Natural Resources and Energy Systems: A Strategic Perspective

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W O R K I I V G P A P E R

I n t e r n a t i o n a l l n s t ~ t u t e for Applied Systems Analys~s

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NOT FOR QUOTATION WITHOUT THE PERMISSION OF THE AUTHORS

NATURAL RESOURCES

AND

EWERGY SEXMS:

A SI'RATEGIC PERSPECTlVE

T.H. Lee E. Schmidt J. Anderer

June 1986 WP-86-30

P r e s e n t e d at t h e Vienna 111 Conference on New Horizons in East-West Trade and Cooperation, Working Group I: Energy and Natural Resources, 16-18 June 1986, Congress Center-Hofburg, Vienna, Aus- t r i a .

Working P a p e r s are interim r e p o r t s on work of t h e International Institute f o r Applied Systems Analysis and have received only limited review. Views o r opinions e x p r e s s e d h e r e i n do not necessarily r e p r e s e n t those of t h e Institute o r of i t s National Member Organizations.

INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS 2361 Laxenburg, Austria

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CONTENTS

1. INTRODUCTION

2. THE MYTH OF "RUNNING OUT OF RESOURCES"

3. ENERGY DEVELOPMENT: IN RETROSPECT AND PROSPECT

4. ENVIRONMENTAL IMPLICATIONS OF EXPANDED ENERGY U S E

5. R&D STRATEGIES FOR ENERGY MANAGEMENT

6. CONCLUSIONS

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1. INTRODUCTION

Oil p r i c e falls t o below ten dollars a barrel!

US synfuel program cancelled after billions of dollars are invested!

Tennessee Valley Authority t r i e s t o sell unfinished nuclear plants to China!

Completed nuclear plant stands idle in Austria!

Canadians seek uses for excess power f r o m Candu plants!

How do these facts c h a r a c t e r i s t i c of today's situation compare against t h e constructs of energy planning of t h e 1970s? Why have so many multibillion dollar energy projects of t h e last decade been e i t h e r abandoned or mothballed?

Simply stated, t h e t e r m s of t h e energy debate have changed dramatically o v e r t h e past decade. Whereas t h e size of t h e fossil fuel r e s o u r c e base was t h e over- riding concern of t h e 1970s' w e are now faced with a totally new set of distresses

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a glut of cheap oil, a general excess of operating nuclear capacity, a n e v e r growing number of mothballed or not quite completed non-operating nuclear plants, t o give but a f e w prominent examples. Today t h e formidable challenge i s to use abundant energy sources in ways t h a t support social and economic development and p r o t e c t t h e environment.

In this p a p e r w e seek t o provide a s t r a t e g i c perspective on how t o m e e t this challenge. Toward this end, w e explore t h e misconceptions of t h e past t h a t led to costly errors in energy planning. The issue h e r e is t o dispel t h e myth of r e s o u r c e depletion as t h e driving force for t h e shift from one energy source to another. To gain insight into t h e actual basis for energy substitution, w e t u r n o u r attention to energy patterns, viewing these in r e t r o s p e c t and prospect. This review of energy development provides an opportunity t o consider some of t h e environmental implications of t h e expanded use of energy resources. These findings are then drawn

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t o g e t h e r in a n a t t e m p t t o highlight c e r t a i n R&D options t h a t w e believe o f f e r a sound basis f o r s t r a t e g i c e n e r g y management. Finally, w e u n d e r s c o r e t h e impor- t a n c e of international cooperation in dealing with t h e t r u l y global issue of e n e r g y development.

2. THE

MYTH

OF "RUNNING OUT OF RESOURCES"

Recent work at IIASA and elsewhere h a s seriously challenged t h e hypothesis t h a t whatever i s t h e most d e s i r a b l e and n e c e s s a r y r e s o u r c e will eventually "run out". This "running out" hypothesis

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t h e modern mineral version of t h e old Malthusian food supply myth

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h a s p e r v a d e d t h e b u r e a u c r a t i c , business, and scientific communities f o r decades. I t h a s s e r v e d as a basis f o r national policy, industrial policy, investment policy, and r e s e a r c h policy. W e shall u s e t h e case of e n e r g y t o dispel t h e myth of r e s o u r c e depletion as t h e driving f o r c e f o r r e s o u r c e substitution. Our s t u d i e s of nonfuel minerals h a v e led t o a similar conclusion (Til- t o n 1984; Tilton and Landsberg 1984).

The r e s o u r c e b a s e of fossil fuels i s l a r g e , p a r t i c u l a r l y of c o a l and n a t u r a l gas. Along such lines i t i s useful to consider t h e estimates given in Table 1 f o r nonrenewable fossil e n e r g y r e s o u r c e s . The d a t a are not intended to b e definitive, b u t r a t h e r to show t h a t t h e world i s in no imminent d a n g e r of running o u t of e n e r g y sources.

Moreover, r e c e n t technological advances in r e s o u r c e exploration are leading to upwardly r e v i s e d estimates of both conventional and unconventional g a s r e s o u r c e s . Until r e c e n t l y , n a t u r a l g a s w a s e x t r a c t e d mainly as a n unwelcomed by- p r o d u c t of c r u d e oil production, and w a s e i t h e r reinjected or flared. Even today on a real-time basis, t h e r e i s more associated g a s f l a r e d around t h e world t h a n i s consumed in Europe. Admittedly, t h i s i s a c r u d e estimate. I t is c r u d e in t h e sense t h a t t h e r e h a s been n o systematic attempt to m e t e r or r e p o r t t h e volume of f l a r e d

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Table 1. Fossil Energy Resources and Primary Energy Consumption, 1984.

Coal Oil Shale G a s Fossil

(10' tce*) (10' toe*) (10' toe) (lo1' cm) ( l o 9 toe)

World 5241 352 428 438 4572

X of total (74) (8) (9) (8) 100

Cons '84

(lo9) t o e 3.35 2.84

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^1.79 ^7.20

X of r e s o u r c e (0.06) (0.81)

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^(0.39) ^(0.16)

*tons of coal equivalent (tce); tons of oil equivalent (toe); cubic m e t e r (cm).

Numbers may not t o t a l due t o rounding.

Based on d a t a from BP Statistical Review of World Energy 1983 (1984), Delahaye and Grenon (1983), H S e l e (1981) and World Energy Conference (1983).

associated gas. Flaring has o c c u r r e d in o r d e r t o release high volumes of gas and thus facilitate t h e production of associated oil o r because i t h a s been too expen- sive and/or dangerous t o seal t h e w e l l and "kill" t h e f l a r e .

Additionally, t h e r e i s growing evidence t h a t abiogenic methane resources may b e abundant in t h e e a r t h ' s c r u s t (Gold 1984, 1985; Gold and S o t e r 1982; Wakita 1985; Wakita and Sano 1983; Marsden and Kawai 1965; Sano and Wakita 1985). This implies t h a t not only methane deposits but even some petroleum and o t h e r carbon compounds may b e of abiogenic origin from t h e d e e p e r strata in t h e crust. Over millenia, primordial methane h a s been continuously outgassing from t h e e a r t h . The volume t r a p p e d within t h e u p p e r strata of t h e crust may have contributed a significant, if not t h e major, p a r t t o known r e s o u r c e s of methane and o t h e r carbon compounds. If i t i s true t h a t much of t h e methane, and indeed much of t h e petroleum and coal deposits, are of abiogenic origin, then t h e potential amount of hydrocar- bon r e s o u r c e s not yet discovered would b e enormous.

