Energy System & Policy

Introduction & Overview

Lecture 1

Salman Tariq
What is Energy

• Energy is the power and ability to do work

• Energy is central in our lives; everything we observe around us has accessed energy

• Energy has a derived demand

• Energy services
• Sustaining & living life
• Economic activity & creating products
Energy Goals

How to get
…to the end ….Keeping in
from the
goal…. view……
starting point…
Energy & The Future: Time is Running Out
Energy & The Future: Time is Running Out

https://www.theatlantic.com/ideas/archive/2019/08/amazon-fires-show-limits-sovereignty/596779/

• Forest fires and climate change operate in a

vicious cycle;

• Increases greenhouse gas emissions

 Energy & The Future: Time is Running Out

“..the bushfires have already scorched millions of acres,

killed two dozen people, and slaughtered an estimated half a
billion animals in the country”

“The Australian bushfires were exacerbated by two factors

that have a “well-established” link to climate change: heat
and dry conditions”

https://time.com/5759964/australian-bushfires-climate-change/
Introduction to The Energy Eco-System

Emissions

Law of conservation of

Final Energy Services

Total Primary Energy

Secondary Energy

Consumption
Total Energy
energy: for an isolated system
Resources

Supplies

Supplies
energy cannot be created nor
destroyed but can only be
transformed or transferred
from one form to another

Capital

The Energy system involves the conversion of the primary energy supplies to useful energy.
The Energy System: Technology, Economics, Markets and Policy (Travis Bradford)
Energy: Not Just Engineering

• Technology • Cost Benefit

(engineering / Evaluations to
physical meet the needs
transformation) of people

Physical Economic
Energy is not just for engineers; there is a
larger component of finance, policy and
market systems around the core product.
Market Social

• Transaction • Political & Social

Systems – how consequences;
energy is bought policy making;
and sold laws
Questions to Explore in the Energy System

• Physical Questions • Market Questions

• What is energy • How is it transacted
• Energy transformation • What are the cheapest technologies today?
• Energy content and how is it consumed Tomorrow?
• How is it measured • What risks exist in the market and who bears
• What are the unintended consequences of its them?
use or overuse • What are the emerging technologies that can
disrupt the market?

• Economic Questions
• How much is required • Social Questions
• How much does it cost and what is its actual • What are the political implications of energy
worth endowments
• What if we run out • How should we allocate scarce resources
• Are all costs and benefits accounted for • Is energy a basic right?

The Energy System: Technology, Economics, Markets and Policy (Travis Bradford)
 Why Study Energy in Humanities & Social Sciences

• Any conversation on urbanization and poverty reduction not complete without access to modern
energy

• Energy system needs to be understood as an enabler of work

• Links our understanding of societies through Gross Domestic Product (GDP)

• Measure of production in society
• Energy is the foundational concept in economic activity
• High correlation in modern form of energy usage & economic activity

• According to World Bank, economic cost of power distortions is equivalent to 4-7% of GDP/year in
South Asia
• Estimated $18bn annual loss to Pakistan due to inefficient power sector
• ~$15bn loss due to the 2022 floods

https://www.dawn.com/news/1451138
The Energy System: Technology, Economics, Markets and Policy (Travis Bradford)
https://www.worldbank.org/en/region/sar/publication/in-the-dark-how-much-do-power-sector-distortions-cost-south-asia
 Energy Poverty
Lack of Access to Affordable Energy
• Relying on traditional fuels (firewood) requires many hours
collecting
• Disproportionate burden on women and children

• Indoor Pollution
• 4million deaths annually
• 600,000 Africans killed every year
• 28,000 deaths per year in Pakistan & 40million cases
of acute respiratory infections

• Deforestation/climate change has disproportionate impact

• Lack of basic services

• 36,000 women die in childbirth per year in Nigeria as lifesaving medical help is hampered due to lack of
lighting
• 50% of schools in Pakistan do not have access to electricity (Pakistan District Education Rankings 2016 – SDPI & Alif Ailaan)

https://theconversation.com/empowering-the-powerless-lets-end-energy-poverty-83628

http://www.emro.who.int/pak/programmes/environmental-health.html
 Conflicts & Constraints

• Systemic Constraints
• Social
• Economic
• Environmental

• Sustainable growth at the intersection of all three

• Conflicts in Energy
• Depletion: Limited physical resources, capital,
market failures

• Innovation: invention, increase in efficiency, The Three

opportunities, necessity, entrepreneurship Spheres of
Sustainability

The Energy System: Technology, Economics, Markets and Policy (Travis Bradford)
https://soapboxie.com/social-issues/The-Environmental-Economic-and-Social-Components-of-Sustainability
 Energy Supply Chain
Discovery Storage & Further Final
Harvesting
transportation processing Consumption

Exploration Primary Purification Secondary

Natural energy Final Energy Final Energy
& Energy & Energy Distribution Devices
Resources Consumers services
Production Sources conversion Sources

Oil Fields Oil Rigs Crude Oil Oil Refinery CNG Petrol Stations Homes Phones Communication
Coal Deposits Coal Mines Natural Gas Gas Refinery Hi-Octane Transmission Offices Geysers Miles/KM
Gas Reserves Gas Rigs Coal Power Plants Electricity Gas pipelines Industry Appliances Cool Room

Exploitation Environment Exclusion

- Depletion of - Oil spills - Affordability
resources - Gas leaks - Access
- Wildlife extinction - Fumes - Quality
- Natural landscape - Awareness

Every step of the energy supply chain constrains the natural eco-system and has socio-economic impact
The Energy System

