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
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
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
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%
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
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
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,
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
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
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.
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
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.
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
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.