Professor Mar Rubio’s (Universidad Pública de Navarra) keynote speech about “Energy Transition in the periphery” opened the second day of the workshop. Based on Grübler’s (2004) definition of energy transition – in terms of growth in energy consumption, changes in energy basket and the energetic and environmental characteristics of the energy use – she has analyzed the hypothesis that large and small energy consumer’s baskets tend to change differently, which implies that the concentration of the energy mix developed differently based on the scale of energy consumption.
As earlier studies have shown, the energy transition in rich countries – with large energy consumption – was slow. Intuitively, one could expect that in poorer countries, with small energy consumption, the change in energy basket might take an even longer time. However, empirical evidence in the energy mix in Latin American countries showed very quick, and in some cases inverse and reversible, transitions, and an earlier transition to oil, compared to advanced economies. While in most Latin American countries oil became permanently prevalent over coal before 1930’s, developed countries started to use more oil in 1950’s-1970’s.
The empirical evidence also shows that the level of decarbonization in both developed and developing countries followed the same path, although a difference – a delay – in CO2 emission per unit of energy could have been intuitively expected. Professor Rubio found that there are four main variables which could cause the earlier and quick changes in the energy mix for developing, small energy, consumers. These include the initial level of consumption, as it is easier to switch the source of energy if the smaller amounts used. The lower consumption level can also indicate that a country is less dependent on the current energy infrastructure as technologies which imply scale of economies, but also large investments would end up in large sunk costs, which could prevent the installation of new infrastructure. The (relative) transportation cost of oil tend to be lower than of coal, which also supported the earlier transition while the policy with the trading partners also impacted the time of changes in energy mix.
The main conclusion of this study is that there is no standard energy transition model that could be applied for each – developed and developing, large and small consumer – country, rather, other factors, such as the size of the energy consumption, also influence the change in energy mix.
In the second part of her presentation, Professor Rubio introduced the Energy Mix Concentration Index to study the diversification of the energy mix of eight countries in the long run. The considered countries were grouped into two according to their economic and energy use histories; the early comers are with high mechanization and coal predominance in the 19th century – such as England and Wales, France and the Netherlands, while the latecomers are characterized by little mechanization with firewood dominating their energy mix until the 20th century, such as Portugal, Spain, Italy and Sweden. The Energy Mix Concentration Index is based on Herfindahl-Hirschman Index (Hirschman, 1964) that was first used to calculate the concentration of trade for a given country; the value a HHI index can lie between 0 and 1, where the lower value indicates less concentrated energy mix while HHI index close to one shows lower diversification.
The results show that early comers endure much more concentrated energy baskets, as the maximum concentration level in those countries occurred in 1930’s with a HHI index between 0.7-0.8 and dominated by coal. On the other hand, the maximum level of concentration in the less developed countries occurred in 1970’s due to the predominance of oil, while the HHI index took the value between 0.4-0.6. Therefore she concluded that the path towards today’s level of diversification of the energy mix differed over the past two centuries, as large consumers had to increase the diversification level, while small consumers were characterized by lower levels of concentration in their energy mix. This is due to the fact that energy transition requires changes in infrastructural investments which can be prevented by the inertia that distinguish large-scale embedded energy systems from small energy baskets, which therefore have the opportunity of leapfrogging.
Benjamin Leiva (University of Georgia, Athens, USA) was the second presenter on the second day. He presented his paper “Mind the gap: economics as an interplay among desires, matter, and energy” which suggests an integrative framework between energy and neoclassical economics based on three building blocks; 1) gaps between the spontaneous and desired states of material reality as the necessary condition of the economic problem, 2) goods as particular material rearrangements produced by an agent’s work that close at least one gap and 3) work as energy transferred by prime movers to produce goods.
