Fundamental Energy Constraints on Continued Growth in Economic Activity as measured by GDP be recognised

NS Nathan Surendran Public Seen by 40

Q1 – Why do we need growth? A: To service interest payments on money lent into existence as debt. http://bit.ly/1rfcumz

Q2 – Why is the economy moribund? A: Because we’ve hit diminishing returns on capital and energy in many spheres, as the expansion in economic activity and natural resource throughput of the last couple of centuries bumps up against planetary boundaries. http://bit.ly/1qhWoXB

Q3 – What is a realistic view of the global future? A: De-growth of economic activity, energy consumtion, natural resource exploitation rates, population, until we get back inside the sustainable capacity of the planet. http://bit.ly/1qhWluX and http://bit.ly/1z69MSK

Source: http://bit.ly/1jHEBDi

For another approach to this, see this chart: http://www.theoildrum.com/files/humans_energy_timeline.jpg

> The above graphic shows a three-tiered time history of our planet, starting with the top black line being geologic time. The tiny black sliver on the far right, is enlarged in the second line, and the sliver on its far right is again enlarged on the bottom line, where the last 12,000 years are shown. We, both our environment, and ourselves, are products of this evolutionary history. Our true wealth originates from energy, natural resources and ecosystem services, developed over geologic time. Our true behavioral drivers are a product of our brains being sculpted and honed by 'what worked' in all 3 eras of this graph (but mostly the top 2). The dark line on the bottom is human population, but just as well could be economic output or fossil fuel use, as they have been highly correlated over this period.

> The economic ‘theories’ underpinning our current society developed exclusively during the short period labeled 'A' on the graph, on a planet still ecologically empty of human systems and when increasing amounts of extraordinarily powerful fossil energy was applied to an expanding global economic system. For decades our human economies seemed to follow a pattern of growth interrupted by brief recession and resumption to growth. This has made it seem, for all intents and purposes, that growth of both the economy and aggregate individual wealth was something akin to a natural law –it is certainly taught that way in business schools. The reality is that our human trajectory –both past and future - is not a straight line but more like a polynomial - long straight stretches, up and down, with some wavy periods in the middle, and ultimately capped. Our present culture, our institutions, and all of our assumptions about the future were developed during a long 'upward sloping' stretch. Since this straight line period has gone on longer than the average human lifetime, our biological focus on the present over the future and past makes it difficult to imagine that the underlying truth is something else.

> Evidence based science in fields like biology and physics has been marginalized during this long period of 'correlation=causation'. This oversight is not only ubiquitous in finance and economics but present in much of the social sciences, which over the past 2 generations have largely conflated proximate and ultimate explanations for individuals and societies. In nature geese fly south for the winter and north in the spring. They do this based on neurotransmitter signals honed over evolutionary time that contributed to their survival, both as individuals and as a species. "Flying north in spring" is a proximate explanation. "Neuro-chemical cues to maximize food/energy intake per effort contributing to survival" is an 'ultimate' explanation. In business school I was taught, 'markets go north' because of invention, technology and profits, an explanation which seemed incomplete to me even though it has appeared to be valid for most of my life. Social sciences have made great explanations of WHAT our behavior is, but the descriptions of WHY we are what we are and HOW we have accomplished a vast and impressive industrial civilization are still on the far fringes of mainstream science. Economics (and its subset of finance) is currently the social science leading our culture and institutions forward, even if now only by inertia.

Source for the above: http://bit.ly/1jAAzMS

Relates to my calls for economic reform in the economy group, and also my proposal to support the 'Wise Response' appeal (already has Labour and Green backing): http://bit.ly/wr-facebookappeal


Nathan Surendran Fri 11 Jul 2014 1:18PM

8 energy myths:

Myth 1. The fact that oil producers are talking about wanting to export crude oil means that the US has more than enough crude oil for its own needs.
Myth 2. The economy doesn’t really need very much energy.
Myth 3. We can easily transition to renewables.
Myth 4. Population isn’t related to energy availability.
Myth 5. It is easy to substitute one type of energy for another.
Myth 6. Oil will “run out” because it is limited in supply and non-renewable.
Myth 7. Oil supply (and the supply of other fossil fuels) will start depleting when the supply is 50% exhausted. We can therefore expect a long, slow decline in fossil fuel use.
Myth 8. Renewable energy is available in essentially unlimited supply.

For a full treatment of these myths, see the original article: http://bit.ly/1oKzlBU


Nathan Surendran Fri 11 Jul 2014 1:24PM

The story of energy and the economy seems to be an obvious common sense one: some sources of energy are becoming scarce or overly polluting, so we need to develop new ones. The new ones may be more expensive, but the world will adapt. Prices will rise and people will learn to do more with less. Everything will work out in the end. It is only a matter of time and a little faith. In fact, the Financial Times published an article recently called “Looking Past the Death of Peak Oil” that pretty much followed this line of reasoning.

