that distant day when renewable sources can catch up. Both have their handicaps and benefits relative to oil and to each other. Neither approaches the value of oil for making liquid fuels and chemical products. However, these two fossil fuels already dominate the world’s electricity generation, with about 40% coming from coal and 20% from natural gas (in contrast, only 7% of all electricity is generated using oil). A transition to electric cars, therefore, would seem a natural one even without renewable and nuclear sources of electricity.

Should current trends continue unabated, coal demand will nearly triple by 2050, at which point it would capture 52% of the electricity market. Natural gas demand will more than double, at which point it would capture about 21%. However, nothing is fixed about these “business as usual” projections. Through aggressive conservation measures, and development of natural gas, nuclear, and renewable sources, for example, global electricity production from coal could be as little as a few percent by then.¹⁷⁰ There are compelling reasons for the world to work toward this goal, as we shall see shortly.

Demand for natural gas is projected to more than double between now and 2050, and it is difficult to imagine any scenario in which we will not be aggressively pursuing it (and oil) between now and then. Natural gas is widely used for heating, cooking, and industrial purposes. It comprises about one- fourth of all energy consumption in the United States. It has a growing niche as a gaseous transportation fuel, and various gas-to-liquid technologies have good potential for providing liquid fuels. It is the prime feedstock for making agricultural nitrogen fertilizers. Of the big three fossil hydrocarbons, natural gas is by far the cleanest, with roughly one-tenth to one-thousandth the amount of sulfur dioxides, nitrous oxides, particulates, and mercury of coal or oil. When burned, it releases about two-thirds as much carbon dioxide as oil and half as much as coal. There is also considerable room to improve the efficiency of natural-gas-fired plants, mainly by replacing gas-fired steam cycles with more efficient combined-cycle plants.

The biggest drawback of natural gas, of course, is that it’s a gas. Unlike coal and oil, which can be simply dumped into tankers or a train car, it isn’t very portable. Getting natural gas from wells to distant markets requires either an intricate pipeline system or construction of a special refinery to chill it into liquefied natural gas (LNG). Because LNG takes up only about one six-hundredth the volume of natural gas, it can then be transported using tankers. At present, LNG comprises only a tiny fraction of world gas markets, but its use is growing fast. It is especially appealing for remote gas fields that would otherwise be uneconomic to develop. However, this does not come cheaply. A joint LNG venture begun in 2010 by Chevron, Exxon Mobil, and Shell off the coast of Australia, for example, was expected to cost roughly USD $50 billion. The project will tap offshore gas fields for Asian markets and, together with other LNG projects, could make Australia the world’s second-largest LNG exporter after Qatar, with revenues in excess of USD $24 billion per year by 2018.¹⁷¹

A second drawback of natural gas, similar to a big drawback of oil, is that most of it is concentrated in a handful of countries. The world’s largest reserves, by far, are controlled by the Russian Federation (about 1,529 trillion cubic feet or 23.4% of world total), followed by Iran (16.0%), Qatar (13.8%), Saudi Arabia (4.1%), the United States (3.6%), United Arab Emirates (3.5%), Nigeria (2.8%), Venezuela (2.6%), Algeria (2.4%), and Iraq (1.7%).¹⁷² China and India, projected to be the first- and third-largest economies by 2050, have only 1.3% and 0.6% of world reserves of natural gas, respectively. These countries will require aggressive imports of foreign gas to meet their needs.

Like oil, gas fields are finite, so our transition to natural gas is something of a bridging solution to our long- term energy problems. But, as the cleanest-burning fossil fuel, with lowest greenhouse gas emissions and greatest room for efficiency improvements, it is by far the most environmentally appealing of the three. There are substantial world reserves remaining, a long history of exploitation, and additional markets for fertilizers and perhaps hydrogen feedstocks. In the coming decades natural gas will be an elite commodity, highly prized wherever it is found. There seems little doubt that natural gas, like oil, is a raw resource we shall pursue to the last corners of the Earth.

Coal, in contrast, is plentiful and found all over the world. Proved reserves of natural gas have R/P life-index lifetimes of only around sixty years, but for coal they are at least twice as long, often up to two hundred years.¹⁷³ The largest reserves are in the United States (238.3 trillion tons, or 28.9% of world reserves), Russia (19.0%), China (13.9%), and India (7.1%), but coal is mined all over the planet. Coal fueled the Industrial Revolution and, despite popular perceptions, is the world’s single largest electricity source today. Half of all electricity in the United States comes from more than five hundred coal-fired power plants. In China it’s 80%, and the country is building about two new plants per week, equivalent to adding the entire United Kingdom power grid every year. ¹⁷⁴ Coal can even be gasified to make synthetic natural gas (SNG) or liquid diesel and methanol transport fuels. South Africa has been doing this since the 1950s and currently makes nearly two hundred thousand barrels of liquid coal fuel every day.¹⁷⁵ Under our current trajectory, world coal consumption is projected to grow 2%-4% annually for many decades, surpassing oil to become the world’s number one energy source. Should current trends continue unabated, coal demand will nearly triple by 2050.

It’s enough to make you wish there was more oil. Coal is the dirtiest and most environmentally damaging fuel on Earth. Entire mountaintops are leveled to obtain it. Coal mining pollutes water and devastates the landscape, covering it with toxic slurry pools and leaving behind acidic, eroding deposits upon which nothing will grow. I studied one of these places for my rather traumatizing master’s thesis. An hour’s fieldwork would leave me