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Global energy efficiency will shift feedstock dynamics

Posted on November 16th, 2016 by in Chemicals Industry News and Analysis

coal fired plant

The shifting energy landscape will have a profound impact on the availability of all types of hydrocarbon feedstock for chemicals manufacturing, be they natural gas, coal or oil. 

Over the coming decades, energy efficiency and conservation will have profound effects on primary energy demand.

The International Energy Agency (IEA) highlighted its 450 scenario at a recent energy forum in Madrid. It suggest, for example, that European gas demand could fall by 30% by 2030 as increasing effort is applied to limiting emissions of carbon dioxide.

The scenario is based on the assumption that considerable effort will be put in to adopt renewables, nuclear power and other low carbon technologies. At the same time energy efficiency will increase markedly.

The discussion highlights the increasing importance that the battle to tackle climate change will have on the demand for hydrocarbons – be they natural gas, coal or oil. The shifting energy landscape will have a profound impact on the availability of all types of hydrocarbon feedstock for chemicals manufacture.

The IEA said last week that China was making huge strides in energy efficiency. Indeed. The developing world economies were achieving more in terms of energy efficiency than the industrialised nations. The drive towards “decarbonisation” is stronger than in the recent past but still not sufficient to achieve global warming targets The IEA has made encouraging energy efficiency something of a crusade.

Executive director, Fatih Birol, said that the IEA’s latest energy efficiency report described China’s energy efficiency story in great detail for the first time.

“It is a story of great progress, achieving huge efficiency gains over the last 10 years, but also revealing the opportunity for China to achieve much more on a path to the efficiency levels of other countries,” he said in the foreword to the report.

The report shows that energy intensity in the People’s Republic of China rose by 5.6% in 2015. That is up from an average of 3.1% a year in the previous decade.

Primary energy demand in China grew by just 0.9% in 2015, the lowest rate since 1997. The economy (in 2015) grew at 6.9% and, of course, oil prices were much lower than in the recent past.

China has done a great deal to boost energy efficiency and reduce pollution and costs. The statistics are staggering. Some $370bn was invested in China in energy efficiency between 2006 and 2014, the IEA says.

It adds that energy savings from efficiency were as large as China’s entire renewable energy supply. So energy efficiency and renewable energy are, in effect, China’s twin clean fuels.

“In the power sector alone, energy efficiency gains avoided the need for over $230bn in investment for new (mostly coal-fired) electricity generation. The avoided emissions from efficiency improvements were 1.2bn tonnes of carbon dioxide in 2014, equivalent to the total CO2 emissions of Japan.”

We have seen how new technologies can impact the global supply of chemical feedstock dramatically. And the shale gas revolution in the US is just not an ethane story but encompasses natural gas and the natural gas liquids from highly flexible unconventional oil and gas production. Methane availability is prompting investment in methanol and ammonia in the US and in methanol and to olefins in China.

Propane availability has prompted investment in PDH (propane dehydrogenation) in the US and in China. That, alongside the massive investment in new gas cracking capability in North America and the first commercial exports of liquefied ethane, is radically altering supply and demand balances for the major olefins and derivatives.

In the near future, the ready availability of LPG (liquefied petroleum gas) will tend to shift cracker output in Europe and Asia. In the longer term excess refinery capacity will have implications for naphtha availability and cost.

peak coal approaching

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All opinions shared in this post are the author’s own.

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