Risk Assessment and Energy Use - Term Paper Example

Risk Assessment and Energy Use A report on future trends in energy costs relevant to the company and its operations for a strategy development seminar that is looking at energy supply policy for the next five year period. Abstract With the progress of time there has been realized that the exploitation of resources that was carried out by man has had a highly detrimental effect on the natural resources and the ecology of man. Today the world faces the many problems of global warming, climatic changes, flash floods, droughts, and other such natural calamities. Also there has been realized that the economic complications that this shortage of resource posses is also highly problematic (Demirbas, A, 2009). There has been realized that with the depletion in the natural resources, there are today present fewer resources to be utilized. This has caused the prices of the natural resources to have risen, and consequently the whole production process has become more expensive. These problems are faced due to the use of fossil fuels which are limited in nature and the pool of these resources and fuels are reducing every day. To ensure that the human race is ready to face this growing economic and environmental problem, the sustainable approach has been developed by most environmentalists and energy experts. There is today felt a need to develop alternate technology that would not be dependent on the fossil fuel for energy supplies, while at the same time be environmental friendly. There have been many alternate energy resources that are being developed by governments around the world to ensure that these challenges that are being faced on the economic as well as on the environmental field can be addressed (Farrell A E, 2006). In the following paper there shall be conducted a detailed discussion on one of the many alternatives that have been developed by man, that is, the Bio fuels. Background Current Energy Markets and Future challenges The world primary energy demand as per the World Energy Outlook 2011 shows a clear picture of how oil is on the top spot as far as energy demand is concerned. Next to oil is coal and after that gas, renewables and finally nuclear. The report shows that the maximum growth for the next 25 years will be in the demand of renewable and on the second position in terms of demand growth will be gas while oil, coal and nuclear almost showing the same growth. Fig 1 World primary energy demand The primary energy growth demand as per World Energy Outlook 2011, the global enrgy demand increases by one third-from 2010 to 2035, with China and India claiming almost 50% of it and the least and almost constant by Organization for Economic Co-operaton and Development (OECD) countries. Fig : Growth in primary energy demand in the New Policies Scenario (Mtoe = Million Tonnes of Oil Equivalent) The current energy market gives a varied picture of the future energy needs and usage. There are some worrying facts about energy usage. The CO2 emissions have rebounded to a record high and the globally the energy efficiency has worsened. The other thing is that oil imports have also peaked. The pattern of energy usage worldwide gives a clearer picture of the dynamics of the markets. According to (International Energy Agency 2011), emerging economies determine the energy market dynamics. The next 25 years will witness the maximum demand of energy from countries like China and India. The expected demand from China alone will be around 30% again making it the largest energy consumer. Energy growth rates Brazil, Middle East, Indonesia and China are faster than that in China. As far as energy is concerned, the world is and will (in future) focus mainly on Asia. Global oil production is going to reach its peak but the share of output of natural gas and unconventional sources is also growing up. However, for all nations there have been an increased reliance on imports of crude oil, which raises concerns about the cost and supply security of imports. Out of the conventional sources of energy, natural gas has an important role to play in near future. Gas consumption is fast increasing and power sector is mostly responsible for the increase in gas demand. Gases like shale gas, tight gas and coal bed methane, which are called unconventional gases, are on their way to become important on the world energy usage scene. The demand for oil and coal is strong at the moment but it sure is going to fall and the demand for gas is going to increase if we consider the growing concerns about the CO2 emissions globally. Since gas is the cleanest of fossil fuels, the demand is growing. However, it still depends on future policy decisions to determine the role of oil, coal and gas. Russia being the largest producer of gas at present has a greater role to play in future. Coal, on the other hand, over the past decade has accounted for nearly half of the increase in use of global energy due to the demand from power and industrial sectors in China. The future of the coal markets will completely depend upon the government policies of developing nations especially China and India. Coal reserves total to a 1 trillion tons which makes it the most abundant fossil fuel globally. China, India and Indonesia will be the most important or bulk suppliers in future. In the past decade, 