Energy Common Sense Doesn’t Work Because the World is Finite

The main reason such common sense doesn’t work is because in a finite world, every action we take has many direct and indirect effects. This chain of effects produces connectedness that makes the economy operate as a network. This network behaves differently than most of us would expect. This networked behavior is not reflected in current economic models.

Most people believe that the amount of oil in the ground is the limiting factor for oil extraction. In a finite world, this isn’t true. In a finite world, the limiting factor is feedback loops that lead to inadequate wages, inadequate debt growth, inadequate tax revenue, and ultimately inadequate funds for investment in oil extraction. The behavior of networks may lead to economic collapses of oil exporters, and even to a collapse of the overall economic system.

An issue that is often overlooked in the standard view of oil limits is diminishing returns. With diminishing returns, the cost of extraction eventually rises because the easy-to-obtain resources are extracted first. For a time, the rising cost of extraction can be hidden by advances in technology and increased mechanization, but at some point, the inflation-adjusted cost of oil production starts to rise.

With diminishing returns, the economy is, in effect, becoming less and less efficient, instead of becoming more and more efficient. As this effect feeds through the system, wages tend to fall and the economy tends to shrink rather than grow. Because of the way a networked system “works,” this shrinkage tends to collapse the economy. The usage of energy products of all kinds is likely to fall, more or less simultaneously.

In some ways current, economic models are the equivalent of flat maps, when we live in a spherical world. These models work pretty well for a while, but eventually, their predictions deviate further and further from reality. The reason our models of the future are wrong is because we are not imagining the system correctly.

Source for the above: http://bit.ly/1mnvxIy


pilotfever Fri 11 Jul 2014 1:45PM

Please refer to my proposal for a NZ renewable energy credit as currency and UBI. I am a huge fan of the ole oil drum forum, and insist that smart people value energy over fiat currency. New Zealand has a leading role to play in the adoption of 100% renewable energy and a new economy and thermoeconomic validation of it. We are at risk until we do so. It is exciting to act across traditional party lines with Green and Labour support to solve long standing economic failures with new thinking supported by best science. Occupy renewable energy and occupy money!


Marc Whinery Fri 11 Jul 2014 8:05PM

If we had solar on every structure, and solar roadways, we'd have enough power for growth 10+ years from now, and that doesn't count the large amount of other renewables we have now.

Renewables are the answer, and replace fossil fuels well. We should stop development of fossil fuels now, and go to 100% renewals, and prevent the extraction of NZ fossil fuels. Wait until they have "run out" elsewhere and they'll be worth much more. They appreciate while we don't extract them.

We can "survive" on 100% renewables. We should be inventing/licensing some of the more interesting ones to build here now, rather than importing them all. Especially if we want to go to energy independence.


Nathan Surendran Sun 13 Jul 2014 5:58AM

@marcwhinery Politely : bollocks. Do the math... There is no way we can get anywhere near the current net energy expenditure of this country on renewables, never mind that liquid fuel for transport is non-substitutable for any renewable energy solutions currently available. The infrastructure to support will take decades to build, and that's if we ever get a significant increase in energy storage density for battery tech, and grid connected storage.

We can survive on 100%renewable energy sources : we did for centuries, before we exploded or global population as a species using a one time endowment of fossil fuel slaves.

Whether you believe we can get back to something like that depends on your view of our chances of doing things like decommissioning 430 commercial nuclear reactors worldwide with a significant decline in net energy like we face. Bear in mind there's no long term nuclear waste facilities fully commissioned yet anywhere...


Nathan Surendran Sun 13 Jul 2014 6:04AM

@jamesabbott - where's your proposal..? Link please?


Marc Whinery Sun 13 Jul 2014 7:20AM

@nathansurendran "Politely : bollocks. Do the math… There is no way we can get anywhere near the current net energy expenditure of this country on renewables,"

I have done the math. More capturable energy hits the roofs of buildings in this country than we use. More capturable energy hits the roads than we use.

It's stupid to dismiss solar because you don't understand the large number of storage mechanisms for powering overnight. The amount of solar power that hits man-made structures in NZ is well over 10x the amount of electrical consumption.

We could end oil use, if we wanted. We are too lazy and spoiled to consider any plan that would reduce oil use.

"never mind that liquid fuel for transport is non-substitutable for any renewable energy solutions currently available." batteries for cars. oil for airplanes. And there are a number of "synthetic" oils that can be burned in jet engines.

"The infrastructure to support will take decades to build, and that’s if we ever get a significant increase in energy storage density for battery tech, and grid connected storage."

We can't solve problems by using the same kind of thinking we used when we created them.
- Albert Einstein

Giving up on a solution because it's hard is what caused the problem. That you are willing to give up without trying doesn't mean it's impossible. It just means you have a really really bad imagination.


