Financial meltdown has formed a grim end to the decade and although recovery has been slow, an increasing number of economies began growing in the second half of 2009.

The United Nations is now tentatively predicting a 2.4% growth in the world economy for 2010. That growth will be uneven, though, and at is best likely to only make up for the falls of 2009.

The increased production that comes with a recovery will bring its own set of problems to the energy markets. In turn, oil and gas prices must rise as demand increases once more. Without massive worldwide investments in renewable energy, demand will far outstrip supply.

Oil looks peaky

Oil makes up over a third of world energy usage but until recently was seen as too expensive to generate electricity. The risk of power blackouts has, however, persuaded governments such as Saudi Arabia, Abu Dhabi and Kuwait to ignore economic (and environmental) concerns.

“Without massive worldwide investments in renewable energy, demand will far outstrip supply.”

A 1,200MW expansion of the crude oil-fired power plant at Riyadh in Saudi Arabia, for example, has now made this the world’s largest crude oil-fired power plant. That will push up competition for oil against global transport and heating, food production and agriculture, both of which depend heavily on oil for fertilisers and fuel, as well as the drugs and chemicals industries.

The International Energy Agency (IEA) has been predicting plenty of oil until 2030 but there are signs that this is wildly optimistic. The assumption is that production can be raised from today’s 83m barrels a day to 105m barrels.

The world’s major oil fields have already passed peak production, however, and the IEA is relying on “fields yet to be found”. Even these seem unlikely to push peak oil past 2020 – around ten years earlier than previously thought.

The concern is that we may already have reached ‘peak oil’ production and that the figures have been massaged to avoid a global panic. The longer we leave action, however, the worse will be any panic when the crunch comes. Peak oil won’t have a soft landing. Rather than seeing prices rising gently as supply starts to drop, we will likely be thrown into a frantic and continued competition for a dwindling resource.

Economic growth is likely to be strongest in China, India and the other developing countries. But while competing for resources against the affluent west, they will actually be manufacturing and transporting products for the western markets.

Estimated oil discoveries of about 2 billion barrels in Uganda and elsewhere will not be enough to keep the burners going. Biofuels will help but not if they must come at the expense of food-producing land.

Otherwise, we will increasingly rely on dirty resources such as the Canadian tar sands. These will take a greater proportion of energy to recover usable oil and large-scale production will also be disastrous for global climate change.

“The concern is that we may already have reached ‘peak oil’ production and that the figures have been massaged to avoid a global panic.”

Coal and gas dominate electricity

Coal is the dirtiest of the fossil fuels and has highest carbon dioxide output per kilogram burned. If you leave aside these ‘real’ costs (as we do), however, it is cheap. For that reason it makes up about a quarter of the world’s total energy usage. New power plants are being built worldwide but some of the older, smaller ones are at least being retired because of inefficiencies and environmental concerns.

China is, for example, planning to modernise or replace many of its smaller plants with medium and large power stations that are above 500MW. Coal is therefore likely to continue to make up three quarters of Chinese power generation through to 2030.

In the US, Exelon has similarly announced plans to retire four 50-year-old Pennsylvania plants in 2011 because of reduced profitability. Three are coal fired with the fourth fuelled by natural gas or fuel oil. Also in the US, Progress Energy will by 2017 replace 11 coal-fired power plants sites with gas-fired plants because of environmental pressure.

Just under another quarter of the world’s energy comes from natural gas and consumption has nearly doubled over the past 30 years. Discovery rates peaked in the 1960s and 1970s, and peak gas has been predicted as early as 2020 or 2030.

Many natural gas power stations are now under construction, and some coal- and oil-fired power plants are being converted to gas. Although gas is the cleanest of the fossil fuels, how cheap it will remain is debatable as it increasingly becomes a seller’s market.

Nuclear supplies around a 20th of world energy, and countries such as Australia have announced they are planning to add plants. That is despite widespread public opposition and concerns about plant safety, waste disposal and the possibility of weapons-grade uranium coming from enrichment facilities. Costs of nuclear build are often hidden, with some estimates now placing them at 20 or even 30 cents/kWh.

Nuclear plants will also take many years to come on stream but even now there is talk of reaching ‘peak uranium’. This does not denote that we will run out of uranium but that production will peak or even may already have done so.

The future is sustainable

Developed countries must reduce energy waste in, particularly, industrial, commercial and domestic buildings. Waste reduction techniques have repeatedly shown to pay for themselves within one to five years. A technique increasingly promoted in 2009 to save energy is the smart grid.

“New coal power plants are being built but some of the older, smaller ones are being retired.”

Smart meters will certainly generate huge volumes of data but how useful that will be is debatable for such a massive investment. There is a danger of being hypnotised by an ineffective high-cost, high-tech solution when low-cost, low-tech solutions would actually work.

Smart meters could, however, be used to form virtual power stations to integrate micro-generation power stations into a single, secure web-connected system. That must not siphon off money that could go to fund actual reductions in demand, though.

Alongside encouraging energy efficiency improvements, governments must increase the share of power from renewable sources. The European Commission’s renewable directive will require EU countries to produce national action plans by the end of June 2010, aiming for a 20% target for renewable energy by 2020. With just over 5% now, that will need a steep increase.

Worldwide, biomass now supplies around 4% of energy, and hydroelectric about 3%. The Three Gorges hydroelectric dam is nearing completion and in 2011 should reach 22.5GW. In India, the Upper Slang project began construction in April this year and should develop 11GW.

The other renewable supplies are greatly underutilised: particularly solar at 0.5% of global energy. Solar energy is gaining ground, though. The solar photovoltaic (PV) market has been growing at more than 30% a year but a production glut in 2009 saw a large drop in PV module prices.

Growth is expected to resume in 2010. Modules are increasingly going into installations across southern countries, for example, the planned 100MW PV plant for SunRay Renewable Energy in Italy, which is expected to be complete by early 2010. Even more promising is the Desertec project, proposed this year to generate solar electricity using steam turbines.

“Alongside encouraging energy efficiency improvements, governments must increase the share of power from renewable sources.”

Wind energy (which in 2009 passed 1.5GW) provides 0.3% and geothermal 0.2% of global energy. Virtually none yet comes from wave energy, which is another huge possible resource. Pelamis – the world’s first commercial offshore wave farm – is now generating 2.25MW.

Despite some technical problems (to be expected with any new technology), it looks very promising technique with wide applicability. The Oyster, installed this year off Orkney, produces power by using waves to pump high-pressure water to an onshore hydroelectric turbine.

Investment in renewable energy dropped in 2009 because of the low prices for oil and gas. That is incredibly short sighted, as we will see when oil goes above US$100 a barrel again, with the US$200 a barrel suggested as a high by the IEA for 2030 looking very optimistic.

Low fossil fuel prices are the other side of the coin to global climate change. If we won’t reduce energy waste to avoid altering the climate, we will have no choice once we can’t afford it any more.