2000 - 2010, the growth in global energy demand has been maximum for coal, almost equivalent to the total growth shown by Natural Gas, Oil, Renewables and Nuclear (World Energy Outlook 2011). Among the non-coal sources of energy, Natural gas has shown the maximum growth and next to it is oil while Renewables showing almost equivalent growth to oil. Fig 3 growth in global energy demand, 2000-2010 Nuclear energy which has been considered the alternative to the fossil fuel energy sources and also has been considered a big bet to quench the thirst of nations especially of the developing economies is now facing a future of uncertainty after Fukushima Daiichi Nuclear disaster. Japan’s Fukushima Daiichi Nuclear Power plant suffered huge damage after an earthquake and subsequent tsunami hit in march 2011. Due to this there were nuclear meltdown and nuclear radiation leaks. After the accident, there have been increased concerns over the safety of the nuclear energy. Emerging economies continue to drive global energy demand World energy consumption is projected to increase 57 per cent between 2002 and 2025 or by 2.0 per cent per year on average-lower than the 2.2 per cent average growth rate from 1970 to 2002-according to International Energy Outlook 2005 (IEO2005) from the energy information administration (EIA). Emerging economies account for much of the projected growth in consumption with energy use in that group more than doubling over the 23 year forecast period in the IEO2005. The use of all energy sources increases over the forecast period, but oil remains dominant and fossil fuel use grows faster than non fossil fuel use. World oil is expected to grow from 78 million barrels per day in 2002 to 119 million barrels per day in 2025. Beside this, world net electricity consumption nearly doubled in the reference forecast. Of this, more than one half 59 per cent of the growth occurs in the emerging economies where electrification use increases on average of 4 per cent a year as opposed to average increase of 2.6 per cent worldwide. The idea behind all the statistics is simple. The developed countries of the world have already invested in and burnt off the process of their growth. Also important is the fact that a majority of the world’s population that lives in underdeveloped countries is only now beginning to witness growth and increase their consumption of fossil fuels. Renewable Energy Renewable energy is energy that does not owe its origin to the fossil fuel family of petrol, diesel and kerosene. This would then mean that renewable energy is energy that comes from sources like wind, sun, water and nuclear elements. The environmental usage of bio fuels over fossil fuels cannot be debated. There are many scholars who have clearly stated that the use of bio fuels will help ensure that the growing problem of global warming is addressed. This is important as there is today being faced the problem of environmental instability where there have come forward many cases of carbon dioxide emission. There has to be realized that the various usages of fossil fuels is one of the most important reasons that are contributing to carbon dioxide emission in the environment that lends heavily to the phenomenon of global warming. Fossil fuel vehicles and electrical equipment, such as air conditioners; were made for our convenience (Bounds A, 2007). However, these products produce large amount of carbon emissions and create air pollution problems. Furthermore, global climate has dramatically changed over the past ten years due to fossil fuel related air pollution problems. These pollution problems lead to an increase in global temperature, as known as the global warming. Global warming causes sea levels to rise and changes the amount and pattern of precipitation, including expansion of subtropical deserts. Global warming is expected to be strongest in the Arctic where it causes a continuing retreat of glaciers, and sea ice. It also changes in the frequency and intensity of extreme weather events, species extinctions, and causes agricultural yields. It can lead to profound economic problems (McMillen S, 2007) Today there has been realized that the use of fossil fuels is highly detrimental to the environment and there are alternative energy resources that are being developed. In fact most of the countries today have started developing alternative energy resources which are more sustainable in nature, are environment friendly while at the same time are derived from renewable resources. This is due to the fact that except for reduction of carbon dioxide from fuels, the other important factor that has to be today functioned into the new energy system is that of fuel efficiency. This is due to the fact that fossil fuels are not renewable in nature due to which the world is today standing on the verge of an energy crisis. This is due to the fact that the source pool of the fossil fuels has reduced considerably in the recent times. The world today is facing the problem of oil crisis and other fuel problem (Hammerschalg R, 2006). There has been seen that countries like India, Germany, America, Australia, and others are today developing other viable energy sources, such as solar energy. Growing importance of natural gas Natural gas is a crucial sometimes irreplaceable compound for a variety of industrial applications; in fact the industrial sector alone consumes 43 per cent of the natural gas share in the US. Natural gas is used in manufacturing for plastics, fabrics and antifreeze among hundreds of other consumer products. Hydrogen produced from natural gas is an essential product in petroleum refining. More importantly, natural gas and oil are vital for modern agriculture. The industrial farming system developed by western society is characterized by vast monocultures of a single crop, which relies on the assistance of large scale machinery and synthetic fertilizers and pesticides. Ammonia derived from natural gas is an essential component of chemical fertilizers. This is not to discount the fact that natural gas is an important energy source.    