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On the face of it, Sweden wants to do the impossible. The country produces
half its electricity from 12 nuclear plants, the highest proportion of nuclear
power per inhabitant in the world. But last month, the Swedish government
renewed a promise to close down the nuclear plants within 20 years (This
Week, 27 January). It has also promised not to build any new hydroelectric
dams, the source of the rest of the country’s electricity. And to top it
all, it has pledged to maintain high employment and an annual economic growth
rate of 1.9 per cent.

In conventional planning, this would mean that Sweden should build new
power plants that burn coal or oil, to replace the nuclear power. But Sweden
has also promised that in 20 years its emissions of carbon dioxide (CO₂),
the main greenhouse gas, will have dropped to 1986 levels. This means burning
less, not more fossil fuel.

Can the Swedes do it all? No, say conservative politicians and industrialists,
who are campaigning the save the nuclear plants. Yes, say Thomas Johansson
and colleagues in the Department of Environmental and Energy Systems Studies
at Lund University.

Johansson arrives at this positive conclusion by using a new kind of
energy analysis, which compares the costs and benefits, both economic and
environmental, of the ways a society can meet its energy needs. And the
new method of analysis shows that developing countries such as India, as
well as rich countries like Sweden, can meet their people’s needs for energy
without breaking the bank or destroying the environment.

Cost, and the fair comparison of costs, is critical. No energy planner
will ever convince a government to change its sources of energy or invest
in energy efficiency without a cost estimate, and preferably one that quantifies
the cost of protecting the environment in a way that electorates can understand.

Energy planners have also developed ways of including the energy efficiency
of each fuel source in cost-benefit models. Johansson has analysed Sweden’s
future energy needs using a model of this type. He looked at the sectors
of the power industry that the closure of the nuclear plants will hit hardest:
electricity, its combined production with useful heat (cogeneration), and
district heating. These account for 63 per cent of the primary energy used
in Sweden.

But it is not industrialised countries such as Sweden that matter most.
The world’s climate depends on whether China and India can develop without
producing tonnes of CO₂, as the industrialised countries did
while they were developing. The biggest conflicts looming over negotiations
for a climate treaty, which begin this month, involve the money that rich
countries must give to poor ones to enable them to develop with reduced
CO₂ emissions.

Amulya Reddy and his colleagues at the Indian Institute of Science in
Bangalore say India can improve its standard of living, generate less CO₂
and spend less on energy. Reddy calculates that rather, than costing more,
environmentally benign energy will cost far less than plans that continue
with the energy policies of the past.

Both Johansson and Reddy reached their conclusions by using a simple,
yet innovative approach. The ordinary householder might think it normal
to estimate needs, list the various ways of filling them, then adopt the
cheapest options. But the energy business does not work that way.

According to Johansson, government planners typically assess how energy
demand has grown alongside economic growth. Then, for an economy forecast
to grow a certain amount, they predict that a corresponding amount of extra
energy will be needed. They then build the plants required to generate the
energy. It is as if you discover that you spent 1,000 Pounds last month,
and therefore assume you will have to spend 1,000 pounds, or a bit more,
next month, without even wondering if some of your expenditure was wasted.

The alternative, says Johansson, is to plan your power supply in terms
of the services you need, considering the possibility of making existing
energy go further, as well as simply generating more power. The point is
to provide ‘hot showers, cold herring’ and whatever else electricity users
want, rather than power for its own sake.

This is the way the first power companies worked. In 19th century New
York, Thomas Edison’s electric company sold not electricity, but its end
product – illumination. The crafty Edison also held the patent on the light
bulb. His profits climbed as the efficiency of the bulbs increased, and
he could sell more lighting as a service, without having to pay to generate
more power.

It may not be possible now to reorganise the power industry to sell
services, rather than energy, but it is at least possible to plan in terms
of the uses to which the energy must be put. The planner can then show how
to meet those needs, either by generating more power, or by using existing
supplies more efficiently, for the least cost. Least cost might mean less
money required to install equipment or buy fuel. On the other hand, it might
mean less CO₂.

