Forget 1984…. 2020 is the apocalypse year

26 01 2017

The crescendo of news pointing to 2020 as the date to watch is growing apace…. it won’t be the year collapse happens, because collapse is a process, not an event; but it will definitely be the year this process starts to become obvious. To people other than followers of this blog at least…!

RIYADH, Saudi ArabiaAccording to the International Monetary Fund, Saudi Arabia’s economy is in danger of collapse as oil prices grow increasingly unstable.

The warning appeared in the “Regional Economic Outlook” for the Middle East and Central Asia published on Oct. 15, an annual report published by IMF economists. Adam Leyland, writing on Oct. 23 for The Independent, explained the grim prognosis for Saudi’s economy, which is almost completely dependent on fossil fuels:

“[T]he IMF said that the kingdom will suffer a negative 21.6 per cent ‘General Government Overall Fiscal Balance’ in 2015 and a 19.4 per cent negative balance in 2016, a massive increase from only -3.4 per cent in 2014.

Saudi Arabia currently has $654.5 billion in foreign reserves, but the cash is disappearing quickly.

The Saudi Arabian Monetary Agency has withdrawn $70 billion in funds managed by overseas financial institutions, and has lost almost $73 billion since oil prices slumped, according to Al-Jazeera. Saudi Arabia generates 90 per cent of its income from oil.”

AND……..

Tax-free living will soon be a thing of the past for Saudis after its cabinet on Monday approved an IMF-backed value-added tax to be imposed across the Gulf following an oil slump.

A 5% levy will apply to certain goods following an agreement with the six-member Gulf Cooperation Council in June last year.

Residents of the energy-rich region had long enjoyed a tax-free and heavily subsidised existence but the collapse in crude prices since 2014 sparked cutbacks and a search for new revenue.

Author Dr Nafeez Ahmed, a Visiting Fellow at Anglia Ruskin University’s Global Sustainability Institute, is making even more waves today, saying………:

“Syria and Yemen demonstrate how climate and energy crises work together to undermine state power and fuel terrorism. 

“Climate-induced droughts ravage agriculture, swell the ranks of the unemployed and destroy livelihoods.  Domestic oil depletion undercuts state revenues, weakening the capacity to sustain domestic subsidies for fuel and food.  As the state is unable to cope with the needs of an increasingly impoverished population, this leads to civil unrest and possibly radicalisation and terrorism. 

“These underlying processes are not isolated to Syria and Yemen.  Without a change of course, the danger is that eventually they will occur inside the US and Europe.”

Failing States, Collapsing Systems: BioPhysical Triggers of Political Violence, authored by Dr Nafeez Ahmed, published by Springer Briefs in Energy includes the following key points…:
  • Global net energy decline is the underlying cause of the decline in the rate of global economic growth.  In the short term, slow or absent growth in Europe and the US is complicit in voter discontent and the success of anti-establishment politicians. 
  • Europe is now a post-peak oil society, with its domestic oil production declining every year since 1999 by 6%.  Shale oil and gas is unlikely to offset this decline. 
  • Europe’s main sources of oil imports are in decline. Former Soviet Union producers, their production already in the negative, are likely to terminate exports by 2030.  Russia’s oil production is plateauing and likely to decline after 2030 at the latest. 
  • In the US, conventional oil has already peaked and is in sharp decline.  The shortfall is being made up by unconventional sources such as tight oil and shale gas, which are likely to peak by 2025. California will continue to experience extensive drought over the coming decades, permanently damaging US agriculture.
  • Between 2020 and 2035, the US and Mexico could experience unprecedented military tensions as the latter rapidly runs down its conventional oil reserves, which peaked in 2006. By 2020, its exports will revert to zero, decimating Mexican state revenues and potentially provoking state failure shortly thereafter.
  • After 2025, Iraq is unlikely to survive as a single state.  The country is experiencing worsening water scarcity, fueling an ongoing agricultural crisis, while its oil production is plateauing due to a combination of mounting costs of production and geopolitical factors.
  • Saudi Arabia will face a ‘perfect storm’ of energy, food and economic shocks most likely before 2030, and certainly within the next 20 years.
  • Egypt will begin to experience further outbreaks of civil unrest leading to escalating state failure after 2021.  Egypt will likely become a fully failed state after 2037.
  • India’s hopes to become a major economic player will falter due to looming food, water and energy crises.  India’s maximum potential domestic renewable energy capacity is insufficient to meet projected demand growth.
  • China’s total oil production is likely to peak in 2020.  Its rate of economic growth is expected to fall continuously in coming decades, while climate change will damage its domestic agriculture, forcing it to rely increasingly on expensive imports by 2022.

I wish Julian Simon could read this….. it seems all our limits to growth chickens are coming home to roost, and very soon now.





The implications of collapsing ERoEI

25 01 2017

Judging by the relatively low level of interest the past few articles published here regarding the collapse of fossil fuel ERoEI (along with PV’s) have attracted, I can only conclude that most people just don’t get it……. How can I possibly fix this……?

When I first started ‘campaigning’ on the issue of Peak Oil way back in 2000 or so, 2020 seemed like a veoileroeiry long way away. I still thought at the time that renewables would ‘save us’, or at the very least that energy efficiency would be taken up on a massive scale. None of those things happened.

Way back then, I gave many public powerpoint presentations, foolishly thinking that, presented with the facts, (NOT alternative facts like we have today…) people would wake up to themselves. I even foolishly believed that the Australian Greens would take this up as a major issue, because after all the ‘solutions’ to Peak Oil also happen to be the ‘solutions’ for Climate Change. Now you know why I have turned into such a cynic.

In that presentation, there was one important slide, shown above. It is indelible in my memory.

I’ve now come across a very similar chart, except this one has dates on it….. and 2020 no longer seems very far away at all….

COLLAPSING ERoEI IN ONE CHART

peakeroei

I have selected three years; 2017, in red; 2020 in black; 2025 in green.

Each year has two lines. One for how much energy is being extracted, and the lower one of the same colour shows the net energy available from that extraction. The ‘missing’ energy, lost to crashing ERoEI, is the difference between the two lines of the same colour….  Already, in 2017, we probably only have the amount of energy that was available mid 1980.

By 2020 (which I happen to believe will be crunch time), net energy available is roughly equal to what we had in ~1975.

By 2025, we will be down to 1950 levels………

It doesn’t matter whether I’m out by 1, 2, 5, or even 10 years (which I very much doubt). The point is, the global economy will have shrunk dramatically by then. It simply cannot grow without energy, more and more of it every year in fact. Without growth, the entire money system will have collapsed, and it’s anyone’s guess how many banks will be left standing. Or governments for that matter, the electorate has recently proven itself to be very very fickle……

Why this isn’t mainstream news beggars belief….

Good luck.





Do we have five years left…….?

23 10 2016

You may remember the articles I recently published about the twilight of the age of oil by Louis Arnoux….. well Raul Ilargi from the Automatic Earth has published them too, and this time, there’s a video to go with them. It’s very informative, and led me to understand all sorts of things, not least why the price of oil can never go back up. Basically, as less and less net energy is present in each new barrel of oil extracted, it’s simply worth less….

I was getting very enthusiastic about this presentation, right up until the end when Arnoux starts pushing this ‘green box’ of his, the logo for which appears (I now realise) in the bottom corner of all his slides. It’s called the nGeni. And it all sounds too good to be true, especially after telling us all that the economy probably has just five years left, and will grind to a halt…..

Here’s the video

After watching it, I then googled nGeni, and found this website trying to crowdfund it. I’d love to know what DTM readers think of this, because it all sounds like snake oil to me…..





