On Energy

 By: Bikal Dhungel 

If anyone asks, ' what is development ? ' , answer , ' Energy '. Without energy, development is not possible and in order to maintain the level of prosperity, supply of energy need to be ensured in the first place because without Energy, no production facility can go on and no new facilities could be built. For example, from 2005 through 2011 China built roughly two 600 megawatt coal plants per week. Otherwise their economic growth of 7-11% could not be realized. Before we go on, let us be clear what is meant by Energy and what these kilowatt, megawatt, or gigawatt means.

Energy can exist in many forms. When we humans or other animals eat food, it gives us energy to perform tasks until a certain limit. When we use this energy, then we need to eat more. So, food is one important source of energy. If we want to pull a bus, then we might need many people to do this but this might not be an efficient form but luckily, humans have developed other forms which could generate higher amount of energy, for example Coal, Nuclear Power, Hydro Power and even sunlight which we use in a daily basis to run our industries, to light the bulbs at home, to cook food, to drive cars and so on. Looking the share of electricity production in the world, the largest share is generated by Coal ( 40%) followed by Gas (23%), Hydro power (17%), Nuclear Power (11%), and Oil (4%) etc. (Source: IEA, 2011). Among them, Coal is regarded as most environmentally unfriendly, Nuclear Power relatively friendly (but is highly dangerous if events like Tschernobyl or Fukushima disaster take place ), and hydro power is regarded as environmentally friendly. The share of energy consumption differs in countries according to what is available there mostly or which is more preferred. For example in Norway, a country that is rich in natural resource, the share of hydropower is over 95% of total electricity production whereas in the US, percentage share of Coal is 39% Natural Gas 27%, hydro power only 7%. In Nepal when we look at total energy consumption by fuel types, 77% is from firewood, 8% from Oil, 6% from animal dung and only 0.6% from renewables implying that still primitive measures are used. An then, energy is used for various purposes which is different in different countries. Taking an example of Germany, 58% of total energy is used in Industries and Transportation combined, in households other 27% and the remaining for other purposes. This can again be divided accordingly. Like, how many percentage of household is covered by renewable energy, how many by nuclear ones etc. Data can be taken for each country for each sector from the respective agency or governmental bereau.

To understand the units measured, let us consider the following example. At home we have light bulbs, some 60 watt, some 100 watt etc. When we use 1000 watts for one hour, ( if 10 pieces of 100 watt bulbs are switched on for one hour ) you consume one kilowatt-hour. At home we have many devices that need energy: Television, Radio, Computer, Washing Machine, Air Conditioner etc. Some need more energy than the other. A typical desktop computer uses between 60-70 watts whereas an air conditioner uses between 3000-4000 watts. Of course there are less energy consuming appliances in the market. Also due to environmental concerns, countries are enacting laws to bring efficient devices in the market. For example, the European Union brought a new law that from 2014 the Vacuum Cleaners should not exceed 1600 watts and from 2017, it should be only 900 watts. That was aimed to reduce the energy consumption.

So, 1000 watts an hour is one kilowatt,1000 kilowatt is one megawatt, 1000 megawatt is one gigawatt, 1000 gigawatt is one terawatt and 1000 terawatt is one petawatt. Or you can also calculate each unit in kilowatt, implying that one petawatt is equal to 1,000,000,000,000,000 watt or 1,000,000,000,000 kilowatt. How much energy a person or a country consumes varies according the the level of prosperity in individual countries. For example, one person in Germany consumes 2800 kilowatt hour per year in average and a household of 4 person consumes about 4500 kwh per year. The whole country then consumes about 450 billion kilowatt hour per year. In a country like Nepal, per capita energy consumption is only 106 kilowatt hour per year. This means, an average German consumes about 27 times more energy per year than an average Nepali.