That is the analysis Johansson has done for Sweden, and Reddy has done
for the state of Karnataka, India. The results show that Sweden can spend
less than it now expects on district heating and electricity and still cut
CO₂ emissions by 35 per cent by the year 2010. Reddy estimates
that Karnataka could meet its energy needs better than it could under current
plans, while avoiding the doubling of CO₂ by the year 2000 that
those plans would bring. At the same time, the state could save the $3,000
it would have cost to produce each tonne of CO₂.

In Sweden, if there are no increases in energy efficiency, the electricity
demand in 2010 will be for 194 terawatt-hours (TWh) of energy – half as
much again as demand today. (Each TWh is 1,000 million kilowatt-hours, kwh.)
But with electricity prices expected to increase 50 per cent by 2010, the
extra cost of power should, in itself, lead consumers to increase their
own energy efficiency. Johansson calculates that efficiency will increase
enough in this way to allow the demand for electricity to be met by only
140 TWh.

The government can, however, promote a more extensive adoption of efficient
technology than would be achieved by relying on such market forces. Methods
could include imposing efficiency standards, allowing tax concessions for
efficient appliances and replacing electric space heating, common now in
Sweden with its abundant electricity, by more efficient heat pumps and fuel.

If such measures lead to replacement of all today’s inefficient equipment
as it wears out by the most efficient equipment now on the market, Sweden
will need only 111 TWh of electricity in 2010, rather than 140 TWh. If consumers
adopt energy-efficient equipment currently in the research and design stage
as well, Sweden can meet its electricity needs with 96 TWh by 2010 – a drop
in power requirements of a third. This, says Johansson, is the benefit of
calculating energy requirements in terms of need, rather than supply. Increased
efficiency can be taken into account.

The environmental impact of such increases in efficiency, however, depends
on how you generate the power. Johansson’s team calculated the effect of
different energy mixes, used at different levels of efficiency. One energy
mix simply chose the cheapest options for supplying energy – using entirely
coal, oil and natural gas. Another chose energy sources that minimised the
production of CO₂. The solution that produced least CO₂
used no coal, some oil and gas, but substantial biomass, a renewable fuel
that does not increase the net amount of CO₂ in the atmosphere.

Vatenfall, the Swedish energy board, estimates that Sweden already has
50 TWh per year of unused biomass power, chiefly the branches, bark, sawdust
and other residues from the timber industry. To this Johansson’s team added
another 40 TWh per year that Sweden could produce from energy plantations
– fast-growing trees planted solely as fuel. They calculated the energy,
and costs, that would result if the wood were used to fuel highly efficient
cogenerating power stations, where both the electric power generated by
steam, and the waste heat, are used. They rounded off the environmental
scenario by including the 3 TWh of wind power Vatenfall thinks could be
installed in Sweden by 2010.

The team then calculated the costs, both in money and CO₂,
of each energy mix at three different levels of efficiency: efficiency improved
only by market forces, adoption of all commercially available efficient
technology, and using efficient technology now in the planning stage.

Not surprisingly, the more energy efficiency was included, the cheaper
energy became. More surprisingly, there was little difference in price between
scenarios which optimised costs, and those that optimised CO₂.
All the options came out filling Sweden’s energy needs at a cost of between
$5.5 and $7 billion per year, or from 2 to 2.9 cents per kWh.

The real surprises were in CO₂ production under each scenario.
If the basic source of power was fossil fuel, no amount of efficiency was
enough to reduce CO₂ emissions to the 1986 level of 11 million
tonnes per year – equivalent to 3 million tonnes of carbon – as Sweden has
promised. Even with maximum efficiency, this plan, although otherwise the
cheapest, produced 7.6 billion tonnes of carbon per year.