*2500 MM TOE
*2500 MM TOE

65%
Rejected
Energy

35%
Energy
Utilized
only

Law of
conservation of
energy

https://flowcharts.llnl.gov/
 The Energy System: Pakistan
(Draft Version)

89% losses

11% useful energy

Sankey diagram made by Nida R. Farid

 The Energy System: Pakistan

47% Imported; 53% Indigenous

86.3 Million Tons of Oil Equivalent (Energy Supply Available)

62% of Primary Energy utilized for consumption

37% Industry | 34% Transport | 21% Domestic

7% Commercial, government & Agriculture

Further losses in end use consumption

(Over 85%)

Pakistan Energy Year book 2018

Imported Fuel - Problem

Global Prices

$17 billion oil imports during Jul-Apr FY22

$3.4 billion Gas imported

Cost of Living
LPG
Political stability

$$ Reserves
Electricity Price
Transportation costs
PKR:$ Heating costs
All imported products
The Energy Sub-Systems

1. Power

• Electricity Generation, Transmission, Residential Commercial

Distribution

2. Thermal

• Storage and transfer of heat primarily fossil Industrial Government

fuel based

3. Transport

• Mobility sector
 The Electricity System

Pakistan Economic Survey 2022

Fossil Fuels: Coal, Oil & Gas

• Industrial Revolution in the

18th Century coincided with
use of fossil fuels and shift
away from traditional energy
sources

• Coal dominated till mid 19th

Century which was then
taken over by crude oil

• Natural Gas usage has

increased sharply and taking
over coal. NG plants has 50-
70% lower CO2 emissions
than coal
https://ourworldindata.org/fossil-fuels
Carbon Emissions

• Fossil Fuels largest

contributor to CO2 emissions
followed by land use changes
(deforestation, fires)

• 43% of CO2 emitted in 2018

accumulated in atmosphere
while rest taken up by
“carbon sinks” (35% land,
23% ocean)

• Paris Agreement:
commitment to reduce
emissions to 1.50 C
https://www.carbonbrief.org/analysis-fossil-fuel-emissions-in-2018-increasing-at-fastest-rate-for-seven-years
 Renewables in Electricity: Solar & Wind
• Solar and wind have had an exponential
rise due to significant cost reductions.
• Solar: 5GW (2006) to 500GW (2017)
• 849GW (2021)
• Wind: 74GW (2006) to 600GW (2018)
• 825GW in 2021

• Solar and wind reached grid parity

• Competitive with fossil fuels

• Solar costs have dropped by 99% in the

last four decades

• Global investment in solar and wind is

outpacing fossil fuels

• Intermittency remains a problem that can https://www.lazard.com/perspective/levelized-cost-of-energy-2017/

be solved with electricity storage
The Electricity System

• System Components
• Generation
• Conventional fuels, renewables
• Transmission
• Electricity transportation, infrastructure
• Distribution
• End user

• System Constraints
• T&D Losses around 20%
• Expensive & complex grid which may not feasibly
reach remote/isolated areas
• Market structures are being liberalized to involve more private sector participation

Governments have a range of policy tools to impact the electricity sector. Policy impacts rate
determination, Supply/demand and efficiency improvements.
 Transportation Sector

• Oil is the dominant fuel for transportation today and in

future scenarios

• Wells-to-Wheels efficiency of <25%

Total Transport Energy Consumption

2012 55% 45%
2040 39% 61%
OECD Non-OECD

Share of Petroleum & Share of Gas

Other Liquid Fuels
2012 96% 3%
2040 88% 11%

https://www.eia.gov/outlooks/ieo/pdf/transportation.pdf https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/demand-by-sector/transport.html
 Transportation Sector: Electric Vehicles

• Over 2 Million Electric Vehicles sold in 2018, up from few thousand in 2010.
• Projected 10Million in 2025

• EVs to displace 13.7 Million Barrels per day of oil demand by 2040

• Transportation sector has been growing at a double digit growth in Pakistan

• Transport sector dependent on oil

• 65% of petroleum products consumed in transport sector
• Annual import expenditure $13Billion.
• With current growth rate of the transport sector, oil import bill can reach $30Billion by 2025

• Pakistan expected to have an electricity surplus in the next several years (55,000+MW)
• 500,000 Electric Vehicles can be charged with 1,000MW supply

• Most countries have EV targets – Norway to sell EVs by 2025, Netherlands by 2030, UK & France by 2040.

Bloomberg NEF Electric Vehicle Outlook

Electric Vehicles in Pakistan: Policy Recommendations (LUMS Energy Institute & USPAS-E)
Course Topics

Week Topic Week Topic

1. Introduction to Energy System 12. Transportation / Electricity in
2. Electricity Markets & Grid Transportation

3. Electricity Generation, Load, Fossil fuel 13. Energy & Environment

based generation 14. Energy & Sustainable Development
4. Renewable Energy Technologies
5. Energy Storage
6. Distributed Generation
7. Electricity Demand Management &
Policies
8. Coal, Oil Markets & Alternate Fuels
9. Natural Gas
10. Energy Presentation/Debate
11. Energy Presentation/Debate
Assignments & Grading

• Attendance and Participation – 15%

• Problem Sets (5) – 20%

• Class Quiz (3) – 15%

• Energy Presentation/debate – 20%

• Policy Paper and Analysis – 30%

Course Aims & Outcomes

• Become fluent in the energy language and its terminologies

• Understand the entire energy system, the stakeholders and the conflicts

• Understand the technological aspect that impacts the physical characteristics

• Understand energy policies and the nexus between energy, economy and environment

• Understand basic economic models in the energy system

• Understand the policies, market failures and solutions

• Be up to date with the current energy transitions and various viewpoints