Energy Products: Return on Investment is Already Too Low

[GliderGuider]

An excellent recent article by Gail Tverberg.

Energy Products: Return on Investment is Already Too Low

My major point when I gave my talk at the Fifth Biophysical Economics Conference at the University of Vermont was that our economy’s overall energy return on investment is already too low to maintain the economic system we are accustomed to. That is why the economy is showing signs of heading toward financial collapse.

My analysis is with respect to the feasibility of keeping our current economic system operating. It seems to me that the problems we are experiencing today–governments with inadequate funding, low economic growth, a financial system that cannot operate with “normal” interest rates, and stagnant to falling wages–are precisely the kinds of effects we might expect, if energy sources are providing an inadequate energy return for today’s economy.

Commenters frequently remark that such-and-such an energy source has an Energy Return on Energy Invested (EROI) ratio of greater than 5:1, so must be a helpful addition to our current energy supply. My finding that the overall energy return is already too low seems to run counter to this belief. In this post, I will try to explain why this difference occurs. Part of the difference is that I am looking at what our current economy requires, not some theoretical low-level economy. Also, I don’t think that it is really feasible to create a new economic system, based on lower EROI resources, because today’s renewables are fossil-fuel based, and initially tend to add to fossil fuel use.

In order to extract oil or create biofuels, or to make any other type of energy investment, at least four distinct elements described in Figure 1: (1) adequate payback on energy invested, (2) sufficient wages for humans, (3) sufficient credit availability and (4) sufficient funds for government services. If any of these is lacking, the whole system has a tendency to seize up.

There's much more in the article, and the comments are very interesting as well. A lot of people are beginning to understand that the world is at the edge of an "energy cliff" and may have even slipped over without noticing. Thanks for all the fish.

[cantbeserious]

1. Thank You For Sharing - This Is A Vexing Topic For Many

eom

[Laelth]

2. Very interesting. k&r for exposure. n/t

-Laelth

[djean111]

3. Good article and really good comments, too. Thanks!

[kristopher]

4. Here we go again...

...down another GG rabbit-hole.

The EROI of both wind and solar are far in excess of 5:1 and rising. The amount of applications where liquid fuels are the only (or even the best) alternative is extremely low - basically amounting to heavy lifting in industry, commercial transportation and agriculture.

Once you adjust demand to reflect only the uses where alternatives are not available, the ability of biofuels and hydrogen to meet that demand becomes, in terms of cost, a reasonable proposition.

[GliderGuider]

5. I know.

Sucks to be on a public forum with the great unwashed, doesn't it? People trotting out their opinions all the time...

Tverberg's(pre-emptive response to your objection is this:

Commenters frequently remark that such-and-such an energy source has an Energy Return on Energy Invested (EROI) ratio of greater than 5:1, so must be a helpful addition to our current energy supply. My finding that the overall energy return is already too low seems to run counter to this belief. In this post, I will try to explain why this difference occurs. Part of the difference is that I am looking at what our current economy requires, not some theoretical low-level economy. Also, I don’t think that it is really feasible to create a new economic system, based on lower EROI resources, because today’s renewables are fossil-fuel based, and initially tend to add to fossil fuel use.

Tverberg's last remark seems logical: "today’s renewables are fossil-fuel based, and initially tend to add to fossil fuel use." Note she uses the word "initially". This could be one reason why we're not seeing an overall drop in FF use yet, as we've just begun to build out a renewable infrastructure.

[kristopher]

6. That doesn't address my remark.

We already have a great deal of study on the breakdown of what energy carriers (petroleum is a type of energy carrier) are required/best suited for nearly every application we use energy for. The fundamental concept Tverberg is exploring is flawed as it presumes that petroleum is somehow preferential in most applications - it isn't. Energy density and transportability are the hallmark characteristics of petroleum, and there are only a very narrow range of areas that demand those characteristics to the degree they require liquid hydrocarbons.
There is, in fact, a significant downside to the use of fossil fuels for most of the applications they serve - inefficiency. See if you can dig out the numbers for "primary energy supply" vs "end use energy consumed" and you'll see that point clearly.

[GliderGuider]

7. You're looking at possible future economies

Gail specifies that she's looking at the current economy. With 87% of primary energy coming from fossil fuels "right now", it makes sense that the manufacturing of renewable infrastucture "right now" would get its energy inputs in approximately that proportion. Other energy sources may be usable or preferable for given applications, but if they're not being used that way right now, it doesn't count in terms of assessing the current situation.

This this much the same disagreement that you and I have. You seem to look at a lot of future economies and possibilities. I have had a major lesson in the perils of prediction over the last 8 years, so now I'm trying to confine myself to the current situation.

I think that in the current situation, Gail is probably right. Going forward? Who knows. I'll wait and see.

[kristopher]

8. No, that isn't accurate

I'm looking at what we are doing now. Most of the fossil fuel inputs are in two areas - production of the energy carrier electricity and the movement of individuals in self propelled heavy autonomous boxes of metal.

Electricity is by far the most relevant energy carrier to her discussion and electricity is indifferent as to how it is produced.

[GliderGuider]

9. It all depends on where you draw the system boundaries.

The workers at the turbine plants have to drive to get there, they eat food that's grown by a FF-dependent ag system, the parts are shipped by rail and truck, whose operators also have to eat...

In the end, while the contribution of FF might be a bit lower than 87% due to some hydro or nuclear electricity being used in the direct manufacture of the components, the overall system in which the sub-system is embedded, and on which it depends for existence, will push the number closer to the aggregated average.

Which approach one takes to the boundaries depends on one's agenda. Boosters (like you) will adopt tighter boundaries to make the product more attractive, while detractors (like me) will tend to insist on looser ones. I maintain that the the system complexity of GlobCiv makes the loose-boundary approach more realistic, but of course it provides somewhat less motivation for change. For me the motivation for significant global change will probably only come from a drastic involuntary change to the cultural infrastructure, driven by external events like climate change and ocean acidification.

If we still have time left when that shift hits the fan, it would be nice (from a purely humanocentric viewpoint) to have new technologies available. So I certainly see the point of taking a marketing-oriented approach like yours. I just don't share that mindset for a wide variety of reasons.

[kristopher]

10. We know that is what happens.

Whether you like it or not, micro-economics is an extremely effective tool for predicting some aspects of social behavior and change.

Resource depletion is a well trodden area of study and there is no reason to think that the rules governing substitution of acceptable alternative resources are suddenly going to fail in the area of fossil fuels. It really doesn't matter what you hold on this topic, the facts are the facts.

At $4 a gallon the curve for EV adoption slopes up sharply. At $5 a gallon it skyrockets. At $6 a gallon it will go nearly vertical. It is absolutely predictable.

And it's predictable not only in this application, but in all others as well. Remember what I said about the basics. They will beat your gut black and blue every time.

[GliderGuider]

11. You have a lot more faith in economics than I do.

But that's another of our interpersonal sticking points isn't it?

Again, neither Gail nor I are talking here about predictions, whether based on microeconomics, macroeconomics or chicken entrails. We're talking about what's happening right now. Since you apparently agree that this assessment of the present situation is correct, I guess we're done.