The issue of Energy has always been an important topic. In the developed countries, the discussion recently has been about the investment in environmentally friendly sources of energy like Solar energy whereas the developing countries like Nepal is still struggling to fulfill its energy demand by any means. Despite having a high potential of hydro power generation, the Nepalese are facing as much as 18 hours of load-shedding per day. Due to lack of energy, industries cannot increase its production. As a result, goods could not be supplied according to demand and the Nepalese are dependent on neighbouring countries India and China for basic supplies. Mostly in winter season, the supply of cooking gas faces a shortfall. There might be various issues connected to it. One is, because cooking gas comes from India, the decrease of production or an increase in demand in India will directly impact negatively in Nepal. As soon as scarcity arises, dealers have more incentive to profit from the situation by hiding the cylinders and selling with higher prices in black market. Also the public tends to be secure hence wants to have at least one stock at home and demands more gas. This will worsen the scarcity further. As a result, the general public cannot cook food and are forced to eat either raw or finished foods like instant noodles or minced rice. People also spend a long time queuing for Gas, hence being economically inactive and those who earn wages in daily basis, might end up not having anything to eat or feed their family. A shut down of a nation 'bandh' for a day will cause a loss of 2 billion rupees, a similar inactivity due to gas scarcity will cause other losses in the form of earnings or adverse effects on health. When people use firewoods to cook food, they become prone to respiratory diseases. Moreover, as there is a monopoly in supply, any inefficiency of the government agencies, in this case, Nepal Oil Corporation, will directly impact the general public. Economists think that government is a very inefficient manager and does thing worse than the private sector mostly. This is justified. The managers of Nepal Oil Corporation have no incentive to run the organisation efficiently because they are not the stakeholders. Any loss of NOC will be beared by government ( tax payers ) and as they are the monopolists, people have no other option than to buy with them. This policy should end immediately. Oil corporation should be privatised. This would first of all kick out all the unnecessary employees who were recruited by political parties and on the other hand, a private enterprise competes to stay in the market, hence put customer satisfaction as its highest priority. So, in times of higher demand, it will react in time to fulfill this demand. Consequently, such scarcity of cooking gas is not likely to occur. Another example of state enterprise is Nepal Airlines Company. When it used to be efficient and well managed, there were about 19 airplanes 20 years ago and about 190 employees, today with only 2 airlines remaining, there are about 1100 employees, most of whom entered through political pressure. In such situation, no company can earn a profit. Hence, a well managed privatization is a magic bullet for Nepal's Oil corporation and Airlines.

In the macro level however, the government should focus on building hydro power plants. Nepal has enough water resources to supply its citizens with energy. Like Norway, it can generate almost all of its energy demand by hydro electricity. Then it decreases its dependency on neighbouring countries like India and China for energy needs and on the other hand, electrical heaters at home is good for the health and also for environment. Only if it can power the water supply system and irrigation on the hills, only if it can clean the Kathmandu valley, only if it can launch water related businesses like Water parks, swimming pools, mineral water factories etc, there is a huge potential of water related economic growth in one hand, but also the good irrigation system could boost vegetable industries as the geographical location of Nepal is a god-given gift. The tropical terai, medium hills and lower mountainous regions are excellent for wide varieties of fruits and vegetables. Moreover, the potential of tourism continues to exist. Looking at giants like India and China, only attracting less than 0.1% of their population as tourists in Nepal can take Nepal's per capital income same like theirs. Potential is there but either to use it properly lies in the hands of Nepal. Coming back to the issue of Energy, it is only energy that can give a boost of economic take over, and lack of it can bring it to freefall with no sign of any land down.

Coming to developed countries, the issues are quite different than in Nepal. They are concerned with energy security which is extremely volatile to political relations and other factors like climate. The political turmoil between Western Europe and Russia can have a deadly effect in the energy supply system and the economy as a whole. It may not even be western Europe. Few years before, when Ukraine did not pay the bills to Russia ( also believed to be a different reason ), Russia tightened the tap causing a halt in gas supply in Europe. High level political delegations rushed to Russia to solve the deal. There were several deaths in Balkans by freezing due to the lack of gas in winter. Hospitals were not able to warm up and the refrigerators did not work and materials that needed to be kept cold could not be kept so, hence causing problems one after another. There were also consequences on the economy. Due to the potential of such crisis, a new Gas pipeline was built connecting Vyborg, Russia to Greifswald, Germany directly surpassing other eastern European countries. To reduce the dependency on Russia, another pipeline Nabucco was built, to supply gas from Central Asia to Europe.