L a t e r in Section 5 w e examine t h e issue of exploiting t h e vast potential f o r methane r e s o u r c e s . A t this point w e a r g u e against t h e notion of "running out" as t h e basis f o r energy substitution. To support this belief, w e briefly review energy

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developments and what t h e s e r e v e a l a b o u t t h e behavior of e n e r g y systems.

3. ENERGY DEVELOEWENT: IN RETROSPECT AND PROSPECT

F o r c e n t u r i e s fuelwood, t o g e t h e r with animal a n d farm waste and animal and human muscle power, w e r e t h e mainstays of energy supply. Compared with contem- p o r a r y e n e r g y consumption p a t t e r n s , t h e s e traditional e n e r g y forms w e r e used at low absolute levels a n d low densities of generation and end use. Essentially, t h e i r exploitation w a s not dependent o n i n f r a s t r u c t u r e s f o r transformation a n d t r a n - s p o r t .

These p a t t e r n s were a l t e r e d with t h e emergence and intensification of t h e industrial revolution of t h e 1 9 t h c e n t u r y . As Figure 1 indicates, fuelwood w a s r e p l a c e d by coal during t h e last half of t h e 1 9 t h c e n t u r y , with fuelwood's s h a r e declining from some 7 0 p e r c e n t in 1860 t o a b o u t 20 p e r c e n t a r o u n d t h e e a r l y 1900s and concomitantly t h a t of c o a l increasing from 30 p e r c e n t t o almost 8 0 p e r c e n t . Fuelwood w a s abandoned, not b e c a u s e of t h e t h r e a t of r e s o u r c e depletion, b u t because coal mining a n d coal end-use technologies h a d provided a n e n e r g y s o u r c e t h a t could d o what fuelwood did

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b u t b e t t e r . Although i t w a s possible (and s t i l l is) t o o p e r a t e t r a i n s a n d s h i p s with fuelwood and t o u s e fuelwood f o r shaft-power and e l e c t r i c i t y , coal technology advances made i t increasingly e a s i e r , more efficient, and c h e a p e r t o d o s o with coal.

However, by 1910 coal's r a p i d growth had ceased, with i t s s h a r e of t h e primary m a r k e t peaking some t e n y e a r s later and declining in r e l a t i v e s h a r e s t h e r e a f t e r in a p a t t e r n t h a t i s almost symmetrical with t h a t of fuelwood fifty y e a r s e a r l i e r . By t h e e a r l y 1960s, coal had been displaced by c r u d e oil as t h e dominant f u e l on t h e p r i m a r y m a r k e t both in m a r k e t s h a r e s a n d on a n absolute basis. A simi- l a r substitution p a t t e r n c a n b e observed. Coal r e s o u r c e s w e r e (and still a r e ) abundant. But with t h e discovery of oil drilling a r o u n d 1860, a set of oil-related

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technologies began a development p r o c e s s t h a t eventually led t o t h e large-scale and efficient refining of c r u d e oil into a b r o a d r a n g e of p r o d u c t s and chemical feedstocks. This opened up t h e e n e r g y market f o r oil. On t h e end-use side, refined oil p r o d u c t s proved t o b e f a r s u p e r i o r t o coal f o r powering t r a i n s , automobiles and a i r c r a f t , f o r generating e l e c t r i c i t y , and f o r providing residential and commercial heating. All b u t one of t h e s e end-use applications had been achieved f i r s t by coal. The p r i m a r y new application opened up by t h e u s e of oil was, of c o u r s e , aviation, now a l a r g e consumer of refined oil products. Nonetheless, around 1980 c r u d e oil peaked on t h e world primary m a r k e t both in t e r m s of s h a r e s and on a n absolute basis, and began t o decline t h e r e a f t e r . A s Figure 1 a l s o shows, n a t u r a l g a s and n u c l e a r e n e r g y h a v e been steadily gaining m a r k e t s h a r e s against c r u d e oil

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n a t u r a l g a s s i n c e a r o u n d 1920 and n u c l e a r e n e r g y s i n c e around 1970.

Figure 1: Fractional Shares of Major Primary Energy Sources, World (Naki- cenovic 1984).

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Thus from t h e h i s t o r i c a l perspective, e n e r g y substitution h a s been driven by t h e availability of a set of new technologies t h a t enabled a n a l t e r n a t i v e e n e r g y s o u r c e t o b e t t e r satisfy t h e end-use demands of society.

This reasoning led IIASA t o f o r e c a s t

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more t h a n a decade a g o

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t h a t n a t u r a l g a s and n u c l e a r e n e r g y would b e t h e dominant growth fuels o v e r t h e next few decades. A t t h a t time, t h e s e predictions were a highly controversial and emotional issue. They have, however, stood t h e test of time. An understanding of t h e analytic basis of t h e s e predictions i s considered useful f o r o u r discussions. W e t h e r e - f o r e briefly d e s c r i b e t h e work of C e s a r e Marchetti and Nebosja Nakicenovic at IIASA on t h e dynamics of m a r k e t substitution and what t h i s r e v e a l s about t h e system behavior (Marchetti 1979; Marchetti and Nakicenovic 1979; Nakicenovic 1979, 1984).

The evolution of primary e n e r g y consumption emerges as a r e g u l a r and predictable substitution p r o c e s s when i t i s assumed t h a t e n e r g y s o u r c e s are clus- ters of technologies t h a t compete in a Darwinian manner t o conquer t h e market

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o r , in ecological terms, to fill a niche. Figure 2 shows t h e r e s u l t s of applying t h e logistic substitution p r o c e s s t o t h e competition on t h e global primary e n e r g y m a r k e t and t h e p r o j e c t e d p a t h s t o t h e y e a r 2050. The p i c t u r e emerging i s t h a t of n a t u r a l g a s progressively capturing t h e m a r k e t from c r u d e oil, achieving a max- imum penetration (ca. 70 p e r c e n t ) around t h e y e a r 2025 and declining in m a r k e t s h a r e s t h e r e a f t e r . Another interesting f e a t u r e of t h i s c h a r t i s t h a t , at t h e world level, n u c l e a r e n e r g y h a s begun a steady penetration of t h e market and i s t h e r e - f o r e well-positioned t o r e p l a c e n a t u r a l g a s as t h e dominant primary energy s o u r c e sometime around t h e middle of t h e n e x t century.

The m a r k e t penetration of n a t u r a l g a s c a n a l s o b e viewed through t h e lens of t h e hydrogen-carbon (H/C) r a t i o (Figure 3). Over t h e p a s t one hundred y e a r s , t h e global primary e n e r g y system h a s moved progressively toward hydrogen-rich qual-

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ity fuels: t h e H/C r a t i o of fuelwood is roughly 0.1; of coal, 1.0; of oil, 2.0; and of natural gas, 4.0.