Some reflections on the Twilight of the Oil Age (part III)

21 07 2016

Guest post by Louis Arnoux, republished from Ugo Bardi’s excellent blog

Part I

Part 3 – Standing slightly past the edge of the cliff

The Tooth Fairy Syndrome that I discussed in Part 2 is, in my view, the fundamental reason why those holding onto BAU will grab every piece of information that can possibly, superficially, back up their ideology and twist it to suit their viewa, generating much confusion in the process.  It is also probably fair to say that the advocates of various versions of“energy transition” are not immune to this kind of syndrome when they remain oblivious to the issues explored in Parts 1 and 2.  Is it possible to go beyond such confusion?

The need to move away from ideology

The impact of the Tooth Fairy Syndrome is all the more felt in the main media and among politicians – with the end result that so many lay people (and many experts) end up highly confused about what to think and do about energy matters.  Notably, we often encounter articles advocating, even sensationalising, various energy transition technologies or instead seeking to rubbish them by highlighting what they present as problematic issues without any depth of analysis.  For example, a 2013 article from the Daily Mail was highlighted in recent discussions among energy experts as a case in point.[1]  The UK is indeed installing large numbers of subsidized, costly diesel generators to be used as back-up at times of low electricity supplies from wind turbines. This article presented this policy as very problematic but failed to set things in perspective about what such issues say about the challenges of any energy transition.

In New Zealand, where I lived close to half of my life before a return to my dear Provence (De reditu suo mode, as a wink to an earlier post by Ugo) about 73% of electricity is deemed renewable (with hydro 60%, geothermal 10%, wind 3%, PVs about 0.1%); the balance being generated from gas and coal.  There is a policy to achieve 90% renewables by 2025. Now, with that mix we have had for many years something like what the UK is building, with a number of distributed generators for emergency back-up without this being a major issue.  The main differences I see with the UK are that (1) in NZ we have only about 5M people living in an area about half that of France (i.e. the chief issue is a matter of renewable production per head of population) and (2) the system is mostly hydro, hence embodying a large amount of energy storage, that Kiwi “sparkies” have learned to manage very well.  It ensues that a few diesel or gas generators are not a big deal there.  By contrast, the UK in my view faces a very big challenge to go “green”.

The above example illustrates the need to extricate ourselves from ideology and look carefully into systems specifics when considering such matters as the potential of various technologies, like wind turbine, PVs, EVs, and so on, as well as capacity factors and EROI levels in the context of going 100% renewable.  All too often, vital issues keep being sidestepped by both BAU and non-BAU parties; while ignoring them often leads to erroneous “solutions” and even dangerous ones.  So as a conclusion of this three-part series focused on “enquiring into the appropriateness of the question”, here are some of the fundamental issues that I see in front of us (the list is not exhaustive):

“Apocalypse now”

At least since the early 1970s and the Meadows’ work, we have known that the globalised industrial world (GIW) is on a self-destructive path, aka BAU (Business as usual). We now know that we are living through the tail end of this process, the end of the Oil Age, precipitating what I have called the Oil Fizzle Dragon-King, Seneca style, that is, after a slow, relatively smooth climb (aka “economic growth”) we are at the beginning of an abrupt fall down a thermodynamic cliff.

The chief issue is whole system change. This means thinking in whole systems terms where the thermodynamics of complex systems operating far from equilibrium is the key.  In terms of epistemology and methods, this requires what in anthropology is called the “hermeneutic circle”: moving repeatedly from the particulars, the details, to the whole system, improving our understanding of the whole and from this going back to the particulars, improving our understanding of them, going back to considering the whole, and so on.  Whole system replacement, i.e. going 100% renewable, requires a huge energy embodiment, a kind of “primitive accumulation” (as a wink to Marx) that presently, under the prevailing paradigm and technology set, is not feasible.  Having the “Energy Hand” in mind (Figure 5), where does this required energy may come from in a context of sharp decline of net energy from oil and Red Queen effect, and concerning renewable, inverse Red Queen/cannibalisation effects?  As another example of the importance of whole system thinking, Axel Kleidon has raised the question of the viability of very large-scale wind versus direct solar.[2]

Solely considering the performances and cost of this or that alternative energy technology won’t suffice.  Short of addressing the complexities of whole system replacement, the situation we are in is some kind of “Apocalypse now”.  The chief challenge I see is thus how to shift safely, with minimal loss of life (substantial loss of life there will be; this has become unavoidable), from fossil-BAU (and thus accessorily nuclear) to 100% sustainable, which means essentially, in one form or another, a direct solar-based society.

We currently have some 17 TW of power installed globally (mostly fossil with some nuclear), i.e. about 2.3kW/head, but with some 4 billion people who at best are grossly energy stressed, many who have no access to electricity at all and only limited transport, in a context of an efficiency of global energy systems in the order of 12%.[3]  To address the Oil Fizzle Dragon-King and the Perfect Storm that it is in the process of whipping up, I consider that we need to move to 4kW/head for the whole population (assuming it levels off at some 8 billion people instead of the currently expected 11 billions), plus some 10TW additional to address climate change and other ecological energy related issues, hence about 50TW, 100% direct solar based, for the whole spectrum of energy uses including transport; preferably over 20 years.  Standing where we now are, slightly past the edge of the thermodynamic cliff, this is my understanding of what’s required.

In other words, going “green” and surviving it (i.e. avoiding the inverse Red Queen effect) means increasing our Energy Hand from 17 TW to 50 TW (as a rough order of magnitude), with efficiencies shifting from 12% to over 80%.

To elaborate this further, I stress it again, currently the 17 TW do not even suffice to cater for the whole 7.3 billion global population and by a wide margin.  Going “green” with the current “renewable” technology mix and related paradigm would mean devoting a substantial amount of those 17 TW to the “primitive accumulation” of the “green” system.  It should be clear that under this predicament something would have to give, i.e. some of us would get even more energy stressed, and die, or as the Chinese and Indians have been doing for a while we would use much more of remaining fossil resources but then this would accelerate global warming and many other nasties. Alternatively we may face up to changing paradigm so as to rapidly steer away from global EROIs below 10:1 and global energy efficiency around 12%.  This is the usual “can’t have one’s cake and eat it” situation writ large.

Put in an other way, when looking at whole societal system replacement one must look at the whole of what’s required to make the system work, including people and their own energy requirements – this is fundamentally a matter of system boundary definitions related to problem definition (in David Bhom’s sense).   We can illustrate this by considering the Kingdom of Saudi Arabia (KSA).  As a thought experiment, remove oil (the media have reported that KSA’s Crown Prince has seen the writing on some wall re the near end of the oil bonanza).  This brings the KSA population from some 27M down to some 2M, i.e. some 25M people are currently required to keep oil flowing at some 10M bbl/day (including numerous Filipino domestics, medics, lawyers, and so on) plus about three times that population overseas to supply what the 25M require to keep the oil flowing…

Globally, I estimate very roughly that some 1.5 billion people, directly related to oil production, processing distribution and transport matters did require oil at above $100/bbl for their livelihood (including the Filipino domestics).  I call them the Oil People. [4]  Most of them currently are unhappy and struggle; their “demand” for goods and services has dropped considerably since 2014.

So all in all, whole system replacement (on a “do or die” mode) requires considering whole production chain networks from mining the ores, through making the metals, cement, etc., to making the machines, to using them to produce the stuff we require to go 100% sustainable, as well as the energy requirements of not only the Oil People but the full compendium of the Energy People involved, both the “fossil” ones and the “green” ones; while meanwhile we need to keep existing fossil-based energy systems going as much as possible.  Very roughly the Energy People are probably in the order of 3 billion people (and it is not easy to convert a substantial proportion of the “fossil” ones to “green”, including their own related energy requirements – this too has a significant energy cost).  This is where Figure 2, with the interplay of Red Queen and the inverse Red Queen, comes in.

