Richard Jennings

At the time this article was published Richard Jennings was a research officer with the Legislative Research Service in the library of the Ontario Legislature.

The energy crisis is fundamentally caused by a shortage of convenient energy sources available at low cost. Cheap oil, the basis upon which our present energy inefficient economy and society were built, is no longer available. This article discusses the profound social and technological adjustments necessitated by the energy situation.

The cost of imported oil, around $2 a barrel in 1970, is approaching $40 landed in Montreal (June 1980). The costs of incremental domestic sources will not be much less. To maintain and improve our standard of living, goods and services must be available at an affordable cost. The demand for energy is really a demand for space, water and industrial heat, mobility, light, cooling, motor drive and electronic applications. The demand for these services will be determined by their relative costs, population growth, economic growth and lifestyle changes. Demands can be met under constrained energy circumstances by providing these goods and services more efficiently, by expanding the supply of convenient sources of energy or by substituting, where practical, less convenient sources of energy for those sources facing the most constraints. Crucial to all this is the energy pricing issue. This will influence demand in the short term and more strongly in the long term. It will determine how much of the energy resource is economic to produce and where the substitution of alternative fuels will be practical.

Oil demand faces the most severe constraints. It is in most widespread use and is difficult to replace in some applications. The energy policy of the short-lived federal Conservative government was aimed at achieving oil self-sufficiency for Canada by 1990. The Canadian Petroleum Association believed this was possible but would require expenditures of $200 billion, a reduction of the energy demand growth rate to 2%, a rapid expansion of tar sands production. continued record exploration levels and annual price increases of $4-5 a barrel until the world price is reached. The present Liberal government feels this is possible but is not setting a deadline. Industry officials now believe that this cannot be achieved until 1995.

While enormous energy investments would be required for Canada to achieve historic consumption growth rates for oil, it is probable that manageable, though still large, investments would allow present production levels to be maintained. By increasing energy efficiency particularly for new equipment and by substitution of available energy sources for oil where practical, economic growth could continue.

Specific industries such as the automobile industry, to which one in six workers in Ontario owe their jobs, will have to make great adjustments. Higher energy prices and the distribution of the additional revenue will have the effect of transferring large amounts of wealth throughout the economy. The energy industry will argue for a large share of additional revenue to cover exploration, development and risk costs. However, governments will argue for the largest share to prevent a massive transfer of wealth to multinational corporations, to lessen the impact of higher prices on lower income groups and to finance conservation and alternative energy technologies. Furthermore the provincial and federal governments will have to reach an agreement on how to divide additional resource revenues.

Expansion of Traditional Energy Supplies

Conventional domestic oil production has long been expected to decline significantly before the end of the century. Pessimistic predictions have forecast production to fall from 200,000 cubic meters a day (M3/d) to as little as 80,000 M3/d by 1995. Optimistic sources have forecast that eventually recoverable reserves in Alberta will be 8 billion M3 and present production levels can be maintained until well into the next century. If the three additional proposed synthetic oil plants are completed, production of synthetic crude will be in excess of 80,000 M3/d. However, each of these plants is expected to cost $5-7 billion in addition to the environmental costs of strip mining, bituminous mine tailings and sulphur dioxide emissions. Water requirements are high and the economics remain uncertain.

Heavy oil deposits in Alberta and Saskatchewan do not require separation of bitumen and sand, however, like tar sands they are too thick to flow naturally. Except in the few areas where little overburden allows economical mining, the unconventional oil deposits must be heated in place until they will flow. Resources are estimated to be as high as 1500 times present annual Canadian consumption. Deposits of carbonate rock beneath the tar sands may contain an energy resource of equal magnitude. Upgrading plants to produce gasoline and middle distillates from residual oil could help to reduce consumption of oil. A series of plants to upgrade 20,000 M3/d will cost an expected three billion dollars. The economics will depend on alternative markets for heavy oil and the price at which competing natural gas is available.