Concerning Oil, among the major producers, many are non-democratic states with terrible human rights record, like Saudi Arabia, Iraq, Iran, Russia, Venezuela etc. Due to the dependency on oil, we are obliged to look away when countries like Saudi Arabia practices unlawful killings and harsh punishments for minor crimes. There is war going on in several countries with western involvement based on human rights principles but on the other hand, Saudi Arabia is a major ally of western powers. This is why, investments in Green Energy is essential to reduce such unholy alliances. The US has already taken the initiative and started to take its oil reserves out and hence, might become the largest oil producer in the world. Also history teaches us some lessons. When western powers supported Israel in the Yom Kippur War, Oil exporting Arabic nations brought an Oil Embargo, stopping the supply of oil for western countries. Consequently, there was a brief economic recession in Europe and America. One reason why it was good was, countries like Denmark started to think about Green Energy, to reduce this dependency. As a result, Denmark as well as other Scandinavian countries have highest portion of renewable energy sources today. Despite having a large oil reserve, Norway powers itself almost solely with hydro electricity. In other countries, the major concern is not oil itself, but its power to affect the economy. Rising oil prices or energy prices cause an economical downturn. Rising oil price will cause higher production costs, higher transportation cost and at last, the price of a good will go up. When prices go up, people consume less. When people consume less, firms need fewer employees, should fire workers. This will then cause reduced tax revenues for the government, and additional burdens on social security system because those fired from firms need governmental support. By this way, even a tiny rise in oil prices could cause a large crisis. One reason of high inflation in the last 15 years can be attributed to high oil prices. The oil price was $25 per barrel in 2002, in 2008 it crossed $140 per barrel, in 2011, came down to $100 and now has again decreased. Econometric calculations show that one dollar increase in one barrel oil will cost additional 31 billion dollar to the world economy if the consumption is to remain the same. When the Gas price would increase by $1, consuming the same amount, the economy would bear the lost of another 60 billion dollar yearly. Regarding electricity, an increase of one cent per kilowatt hour would cost additional 180 billion dollar to the world economy. So, energy prices are important but also vulnerable to the economy.

However, we should also consider the effect of falling oil prices. In the short term, falling oil prices can be a good thing for a country that imports oil and bad thing for the country that exports oil. When oil price falls, the price of goods also fall due to lower production and transportation costs. So, when prices are falling, people do not immediately buy the goods, they would wait till the price falls further, causing a deflation. This means simply, when people don't buy goods, producers need to produce less, so they again fire workers and unemployment increases, causing a problem in the economy, as Japan is facing right now. The process of deflation stops at that point when people think that it wont/cant fall further. So, in the medium term, falling oil prices can be bad for the economy. On the other hand, when oil is cheap, there is no incentive to invest in clean energy because it will be too costly. When there is a cheap source of energy, why bother with expensive green energy ? So, the green project can be put under the carpet. When we postpone the Green Project, the problems will arise in the future as oil is about be finished until the end of this century if no other sources will be discovered. According to Jon Jones of the school of engineering at the University of Aberdeen, when oil drilling started by John D Rockefeller's Standard Oil Company ( richest man in human history with about $300 billion in today's money, 6 times richer than Bill Gates ) at least 135 billion barrels of oil has been used and about 40% of possible reserves is yet to be discovered.

However, investment in Green Energy is vital. The challenges of Climate Change and other environmental issues have put the future of our children at risk. Germany and Scandinavian countries have took a lead in this transformation though it is not sure either Germany will take a U turn in its policy because of lots of uncertainties. Before the nuclear accident in Fukushima in Japan, nuclear energy did not remain the major issue as it was cheap and not so environmentally unfriendly. Then came Fukushima, and all of a sudden, there was a huge pressure to Chancellor Merkel to take action to end such risky sources. She did not hesitate to announce that 8 nuclear power plants will be immediately shut down and will totally shut all the nuclear facilities by 2022. This is not far away, its in seven short years. It is unclear from where Germany will power its industries. It is the fourth largest economy of the world today and among the largest exporters with almost no natural resources. Shutting down industries is not an option. Companies like Siemens are investing massively in storage batteries, wind turbines are being built in east and north sea though with some opposition , ' not in my backyard ', but still there is no sure solution for this problem. On the other hand, neighbouring countries like France and Czech Republic saw an opportunity to export energy to Germany. Both of these countries are building new power plants but the problem is, when they face a similar accident in Fukushima, it will have impacts on thousands of miles, affecting Germany in a same way. The disaster in Chernobyl affected people as far as Sweden through the radiation taken by wind. It was reported in a study that concluded that people in one particular area had lower cognitive skills and lower performance in general in Sweden. So, at last, Germany was the only stupid one that acted, though we have to honour the will of chancellor Merkel to lead by example.