This phenomenological approach has been applied t o o v e r 400 c a s e s involving energy systems and t o some 500 c a s e s involving social and economic systems, demonstrating t h e capacity of t h e Volterra method f o r both backcasting and fore- casting. These applications also show t h a t t h e r e are time constants f o r t h e societal acceptance of technologies. In t h e case of energy, t h e time constant involved w a s s e v e r a l decades; thus, energy substitution i s a n evolutionary process. Failure t o recognize t h e s e c h a r a c t e r i s t i c s and t h e "running-out" myth could have well been responsible f o r t h e failure of many multibillion dollar projects. Indeed, t h e existence of r e g u l a r p a t t e r n s of evolution would have far-reaching implications f o r s t r a t e g i c energy management. W e explore this issue later in Section 5.

The findings of t h e IIASA global energy study, E n e r g y in a f i n i t e World, also point t o a n increasingly l a r g e r r o l e f o r natural gas and nuclear energy in t h e global energy system (Hafele 1981). The logistic substitution analysis was, in f a c t , a n integral p a r t of t h e global analysis t h a t examined, among o t h e r things, constraints on r e s o u r c e supply, environmental implications, and energy supply and demand balances. The IIASA study, conducted during t h e energy c r i s e s of t h e 1970s, explored not only post-oil systems but also post-fossil fuels systems and how t h e world might successfully negotiate t h e transition t o such systems. I t concluded t h a t r e s o u r c e s and technologies are available o r in hand t o meet a projected t w o - t o threefold i n c r e a s e in global primary energy consumption by 2030. The next 50 y e a r s would mark a transition t o a world primary system based on t h e expanded use of fossil fuels and increasing contributions from nuclear energy. The contri- bution of renewable energy sources, albeit important, would remain at a relatively low level globally. Constraints on t h e buildup of large-scale s o l a r facilities would not allow this primary s o u r c e t o contribute significantly at t h e global level b e f o r e

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t h e end of t h e next century. A t t h e end-use side, t h e s t r u c t u r e of demand would not change significantly, with liquid fuels, electricity, and p r o c e s s d i s t r i c t h e a t remaining t h e p r e f e r r e d energy forms o v e r t h e next f e w decades.

Recently, IIASA exploited t h e s e findings t o determine t h e technical and economic feasibility of a n expanded gas market in both E a s t e r n and Western Europe and what t h i s would imply f o r t h e development of a viable international gas market. Industry w a s a n active p a r t n e r in this effort, which realistically examined how environmental issues, government policies on import-export quotas, p r i c e s , and o t h e r r e l a t e d issues may a f f e c t t h e ability of n a t u r a l gas to compete on Euro- pean markets against i t s main rival oil and, to a lesser extent, coal. (Rogner et at.

1985; Sinyak 1984).

In sum, t h e IIASA gas study indicates substantial growth p r o s p e c t s f o r n a t u r a l gas r4fter t h e t u r n of this century, p r o v i d e d government policies and capital investments along t h e e n t i r e energy chain (from e x t r a c t i o n to end use) are put in place now t o support t h e expansion of natural gas into t h e electricity and t h e h e a t generation markets. The p i c t u r e o v e r t h e next 15 y e a r s i s less sanguine: although natural gas consumption will i n c r e a s e in t h e p r o c e s s and s p a c e h e a t market, t h e market itself i s expected to remain relatively stable o v e r t h i s period. A s Figure 4 suggests, n a t u r a l gas consumption would be relatively insensitive t o p r i c e altera- tions up t o t h e y e a r 2000; however, o v e r t h e longer term (up t o 2030) a 20 percent reduction of gas p r i c e s could lead t o a roughly 50 percent increase in gas consumption. N o t surprisingly, t h e study also found natural gas consumption to b e highly sensitive t o environmental issues.

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Change in natural gas price (%)

20

-

10-

Reference price 0

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-1 0-

-20

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1990 1995 2000 2010 2030

I I 1 I I I I I I I I I I I 1

30 40 60 80 100 1 20 140 160 170

lgm3

Figure 4. N a t u r a l G a s Price Elasticities. Central Europe (Industrial Sector).

1990-2030 (Rogner et aL. 1985).

Before ending o u r review of e n e r g y t r e n d s , w e comment briefly on t h e pros- p e c t s f o r n u c l e a r e n e r g y . All t h e bad news a b o u t t h e c u r r e n t situation, particu- l a r l y in t h e United S t a t e s , h a s been c o v e r e d many times o v e r in t h e media. A nega- tive p i c t u r e h a s emerged t h a t clouds t h e reality. Straightforwardly speaking, despite a l l r e p o r t e d cancellations

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myriad t r o u b l e s , delays, c o s t o v e r r u n s

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^{t h e}

n e t n u c l e a r additions and cumulative n u c l e a r e l e c t r i c i t y production are not only logistic b u t are penetrating much f a s t e r than w a s forecasted more than a decade a g o on t h e basis of business-as-usual (Marchetti 1985a). A similar dynamic is r e f l e c t e d in t h e median estimates f o r t h e 1985 poll of t h e International Energy Workshop: n u c l e a r e n e r g y i s t h e f a s t e s t growing primary e n e r g y s o u r c e on a worldwide basis, with a n annual growth rate of 7 p e r c e n t o v e r t h e period 1980- 2000. This c o r r e s p o n d s t o a some fourfold i n c r e a s e in t h e use of nuclear energy in

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t h e industrialized world as a whole and a twelvefold increase in t h e case of t h e developing world outside t h e OPEC countries (Manne et al. 1985).

Recall t h a t w e are discussing growth prospects f o r nuclear energy at t h e global primary scale. Up to now, t h i s r a p i d growth may b e a t t r i b u t e d to t h e fact t h a t nuclear energy h a s found a ready-made distribution network in t h e e l e c t r i c a l grid.

But, as r e c e n t analyses suggest, nuclear's s h a r e of t h e electricity generation sector may be approaching saturation in s e v e r a l countries (e.g., France, Sweden, t h e FRG). I t i s not our intent t o discuss t h e s e findings, which are w e l l documented (see, f o r example, Hiifele 1985; Marchetti 1985a). L a t e r in Section 5 w e consider system possibilities f o r so-called second generation nuclear technologies t h a t could support t h e market penetration of nuclear energy along t h e lines described above.

Armed with t h e s e insights on dominant t r e n d s in energy development, w e focus o u r attention on t h e environmental implications of expanded energy use. A common t h r e a d running throughout t h e s e energy analyses i s t h e increasing interdependence of human development activities and t h e environment.

4. ENVIRONMENTAL IMPLICATIONS OF EXE'ANDED ENERGY USE

W e have e n t e r e d a n era of increasingly complex p a t t e r n s of environmental and human development interdependences, c h a r a c t e r i z e d by time and spatial s c a l e s transcending those of m o s t contemporary political and regulatory institutions.

What were once local incidents of pollution shared through a common watershed or a i r basin now involve many nations

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witness t h e concern f o r acid deposition in Europe and North America. What were once straightforward questions of conser- vation v e r s u s development now reflect complex linkages

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witness t h e global feed- backs among energy and c r o p production, deforestation, and climatic change t h a t are evident in studies of atmospheric "greenhouse effects". A s a result, planners

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are faced with t r a d e o f f s in t h e f a c e of significant scientific uncertainty and minimal social consensus.