Offshore oil production is likely within 10 years with the most optimistic forecasts being an eventual 80,000 M3/d from the East Coast Hibernia find and 160,000 M3/d from the Kopanoar find in the high Arctic. As yet neither find has been fully delineated and exploratory ocean drilling can cost up to 550 million per well. Bringing the Hibernia find to the production stage will cost at least $2.5 billion.

The continuing strength of the OPEC cartel and the political instability of many of its members indicate an increasing real price and decreasing security of supply. Maintaining imports near present levels would entail severe risks. It appears that by the end of the century the minimum domestic oil production will be between present production and consumption. Based on moderately optimistic assumptions, an annual growth rate of 1% could be sustained. with levels of investment of $100-200 billion required for exploration, develop merit and production.

More than 40% of Canadian natural gas production is exported to the United States. If present production levels can be sustained and exports phased out by 2000, consumption could grow by more than 2.5% a year. The Deep Basin in northern Alberta and British Columbia could have gas reserves equivalent to 30 times present Canadian annual consumption. Located in tight sands with low porosity and permeability the gas will have high production costs because of the need to develop advanced fracturing techniques. Production from these reserves could be 1.5 times present Canadian consumption by 1984 with investments exceeding $13 billion.

Arctic reserves containing 7-14 years supply of gas have been discovered, however, the Alaska gas pipeline's estimated $23 billion cost and long delays have made production uncertain. Gas reserves near Sable Island of Nova Scotia may be developed if they hold 1-2 years supply. The liquefaction of natural gas from the high Arctic and its transport to the east coast although hazardous has been proposed with investment likely to exceed $1.5 billion. Conversion to methanol for use as i liquid fuel while less efficient would be less hazardous.

The very large western Canada coal reserves can be expanded to meet likely industrial, electrical utility and synthetic fuel requirements. A tripling of coal production is possible in the next 20 years if there is some substitution of coal for oil or gas. Significant environmental problems could result from a large increase in strip mining in Alberta and British Columbia. Large lignite deposits such as the Hat Creek deposit could be developed for electricity production or coal gasification.

Electricity produced from hydraulic and nuclear power accounts for almost 18 percent of energy use in Canada. Based solely on present commitments there will be at least an additional 9000 MW of nuclear and 20-30,000 MW of hydro capacity built in the next 20 years. This would permit a growth rate of 2.5% a year. The cost will be at least $1,500 per kW of capacity in 1985 dollars or a total investment of $45-60 billion. Further expansion will be constrained by environmentalists, falling load growth, and borrowing limits imposed on utilities.

Thus it. would appear that coal, gas and primary electricity supply can be expanded 2.5-3.5% annually while oil supply grows at a rate of less than 1%, for an overall energy growth of 1.5-2.5% annually.

Conservation

Space heating requirements for existing and to a greater extent for new homes can be reduced considerably by investments which while high, in the $2,000-3,000 per house range, are less than half that required to supply the energy saved with natural gas. The following technological and construction changes are essential if conservation is to be effective.

Increasing insulation levels to those recommended by the National Research Council could halve heating requirements. The Conservation House in Regina uses 4% of average requirements by retaining heat generated by the heating equipment, people, appliances and captured sunlight longer. Retrofitting old buildings will be more expensive than constructing new energy efficient ones because of former building practices.

Tight construction, employing a vapour barrier can reduce air changes from 0.51 / hour to below 0.25/ hour, the minimum necessary to maintain a healthy environment. By directing most air through a heat exchanger, the warm out-flowing air supplies 60-80% of the heat required by the cooler in-flowing air, thus maintaining a healthy air flow with the minimum heating requirements.

Increasing the efficiency of oil and gas furnaces from 60-65%,(with newly developed furnaces and proper maintenance) to 70-75% could reduce fuel use 10-20%. Heat pumps are 2 to 3 times as efficient as conventional electric resistance heaters at providing heat at temperatures above 0 degrees C and could use 40% less electricity though at considerable capital cost.