The issue of Energy will continue to be important, be it oil or gas or other forms. In the future, it is going to be more a problem as world population is increasing with high rate. Economic growth in emerging economies especially China and India and many other Asian and African countries will pose additional demand on energy. They will not postpone their growth due to energy. Fact is, the women in Asia and Africa who spent their long days washing cloths at the river needs Washing Machine, their kitchen will also need refrigerators to cool the foods and children should also be able to learn at night under the electric bulbs. Development is the development energy. The story of climate change cannot be posed to the poor to stop them from economically growing, it is their right to live in a standard that is usual in rich countries. Climate Change is the issue of tomorrow ( also today ) but to eat and survive is the issue of now immediately. So, poor do not care if the fuels they are burning is environmentally friendly or not, they must not care. What they care is if they and their children get enough energy supplements in a daily basis. It is the basis of development. Only, not to forget that the threat of Climate Change is real and it will affect the poor over-proportionally but the richer world should bear the cost of consequences concerning support to poor countries, investment in mitigation programs and investment in adaptation technologies. Additionally, it is also true that, when an average citizen of the world live like an average american, three Earths are needed.

It is the humans who created the destruction. Since the humans started to rule the world, over 80% of creatures faced extinction according to the National Geographic. We have destroyed the largest part of the world's forests, as a result of which countries like Haiti and even England is roughly treeless, we have brought a near extinction of Rhinos, Bengal Tigers, Sumatran Elephants, Black Spider Monkeys, Chimpanzees, Fin Whale, Giant Panda, Green Turtle, Sea Lions, Snow leopards and many others who face extinction today. Many of them are because of human activity on earth. Humans top the list of most dangerous animals that have killed most other species, and this in a short time. Since we reached industrialization, we have crossed the limits and then started to destroy the place which we call home, the Earth. The world didn't care when it burnt fossil fuels, the issue of energy and environment was already popular in the 1960s, but nobody cared because they would not live enough to face the consequences anyway. It is their children. Even today, the large number of countries do not care about the environment, also the countries that care, large number of people do not care. This is why international summits like The Copenhagen Conference fail time and again. When it is about loosing money, millions will march on the street with banners like ' For our children, for our future ' but when it comes to environment which we all need, people have no time to pressure their government. Again, developed countries are in a position to adapt with climate change, their economy will only face a tiny contraction. For countries like Canada, Russia or Scandinavia, increase in temperature might be even better due to more crop yields, less need of heating, lower winter deaths or the rise in tourism but for southern countries and especially small island countries, it is the matter of life and death. Maldives may not exist in 20 years, as other islands in the pacific. Countries like Bangladesh will loose 25% of their land. Others will suffer with flood, heat waves, crop failures etc causing additional burdens to already over-burdened places. Developed countries do not seem to be ready to provide clean technologies to poorer countries , a so called 'Leap Frog' measures to avoid poor countries to use the same energy inefficient machines as rich countries of today used in the last 100 years. But poor countries are responsible equally. Technology transfer does not happen by a way that Siemens tells the Nepalese government, ' by the way, here I have a machine to generate electricity cheaply, take it and use it', it can only happen by Trade, Foreign Direct Investment ( FDI ) etc. For this, the Nepalese side should be an investment friendly country with a welcoming nature towards international investors. It should integrate itself to the global economy instead of being too nationalistic and supporting inefficient national companies. It should let people make profit, without the incentive to make profit, no one will come and invest. Government should only make proper rules but bring liberal policies. In the case with energy, if there are no local companies who can invest and provide the country with electricity, it should let foreign countries to do this. It should not forget that, energy is development, without energy, it cannot develop. So, the choice is, either to let the foreigners come and invest and make profit and be both side better off or telling that this is our internal affairs by putting the people into darkness unable to study at night, unable to cook food, unable to heat the houses in cold winter, unable to store foods for longer, unable to power the roads, and unable to develop. These are the choices.