The major f e a t u r e s of t h e interaction of human development and t h e global environment were sketched in a r e c e n t r e p o r t of t h e International Council of Scientific Union's Committee on Problems of t h e Environment (SCOPE). They are r e p o r t e d h e r e as background t o o u r discussion:

"Man's activities on e a r t h today induce fluxes of carbon, nitrogen, phosphorus and sulfur t h a t are of similar magnitude to those associated with t h e n a t u r a l global cycles of t h e s e elements; in limited areas man's influ- ence dominates t h e cycles. The likely i n c r e a s e of man's activities during t h e remainder of t h i s and during t h e next c e n t u r y will undoubtedly mean significant disturbances of t h e global ecosystem.

The most important ways whereby man i s interfering with t h e global ecosystem are:

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fossil fuel burning which may (a) double t h e atmospheric C02 concentration by t h e middle of t h e next century; (b) f u r t h e r increase t h e emission of oxides of sulfur and nitrogen v e r y significantly;

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expanding a g r i c u l t u r e and f o r e s t r y and t h e associated use of fertil- i z e r s (nitrogen and phosphorus) significantly alter t h e natural cir- culation of t h e s e nutrients;

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i n c r e a s e exploitation of t h e f r e s h water system both f o r irrigation in a g r i c u l t u r e and industry and f o r waste disposal.

According t o o u r p r e s e n t understanding, t h e most important impacts of t h e s e changes in t h e long-term perspective are:

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a gradual change toward a warmer climate, t h e details and implications of which w e know very little about;

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t h e concentration of ozone will d e c r e a s e in t h e s t r a t o s p h e r e , due t o t h e increased release of N20 and chlorine compounds and increase in t h e troposphere, due t o t h e increased release of NO,, and hydro- carbons;

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an i n c r e a s e of t h e areas affected by lake and stream acidification in mid-latitudes and possibly also in t h e tropics; t h e ion balance of t h e soils may b e significantly disturbed, as i s now being found with r e g a r d to aluminum;

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a d e c r e a s e of t h e extent of tropical forests, which will enhance t h e rate of i n c r e a s e in atmospheric C02 concentration and release o t h e r minor constituents to t h e atmosphere; this may also contribute t o soil degradation;

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due t o loss of organic matter and nutrients, soil deterioration will o c c u r and t h i s implies a reduced possibility f o r t h e vegetation t o r e t u r n t o pristine conditions..

.;

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a t r e n d toward t h e eutrophication of estuarine and coastal marine areas;

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more frequent development of anoxic conditions of fresh-water and marine systems and sediments.

The long-term implications of exploiting t h e natural resources of t h e e a r t h are not well understood, n o r do w e understand what i s permissible in o r d e r t o guarantee t h a t present or future (possibly higher) levels of productivity will not l a t e r decline..

. "

(Bolin and Cook 1983).

The modern world described by t h e SCOPE r e p o r t supports t h r e e times t h e human population and one hundred times t h e industrial activity than i t did a century ago.

A s t h e r e p o r t suggests, today's environment is not just modified by human action; i t i s fundamentally transformed.

To learn m o r e about these transformations, IIASA recently began a study of t h e increasing interaction of human activities and t h e environment. The aim i s t o identify t h e technological, institutional, and r e s e a r c h strategies t h a t if adopted o v e r t h e next decades could improve t h e management of these interactions. The effort involves collaboration with institutions in Canada, t h e Federal Republic of Germany, Hungary, t h e Netherlands, Poland, Sweden, t h e Soviet Union, and t h e United States, as w e l l as with regional and international agencies. (For perspective on t h e program see Clark in press; background essays a p p e a r in Clark and Munn in press.)

For o u r discussion h e r e w e draw heavily on t h e insights emerging from this r e s e a r c h as they apply t o t h e r o l e played by energy development in these environmental transformations. W e focus primarily on t h e long-term, large-scale carbon dioxide (Con) implications of fossil fuel burning. However, this i s not t o imply t h a t w e consider fossil-fuel based emissions of sulfur, nitrogen, and o t h e r gases and particles insignificant. Quite simply, t h e C02 issue h a s received t h e m o s t analytic attention from t h e global perspective. I t i s only recently t h a t r e s e a r c h e r s have begun t o assess t h e impacts of fossil fuel burning via pathways of sulfur oxides, nitrogen oxides and radiated trace gases. There i s growing evidence t h a t t h e impact of these trace gases on atmospheric greenhouse effects may exceed t h a t of

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C02 alone (Dickinson and Cicerone 1986; Ramanathan et al. 1985). The situation i s complex and not well-defined.

C02 Implications o f F o s s i l Energy Use

W e again start with a look at history, in o r d e r t o d i s c e r n p e r s i s t e n t background t r e n d s a g a i n s t which f u t u r e i n t e r a c t i o n s of e n e r g y development a n d t h e environment c a n b e assessed. Unfortunately, global h i s t o r i e s of t h e environmental consequences of e n e r g y consumption are only now beginning t o b e assembled ( J a g e r 1983; Darmstadter in p r e s s ; R i c h a r d s in p r e s s ) . Moreover, t h e p i c t u r e s emerging f r o m t h e s e studies are incomplete, p a r t i c u l a r l y with r e g a r d t o t h e environmental implications of e n e r g y consumption based on fuelwood, hydropower, and n u c l e a r fission. Figure 5 shows t h e r e s u l t s of a t t e m p t s t o r e c o n s t r u c t global fossil fuel consumption t h a t e x t e n d back t o t h e middle of t h e last c e n t u r y . The production of C02 c a n b e o b s e r v e d t o grow exponentially, with a slowing down in t h e global production rate o c c u r r i n g around 1973.

Figure 5. History o f World Fossil Fuel Energy Consumption as R e f l e c t e d i n Carbon Emissions. Data from R. Rotty published in Clark (1982).

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A s to p r e s e n t a n d p r o j e c t e d t r e n d s , t h e r e are a number of long-term, global- scale e n e r g y s t u d i e s t h a t in varying d e g r e e s have considered environmental issues. However, t h e m e r i t s of t h e s e studies are hotly debated (see, f o r example, Ausubel and Nordhaus 1983). One r e a s o n given f o r t h e s e shortcomings i s t h a t all of t h e s e studies make convenient, but unrealistic " s u r p r i s e f r e e " assumptions r e g a r d i n g f u t u r e developments in t h e institutional, technological, and knowledge s p h e r e s (Brooks in p r e s s ) . Recently IIASA c r i t i c a l l y reviewed major global f o r e - casts of energy in terms of t h e i r usefulness in addressing environmental transformations (Ygdrassil et al. 1985). W e comment briefly on t h e findings of t h r e e studies which IIASA i s exploiting to develop a more r e a l i s t i c p e r s p e c t i v e on human development a n d environmental interactions.