Figure 2

redqueen
In my view at this whole system level we do have a major problem.  Given the very short time window constraint, we can’t afford to get it wrong in terms of how to possibly getting out of there – we have hardly enough time to have one go at it.

Remaining time frame

Indeed, under the sway of the Tooth Fairy (see Part 2) and an increasingly asthmatic Red Queen, we no longer have 35 years, (say up to around 2050).  We have at best 10 years, not to debate and agonise but to actually do, with the next three years being key.  The thermodynamics on this, summarised in Part 1, is rock hard.  This timeframe, combined with the Oil Pearl Harbor challenge and the inverse Red Queen constraints, means in my view that none of the current“doings” renewable-wise can cut it.  In fact much of these stand to make matters worse – I refer here to current interactions between efforts at going green largely within the prevailing paradigm and die hard BAU efforts at keeping fossils going, as perhaps exemplified in the current UK policies discussed earlier.

Weak links

Notwithstanding its apparent power, the GIW is in fact extremely fragile.  It embodies a number of very weak links in its networks.  I have highlighted the oil issue, an issue that defines the overall time frame for dealing with “Apocalypse now”.  In addition to that and to climate change, there are a few other challenges that have been variously put forward by a range of researchers in recent years, such as fresh water availability, massive soil degradation, trace pollutants, degradation of life in oceans (about 99% of life is aquatic), staple food threats (e.g. black stem rust, wheat blast, ground level ozone, etc.), loss of biodiversity and 6th mass extinction, all the way to Joseph Tainter’s work concerning the links between energy flows, power (in TW), complexity and overshoot to collapse.[5]

These weak links are currently in the process of breaking or are about to break, the breaks forming a self-reinforcing avalanche (SOC) or Perfect Storm.  All have the same key timeframe of about 10 years as an order of magnitude for acting.  All require a fair “whack” of energy as a prerequisite to handling them (the “whack” being a flexible and elastic unit of something substantial that usually one does not have).

It’s all burnt up

carbonbudget

Figure 6 – Carbon all burnt

Recent research shows that sensitivity to climate forcing has been substantially underestimated, meaning that we must expect much more warming in the longer term than touted so far.[6]  This further exacerbates what we already knew, namely that there is no such thing as a “carbon budget” of fossils the GIW could still burn, and no way of staying below the highly political and misleading 2oC COP21 objective (Figure 6).[7]

The 350ppm CO2 equivalent advocated by Hansen et al. is a safe estimate – a boundary crossed in the late 1980s, some 28 years ago.  So the reality is that we can’t escape actually extracting CO2 from the atmosphere, somehow, if we want to avoid trying to survive in a few mosquito infested areas of the far north and south, while some 80% of the planet becomes non-habitable in the longer run.  Direct Air Capture of atmospheric CO2 (DAC) is something that also requires a fair “whack” of energy, hence the additional 10TW I consider is required to get out of trouble.

Cognitive failure

eroei

Figure 7 – EROI cognitive failure

The “Brexit” saga is perhaps the latest large-scale demonstration of cognitive failure in a very long series.  That is to say, the failure on the part of decision-making elites to make use of available knowledge, experience, and expertise to tackle effectively challenges within the timeframe required to do so.

Cognitive failure is probably most blatant, but largely remaining unseen, concerning energy, the Oil Fizzle DK and matters of energy returns on energy investments (EROI or EROEI).  What we can observe is a triple failure of BAU, but also of most current “green” alternatives (Figure 7): (1) the BAU development trajectory since the 1950s failed; (2) there has been a failure to take heed of over 40 years of warnings; and (3) there has been a failure to develop viable alternatives.

However, although I am critical of aspects of recent evaluations of the feasibility of going 100% renewable,[8] I do think it remains feasible with existing knowledge, no “blue sky” required, i.e. to reach in the order of 50TW 100% solar I outlined earlier, but I also think that a crash on the cliff side of the Seneca is no longer avoidable.  In other words I consider that it remains possible to partly retrieve the situation while the GIW crashes so long as enough people do realise that one can’t change paradigm on the down side as one may do on the upside of a Seneca, which presently our elites, in full blown cognitive failure mode, don’t understand.

To illustrate this matter further and highlight why I consider that production EROIs well above 30:1 are necessary to get us out of trouble consider Figure 8.

freelunch

Figure 8 – The necessity of very high EROIs

This is expanded from similar attempts by Jessica Lambert et al., to perhaps highlights what sliding down the thermodynamic cliff entails.  Charles Hall has shown that a production EROI of 10:1 corresponds roughly to an end-user EROI of 3.3:1 and is the bare minimum for an industrial society to function.[9]  In sociological terms, for 10:1 think of North Korea.  As shown on Figure 7, currently I know of no alternative, either unconventional fossils based, nuclear or “green” technologies with production EROIs (i.e. equivalent to the well head EROI for oil) above 20:1; most remain below 10:1.  I do think it feasible to go back above 30:1, in 100% sustainable fashion, but not along prevalent modes of technology development, social organisation, and decision-making.

The hard questions

So prevailing cognitive failure brings us back to Bohm’s “enquiry into the appropriateness of the question”.  In conclusion of a 2011 paper, Joseph Tainter raised four questions that, in my view, squarely address such an enquiry (Figure 9).[10] To date those four questions remain unanswered by both tenants of BAU and advocates of going 100% renewable.

We are in an unprecedented situation.  As stressed by Tainter, no previous civilisation has ever managed to survive the kind of predicament we are in.  However, the people living in those civilisations were mostly rural and had a safety net, in that their energy source was 100% solar, photosynthesis for food, fibre and timber – they always could keep going even though it may have been under harsh conditions.  We no longer have such a safety net; our entire food systems are almost completely dependent on that net energy from oil that is in the process of dropping to the floor and our food supply systems cannot cope without it.

Figure 9 – Four questions

perfectstorm2

Figure 10 summarises how, in my view, Tainter’s four questions, his analyses and mine combine to define the unique situation we are in.  If we are to avoid sliding all the way down the thermodynamic cliff, we must shift to a new “energy pool”.  In this respect, dealing with the SOC-like Perfect Storm while carrying out such a shift both excludes “shrinking”our energy base (as many “greens” would have it) and necessitates abandoning the present highly wasteful energy use paradigm – hence the shift from 17TW fossil to 50TW 100% solar-based and with over 80% useful uses of energy that I advocated earlier, over a 20 to 30 years timeframe.

Figure 10 – Ready to jumping into a new energy pool?

specialtimes

 

Figure 10 highlights that humankind has been through a number of such shifts over the last 6 million years or so.  Each shift has entailed:

(1) a nexus of revolutionary innovations encompassing thermodynamics and related techniques,

(2) social innovation (à la Cornelius Castoriadis’ imaginary institution of society) and

(3) innovations concerning the human psyche, i.e. how we think, decide and act.

Our predicament, as we have just begun to slide down the fossil fuels thermodynamic cliff, similarly requires such a nexus if we are to succeed at a new “energy pool shift”.  Just focusing on thermodynamics and technology won’t suffice.  The kind of paradigm change I keep referring to integrates technology, social innovations and innovation concerning the human psyche about ways of avoiding cognitive failure.  This is a lot to ask, however it is necessary to address Tainter’s questions.