There have been a number of bio fuels that have been developed over the years. These include bio diesel, which is perhaps the first bio fuel that was known to mankind at large. It is a popular form of energy fuel in the form of a liquid and is usually used as a substitute for diesel fuel in cars and other vehicles. Another famous bio fuel that is utilized in the world today is that of bio gas. Bio gas is usually derived from plant or animal waste, and can be derived from both at the same time. The positive part of both these bio fuels is that they make use of the system that is already in place and there does not have to be put into place new technology to support these. The bio gas can make use of the same burners that are being utilized currently for natural gas, and the bio diesel can easily be utilized as an alternative for diesels in cars that have diesel engines and make use of diesels (Strahan D, 2008). People now realize the importance of environment protection and there are being undertaken a number of steps to ensure that these can be ensured in the long run. This is through the development of the a sustainable method of energy production that will take into account the environmental needs of society not only in the short run but also in long terms, where the energy production can be sustained in accordance to the needs of the people. President Obama indicates that within ten years, the U.S. government will allot $150 billion for energy efficiency and carbon reduction policy. He believes this investment could bring energy efficiency and carbon reduction improvement to a next stage of development and create five million jobs. Energy efficiency and conservation are major elements for the improvement of the environmental impact of the energy sector, particularly regarding climate change. Energy efficiency also contributes to reducing dependence and vulnerabilities to foreign oil. Bio fuels have been developed as an alternative form of energy that takes into account all these requirements and helps provide a cheap alternative or fossil fuels. But there has to be realized that there have been certain problems that have been faced in the development of these technologies (Thomas, Choi, Luo, Okwo and Wang, 2009). There has to be realized that in the development of all technologies there are problems that are faced. In the case of bio fuels, the problem that has been faced is that although it helps provide an alternative for fossil fuels, it makes use of plants and bio resources. This leads to a greater need of utilization of the agricultural foods. This helps reduce the overall cost of energy production in the society. The figure denotes that the use of renewable energy more than quadrupled in UK between 1990 and 2007 For example, in the years between 1990 and 2007, the usage of renewable energy that comes from natural sources in UK more than quadrupled. The problem with this trend is that it is unsustainable in the development of renewable energy as a system for producing energy. This is caused by the fact that the growth in the usage has been driven primarily by sources four sources: 1. landfill gas, 2. plant biomass, 3. wind power and 4. liquid biofuels. Landfill gas is fundamentally unsustainable as a source of energy " it's a net loss not a source of energy. Plant biomass, although technically "renewable", is being burnt very inefficiently in large, coal-fired power plants, and this represents a loss of a potential energy resource if it were used more efficiently. And though liquid biofuels are on the face of it better, the global growth in biofuel use is not cutting carbon emission or fossil fuel energy use in the transport sector. Available Alternative Energy Sources in the UK Apart from the conventional sources of energy, Alternative, or renewable energy, sources are also available in the market. The fossil fuels and nuclear energy have hazardous effects on the environment due the harmful waste in the form of gases and radioactive waste. The alternative energies help protect the environment and conserve conventional energy sources. As per the EU’s Renewable Energy Directive the UK has to supply 15% of its energy consumption from renewable sources by 2020, with interim targets of 4% for 2011-12, 5.4% by 2013-14, 7.5% by 2015-16 and 10.2% by 2017-18. (Analysis of renewable growth to 2020 2010) In 2009, the UK government published its Renewable Energy Strategy (RES), which covered all the factors important for deployment of Renewables for future. RES provides for the market incentives for all sectors of the energy market. This comes as an impetus to