A s mentioned e a r l i e r , t h e IIASA global e n e r g y analysis concluded t h a t fossil fuels and n u c l e a r power h a v e t h e potential f o r meeting a l a r g e fraction of t h e world's p r i m a r y e n e r g y demand o v e r t h e next 5 0 y e a r s . From t h i s basis, t h e study examined t h e possible climatic impacts of substantial i n c r e a s e s in t h e atmospheric concentration of C 0 2 a n d o t h e r g a s e s a n d p a r t i c l e s , as well as of large-scale waste-heat r e l e a s e s , p a r t i c u l a r l y when t h e y are concentrated in c e r t a i n areas.

The r e s u l t s suggest t h a t t h e C02 buildup caused by fossil fuel combustion o v e r t h e n e x t 50 y e a r s i s p r o b a b l y t h e most s e v e r e climate issue, possibly leading t o global a v e r a g e t e m p e r a t u r e i n c r e a s e s of from lo t o 4' C by 2030. In t e r m s of t h e global e n e r g y demand levels estimated in t h e two IIASA s c e n a r i o s (equivalent t o a two- or t h r e e f o l d i n c r e a s e o v e r t h e c u r r e n t level) waste-heat r e l e a s e s would p r o b a b l y not p e r t u r b t h e global a v e r a g e climate state in t h e f o r e s e e a b l e f u t u r e (Hgfele 1981).

Recently t h e IIASA low s c e n a r i o s e r v e d as a basis f o r exploring energy-based emissions of s u l f u r , nitrogen, and trace g a s e s and t h e i r deposition p a t t e r n s o n regional levels. The analysis p r o v i d e s a useful framework f o r ordering t h e knowns a n d unknowns with r e s p e c t to environmental-energy interactions. (Hafele, et al.

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The long-term, regionalized e n e r g y model developed by J. Edmonds and J.A.

Reilly of t h e Institute f o r Energy Analysis of t h e Oak Ridge Associated Universities h a s been used extensively in t h e United S t a t e s since 1982 (Edmonds and Reilly 1983, 1985). Essentially t h e y e x p l o r e d t h e sensitivity of C02 releases t o assumed rates of growth in t o t a l e n e r g y consumption and to i n t e r f u e l u s e p a t t e r n s . The r e s u l t s suggest t h a t t h e C02 implications of growth in e n e r g y consumption will not b e a pressing issue throughout t h i s century (influenced t o a considerable e x t e n t by n u c l e a r e n e r g y ' s gain in m a r k e t s h a r e s ) ; however, t h e y e x p e c t t h e situation t o change dramatically in t h e n e x t c e n t u r y when ( a s assumed) e n e r g y systems s h i f t t o a heavy r e l i a n c e on coal a n d s h a l e oil. On t h i s basis t h e y p r e d i c t a doubling of C02 concentration sometime a r o u n d 2080.

William Nordhaus and Gary Yohe's study of a l t e r n a t i v e e n e r g y f u t u r e s and t h e C02 implications w a s c a r r i e d out within t h e framework of t h e National Research Council r e p o r t on climate change (Nordhaus and Yohe 1983). Their time horizon e x t e n d s t o 2100, during which t h e y envisage a d e c r e a s e in t h e level of c a r b o n emissions and buildup r e l a t i v e t o t h a t of conventional estimates. They a t t r i b u t e t h i s to a slowdown in t h e growth of t h e world energy and t o t h e h i g h e r p r i c e s f o r fossil energy. A key f e a t u r e of t h e i r study i s t h e systematic t r e a t m e n t of uncertainty, which leads them t o u n d e r s c o r e t h e need t o t a k e t h i s specifically into account in designing e n e r g y management s t r a t e g i e s . Nevertheless, t h e y identify a one-in-four probability of a doubling of atmospheric C02 concentration b e f o r e 2050 and even odds f o r t h i s e v e n t t o o c c u r during 2050-2100.

Notwithstanding t h e d i f f e r e n c e s among t h e s e and r e l a t e d studies, t h r e e major points emerge. F i r s t , fossil fuel combustion f o r e n e r g y seems likely t o b e t h e larg- est anthropogenic s o u r c e of C02 at p r e s e n t a n d f o r any f u t u r e in which t h e c a r b o n dioxide question might b e of c o n c e r n t o society (Clark 1982; National R e s e a r c h

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Council 1983a). Second, t h e r e i s a high probability of a significant r i s e in global C02 concentration by t h e middle of t h e Z l s t century. Third, t h e r e i s need simultaneously f o r more r e s e a r c h t o narrow t h e uncertainty r a n g e with r e s p e c t t o all energy-based emissions and f o r more flexible energy management s t r a t e g i e s t o avoid serious, possibly i r r e v e r s i b l e , damage to not only t h e climate system but to all ecosystems.

Sulfur and N i t r o g e n Ehissionss The C a s e o f A c i d D e p o s i t i o n

The p r e s s u r e on government and industry to act in t h e f a c e of much scientific uncertainty i s also evident in t h e escalating debate on acid deposition. Decision makers are h a r d pressed to decide whether to install additional controls on power plants and o t h e r potential s o u r c e s of pollution; to t a k e s t e p s to mitigate possible e f f e c t s of acid deposition (e.g., liming of lakes and soils, development of r e s i s t a n t species of biota); or to w a i t perhaps five or ten y e a r s until t h e r e is m o r e con- clusive scientific information about emissions, atmospheric transformation and t r a n s p o r t , deposition and ecological effects. Consequently, control policies are being advanced t h a t often have only a tenuous link with scientific knowledge. For example, in Europe a common policy being implemented f o r acidification control i s a 30 p e r c e n t reduction in sulfur emission by 1993 relative to t h e 1980 level.

Research aimed at improving scientific understanding of t h e acidification problem has increased dramatically o v e r t h e past few years. (See, f o r example, OECD 1979; National Research Council 1983b; Netherlands Ministry of Housing, Physical Planning and Environment 1985; HAPRO 1985; Izrael et al. 1983; Royal Society of Canada 1984.) A t IIASA, w e are developing a conceptual framework f o r a n integrated assessment of t h e acidification problem in Europe. The work is being done in close collaboration with t h e United Nations Economic Commission f o r Europe (ECE), which o v e r s e e s t h e European joint e f f o r t s t o a b a t e t h e e f f e c t s of acidification (the Geneva Convention on Long Range Transboundary Air Pollution).

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(See, f o r example, Hordijk, in p r e s s ; Hordijk 1985; Alcamo et ^al.1985; Alcamo et al. in press).

Figure 6 illustrates t h e r e s u l t s of applying t h e IIASA-built RAINS (Regional Acidification Information and Simulation) model t o a n analysis of energy-use pat- t e r n s and total sulfur deposition in Europe in t h e y e a r 2010. This i s viewed from t h e perspective of two scenarios, both based on energy f o r e c a s t s by t h e Interna- tional Energy Agency (IEA). The f i r s t s c e n a r i o involves no controls f o r SO2 emissions, with t h e bold lines encapsulating t h e a r e a where deposition is above a moderate level (defined h e r e as 5 g/m2/yr). For t h e second scenario, extensive SO2 emission controls were assumed (i.e., flue gas desulfurization units a t power plants and industrial boilers, and t h e use of low sulfur fuels f o r domestic and t r a n - s p o r t s e c t o r s ) . The shaded area on t h e graph indicates where sulfur deposition i s above moderate level. A s t h e r e s u l t s suggest, t h e use of emission controls would drastically r e d u c e t h e area in Central Europe affected by sulfur deposition.