This challenge is a measure of the huge selection pressure humankind managed to place itself under.  Presently, I see a lot going on very creatively in all these three intimately related domains.  Maybe we will succeed in making the jump over the cliff?

Bio: Dr Louis Arnoux is a scientist, engineer and entrepreneur committed to the development of sustainable ways of living and doing business.  His profile is available on Google+ at: https://plus.google.com/u/0/115895160299982053493/about/p/pub

[1] Dellingpole, James, 2013, “The dirty secret of Britain’s power madness: Polluting diesel generators built in secret by foreign companies to kick in when there’s no wind for turbines – and other insane but true eco-scandals”, in The Daily Mail, 13 July.

[2] As another example, Axel Kleidon has shown that extracting energy from wind (as well as from waves and ocean currents) on any large scale would have the effect of reducing overall free energy usable by humankind (free in the thermodynamic sense, due to the high entropy levels that these technologies do generate, and as opposed to the direct harvesting of solar energy through photosynthesis, photovoltaics and thermal solar, that instead do increase the total free energy available to humankind) – see Kleidon, Axel, 2012, How does the earth system generate and maintain thermodynamic disequilibrium and what does it imply for the future of the planet?, Max Planck Institute for Biogeochemistry, published in Philosophical Transaction of the Royal Society A,  370, doi: 10.1098/rsta.2011.0316.

[3] E.g. Murray and King, Nature, 2012.

[4] This label is a wink to the Sea People who got embroiled in the abrupt end of the Bronze Age some 3,200 years ago, in that same part of the world currently bitterly embroiled in atrocious fighting and terrorism, aka MENA.

[5] Tainter, Joseph, 1988, The Collapse of Complex Societies, Cambridge University Press; Tainter, Joseph A., 1996, “Complexity, Problem Solving, and Sustainable Societies”, in Getting Down to Earth: Practical Applications of Ecological Economics, Island Press, and Tainter, Joseph A. and Crumley, Carole, “Climate, Complexity and Problem Solving in the Roman Empire” (p. 63), in Costanza, Robert, Graumlich, Lisa J., and Steffen, Will, editors, 2007, Sustainability or Collapse, an Integrated History and Future of People on Earth, The MIT Press, Cambridge, Massachusetts and London, U.K., in cooperation with Dahlem University Press.

[6] See for example Armour, Kyle, 2016, “Climate sensitivity on the rise”, www.nature.com/natureclimatechange, 27 June.

[7] For a good overview, see Spratt, David, 2016, Climate Reality Check, March.

[8] For example, Jacobson, Mark M. and Delucchi, Mark A., 2009, “A path to Sustainability by 2030”, in Scientific American, November.

[9] Hall, Charles A. S. and Klitgaard, Kent A., 2012, Energy and the Wealth of Nations, Springer; Hall, Charles A. S., Balogh, Stephen, and Murphy, David J. R., 2009, “What is the Minimum EROI that a Sustainable Society Must Have?” inEnergies, 2, 25-47; doi:10.3390/en20100025. See also Murphy, David J., 2014, “The implications of the declining energy return on investment of oil production” in Philosophical Transaction of the Royal Society A, 372: 20130126,http://dx.doi.org/10.1098/rsta.2013.0126.

[10] Joseph Tainter, 2011, “Energy, complexity, and sustainability: A historical perspective”, Environmental Innovation and Societal Transitions, Elsevier





Another sublime article on ERoEI

26 05 2016

ERoEI for Beginners

Not sure if I can come to terms with the concept of kite flying with wind turbines, but there you go……  doesn’t make renewables look good, that’s for sure.  Reblogged from Euan’s excellent website…..

The Energy Return on Energy Invested (ERoEI or EROI) of any energy gathering system is a measure of that system’s efficiency. The concept was originally derived in ecology and has been transferred to analyse human industrial society. In today’s energy mix, hydroelectric power ± nuclear power have values > 50. At the other end of the scale, solar PV and biofuels have values <5.

It is assumed that ERoEI >5 to 7 is required for modern society to function. This marks the edge of The Net Energy Cliff and it is clear that new Green technologies designed to save humanity from CO2 may kill humanity through energy starvation instead. Fossil fuels remain comfortably away from the cliff edge but march closer to it for every year that passes. The Cheetah symbolises an energy system living on the edge.

I first came across the concept of Energy Return on Energy Invested (ERoEI) several years ago in Richard Heinberg’s book The Party’s Over [1]. I had never contemplated the concept before and I was immediately struck by its importance. If we used more energy to get the energy we need to survive then we will surely perish.

Shortly thereafter I joined The Oil Drum crew and had the great pleasure of meeting Professor Charles Hall,  the Godfather of ERoEI analysis who developed the concept during his PhD studies and first published the term in 1977. ERoEI would become a point of focus for Oil Drum posts. Nate Hagens and David Murphy, both Oil Drum crew, have now completed PhDs on ERoEI analysis aided and abetted by the conversation that the Oil Drum enabled.

But recently I have received this via email from Nate:

10 years on the same questions and issues are being addressed – (and maybe 40 years on for Charlie). A new tier of people are aware of EROI but it is still very fringe idea?

Are we wrong to believe that ERoEI is a fundamentally important metric of energy acquisition or is it simply that the work done to date is not sufficiently rigorous or presented in a way that economists and policy makers can understand. At this point I will cast out a bold idea that money was invented as a proxy for energy because ERoEI was too complex to fathom.

And I have this via email from my friend Luis de Sousa who did not like the Ferroni and Hopkirk paper [3] nor my post reviewing it:

On the grand scheme of things: PV ERoEI estimates range from 30 down to 0.8. Before asking the IEA (or whomever) to start using ERoEI, the community producing these estimates must come down to a common, accepted methodology for its assessment. As it stands now, EROEI is not far from useless to energy policy.

And while I disagree with Luis on a number of issues, on this statement I totally concur. So what has gone wrong? Professor Hall points out that it is not the concept that is at fault but non-rigorous application of certain rules that must be followed in the analysis. In this post I will endeavour to review the main issues and uncertainties, and while it is labelled “for Beginners”, I will flirt with an intermediate level of complexity.

What is ERoEI?

ERoEI is simply the ratio of energy gathered to the amount of energy used to gather the energy (the energy invested):

ERoEI = energy gathered / energy invested

Note that in common vernacular the term energy production is used. But in fact humans produce very little energy, but what distinguishes us from other species is that we have become very efficient at gathering energy that already exists and building machines that can convert the energy to goods (motor cars, televisions and computers) and services (heat and light and mobility) that collectively define our wealth.

This began by gathering fire wood and food and progressed to gathering coal, oil and natural gas. This led to gathering U and Th and learning how to convert this to enormous amounts of thermal and electrical energy. And now we attempt to gather solar energy through photovoltaics, wind turbines and liquid biofuels.

The prosperity of humanity depends upon the efficiency with which we gather energy. 100 years ago and 50 years ago we hit several jackpots in the form of vast coal, oil and gas deposits. These were so rich and large that energy virtually spewed out of them for next to no energy or financial investment. Examples include the Black Thunder coal field (USA), the Ghawar oil field (Saudi Arabia) and the Urengoy gas field (Russia) to name but a few. But these supergiant deposits are now to varying degrees used up. And as global population has grown together with expectations of prosperity that are founded on energy gathering activities, humanity has had to expand its energy gathering horizons to nuclear power, solar power and energy from waste. And it is known that some of the strategies deployed have very low ERoEI, for example corn ethanol is around 1 to 2 [2] and solar PV between 1 and 5 [2,3] depending upon where it is sited and the boundaries used to estimate energy costs. Consider that an ERoEI greater than 5 to 7 is deemed necessary to sustain the society we know (see below) then it is apparent that we may be committing energy and economic suicide by deliberately moving away from fossil fuels.