But even by relying on biomass, Sweden will not meet its targets unless
its overall energy needs are reduced by efficient technology. Maximum use
of biomass, plus market-driven energy efficiency, still produced 5 million
tonnes of carbon per year. Using commercially available, efficient technology
in the plan using maximum biomass, carbon emissions drop to 2.7 million
tonnes. The target can be exceeded, with carbon emissions falling to 1.9
million tonnes, if the most efficient technology that researchers can imagine
is adopted.

Johansson’s team tested a third energy mix that did not achieve the
target. This was a halfway house in which Sweden used no coal, and only
its existing biomass, without the energy plantations. The rest came from
natural gas. Gas is promoted in some countries, including Britain, as a
way to reduce emissions from fossil fuels, because it generates less CO₂
per unit of energy produced. In Johanssen’s model, this option produced
lower emissions, but they were not low enough. It produced 3.8 million tonnes
of carbon per year, even with the highest levels of energy efficiency.

The difference between the cost of energy under these low-CO₂
scenarios and the costs of the other plans gives the cost of achieving Sweden’s
CO₂ target. The plan that produces the least CO₂ costs
less than simply letting market forces prevail, because its high level of
energy efficiency saves enough money to pay for the investment needed to
switch to biomass production. Johansson estimates that under such a plan
Sweden would gain $40 for every tonne of carbon it does not produce that
it would have produced under market forces alone. But this would not be
the cheapest option.

Carbon emissions under the cheapest plan are less than under market
forces, thanks to the efficient methods it uses. But they are far too high
to meet Sweden’s target. The difference in cost between the cheapest scenario
and the plan that produces least CO₂ is $102 for each tonne of
carbon not released. This may be taken, says Johansson, as the cost to society
of adopting an energy policy which minimises CO₂, versus one
that minimises costs. The Swedish government plans to introduce a tax on
carbon emissions in 1991, at a rate of $150 per tonne of carbon. This would
generate the extra revenue needed to pay the higher cost of replacing nuclear
energy with biomass, compared to replacing it with fossil fuels.

But it is one thing to say that the rich, orderly Swedes can put their
energy house in order with a minimum of CO₂. It is quite another
to assert that huge and poor India can do the same. Yet India has a stronger
case for putting its house in order, according to Reddy. The Third World
faces an energy crisis even without the problems posed by global warming.

In 1987, the state of Karnataka produced a ‘long range plan for power
projects 1987-2000′, known as the LRPPP. It predicted future power needs
in the classic manner, by assuming they would continue to grow at 9 per
cent per year. This predicted an increase in demand from 2,500 megawatts
in 1986, to 10,000 megawatts in 1999. Producing this would require the investment
of $17 billion, at $3.3 billion per year, a sum Reddy describes as ‘astronomical’.
The plan depends on the building of a 1000-megawatt station fired by fossil
fuel, and quadrupling the size of the planned Kaiga nuclear power plant.
Despite this, the LRPPP predicted continuing power shortages in Karnataka.

Reddy disagrees with the assumption that such expensive energy supply
is necessary. But it is an assumption that is made throughout the developing
world, where current energy plans would cost $100 billion per year. These
expansive plans will never be realised; only $4 billion is available from
the World Bank for developing electric power, and $16 billion from other
aid and loan sources. So there must be another approach. Reddy says that
traditional plans also lack a ‘development focus’, and take no account of
how the benefits of energy are distributed in society.

In developing countries, energy can be used wastefully by whoever has
the money to use it, while the poorer and less powerful go without. This
creates situations such as that in Karnataka, says Reddy, where one aluminium
plant used 20 per cent of the present power supply, in a world with a glut
of aluminium, and a state where not all houses have electricity.

Reddy’s alternative analysis of Karnataka’s energy needs includes this
political focus on meeting development needs. ‘We arrived at the energy
required in the year 2000 by estimating the growth rates for each category
of consumer,’ says Reddy. The constants in the model were growth rates in
electricity used by commercial premises, industry that uses little electricity,
and irrigation, which now takes 20 per cent of Karnataka’s electricity.
They speeded up the spread of electricity until all the homes were connected.
And they shut the aluminium smelter. ‘The aluminium plant was a bad plan,’
says Reddy. ‘It is cheaper to address the needs of the people.’