Relative t o sulfur emissions, t h e inventories f o r nitrogen oxides and r e l a t e d nitrogen compounds are much less advanced. IIASA i s working with t h e Federal Republic of Germany-Netherlands PHOXA p r o j e c t , t h e Nuclear Research Center Karlsruhe (FRG), and t h e OECD t o develop a NO, emission model f o r integration in RAINS.

Controlling Emilrrrions

Most of t h e discussion of management responses t o t h e question of energy emissions have c e n t e r e d on measures t o alter t h e production of carbon, sulfur, nitrogen, and r e l a t e d emissions. Basically t h e s e fall into t h r e e classes (Clark 1985a; 1985b). The f i r s t and more general concerns t h e total use rate of energy.

Given t h e l a r g e s h a r e of fossil fuels in t h e total energy budget, energy conserva- tion and slower growth in energy consumption (say, from more efficient uses of

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T O T R i SULFUR D E F O S I T I C N [ G / M Z / Y R I

SCENAR 101 IER-ENERGY PRTHURYS. L E V E L I N G OFF

C ~ P R R E D urrn* MQJOR FOLLIJT ION CCNTROLS

Emissions from : Europe

F i g u r e 6. Computer G e n e r a t e d Schematic Map o f E u r o p e Showing Areas With M o d e r a t e S u l f u r D e p o s i t i o n L e v e l s ( 5 g / m /yr) R e s u l t i n g From E n e r g y Emis- sions, 2010.

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energy) are almost c e r t a i n t o reduce emissions. The ways in which changes in energy use rates would alter C02 emissions have been explored in numerous studies. (See, f o r example, Edmonds and Reilly, 1983, 1985; Ausubel and Nordhaus, 1983; P e r r y et ^al.,1982.)

The second energy management option concerns t h e s h a r e of fossil fuels in t h e t o t a l energy budget. Replacing fossil fuels by s o l a r , nuclear, sustained yield biomass, o r exotic forms of noncarbon energy will all limit emission releases t o t h e atmosphere. Both t h e Edmonds-Reilly and Nordhaus-Yohe studies r e f e r r e d t o above provide perspectives on t h e impact t h i s would have on t h e C02 problem.

The t h i r d energy management option concerns t h e s h a r e of various fossil fuels in t h e total fossil fuel budget. In t h e case of C02, natural gas and oil produce about 60 and 80 p e r c e n t , respectively, as much C02 as coal. Synthetic fuels derived from coal r e q u i r e energy expenditure in t h e i r production and t h e r e f o r e yield around 150 p e r c e n t as much C02 as coal (Marland 1982), unless t h e process- ing energy i s derived from nonfossil sources. Natural gas combustion produces essentially no sulfur emissions and from t h a t viewpoint i s considered environmentally more a t t r a c t i v e than oil and coal.

A fourth class of responses t o emission control involves abatement measures for t h e post-combustion process. A s Thomas Schelling (1983:563) puts it

...

"If w e cannot help producing too much, can w e remove some?" S e v e r a l technologies (e.g., s c r u b b e r s ) are now available, r e s t r i c t e d mainly t o use on large-scale fuel combustion systems like e l e c t r i c a l power utilities. -While such techniques can r e d u c e t h e level of energy-based emissions, they cannot eliminate them. Moreover, t h e r e are enormous costs associated with such measures, particularly when a high level of reduced emissions i s r e q u i r e d . The case of lignite use f o r electricity generation in t h e Federal Republic of Germany, following t h e establishment of stringent SO2 emission standards, underscores t h e difficulties one can e x p e c t with such

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p r a c t i c e s (Der Bundesminister d e s Inneren 1983). The c o n c e p t of i n t e g r a t e d e n e r g y systems h a s been advanced as a technical option t h a t , in principle, can eliminate s u l f u r and nitrogen emissions and k e e p t h e problem of C02 emissions in focus (Hafele and Nakicenovic 1984, Hgfele et ^aL.in p r e s s ) . W e will discuss t h i s novel a p p r o a c h t o environmentally benign e n e r g y systems in t h e n e x t section, when w e t a k e u p t h e issue of s t r a t e g i c e n e r g y management.

5. R&D STBATEGES FOR ENERGY KANAGEXENT

Throughout o u r discussions w e h a v e s t r e s s e d t h a t t h e p r o c e s s of e n e r g y substitution i s essentially a competitive p r o c e s s whereby a successful energy technology i s a b l e to comply with end-use demands f o r increasingly more efficient, c l e a n e r , a n d flexible forms of energy. W e h a v e indicated t h e s t r o n g probability of a n increasing r e l i a n c e on fossil fuels and n u c l e a r e n e r g y o v e r t h e n e x t few decades. W e now e x p l o r e two b r o a d R&D s t r a t e g i e s t h a t could help governments a n d industries to exploit t h e s e e n e r g y forms in line with t h e s e consumer demands.

T e c h n o l o g y Life-Cycle9s T h e C a s e o f Methane T e c h n o l o g i e s

I t i s well known t h a t many industries a n d r e s o u r c e production s e c t o r s are plagued by o v e r c a p a c i t y problems. World steel mills, automobile plants, steam t u r b i n e / g e n e r a t o r f a c t o r i e s , heavy construction equipment f a c t o r i e s , a n d home appliance plants are prominent examples of industries troubled by overcapacity of a f a c t o r of t w o t o five. R e c e n t phenomenological evidence suggests t h a t o v e r c a p a - city and industry maturity o c c u r almost simultaneously (Marchetti 1980, 1983a, 1983b; Nakicenovic 1986; Nakicenovic in p r e s s ) .

Why d o managers flagrantly overbuild plants at t h e end of an industry's growth cycle? The r o o t s of t h e problem a p p e a r t o lie in t h e lack of p e r c e p t i o n of t h e p h a s e of s a t u r a t i o n in t h e so-called life-cycle of technology a n d business.

H e r e w e briefly d e s c r i b e a new r e s e a r c h e f f o r t at IIASA t h a t could yield valuable

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insights a b o u t measuring and controlling t h e life-cycle p r o c e s s and a p p r o p r i a t e management responses.

Technology and business are assumed t o undergo t h r e e distinct life-cycle p h a s e s (Figure 7). The f i r s t p h a s e i s embryonic, c h a r a c t e r i z e d by c h a o t i c competition among numerous experimental technologies t h a t are struggling to emerge t h e winner. Once beyond t h i s high-risk phase, t h e successful technology e n t e r s a p h a s e of exponential growth in which generally i t competes with a n o l d e r technology t o provide a similar s e r v i c e or product. The learning c u r v e becomes a valu- a b l e tool f o r analyzing t h i s growth phase, which typically involves d e c r e a s i n g c o s t s and improved performance. Maturity defines t h e final phase, during which improvements are incremental and costly and demand eventually s a t u r a t e s . A m a t u r e technology i s seriously challenged by new competitors t h a t are e n t e r i n g t h e i r own exponential p h a s e of steady growth p r o s p e c t s .