District heating systems combust fuel at a central facility alone or in combination with electric generation and pipe hot water or steam to individual homes. While they operate at a high efficiency, there are energy, losses and high capital costs involved in distribution. A district heating system can use heavy, oil. coal or wood to heat homes instead of light oil or gas.

Passive solar heated homes are designed to maximize the heat gain from the sun in the winter and minimize it in the summer by careful use of windows, landscaping, shading and the building mass.

Certain changes in the present lifestyle of Canadians could also result in considerable savings. For example:

Reducing indoor temperatures from 22 degrees C to 20 degrees C reduces consumption by 10%. Use of warmer clothing and blankets and electric blankets could allow temperatures of 18 degrees C to 13 degrees C at night.

Smaller dwellings have lower heating requirements. Square or circular dwellings minimize surface area and, thus, beating requirements.

The heating demand for multifamily dwellings (row-houses, apartments) is 50-70% that of single family dwellings because of the reduction in exterior wall space.

The average household size has been decreasing in recent years with rising incomes. Larger household sizes would mean lower space heating requirements per capita.

The population growth rate is expected to be less than 1% annually. Due to demographic and social trends, however, the rate. of household formation will likely be somewhat higher, around 1.5% annually. New dwellings can be built to consume half as much energy as present dwellings. Existing dwellings would only have to reduce their energy use by one-sixth to ensure that the overall use of energy for space heating did not increase.

The energy use by appliances could be reduced by 25% per household by increased insulation of hot water tanks and water heating at the point of end use; increased use of microwave ovens which are approximately twice as efficient as conventional ovens due to higher insulation and more rapid cooking; improved motor efficiency and increased insulation for refrigerators, freezers and air conditioners; replacing incandescent lighting with fluorescent lighting which is more than four times as energy efficient; increased use of transistorized solid state and semiconductor technology.

These rather modest improvements in energy use would allow the expected growth rate in households to take place while holding the energy used by appliances constant, even with an increase in appliance saturation. In the event of the widespread introduction of new appliances there will be an increase in energy use. However, they will likely be highly efficient and not increase energy, use significantly.

Commercial buildings are often quite inefficient in their use of energy. Lighting levels are usually much higher than necessary, and lighting and heating systems are left on when not required. Even on very cold days, the internal heat production from workers and machines can be greater than the heat loss but because of the poor distribution of heat, different parts of the building are being cooled and heated at the same time. Energy use can also be reduced by:

Modifying existing buildings by reducing lighting levels, switching to task rather than area lighting and improving systems control. In the longer term retrofitting to improve ventilation, insulation, and double glazed windows could reduce energy use by 20%.

New buildings with improved ventilation systems, lower lighting levels, and computer controlled energy systems could be built to consume only 67% of present buildings.

Energy conservation buildings, such as the Ontario Hydro building in Toronto, use reflective glass around the outside of the building, to reflect sunlight out, thus reducing the building's cooling load in summer. The internal heat generated by employees, lights and machines is reflected back into the building to retain heat during the winter. Heat pumps extract heat from warm areas of the building and pump it to cooler areas. When there is an excess of heat it is pumped to large water storage tanks in the basement. Buildings designed in this way could consume about 40% of present buildings. The Gulf Canada building recently constructed in Calgary is even more efficient in its use of energy.

With a 20% reduction in energy use by existing buildings and a 50% reduction for new buildings a 2% annual growth rate for commercial floor space could occur without increasing present commercial energy use.

Industry has made the most progress of all the sectors in controlling energy consumption, but there is still room for improvement in the following areas:

The average efficiency of electric motors in manufacturing is about 52% because most are operated at low load factors. Historically, low energy costs led to the purchase of oversized motors to meet peak demands while minimizing capital investment. A better matching of motor size to average load with the use of backup motors for peak demand or the use of Alternating Current Synthesizers developed by Exxon could increase efficiency to 75%.