the companies, communities and individuals to make investments in these areas and reap handsome benefits. However, the renewables involve different technologies which have their own constraints and limitations. The graph below shows the historic data and the projection to 2020 regarding renewable energy production in UK. There are 3 projections for years up to 2020 – upper estimate, lower estimate and the central estimate. Also shown is the EU’s Renewable Energy Directive targets. Fig 5 UK renewable energy production 2005-2009 and projection to 2020 The various forms of available alternate energies are as follows. Onshore wind Presently, one of the most mature renewable energy technologies is onshore wind. Since 1991, wind farms have been operating in the UK. Wind speeds are good in the UK and thus there is huge onshore wind resource ready to be tapped and utilised. Offshore wind The potential for offshore wind generation around the UK coastline is tremendous. In 2001, The Crown Estate granted a number of twenty-two year leases for development of offshore wind projects in the UK. There were 14 projects in total but only 11 are operational now. By the end of March 2010, the UK offshore wind industry became the world’s largest. Biomass electricity Different technologies are used to generate electricity from biomass. Thermal processing and anaerobic digestion are used to produce biogas which is used in gas engines. Woodchip, waste wood, energy crops, agricultural residues such as cereal straw and poultry litter, food wastes, livestock wastes and sewage sludge consist the biomass feedstock. RESTATS, the Renewable Energy Statistics database, data says that in comparison to some other renewable energy technologies, the biomass electricity has low installed capacity. However, it says it has increased overall from 2005 to 2008. Electricity from waste combustion The thermal treatment of waste produces energy which is used for generating electricity. The wastes used here are those produced by households and also similar type of waste from commercial establishments. These wastes are collected by the local authorities and are known as Municipal Solid Waste (MSW). Commercial and industrial waste consisting mainly of similar wastes collected by private disposal contractors is also by this industry. Solvents, clinical and hazardous waste and biomass are not used in this process. Total installed capacity has steadily increased since 2005 and the future also holds a reasonable promise. Landfill Gas When biodegradable organic wastes decay in the anaerobic conditions of landfills, landfill gas is produced. It is the mixture of methane and carbon dioxide. Landfill gas is used to generate electricity. The technology used for this is readily available and simple. The facility is situated adjacent to a landfill and the technology requires little modification. The future for the energy doesn’t look bright. At least, this is what some industry sources believe. They predict that there will be a decrease in landfill gas electricity capacity of between about 20% and 40% of 2010 levels by 2020. Solar Photovoltaics Solar photovoltaic devices and materials convert light energy into electrical energy. Most solar photovoltaic systems, in the UK, are installed on the roofs of domestic and non-domestic buildings. In mass production, 20-24% efficiencies have been obtained from silicon cells. Tidal stream Tidal stream energy is the energy that is extracted from the water currents in the sea. The capability of the tidal resources in the UK is estimated to be around 16.3 TWh/year (4.2% of 2008 UK electricity production). Hydroelectricity Hydro electricity is produced from the energy of moving water. Some assessments have concluded that there are opportunities of hydropower in England and Wales. Wave power Wave energy is the energy extracted from the motion of water in surface waves on the sea. The capability of the UK’s wave resources is estimated to be 52 TWh/year (14% of 2008 UK electricity production). Deep geothermal electricity Naturally occurring hydrothermal systems are exploited by geothermal energy by extracting heated fluids from permeable aquifers or fracture systems. This energy can be used to generate electricity. In the past, the UK evaluated the energy but the results were not encouraging. Solar Thermal In the UK, approximately 30% of energy is consumed by the domestic sector. Solar thermal energy helps to meet the space heating demand in the domestic sector. It is also used for domestic under–floor heating, heating of indoor and outdoor swimming pools and commercial water heating. Air and ground source heat pumps Heat pumps absorb heat from one place and release it at another place. The common use is in chillers to provide cool air to office buildings. It is also used to provide heating for buildings. Bioenergy boilers (heat) Bioenergy boilers burn fuels to produce steam for industrial, commercial and domestic heating. The fuels mainly consist such as wood and wood wastes from forestry, woodlands and energy crops, agricultural residues and clean wood wastes from industrial processes. This is a well developed technology and its demand is rising. First generation biofuels First generation technologies for biofuel production refer mainly to the fermentation of sugars to bioethanol and the trans-esterification of