W e have a number of case studies underway of technologies at v a r i o u s s t a g e s in t h e life-cycle, ranging from mature technologies (e.g.. coal e x t r a c t i o n a n d Bessemer s t e e l ) , t o t h o s e in t h e growth p h a s e (e.g., automobiles and a i r c r a f t ) , t o emerging technologies. Methane-related technologies are a prime example of a n emerging technology c l u s t e r t h a t h a s a high potential f o r success. IIASA e n e r g y specialist Ed Schmidt considers t h e situation f o r methane-related technologies t o b e analogous t o t h a t of a i r c r a f t engineering and t h e aviation industry in t h e 1930s:

s i n c e t h e middle of t h e 1930s until today, aviation technology h a s improved roughly by a f a c t o r of o n e hundred. Specifically, t h e Boeing 747 i s a b o u t 1 0 0 times more productive t h a n t h e DC-3, measured in t e r m s of ton-kilometers p e r h o u r and o p e r a t i n g o v e r comparative r o u t e s . Operating o v e r "non-comparative" r o u t e s , i.e., intercontinental r o u t e s . t h e 747 i s infinitely more productive. The DC-3 simply cannot o p e r a t e from N e w York t o London, o r Tokyo t o Frankfurt. If o n e were t o h a v e used t h e p e r f o r m a n c e of t h e DC-3 in t h e 1940s as t h e basis f o r predicting

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Figure 7. Technology LifeCycles.

A

t h e f u t u r e of commercial aviation, undoubtedly t h e answer would h a v e been wrong.

T h e r e i s increasing evidence t h a t at t h e point where a technology i s o n i t s life-cycle t h e r e a l s o e x i s t o t h e r interdependent phenomena. These include techni- c a l performance, p r i c e , c o s t , market s h a r e , industry s t r u c t u r e , s p a t i a l s h i f t of l e a d e r s h i p position, management a n d investment issues. If IIASA's f o r e c a s t s a b o u t t h e growing importance of methane i s t o b e realized, t h e set of methane-related technologies will h a v e t o move along t h e life-cycle rapidly in t h e d e c a d e s t o come.

- _r'

^MaturitySenescence

1

⁴

- Growth

i'

4 '

Embvonic Chaotic

-/ 0

b

The problems associated with t h e expanded use of n a t u r a l g a s o n a global scale h a v e been defined. F o r example, n a t u r a l g a s i s more difficult t o t r a n s p o r t o v e r transcontinental distances, t h a n , s a y , c r u d e oil a n d i t s r e f i n e d products. The main r e a s o n i s t h a t methane i s gaseous at ambient p r e s s u r e s and t e m p e r a t u r e s . A s

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a r e s u l t , n a t u r a l g a s is invariably associated with t h e need f o r e l a b o r a t e infras- t r u c t u r e s f o r long distance t r a n s p o r t , s t o r a g e , and distribution. In i t s gaseous f o r m , natural gas cannot be stored in compact reservoirs, constraining its use c u r r e n t l y to stationary devices with d i r e c t communications to grid systems. Thus primary applications of natural gas have been in t h e industrial, residential, and commerical s e c t o r s , with very little natural gas being used f o r t h e t r a n s p o r t sector. On t h e supply side, n a t u r a l gas is transported by t w o technologies

-

^pipe-

lines, generally for continental links, and LNG (liquefied natural gas) vessels, mainly for intercontinental links. Pipelines, LNG vessels and facilities, as w e l l as distribution grids are highly capital intensive; once installed they r e p r e s e n t a commitment during t h e lifetime of t h e plant which i s in t h e o r d e r of 15 to 20 y e a r s or m o r e .

Will t h e s e obstacles b e overcome as methane-related technologies evolve and p r o g r e s s along t h e life-cycle c u r v e ? W e are exploring this issue, analyzing a group of methane-related technologies from t h e dynamic perspective. Among t h e technologies being studied are s e a r c h and exploration techniques, such as geophy- sical and geochemical methods, high-speed drilling with continuous coring, t h e use of downhole motors with electronic guidance packages and d i r e c t communication with t h e s u r f a c e via t h e MWD (measurement-while-drilling) techniques; more efficient technologies for t r a n s p o r t via pipelines, LNG vessels; and conversion and end-use technologies, such as catalytic conversion of methane into clean liquid fuels at ambient t e m p e r a t u r e s and high-performance combined cycle gas turbines for electricity generation.

This r e p r e s e n t s a formidable task t h a t necessarily involves close working relations with industry and r e s e a r c h e r s around t h e world. For example, w e are collaborating with t h e G a s Research Institute (GRI) in t h e United S t a t e s t h a t recently began r e s e a r c h on technologies for finding and producing nonassociated

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methane a n d f o r exploring t h e possible locations of abiogenic methane. Similar work i s underway a t t h e University of Tokyo. Indeed, t h e prime example of scientif- ically confirmed production of nonassociated methane i s t h a t from t h e Niigata Basin on t h e West Coast of Japan. Close c o n t a c t s are a l s o being maintained with Thomas Gold of Cornell University concerning new t h e o r i e s of methane formation and location. IIASA's Ed Schmidt and P r o f e s s o r Gold visited t h e Siljan C r a t e r in Sweden, t h e s i t e of a n experimental drilling e f f o r t to p r o d u c e abiogenic methane from a 350 million y e a r old meteor impact c r a t e r in t h e Baltic Shield; production drilling will begin in summer. Other r e s e a r c h g r o u p s include t h e University of S o u t h e r n California in t h e United S t a t e s and t h e University of Trondheim in N o r - way, both of which h a v e major R&D e f f o r t s underway f o r t h e d i r e c t c a t a l y t i c conversion of methane i n t o room t e m p e r a t u r e liquid fuels. A s to conversion technologies, w e are working with t h e Massachusetts Institute of Technology (MIT) t h a t h a s a major e f f o r t underway with t h e G e n e r a l E l e c t r i c Company and t h e E l e c t r i c Power R e s e a r c h Institute (EPRI) to analyze t h e technology growth p a t t e r n s a n d resulting m a r k e t impact f o r combined c y c l e g a s turbines. The findings of t h e i r analysis ( t h e so-called EGEAS study) suggest t h a t , even at today's e n e r g y p r i c e s a n d with existing technology, in most p a r t s of t h e United S t a t e s t h e u s e of methane f o r e l e c t r i c i t y g e n e r a t i o n in combined c y c l e systems would b e more economic t h a n i s t h e case f o r e i t h e r oil- or nuclear-based e l e c t r i c i t y generation systems (Tabors a n d Flagg 1985). Moreover, with t h e use of t h e advanced technology in combined c y c l e systems, t h e r e s u l t s are even more dramatic. In t h e Soviet Union. IIASAns p a r t n e r s include t h e S i b e r i a n Energy Institute, t h e Presidium of t h e USSR Academy of Sciences, a n d V/O Soyuzgazexport. In May, IIASA will hold a n international meeting in Hungary o n methane-related technologies. The Hungarian Com- mittee f o r Applied Systems Analysis i s helping t o s p o n s o r t h e event, which i s e x p e c t e d t o a d d considerable momentum t o o u r work.