Process steam and direct heat use per unit of output could be reduced by 25% by using more continuous processes and by increasing waste heat recovery and reuse.

Space heat and ventilation energy, use could be reduced 25% by improving insulation, lowering heating temperature, raising cooling temperature and by, using recovered waste process heat.

The pulp and paper and iron and steel industries use ten times as much energy per dollar of value added as the machinery and electrical products industries do. While changing the present structure of industry would be difficult, future industries could be encouraged which are less energy intensive.

Co-generation: Electricity is produced from fossil fuels at an efficiency of around 37%. Industry produces process steam in boilers at efficiencies of up to 80%. If an industry uses equal amounts of electricity and steam, then its overall energy efficiency is about 60%.

In co-generation, the steam is discarded early from the turbines when it is at a high enough temperature to be used as process steam. While this reduces the efficiency with which the electricity is generated to about 20%, the overall efficiency of the fuel use rises to 70-80%. Ontario Hydro estimates that by the year 2000, industrial co-generation capacity in Ontario could be as high as 2000 MW.

Over the next twenty years, a 2.2% annual growth in industrial activity is possible without increasing industrial energy use. If the new industry was only half as energy intensive as existing improved industry then a 3.8% annual increase in industrial activity would be possible.

Perhaps the most crucial need for conservation is in transportation due to this sector's almost total dependence on oil. Still some improvements can be made. The U. S. Congress has legislated that the Corporate Average Fuel Economy of new cars sold in 1985 must rise to almost 12 km/liter, and Transport Canada has adopted this as a guideline. The auto companies have reduced the weight of the automobiles by downsizing and substituting lighter materials wherever practical and using smaller engines. While Canadians have been slow to adopt smaller cars, and testing methods exaggerate mileage by 10-20%, these efficiencies will be achieved due to sales of imported cars. By 2000 all automobiles will have been built since 1990.

Modifications to present internal combustion engines such as fuel injection, stratified charge and turbo charging reduce fuel use. Alternative engines are being designed which burn oil more efficiently and can use a greater fraction of a barrel of oil. Currently 30-40% of oil is refined into gasoline in Canada. The diesel engine has 25% better efficiency and uses less costly distillate oil, but nitrous oxide emissions are high.

Public transit systems, intercity buses and trains operate almost 6 times as efficiently per passenger mile as automobiles and airplanes. Proposals to increase public transit use include greater public subsidies, increased parking rates, dedicated rights-of-way and more use of existing railways. Increased load factors for trains, automobiles and planes would improve efficiency.

Less acceleration and idling while driving and increased vehicle maintenance can conserve 20% of fuel use. Other measures include reduction in short trips by substituting walking or cycling for driving; increased urban density makes public transit and walking more competitive with the automobile in terms of convenience and cost; and communications can be substituted for transportation by replacing business trips with video phones for as little as one tenth the energy cost in the short term. In the longer term home computer terminals could eliminate commuting.

The implementation of conservation levels which are economic based on present technology and prices would be equivalent to a 2.3-2.8% annual increase in energy availability over the next 20 years.

Inter-fuel Substitution

Oil presently accounts for more than 2/5ths of Canada's energy use. The substitution of more available energy sources could save a lot of oil. The primary use of oil in the residential and commercial sectors is for space heating. Natural gas could be substituted in any area with a population density large enough to justify a pipeline distribution network, probably any town of 1000 or more people within 10 km. of an existing line. Residences in lower density areas could be heated by electricity. Active solar heating systems using an oil fired backup system would reduce the need for utilities to provide electric or gas supply capacity operating at a very low load factor. Coal, wood, wood waste or refuse fired district heating systems, where the heat is generated at a central facility and piped to residences by water or steam, could be particularly useful in high density areas although the retrofitting of old areas would be very expensive.

