Primary Energy In The European Union And U.S. Compared

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Includes: USO
by: Euan Mearns

A couple of weeks ago I had a post on USA Energy Independence Day. This post takes a look at the EU energy statistics and compares them with the USA.

The EU has a larger population and smaller land area than the USA resulting in a population density 3.6 times that of the USA. European citizens therefore have less land available to service the energy needs of its citizens. This combined with different approaches to energy policy has led to the EU now importing 55% of it energy needs while the USA imports only 10%. The USA is well on its way to energy independence. This could have foreign policy and defense implications where the UK and USA has divergent priorities to Europe.

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Figure 1 A good starting point for this story is to compare some of the vital statistics for the EU and the USA. The EU has a substantially larger population and less than half the land area giving rise to a population density 3.6 times the USA. One statistic that jumps out is that the ratio of land area and energy production are the same (0.4). The USA punches above its weight on energy production simply because of its larger land area. The unfavourable population density of Europe results in per capita energy production being one fifth of the USA. This is likely a key statistic that feeds through to energy consumption that on a per capita basis is half that in the USA. Per capita GDP in the EU is 0.7 times that of the USA and one needs to wonder to what extent this reflects lower land area and lower production of natural resources.

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Figure 2 The EU production chart is scaled the same as the consumption chart (Figure 3) and the scale differs slightly to the USA production chart. EU primary energy production has been in gradual decline since around 1987 starting with the phasing out of the coal industry for political, economic and environmental reasons. North Sea oil and gas then began to decline at the turn of the century (note Norway is not included). Trouble in the Groningen Field in Holland has exacerbated the decline of gas. Nuclear and hydro have held constant since the mid-1990s, but even nuclear is now under threat from environmental lobby groups. Renewables production has grown rabidly and sufficiently to have halted production decline. That is without taking into account that this is third class, non-dispatchable energy.

There is a stark contrast with the USA. While the USA has drilled and fracked for a decade driving oil and gas production up, most European governments are remonstrating about fracking under the weight of pressure from environmental lobby groups and the citizenry. Indigenous energy production and energy security does not seem to matter to EU energy policy makers.

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Figure 3 There is a stark contrast in the energy production mix between the EU and the USA. New renewables, mainly wind and solar, now account for 19% of EU energy production, in third place behind nuclear and coal. Low carbon electricity production now accounts for 55% of primary energy. Readers should recall that BP grosses up renewable electricity by a factor of 2.63 in converting to TOE to account for thermal losses not incurred during generation.

The USA remains effectively a fossil fuel based energy production system with only 16% coming from low carbon sources. And despite all the hype, new renewables still only account for 4% of energy supply.

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Figure 4 Turning to look at consumption, we see that the EU and US energy mix have a lot more in common. The bridge between the different production mix and consumption mix being met by imports to the EU. Despite having a much larger population, the EU consumes less energy, the per capita consumption in the EU being half that of the USA.

One notable difference in the consumption trends is that the energy consumption has been in decline in the EU since 2005. The trend in the USA is more flat. The reasons for the decline are complex and I have gone over them many times. The primary reason is the increase in energy prices that began in 2002. The secondary reason is economic malaise. See the big drop in EU consumption in 2009. And the third reason is energy policy where virtuous measures to conserve energy may be supplemented by the subversive influence of an expensive and unreliable electricity system on economic performance.

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Figure 5 The % pie charts underline the broad similarities in the consumption energy mix. The main difference lies in low carbon electricity consumption (nuclear, hydro and renewables) that totals 25% in the EU compared with 14% in the USA. This difference is compensated by higher natural gas usage in the USA.

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Figure 6 Summarising the foregoing as energy balance (production minus consumption = balance) we see that US energy imports both peaked in 2005, this probably in response to sharply rising oil prices. Since then the two continents have had largely divergent energy policies. The EU focus has been on CO2 reduction and the expenditure of trillions on wind turbines and solar PV, neither of which really work, are expensive and dependent upon subsidies. The USA has pretended to follow Europe while in reality has gone out and drilled like never before producing a glut of shale gas and oil that has lowered prices. These trends are best viewed as imports as a percentage of energy consumed (figure 7).

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Figure 7 Converting the energy balance (imports) to a percent of energy consumed shows how startlingly divergent the EU and USA trends have become. The EU has always had to import more energy than the USA - a function of that higher population density. Since 2005 EU dependency on imports has risen then trended sideways while US dependency on imports has plunged. The sideways trend in the EU is largely down to falling consumption.

Discussion

On the surface and in the media it may seem that the EU and USA have similar energy policies designed to reduce CO2 emissions, pandering to several climate treaties. But in reality the approaches have been very different. The USA has pursued the mantra of drill baby drill and the shale oil and gas miracle has almost delivered energy independence. This is in large part down to the structure of mineral rights in the USA where on non-federal lands, landowners also own the mineral rights and are therefore motivated to exploit them. Most European governments have dithered, contemplating the closure of nuclear whilst being at best lukewarm on fracking. Meanwhile, the North Sea will resume its decline in a couple of years and coal appears to be well and truly out of favor. European governments, directed by Brussels, seem content to believe that wind and solar will do the trick and are prepared to simply become increasingly reliant on imported energy.

With the USA close to energy independence, it will be interesting to see how this impacts foreign and defense policy. A Google search throws up a number of articles on this topic but none I have found are up to date or are very informative. In particular most, written a few years ago, talk of US energy independence in 2030. On current trend this will happen much sooner, by the early 2020s. I will speculate that energy independence in the USA will make that country much less likely to get involved in conflict in areas like the Middle East and North Africa. We have already had a taste of this with blowing Libya into oblivion left to the UK and France. It seems likely that the USA will expect Europe to play and pay for an increasingly large part of defending its energy supplies.