These building blocks reveal the centrality of energy goods and prime movers for economics, and allow the use of neoclassical optimization procedures to model energy and power constrained agents that seek to close gaps. Considering autarkic and single-period agents, the producer problem is set to minimize total energy spent to produce a target quantity of goods, or alternatively to maximize total energy surplus harnessed by the production of energy goods. Furthermore, another – consumer – problem is defined to close the maximum amount of the most relevant gaps subject to the agent’s energy budget constraint. Using this framework he was able to provide an energy-based reinterpretation of tangency conditions and the equimarginal principle considering both long- and short-run. More importantly, this setting provides the basis to analyze exchanging and multi-period agents, which is expected to show that conventional marginal analysis is a special limiting case of this framework, and that economic systems can be thought of as visible social expressions of invisible energy dynamics.
The last presentation on the second day of the workshop was given by Akshay Shanker (Australian National University). Like Leiva’s presentation, Shanker’s work is mainly theoretical. It takes a more macro-dynamic approach and is based in unified growth theory. Shanker’s work is joint with David Stern; the two aim to show the role of energy intensity in a long run model with endogenous technological change. Stylized facts drawn from a cross section of places and times that show how an increase in GDP leads to a (lesser percentage) decrease in energy intensity, they build a model that suggests this discrepancy in the rate of change stems from a disparity between profits from doing research in energy and profits from doing research in labor-augmenting technologies, so that the abundance of energy causes the relative price of energy services to fall, making it less profitable to invest in energy augmenting R&D.
During the afternoon the participants attended field excursions to Esbjerg Harbor and to Esbjerg Waste-to-Energy Power plant. A guided bus tour was provided by Kurt Mathiesen, a colleague of Port of Esbjerg, who led us through the main parts of the harbor, which spreads over 4.5 million square meters. He has introduced us to the history of Esbjerg Harbor dating back to 1868, after the loss of the Port Altona in the second Danish-Prussian War. At the beginning of the 20th century, the harbor was the largest fishing port in Denmark with more than 600 fishing boats. However, due to the unregulated fishing activities in the North Sea and also to the structural changes in the fishing industry, the number of these fishing boats decreased significantly and only a few vessels are left in Esbjerg.
While the fishing industry declined, the offshore industry has started to develop after the first traces of oil have been discovered in the North Sea at the end of 1960’s. Soon, Esbjerg became the “Danish capital of oil and gas” as several big oil and gas companies were established at the harbor in order to support these offshore activities. During our tour it was very interesting to see those enormous 9 oil platforms standing at the northern part of the Port, waiting for world market oil prices to rise again, therefore making it economically feasible to operate them.
The energy transition currently underway in Denmark and neighboring countries can be observed by driving through the southern part of the Harbor; the offshore wind industry has moved to Esbjerg and this is the leading port in terms of handling and shipping out wind power in Europe.
Offshore wind turbines are pre-assembled, tested and shipped out to Denmark, to the Netherlands, to Germany and to the United Kingdom, more than 1100 MW capacity – that is equivalent to around 300 turbines with 3.6 MW nameplate capacity – in 2016. The further development of offshore wind industry is expected as the extension of the area which supports this industry is under development.
Esbjerg Harbor is also considered as the leading RoRo port (roll-in/roll-out) in Denmark, with an annual cargo turnover of 4.5 million tonnes in 2016.
Esbjerg Power Station, a coal-firing combined heat and power plant also operates in the Harbor. The Power Station is among Denmark’s largest power plants – with its nameplate capacity of 378 MW – and it provides electric power to the entire commune as well as district heat to Esbjerg city.
After the excursion to Esbjerg Harbor, the workshop participants visited the Waste-to-Energy combined heat and power plant in Esbjerg which is located outside but close to Esbjerg Harbor. The power plant is fueled by 180 thousand tons of industrial and domestic waste annually, at a heat value of 11 MJ/kg. The capacity of the generator is 16 MW, while the plant can supply 46 MW district heating output.
At the beginning of the tour the operation of the power plant was introduced via a detailed presentation, and after that a two-hour guided tour was provided where the workshop participants were able to take a closer look to the actual operation of the power plant, therefore we have visited the following parts of the plant; the waste collector:
the furnace:
the boiler:
and the control room:
Moreover, we could walk around the waste treatment technologies and we could go into the generator house – although it was pretty loud.
The second day of the workshop ended with dinner and lively conversation at a local restaurant.
All photos were taken by Clara Josefine Feldmann.
Mereconomics 