Crude oil is not a homogeneous product; refining oil produces a series of products with variations in density, viscosity and heat value. The products can be separated by distillation because of the difference in boiling temperatures. However, to get a mix of products closer to that required by the market the molecules of some of the heavy products are cracked to produce lighter fuel products. Cracking is done, using catalysts. high temperatures or hydrogen. The range of products will depend on the design of the plant which will take into account the products relative demand in the market. Changing the mix will require large investments in retrofitting refineries or in heavy oil upgrading plants to further crack the residual oil.

With present low saturation of natural gas in Quebec and the absence of it in the Maritimes together with the opportunity in Quebec to increase the saturation of homes heated by electricity, great opportunity for going off oil exists. Light fuel oil used for space heating is interchangeable with diesel fuel used in transportation. By substituting natural gas for light fuel oil. a surplus of diesel fuel would be available. Increased use of diesel fuel for transportation would reduce gasoline requirements and overall demand for petroleum products. Gas could also be used to replace the reduction in heavy fuel oil and petrochemical feedstock caused by the lowering of overall production. This way, a 21 % increase in natural gas consumption or a 13% increase in production could replace 10% of present oil use if about 40% of present light fuel use was replaced by natural gas.

Substitution can also involve the use of alternative engines employing the Rankine (steam), Brayton (gas turbine) or Stirling cycles which are able to burn a broader range of petroleum and other fuels. The commercialization of the engines requires the development of inexpensive high performance materials.

Non-petroleum based fuels, such as methanol and hydrogen, can be used in present engines with some modifications. Methanol can be produced from natural gas, coal, wood or refuse though at present not competitively with gasoline. Hydrogen can be produced from natural gas, coal or the electrolysis of water using off-peak electric power generation. The main technological problem facing hydrogen use is storage of the light gas. The most practical storage method at present is in a chemical bond with titanium or other expensive metals.

Electricity can be substituted for oil in space heating although the load factor in the utility's capacity of about 30 percent makes the electricity cost high. It is not economical to supply this load with nuclear power without an energy storage or load management system. Electricity can be used to replace gasoline in urban transportation. In the short term, electric-transit systems could be expanded in densely populated urban areas where the capital costs would be justified. In the longer term, beginning about 1985, electric cars will begin to penetrate the market. Electric vehicles are very energy efficient at the point of end use, however, the power source will have a low energy to weight ratio. This limits the car's range to 100200 km between charges and requires the cars to be lightweight, making them impractical for highway driving. The zinc-chloride battery developed by Gulf and Western appears to be promising in overcoming both of these problems. Urban driving presently accounts for over half the driving in Canada so the potential for substitution is large.

Most estimates of the contributions of renewable energy sources, other than hydro, range from 2-5% of energy supply by the end of the century. One of the most promising opportunities would be to move the pulp and paper industry, which contributes a large share of Canadian exports and consumes 6% of the energy used in Canada, towards energy self-sufficiency by increased use of wood and other process waste for energy purposes. Use of wood for space heating will also increase.

Solar heating and wind power, particularly in remote locations, will increase as will the use of garbage and waste as a fuel. The commercialization of photoelectric cells would be highly important but significant use in Canada in this century is unlikely. The harnessing of tidal power in the Bay of Fundy, one of the most promising sites in the world, has always appeared to be uneconomical, but this could change.

In total, it appears that other fuels can economically be used in place of oil for 10-20% of its present uses.

Summary

Capital investments in the order of $200-300 billion in the next 10-20 years will be required to end Canadian reliance on imported oil and to permit annual growth rate of 1.5 to 2% in energy consumption and 1% in oil use Conservation investments in the $100 billion rang would probably be sufficient to allow a 2.5% annual in crease in activity over the next 20 years at present energy consumption levels. Investments of less than $50 billion may be sufficient to substitute other forms for oil in 20% of present uses without effecting the present mix of re fined petroleum products. Upgrading the residual oil will make substitution of 30% of present petroleum us feasible.

The combination of these strategies employed will depend on pricing policy, rate of return required by investors, degree of government participation and incentives, prevailing interest rates and the availability o capital to large and small users.