Low ERoEI is expected to correlate with high cost and in the normal run of events investors should steer clear of such poor investment returns. But the global energy system is now dictated by climate concern, and any scheme that portends to produce energy with no CO2 is embraced by policymakers everywhere and financial arrangements are put in place to enable deployment, regardless of the ERoEI.

Net Energy

Net energy is the close cousin of ERoEI being the surplus energy made available to society from our energy gathering activities. It is defined simply as:

net energy = ERoEI-1

If we have ERoEI = 1, then the net energy is zero. We use as much energy to gather energy as energy gathered. The “1” always represents the energy invested. If ERoEI falls below 1 we end up with an energy sink. Low ERoEI systems are effectively energy conversions where it may be convenient or politically expedient for us to convert one energy carrier into another with little or no energy gain. Corn ethanol is a good example where fertiliser, natural gas, diesel, electricity, land, water and labour gets converted into ethanol, a liquid fuel that can go in our cars. But it does leave the question why we don’t just use liquefied natural gas as a transport fuel in the first place and save on all the bother that creating corn ethanol involves?

The Net Energy Cliff

Many years ago during a late night blogging session on The Oil Drum, and following a post by Nate Hagens, I came up with a way of plotting ERoEI that for many provided an instantaneous understanding of its importance. The graph has become known as the net energy cliff, following nomenclature of Nate and others.

Figure 1 The Net Energy Cliff shows how with declining ERoEI society must commit ever larger amounts of available energy to energy gathering activities. Below ERoEI = 5 to 7 such large numbers of people would be working for the energy industries that there would not be enough people left to fill all the other positions our current altruistic society offers.

The graph plots net energy as a % of ERoEI and shows how energy for society (in blue) varies with ERoEI. In red is the balance being the energy used to gather energy.

It is the shape of the boundary between blue and red that is of interest. If we start at 50 and work our way down the ERoEI scale moving to the right, we see that energy invested (red) increases very slowly from 2% at ERoEI=50 to 10% at ERoEI=10. But beyond 10, the energy invested increases exponentially to 20% at ERoEI=5 and to 50% at ERoEI=2. At ERoEI = 1, 100% of the energy used is spent gathering energy and we are left with zero gain.

This is important because it is the blue segment that is available for society to use. This pays for infrastructure, capital projects, mining and manufacturing, agriculture, food processing and retailing, education, healthcare and welfare, defence and government. In fact it is the amount of net energy that powers everything in society as we know it today. The net energy from past energy gathering has accumulated to create what we identify as capital and wealth. Nothing could be more important, and yet the concept remains on the fringe of energy policy and public awareness. One of the problems is that measuring ERoEI consistently is difficult to do. One problem is retaining objectivity. If you manufacture PV modules you are unlikely to claim that the ERoEI is less than 5, and there are a multitude of variables that can be adjusted to provide whatever answer is deemed to be good.

This depiction of Net Energy is also useful in defining that all energy and labour can be divided into energy and labour used in the energy industries and the industries that support them and energy and labour used by society that consumes the surpluses produced by the energy industries. More on this later.

It has been assumed by many that ERoEI > 7 was required for the industrial society we live in to function although the source of this assertion remains elusive. But the blue-red boundary provides a clear visual picture of why this may be so. Below 7 and humanity falls off the net energy cliff where a too large portion of our human resources and capital need to be invested in simply staying alive to the detriment of the services provided by net energy such as health care, education and pensions.

System boundaries

Energy Inputs

One of the main uncertainties in ERoEI analysis is where to set the system boundaries. I have not found a simple text or graphic that adequately explains this vital concept.

Figure 2 A simplified scheme for an energy system divided into construction, operation and decommissioning with accumulated inputs and outputs. Graphic from this excellent presentation by Prieto and Hall

Figure 2 provides an illustration of the life cycle of an energy system divided into three stages 1) construction, 2) operation and 3) decommissioning. Energy inputs occur at each stage but energy outputs will normally only occur during the operational phase. It should be straight forward to account for all the energy inputs and outputs to calculate ERoEI but it isn’t. For example many / most of our energy systems today are still operational. We do not yet have final numbers for oil produced from single fields. And the decommissioning energy costs are not yet known. Most wind turbines ever built are still operational, producing energy and the ultimate energy produced will depend upon how long they last. And then perhaps some turbines are offered a new lease of life via refurbishment etc.

Energy inputs can normally be divided as follows [2]:

  1. On site energy consumption
  2. Energy embedded in materials used
  3. Energy consumed by labour
  4. Auxiliary services

Moving from 1 to 4 may be considered expansion of the ERoEI boundary where energy embedded in materials and energy consumed by labour are added to on-site energy consumption. There follows some examples of ambiguity that remains in deciding what to include and what to leave out. These examples are given for purely illustrative purposes.

No one should question that the electricity used by a PV factory should be included. But do you include electricity / energy used to heat or cool the factory? Or just the electricity used to run the machines? Including heating or cooling  introduces a site specific variable which will mean that the energy inputs to a PV panel may vary according to where it was manufactured. There are many such site specific variables like transport, energy costs, labour energy costs, health and safety energy costs etc, which when combined in our globalised market has made China the lowest energy cost centre for PV manufacturing today.

It is clear to me that the energy cost of all materials used in the energy production process must be included. And this should include materials consumed at the construction, operational and decommissioning stages. In the oil industry this will include the materials in the oil platform, the helicopter and the onshore office. In the solar PV industry this will include all the materials in the panels, in the factory, and in the support gantries and inverter. As a general rule of thumb, massive energy gathering systems that contain a huge amount of materials will have reduced ERoEI because of the energy embedded in those materials.

It is also clear to me that the energy cost of all labour should be included in the ERoEI analysis for construction, operation and decommissioning. But it is far less clear how it should be calculated. The energy consumed by labourers varies greatly from country to country and with time. Should we just include the energy consumed by a labourer on his/her 8 hour shift? Or should we include the full 24/7? Should the energy consumed by labourers getting to and from work be included? – of course it should. Should the energy consumed on vacations be included? – not so clear. And how can any of this be calculated in the first place?

The standard way to calculate the energy cost of labour is to examine the energy intensity of GDP. For most countries, the total amount of primary energy consumed  is roughly known and the total GDP is known. This provides a means of converting MJ to $ and we can then look at the $ earnings of a labourer to get a rough handle on the notional energy use that may be attributed to his salary scale. This is far from perfect but is currently the only practical method available.

Auxiliary services become even more difficult to differentiate. Some argue that the energy cost of the highway network, power distribution network and services like schools and hospitals should be pro-rated into new energy production systems. My own preference is to generally exclude these items from an ERoEI analysis unless there are good reasons for not doing so. I think it is useful to go back to the question are we expending energy on energy gathering or are we expending energy on society and most of the infrastructure upon which new energy systems depend was built using prior surpluses allocated to society. In my view it becomes too complex to pro-rate these into an ERoEI calculation. The power grid delivering power to the PV factory already existed. But if a new power line needs to be built to export renewable electricity then that should be accounted for.

Energy Outputs

One might imagine that measuring the energy output would be more straightforward, but it is not so. Many earlier studies on the ERoEI of oil set a boundary at the well head or on site tank farm. And it is relatively straightforward to measure the oil production from a field like Forties in the North Sea. But crude oil itself is rarely used directly as a fuel. It is the refined products that are used. To actually use the oil we need to ship or pipe it to shore and then on to a refinery. The energy cost of transport may add 10% to energy inputs and refining may add yet another 10%. It has been suggested that one approach is to calculate ERoEI at Point of Use. Crude oil on an offshore platform is of no use to anyone. Gasoline in a filling station is what we want and all the energy inputs involved in getting the gasoline to the forecourt need to be counted.