Reddy employed the same technique as Johansson to arrive at the least
expensive energy – first estimating needs, then filling them through sources
of power and energy efficiency, starting with the cheapest method, and when
that was used as fully as possible, moving to the next cheapest. Unlike
Sweden, however, Karnataka’s low-cost solution also produced least CO₂.

This is because Karnataka does not have to replace nuclear plants with
alternative power sources, where the least environmentally damaging happens
to be most expensive. It aims to expand the energy supply, and it has a
broader choice of energy sources. Small-scale hydroelectric power, which
has mostly already been exploited in Sweden, and biomass are both cheaper
and quicker to implement than fossil fuels in India. Karnataka also has
a range of options for cutting energy use, for example by switching cement
production, which now consumes 20 per cent of the state’s electricity, to
a less energy-intensive technology.

The combination of development focus and end use gave the model its
name – Defendus. ‘It is the only thing that will defend us in the present
crisis, ‘ says Reddy. Defendus came up with a projected energy requirement
in 2000 of about twice the current consumption, some 40 per cent of the
projection made by the LRPPP. Reddy says that about 40 per cent of that
reduction came from improving efficiency. The rest came from incresing the
electricity supply only until it met specific development needs. Largely
because of the ‘development focus’, the plan would cost a third as much
as the LRPPP.

Such savings may allow energy planners like Reddy to muster the political
clout it takes to close aluminium smelters. ‘From an energy point of view,
it is very expensive to keep poor people poor,’ says Reddy. ‘It is far cheaper
to address the needs of poor people than to ignore them, since poor people
consume far less’ – less, that is, than those who now use the lion’s share
of energy.

The cash crisis facing developing countries means that lending organisations,
such as the World Bank, are listening to Reddy. ‘They say, we know you can’t
continue in the old way,’ he says, but until now there has been no alternative.
‘Least cost planning is just starting,’ according to Reddy. ‘This is the
first analysis for a developing country. Before, we knew you should save
energy, but all we could do was wave our hands. Now we have a proposal with
numbers on the table for the first time.’

The most compelling numbers are for CO₂ emissions. The LRPPP,
with its heavy reliance on massive coal-fired power plants, would produce
an extra 830,000 tonnes of CO₂ each year, more than doubling
current emissions by 2000. Defendus would increase emissions by a mere 11
per cent. The costs of the two plans are very different: Reddy calculates
Karnataka would gain $3,000 for each tonne of carbon it does not generate,
than it would have under the LRPPP.

The question begged by all these glowing predictions is whether they
will ever be fulfilled. The cash crisis in the Third World will help concentrate
the minds of lenders. Third World industry could also become an ally in
promoting efficient technology. At present, by cooperating uncritically
with energy suppliers, ‘industry is kept inefficient’, says Reddy, and its
energy costs are high. It could profit from increased efficiency, as long
as the technology is available. Reddy’s shopping list starts with ‘compact
fluorescent light bulbs, efficient motors, better pump sets, and solar water
heaters’. All are on the market today.

Meanwhile, the political difficulties in the way of Reddy’s plan are
only too evident. Karnataka’s aluminium smelter may make little sense to
an energy planner, but it makes a lot of sense to the politically powerful
elite that reap the profits, small though they may be, from the production
of aluminium. The growth of the middle class in industrialising countries
such as India could play an important role here. They have to pay for plans
such as the LRPPP, and if it chiefly benefits big energy users, pressure
to switch to more people-oriented plans such as Reddy’s could mount.

‘Developing countries are afraid funds for combating climate change
will come out of funds that would have gone for development aid,’ says Reddy.
‘This is fallacious. We can advance development with the bonus of decreasing
our impact on climate if we have the proper energy strategy. People miss
the point in thinking extra investment will be required (in the Third World)
to combat climate change.’ The question now is whether energy planning will
continue to be dominated by big oil, big plants, and big bills for the taxpayer
and for the planet.