fats and oils to biodiesel. These technologies are proven commercially and are used all over the world. Second generation bio fuels Second generation biofuels refer to a range of technologies that convert lignocellulosic feedstocks to biofuels. The feedstocks used and the complexity of the conversion pathways determines whether the technology will be called first or a second generation. Electric vehicles Electric vehicles have been around for a few decades now but the technology is yet to come to its full utilization point. But due to the growing CO2 emissions and global pressure to save the environment, electric vehicles are becoming popular among people. Hydrogen Hydrogen is a good source of energy for vehicles. However, it has not proven to be profitable till now. Hydrogen as a fuel is used in batteries and the only by-product is water vapour. Below figure gives the energy production facts and estimate up to2020 for UK Fig 4: historic and projected energy production to 2020 in the UK Quantitative evaluation of cost and security of supply It is important to do a quantitative evaluation of cost and security of supply with respect to certain factors like likely increase in the energy prices in future and security of energy supplies and associated risks involved. Vendor, directly or indirectly, is at the centre of this issue since a supermarket's competitiveness is highly dependent on a vendor’s performance. So while evaluating other risk factors it is always imperative to look into the risks generated from the vendor end. In order to establish a risk quotient index evaluation system can be used using fuzzy analytic hierarchy process. This system, incorporating the quantitative (and as well as qualitative) approaches can give an appraisal of the vendor' risk. This system has been found to be highly effective and goes a long way in understanding the risks posed by vendors; giving clues to managing and controlling the same. The energy prices and the current global scenario of business that is changing by the day are certainly going to trigger policy makers to rethink about the supply chain management as it is prevalent today. In today’s world where most of the commodity cots are determined by the oil prices at any given moment of time; the problem gets intertwined with significant number of social, economic, and demographic factors calling for the need to reinvent the ways and means of doing businesses. Supermarkets are supposed to meet up the challenges rather too seriously on account of the magnitude of business and mass of clientele involved. Furthermore, security of energy supplies is dependent on the source of supplies or origins thereof. Of concern is economic and political dependence of any such arrangement. However, talking of fuel, it is independent of its energy supply source and taken as a domestic energy source. This is because the businesses are more concerned about the energy supply than the fuel that governments have to arrange for the same. Recommendations Recommendations for strategy development with respect to energy supply over the next five year period. The only way out of the situation which has developed at present is to ensure that more and more there is an effort on the part of the political will and the global environmental think tanks to ensure the fact that renewable energy is given time and effort to grow and develop as a serious contender to meet the global fuel and energy needs. Also important is the need to develop a societal consciousness towards the use of renewable energy. The problem is that more and more these projects will have to be developed based on the model of public private partnerships and not only singular government control. This will ensure profitability and increased adoption as well. Finally, investments have to be made toward the development of technology in the ecosystem space to the use of renewable energy. This would include cars that use chargeable batteries, solar lamps, hydraulic turbines among other things. References Bounds, A. (2007). “OECD warns against bio fuels subsidies”, Financial Times, October 9, 2007. Demirbas, A. (2009). "Political, economic and environmental impacts of biofuels: A review". Applied Energy 86 (2009) S108–S117 Farrell, A. E. (2006). “Ethanol can contribute to energy and environmental goals”, Science, Vol 311, pp 505-507. Hammerschalg, R. (2006). “Ethanol’s energy return on investment: a survey of the literature, 1999 to present” Environmental science Technology, Vol 40, pp 1746-1769.  Inderwildi, Q. R., King D A (2009). “Quo Vadis Bio fuels”, Energy and Environmental Science, Vol 2, pp 340-345. McMillen, S. (2007). "The Economics of Biofuels: A New Industrial Revolution?" Connecticut Department of Economic and Community Development, January 11 2007.   Naylor, R., Liska, A., & Burke, M. (2007). “The Ripple Effect: Biofuels, Food Security, and the Environment. “Environment, 49(9), 30-43. Retrieved November 16, 2009, from General Science Full Text database Strahan, D. (2008). “Green Fuel for the Airline Industry”, New Scientist, Vol 2669, pp 34-37. Thomas, V. M., Choi, D. G., Luo, D., Okwo, A., & Wang, J. H. (2009). “Relation of biofuel to bioelectricity and agriculture: Food security, fuel security, and reducing greenhouse emissions.” Chemical Engineering Research and Design, Vol 87, No 9, pp1140-1146  Read More