But here we meet another dilemma. The refinery may produce paraffin and gasoline. The ERoEI of both are likely to be similar at the refinery gate. But the gasoline is burned in an engine to produce kinetic energy used for transport and in so doing about 70% of the energy is lost as waste heat. The paraffin may be burned in a stove with near 100% conversion efficiency to space heating. Do we reduce the ERoEI of gasoline by 70% to reflect energy losses during use?

This introduces the concept of energy quality where we know that final energy conversions are in three main forms 1) heat 2) motion and 3) electricity that has a myriad of different uses. Is it really possible to compare these very different energy outputs using the single umbrella of ERoEI? The routine followed by ERoEI analysts to date is to adjust ERoEI for energy quality though I’m unsure how that is done [2]. Another option that I like is to hypothetically normalise all outputs to a single datum, for example MWh of electricity (see below). But this again gets to a level of complexity that is beyond this blog post.

There are some other important energy quality factors. Dispatch for electricity is one. Producing a vast amount of electricity from wind on a stormy Sunday night has little to no value. While the ability to produce electricity on demand at 6 pm on a freezing Wednesday evening in January (NH) is of great value. Curtailed wind should clearly be deducted from wind energy produced in the ERoEI calculation. Just like the oil spilled from the Deep Water Horizon in the Gulf of Mexico should not be counted as oil produced from the Macondo field.

External environmental factors may also have to be considered as part of the energy quality assessment. It is clear that the oil spilled from the Deep Water Horizon had to be cleared up immediately and the energy cost of doing so almost bankrupted BP. But it is less clear that the energy cost of eliminating CO2 emissions needs to be borne by the energy production industries. For example, the cost of carbon capture and storage would fall on the consumer and not the energy producer.

Using energy proxies

In ERoEI analysis direct energy use can normally be measured, for example gas and diesel used on an oil platform or the electricity used in a factory. But the indirect energy consumed by, for example materials and labour, are less easy to measure and are often based on proxies.  It is nearly impossible to measure the energy embedded in an offshore oil platform. Instead the mass of steel and the number of man days of labour used in construction can be estimated and from these the energy expended and now embedded in the platform can be estimated.

As already discussed, the standard way of estimating the energy cost of labour is to use the energy intensity of GDP data from the countries in question combined with workers salaries.

For materials Murphy et al [2] provide this useful summary (Figure 3)

Figure 3 The estimated energy content of common materials [2]

From this the most striking feature is the vast range within certain materials and between materials. For example aluminium ranges from 100 to 272 GJ/tonne. Steel 9 to 32 GJ/tonne. Part of this will be down to methodological differences in the way the numbers are derived. But part of it may be down to real differences reflecting different energy efficiencies of smelting plants.

ERoEI of Global Fuels and Energy Flows

So what is the current status of ERoEI in the global energy mix? Hall et al 2014 [4] provide the following summary table which is the foundation of the summary graph below.

Figure 4 Summary of the ERoEI for a range of fuels and renewable energies.

Figure 5 Placing main energy sources on The Net Energy Cliff framework shows that hydro-electric power, high altitude kites and perhaps nuclear power have very high ERoEI and embracing these technologies may prevent humanity from falling off the Net Energy Cliff. The new bright Green energies of bio-fuels, solar PV and buffered wind (see below) are already over the cliff edge and if we continue to embrace these technologies human society may perish as we expend too large a portion of our energy endowment simply getting energy. Fossil fuels remain comfortably to the left of the cliff edge but are marching ever closer towards it with every year that passes. Eeq = electricity equivalent (see below).

In order to compare fossil fuels with electricity flows on a single diagram it is essential to reduce all of the energy types to a common datum. Its quite simply not valid to compare the ERoEI of coal at the mine mouth with nuclear power since in converting the coal to electricity, much of the energy is lost. The easiest route is to rebase everything to electricity equivalent (Eeq) where I follow the BP convention and adjust the ERoEI of  fossil fuels by a factor of 0.38 to account for energy conversion losses in a modern power station.

In an earlier thread, Owen posted a link to a pre-print by Weisbach et al [5] who follow similar methodology reporting all data as electricity. To a large extent their numbers are similar to those reported here with the exception of nuclear that is quoted to be  75. Weisbach report values for solar PV and wind that are “buffered” to include the energy cost of intermittency. This reduces the ERoEI for solar PV by about half and wind by a factor of 4. “Buffered” ERoEIs are therefore also included in Figure 6.

The inclusion of high altitude kite is based on a calculation provided by site sponsor KiteGen. I have checked the calculation and am satisfied that the ERoEI is potentially >>50. This will be the subject of another post. But suffice to say here that wind speed at altitude may be double that on the ground and power increases by the cube of wind speed. And the mass of the KiteGen structure is a small fraction of a large wind turbine. Hence it is theoretically straightforward to reach an ERoEI at altitude that is many multiples of the ERoEI of a wind turbine.

Figure 6 At altitude the wind speed may be double that on the ground. Accessing that kinetic energy resource provides potential for a 2 to 4 fold uplift in the power available for wind generation. This calculation does not include further uplift from higher capacity factor and reduced intermittency at altitude.

The key and fundamental observation from Figure 6 is that three energy sources potentially have ERoEI >> 50 making them vastly superior to all others using this metric. These are hydroelectric power, possibly nuclear power (depending upon whose numbers are believed) and possibly high altitude wind power once the technology matures.

These primary high ERoEI sources are followed by coal and natural gas which are the most viable and easily accessible energy sources for electricity today. And yet energy policies are dictating that coal be phased out. This will not matter for so long as natural gas remains plentiful at high ERoEI. The high ERoEI group may also include nuclear power depending upon whose ERoEI numbers one believes.

Biofuels are already over the net energy cliff and should never have been pursued in the first place. Solar PV is at best marginal, at worst an energy sink.

There is a vast range in estimates for nuclear power from 5 to 75 [4, 5]and it is difficult to make sense of these numbers. Nuclear power either sits close to the cliff edge or is a high ERoEI low carbon saviour of humanity. Oil will not be used for electricity production and the fact it sits close to the cliff edge today in Eeq form does not matter too much since the energy quality of oil has a special status as an essential transport fuel and this will unlikely change much in the decades ahead.

Concluding thoughts

The concept of ERoEI is vital to understanding the human energy system. 50 years ago, our principal sources of energy – oil, gas and coal – had such high net energy return that no one need bother or worry about ERoEI. Vast amounts of net energy were simply available for all who had the level of technological development to build a power station and a transmission grid. It is part of human nature to “high grade” mineral deposits targeting the richest seams first. In economic terms these return the biggest profit and in energy terms when it comes to oil, gas and coal, they return the highest levels of net energy. An inevitable consequence of this aspect of human nature commonly known as greed is that we have already used up the highest ERoEI fossil fuel resources and as time passes the ERoEI of new resources is steadily falling. This translates to a higher price required to bring on that marginal barrel of oil.