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Integrated Energy Systems

W e now consider a novel approach t o a n energy system t h a t , in principle, c a n ultimately achieve t h e goals of z e r o emissions and enhanced system efficiency and flexibility. The concept of integrated energy systems (IES) has been developed o v e r t h e past f o u r y e a r s by t h e Kernforschungsanlage Jiilich (KFA) in t h e FRG, and MIT in a n e f f o r t to identify a whole set of energy s o u r c e s t h a t can support a smooth transition to t h e so-called second generation of fossil fuels and nuclear energy technologies. In t h i s way, t h e IES i s evolutionary and a b l e to t a k e into account t h e inherent uncertainty of accurately predicting which fuels will dominate f u t u r e energy systems. The basic idea behind such a system i s to use varying inputs of different primary energy s o u r c e s to provide a flexible r a n g e of clean fuels, indus- t r i a l gases, p r o c e s s h e a t , and electricity. One of t h e important f e a t u r e s i s t h e carefully controlled and environmentally acceptable upgrading of "dirty" (low hydrogen content) fossil fuels into "clean" (hydrogen r i c h ) fuels. The idea i s cap- t u r e d in Figure 8, and has been discussed in detail in s e v e r a l publications. (See, for example, Hafele et aZ. in p r e s s ; Hafele and Nakicenovic 1984; Lee 1983; Lee et al. 1983.)

There are a whole set of technologies associated with t h e IES concept t h a t are e i t h e r well advanced or in hand. These include t h e following:

Steam reforming f o r fuel decomposition (see, for example, Singh et al.

1984)

High t e m p e r a t u r e reactors f o r p r o c e s s h e a t generation (see, for example, Barnert et aZ. 1984; Singh et al. 1984; Nickel et al. 1983; Lee et al.

1983)

High performace gas turbines (see, f o r example, Tabors and Flagg 1985;

Smith and El-Masri 1981; Magnusson 1982) Air separation systems

Separation systems for synthesis gas (CO f r o m Hz)

Ammonia production

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High t e m p e r a t u r e electrolysis f o r splitting water (see, f o r example, Niirnberg et al. 1983; Donitz et al. 1980)

Steam coal gasification (see, for example, von Bogdandy 1983; Kirchhoff et al. 1984)

Hydrogen coal gasification (see, f o r example, Scharf et al. 1984)

Molten iron bath (see, f o r example, Klockner-Werke-AG 1983; KHD Hum- boldt Wedag 1985)

Texaco p r o c e s s of converting h a r d coal to fuel gas and methanol (see, f o r example, Guy et al. 1980)

Enhanced oil r e c o v e r y with C02 and o t h e r techniques f o r C02 disposal Fuel cells

The technical feasibility of t h e IES concept i s not in doubt. Advances in technology are expected to expand system applicability. S t a r t i n g with today's most popular IES-type system

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co-generation

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one can trace a number of evolutionary technical scenarios t h a t c a n lead ultimately t o z e r o emission systems (e.g., high temperature electrolysis and hydrogen-fed fuel cells). Moreover, t h e economic feasibility of t h e IES i s not a basic issue. For example, combined cycle and co- generation systems as w e l l as combined ammonia production and C02 enhanced r e c o v e r y systems are established commercial technologies. Essentially t h e IES concept provides a systematic way of describing dominant t r e n d s in energy sys- t e m s . But by viewing energy developments through t h e lens of this concept, w e gain a perspective on strategies f o r R&D planning and f o r overcoming possible shortsighted institutional and social b a r r i e r s t h a t could impede t h e gradual introduction of a n energy system t h a t can satisfy society's demand f o r cleaner, more efficient and flexible energy sources.

Toward this end, IIASA i s working with a n increasing network of institutions t h a t includes t h e Kernforschungsanlage-Jiilich; MIT; t h e Siberian Energy Institute, Soviet Union; t h e Energy and Mines Research Organization, Taiwan; t h e Atomic Energy Research Institute, Japan; and t h e University of Oklahoma, United States.

Work recently began on a three-stage analysis of system aspects and performance, institutional and organizational f a c t o r s associated with t h e development of t h e IES

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concept, and case studies of specific features of introducing t h e system concept in both market and planned economies.

6. CONCLUSIONS

IIASA, as an international institute, has necessarily devoted a significant fraction of i t s r e s o u r c e s f o r studying t h e global issue of energy development.

More than seven y e a r s have passed since t h e completion of IIASAns global energy analysis (Energy i n a f i n i t e World), and i t seemed a p p r o p r i a t e t o look back at some of t h e findings of this pioneering e f f o r t and what t h e s e suggest about f u t u r e pathways.

In sum, w e have seen t h a t energy substitution i s essentially technology substitution

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a n evolutionary p r o c e s s operating within a time frame. A s energy systems evolve o v e r t h e next few decades, t h e r e will b e a n increasing r o l e f o r methane and nuclear energy, as w e l l as a heavier reliance on low-grade fossil fuels. Given t h e environmental r i s k s associated with t h e expanded use of fossil fuels, s t r a t e g i e s need t o b e put in place now t o advance environmentally benign energy systems.

W e believe t.hat. the challenges posed by t h e s e developments can b e m e t . Specifically, i t i s possible t o move in a n evolutionary way toward energy systems t h a t satisfy societal demands f o r c l e a n e r , s a f e r , and more productive energy sources. This belief is r e f l e c t e d in IIASA1s commitment t o environmental r e s e a r c h , t o t h e newly launched studies of technology dynamics and life-cycles, and t o o u r active involvement in advancing t h e concept of integrated energy systems.

There is yet a n o t h e r dimension t o t h e global issue of energy t h a t w e believe h a s not yet received sufficient attention. In t h e past, international exchanges in t h e field of energy have c e n t e r e d mainly on t r a d e

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b e it c r u d e oil exports from t h e Middle East and North Africa, o r coal r e s o u r c e shipments from Australia, t h e Soviet Union, and t h e United States. But with t h e s p r e a d of technology advances in

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many countries, w e h a v e e n t e r e d a period of g r e a t e r interdependence t h a t o f f e r s v a s t opportunities t o combine national s t r e n g t h s f o r global well-being. T h e r e a r e many possibilities f o r t h e world's l e a d e r s in e n e r g y technologies t o work more closely t o g e t h e r

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b e i t on drilling technologies in t h e Soviet Union and t h e United S t a t e s , o n combined c y c l e systems in Japan and t h e United S t a t e s , o n c o a l gasification schemes in Japan, t h e FRG, Sweden and t h e United S t a t e s , o r on methane con- s e r v a t i o n techniques in Norway and t h e United S t a t e s . Indeed, no o n e country c a n claim intellectual exclusivity, n o r c a n o r should t h e benefits of technology b e con- fined within national boundaries.

I t i s in t h i s s p i r i t t h a t w e have sought t o provide a s t r a t e g i c p e r s p e c t i v e on how n a t u r a l r e s o u r c e s and e n e r g y systems could c o n t r i b u t e to a more peaceful world.

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