At the present time, our energy web comprises a myriad of different resources. The legacy supergiants – Ghawar, Black Thunder and Urengoy et al – are still there in the mix supplemented by a vast range of lower ERoEI (more expensive) resources. The greatest risk to human society today is the notion that we can somehow replace high ERoEI fossil fuels with new renewable energies like solar PV and biofuels. These exist within the energy web because they are subsidised by the co-existing high ERoEI fossil fuels. The subsidy occurs at multiple levels from fossil fuels used to create the renewable devices and biofuels to fossil fuels providing the load balancing services. Fossil fuels provide the monetary wealth to pay the subsidies. Society is at great risk from Greens promoting the new renewable agenda to politicians and school children whilst ignoring the thermodynamic impossibility of current solar PV technology and biofuels ever being able to power human society unaided. The mass closure of coal fired power stations may prove to be fatal for many should blackouts occur.

Wind power, and in particular high altitude wind power, may be different although in the case of ground-based wind turbines care must be taken in moving offshore to ever larger devices that consume ever larger quantities of energy in their creation. And to be viable, ground based turbines must be able to prove they can deliver dispatchable power without subsidies.

It is proposed that money was invented as a means of exchange for the work energy does on our behalf. If we lived in a society with a single global currency (the EJ) and without taxes or subsidies, then money may represent a fair proxy for ERoEI although distortions would remain from the different efficiencies with which that money (EJ) was spent. However, in the real world, different currencies, interest rates, debts, taxes and subsidies exist that allow the thermodynamic rules of the energy world to be bent, albeit temporarily. We are at risk of exchanging gold for dirt.

Acknowledgement

The post was much improved by comments provided by Prof Charles Hall.

References

[1] Richard Heinberg: The Party’s Over – oil, war and the fate of industrial societies. Pub by Clairview 2003

[2] David J. Murphy 1,*, Charles A.S. Hall 2, Michael Dale 3 and Cutler Cleveland 4: Order from Chaos: A Preliminary Protocol for Determining the EROI of Fuels (2011): Sustainability 2011, 3, 1888-1907; doi:10.3390/su3101888

[3] Ferruccio Ferroni and Robert J. Hopkirk 2016: Energy Return on Energy Invested (ERoEI) for photovoltaic solar systems in regions of moderate insolation: Energy Policy 94 (2016) 336–344

[4] Charles A.S. Hall n, Jessica G. Lambert, Stephen B. Balogh: EROI of different fuels and the implications for society: Energy Policy 64 (2014) 141–152

[5] D. Weißbacha,b, G. Ruprechta, A. Hukea,c, K. Czerskia,b, S. Gottlieba, A. Husseina,d (Preprint): Energy intensities, EROIs, and energy payback times of electricity generating power plants





The collapse of oil prices and energy security in Europe

17 11 2014

This is a written version of the brief talk I gave at the hearing of the EU parliament on energy security in Brussels on Nov 5, 2014. It is not a transcription, but a shortened version that tries to maintain the substance of what I said. In the picture, you can see the audience and, on the TV screen, yours truly taking the picture.

Ladies and gentlemen, first of all, let me say that it is a pleasure and an honour to be addressing this distinguished audience today. I am here as a faculty member of the University of Florence and as a member of the Club of Rome, but let me state right away that what I will tell you are my own opinions, not necessarily those of the Club of Rome or of my university.

This said, let me note that we have been discussing so far with the gas crisis and the Ukrainian situation, but I have to alert you that there is another ongoing crisis – perhaps much more worrisome – that has to do with crude oil. This crisis is being generated by the rapid fall in oil prices during the past few weeks. I have to tell you that low oil prices are NOT a good thing for the reasons that I will try to explain. In particular, low oil prices make it impossible for many oil producers to produce at a profit and that could generate big problems for the world’s economy, just as it already happened in 2008.

So, let me start with an overview of the long term trends of oil prices. Here it is, with data plotted from the BP site.

These data are corrected for inflation. You see strong oscillations, but also an evident trend of growth. Let’s zoom in, to see the past thirty years or so:

These data are not corrected for inflation, but the correction is not large in this time range. Prices are growing, but they stabilized during the past 4-5 years at somewhere around US 100 $ per barrel. Note the fall during the past month or so. I plotted these data about one week ago, today we are at even lower prices, well under 80 dollars per barrel.

The question is: what generates these trends? Obviously, there are financial factors of all kinds that tend to create fluctuations. But, in the end, what determines prices is the interplay of demand and offer. If prices are too high, people can’t afford to buy; that’s what we call “demand destruction”. If prices are too low, then it is offer that is destroyed. Simply, producers can’t sell their products at a loss; not for a long time, at least. So there is a range of prices which are possible for oil: too high, and customers can’t buy, too low, and companies can’t sell. Indeed, if you look at historical prices, you see that when they went over something like 120 $/barrel (present dollars) the result was a subsequent recession and the collapse of the economy.

Ultimately, it is the cost of production that generates the lower price limit. Here, we get into the core of the problem. As you see from the price chart above, up to about the year 2000, there was no problem for producers to make a profit selling oil at around 20 dollars per barrel. Then something changed that caused the prices to rise up. That something has a name: it is depletion.

Depletion doesn’t mean that we run out of oil. Absolutely not. There is still plenty of oil to extract in the world. Depletion means that we gradually consume our resources and – as you can imagine – we tend to extract and produce first the least expensive resources. So, as depletion gradually goes on, we are left with more expensive resources to extract. And, if extracting costs more, then the market prices must increase: as I said, nobody wants to sell at a loss. And here we have the problem. Below, you can see is a chart that shows the costs of production of oil for various regions of the world. (From an article by Hall and Murphy on The Oil Drum)

Of course, these data are to be taken with caution. But there are other, similar, estimates, including a 2012 report by Goldman and Sachs, where you can read that most recent developments need at least 120 $/barrel to be profitable. Here is a slide from that report.

So, you see that, with the present prices, a good 10% of the oil presently produced is produced at a loss. If prices were to go back to values considered “normal” just 10 years ago, around 40 $/barrel, then we would lose profitability for around half of the world’s production. Production won’t collapse overnight: a good fraction of the cost of production derives from the initial investment in an oil field. So, once the field has been developed, it keeps producing, even though the profits may not repay the investment. But, in the long run, nobody wants to invest in an enterprise at so high risks of loss. Eventually, production must go down: there will still be oil that could be, theoretically, extracted, but that we won’t be able to afford to extract. This is the essence of the concept of depletion.

The standard objection, at this point, is about technology. People say, “yes, but technology will lower costs of extraction and everything will be fine again”. Well, I am afraid that it is not so simple. There are limits to what that technology can do. Let me show you something:

That object you see at the top of the image is a chunk of shale. It is the kind of rock out of which shale oil and shale gas can be extracted. But, as you can imagine, it is not easy. You can’t pump oil out of shales; the oil is there, but it is locked into the rock. To extract it, you must break the rock down into small pieces; fracture it (this is where the term “fracking” comes from). And you see on the right an impression of the kind of equipment it takes. You can be sure that it doesn’t come cheap. And that’s not all: once you start fracking, you have to keep on fracking. The decline rate of a fracking well is very rapid; we are talking about something like a loss of 80% in three years. And that’s expensive, too. Note, by the way, that we are speaking of the cost of production. The market price is another matter and it is perfectly possible for the industry to have to produce at a loss, if they were too enthusiastic about investing in these new resources. It is what’s happening for shale gas in the US; too much enthusiasm on the part of investors has created a problem of overproduction and prices too low to repay the costs of extraction.

So, producing this kind of resources, the so called “new oil” is a complex and expensive task. Surely technology can help reduce costs, but think about that: how exactly can it reduce the energy that it takes to break a rock into fine dust? Are you going to hammer on it with a smartphone? Are you going to share a photo of it on Facebook? Are you going to run it through a 3D printer? The problem is that to break and mill a piece of rock takes energy and this energy has to come from somewhere.

Eventually, the fundamental point is that you have a balance between the energy invested and the energy returned. It takes energy to extract oil, we can say that it takes energy to produce energy. The ratio of the two energies is the “Net Energy Return” of the whole system, also known as EROI or EROEI (energy return of energy invested). Of course, you want this return to be as high as possible, but when you deal with non renewable resources, such as oil, the net energy return declines with time because of depletion. Let me show you some data.

As you see, the net energy return for crude oil (top left) declined from about 100 to around 10 over some 100 years (the value of 100 may be somewhat overestimated, but the trend remains the same). And with lower net energies, you get less and less useful energy from an oil well; as you can see in the image at the lower right. The situation is especially bad for the so called “new oil”, shale oil, biofuels, tar sands, and others. It is expected: these kinds of oil (or anyway combustible liquids) are the most expensive ones and they are being extracted today because we are running out of the cheap kinds. No wonder that prices must increase if production has to continue at the levels we are used to. Then, when the market realizes that prices are too high to be affordable, there is the opposite effect; prices go down to tell producers to stop producing a resource which is too expensive to sell.

So, we have a problem. It is a problem that appears in the form of sudden price jumps; up and down, but which is leading us gradually to a situation in which we won’t be able to produce as much oil as we are used to. The same is true for gas and I think that the present crisis in Europe, which is seen today mainly as a political one, ultimately has its origin in the gradual depletion of gas resources. We still have plenty of gas to produce, but it is becoming an expensive resource.  It is the same for coal, even though so far there we don’t see shortages; for coal, troubles come more from emissions and climate change; and that’s an even more serious problem than depletion. Coal may (perhaps) be considered abundant (or, at least, more abundant than other fossil resources) but it is not a solution to any problem.

In the end, we have problems that cannot be “solved” by trying to continue producing non renewable resources which in the long run are going to become too expensive. It is a physical problem, and cannot be solved by political or financial methods. The only possibility is to switch to resources which don’t suffer of depletion. That is, to renewable resources.

At this point, we should discuss what is the energy return of renewables and compare it to that of fossil fuels. This is a complex story and there is a lot of work being done on that. There are many uncertainties in the estimates, but I think it can be said that the “new renewables“, that is mainly photovoltaics and wind, have energy returns for the production of electrical energy which is comparable to that of the production of the same kind of energy from oil and gas. Maybe renewables still can’t match the return of fossil fuels but, while the energy return of fossil energy keeps declining, the return of renewables is increasing because of economies of scale and technological improvements. So, we are going to reach a crossing point at some moment (maybe we have already reached it) and, even in terms of market prices, the cost of renewable electric power is today already comparable to that of electric power obtained with fossil fuels.

The problem is that our society was built around the availability of cheap fossil fuels. We can’t simply switch to renewables such as photovoltaics, which can’t produce, for instance, liquid fuels for transportation. So, we need a new infrastructure to accommodate the new technologies, and that will be awfully expensive to create. We’ll have to try to do our best, but we cannot expect the energy transition – the “energiewende” – to be painless. On the other hand, if we don’t prepare for it, it will be worse.

So, to return to the subject of this hearing, we were discussing energy security for Europe. I hope I provided some data for you that show how security is ultimately related to supply and that we are having big problems with the supply of fossil energy right now. The problem can only increase in the future because of the gradual depletion of fossil resources. So, we need to think in terms of supplies which are not affected by this problem. As a consequence, it is vital for Europe’s energy security to invest in renewable energy. We shouldn’t expect miracles from renewables, but they will be immensely helpful in the difficult times ahead.

Let me summarize the points I made in this talk:

Thank you very much for your attention and if you want to know more, you can look at my website “Resource Crisis”. www.cassandralegacy.blogspot.com


Ugo Bardi teaches at the University of Florence, Italy. He is a member of the Club of Rome and the author of “Extracted, how the quest for mineral wealth is plundering the planet” (Chelsea Green 2014)





The Energy Cliff Revisited

22 10 2014

Gough Whitlam died yesterday.  The whole country seems to have paused for thought, many media outlets are even saying things like “where to from here”, and the cluelessness abounds.  Where to from here indeed……  Today, our politicians are elected to office based on false promises.  They promise things they can’t deliver, and we continue to be perpetually shocked when they don’t deliver.  We never seem to get tired of this game, we always lose.

I have spent little time posting here, mainly for fear of simply repeating myself.  As I am doing now, really…. but once you ‘get it’, what else is there to say?  As the price of oil fell to $80 last week, much wringing of hands and gnashing of teeth occurred on the subject of how long the unconventional oil drillers of oil would last….  while some commentators were despairing at the thought that cheaper fossil fuels would mean the end of the current push for renewables, if you can still call it that.

When I pointed out to these people that the fossil fuel companies were actually going broke, I was met with the derision I am now accustomed to.  I’m getting quite immune to that now, if you don’t believe me, it’s your problem, not mine…  mind you, as we approach ‘the knee’ of the energy cliff curve, it is baffling as to why the price of oil dropped so much, when it should have in fact risen, and risen substantially.  The answer of course is that the global economy is on its knees.  Growth is fetid at best, and in Europe, things are going from bad to worse, even prompting some people to predict that ‘the big one’ was going to occur on the 27th anniversary of the Black Monday crash.  Didn’t happen, unfortunately…..  but the ducks have all lined up in waiting.

Most of us here have surely heard of the seven stages of grief…. Shock, Denial, Anger, Bargaining, Guilt, Depression, Acceptance. Where are we in our journey through these stages when it come to the financial crisis, and to growth? There’s only one stage that even remotely sounds right: Denial. We’re not even close to Anger yet, not when it comes to the larger population.  Me, I’d like to add another stage:  REACTION….!

justwalkawayIf enough people just walked away, the whole mess would end.  Any time people post whinges on FB these days, I reply with that picture.

Apart from denial, there is of course ignorance.  The concept of the energy cliff is foreign to just about anyone who doesn’t follow blogs such as this one.  It occurred to me that we have been sliding down the edges of the energy cliff for a very long time.  At the beginning of the oil era, when the ERoEI was 100:1, everything was easy.  We just had to invent it, and we had so much surplus energy that we could fumble our way around and build outrageous cars and airplanes, steel skyscrapers, huge ships, growth was easy…..  and when the ERoEI of oil dropped to 50:1, who noticed?  We still had 100:1 oil to make the equipment needed to get that oil (which, let’s face it, was still amazing value…)http://www.terrysmithblog.com/.a/6a0120a5f40b9d970b01347fbc85dd970c-400wi

As the easy pickings were exploited, it was still easy to burn 25:1 and even 15:1 energy sources…. but it is at this stage that we approach ‘the knee’ of the nett energy curve, and start falling off its cliff.

Building 5:1 solar energy gizmos with 15:1 oil, let alone with more 5:1 PVs or those appallingly inefficient tar sands and shale oil suddenly becomes a struggle.  This is what people who argue that we don’t need fossil fuels to make renewables do not understand.  Bad ERoEI compounds when you use one low source to get another.  Social complexity utterly relies on surplus energy.  It was with surplus energy that Europe’s cathedrals were build during the middle ages, and the same applies to building wind and solar farms.

If you are new to these concepts, I urge you to watch the video below from Chris Martenson’s excellent crash course series, a must watch program of videos for anyone who doesn’t yet know why the world is going to hell in a handbasket……  NOTE:  This video shows solar as having an ERoEI somewhere around 20:1.  This is because it was made in 2009, and in the intervening 5 years, it has been established that it is fact less than 5…. maybe even less than 3!  This is displayed more accurately in the more recent chart above……