Nathan Surendran Sun 13 Jul 2014 8:05AM

@marcwhinery - some actual numbers would be nice?


Nathan Surendran Sun 13 Jul 2014 9:16AM

@marcwhinery I do hope you're not talking about that solar road nonsense? http://www.drroyspencer.com/2014/05/why-are-solar-freakin-roadways-so-freakin-popular/

And regarding solar viability:
A fundamental requirement that any energy supply system must satisfy for economic viability is a sufficiently high energy return on energy investment (EROI) for manufacturing, installing, operating and maintaining the system over its operating life. The question of what constitutes a sufficient return depends on the nature of the economy and society that the energy supply system is intended to support—while an EROI 1 does not automatically entail viability. Consider the limiting case in which net energy supply is zero, i.e. EROI =1. This would entail an economy consisting entirely of an energy supply sector that supported itself, but allowed for no economic activity beyond this. It’s certainly possible to imagine a functional economy along such lines, but it implies that every person living in such a society must dedicate their life to and focus all of their attention and effort on providing for the subsistence energy needs of their economic system. Such an economic system would serve no purpose beyond its own perpetuation; citizens of such a society might very well consider their lives to constitute a form of slavery to their economy.


Nathan Surendran Sun 13 Jul 2014 9:17AM

More from the linked article: Solar PV through the EROI lens

With this in mind, recent studies by Pedro Prieto & Chales Hall [2] and Graham Palmer [3],[4] suggest it would be unwise to assume that the forms of industrial consumer society that have developed in the context of fossil fuel energy systems can transition to renewable energy systems, at least while these forms of social organisation and their associated life-ways remain unchanged. Using actual performance data, Prieto & Hall found that for utility-scale solar photovoltaic (PV) electricity generation in Spain the EROI may be as low as 2.45. Their analysis indicates that the overall EROI for PV is strongly limited by upstream “balance of system” (BOS) energy costs for infrastructure additional to the PV modules and related equipment, and by downstream losses specific to PV (i.e. losses not incurred by other electricity generation technologies). Palmer’s study considered the situation for PV generation in Melbourne, Australia, and focused in particular on constraints associated with its intermittency. Intermittency strongly limits the proportion of PV generation that can be introduced to existing grid-based electricity systems developed in the context of conventional thermal and hydro generation.

This limitation can be reduced by introducing some form of energy storage—but at the cost of further energy investment that significantly reduces the overall EROI. Overall EROI is strongly dependent on the amount of storage capacity added to the supply system. Taking into account the BOS energy costs, including downstream losses similar to those included by Prieto & Hall in their study, and adding four hours of lead-acid battery storage (he characterises this as “a moderate amount”, in terms of its impact on the overall PV penetration that can be accommodated), Palmer arrives at an indicative EROI of 2 to 2.3, depending on the PV cell technology. While his analysis is subject to significant uncertainties, it highlights the extent to which EROI is dependent on factors other than the energy costs associated with emplacing the basic equipment required by grid-connected solar PV electricity generation facilities.

An aside on intermittency

It’s important to note here that Palmer’s assessment of intermittency issues is offered with full awareness of the arguments against their significance from proponents of a “smooth transition” to high penetration renewable electricity generation. It’s now common to encounter outright dismissal of concerns relating to intermittency, with justifications for this position advanced on both theoretical and empirical grounds. Theoretically, proponents typically argue along the lines that “the wind is always blowing (or sun is always shining) somewhere”, and so with a sufficiently wide geographic distribution of generators, electricity will always be available. This is the general stance adopted by Mark Jacobson & Mark Delucchi in a series of articles published in the journal Energy Policy assessing the feasibility of providing all global energy from wind, water and solar power.[5],[6] This theoretical approach typically neglects (or dismisses) an obvious implication: sufficient generating capacity must be located in every region from which all demand might need to be met at any particular time. This translates to very high levels of redundancy, and commensurate capital cost. I will discuss this in more detail in concluding Part 3 of this series.

Empirical arguments tend to focus on the experience in regions with high levels of renewable penetration, especially Germany, and more recently the Australian state of South Australia. These arguments often neglect the fact that it is the level of penetration for grids as a whole which is important, rather than the level of penetration for a given political region or geographic area. For example, around 30 percent of electricity generated in South Australia annually is from wind and solar PV. South Australia, though, is a participant in Australia’s National Electricity Market and is connected to the east coast grid, stretching from Queensland in the north, through New South Wales and Victoria, to Tasmania in the south. Two interconnectors link South Australia with the adjacent state of Victoria, allowing the state to both import and export electricity. As such, South Australia’s large proportion of wind and solar electricity needs to be considered in relation to the generation mix for the entire grid. The high proportion of gas thermal generation that can be brought on-line in South Australia is also an important consideration here. That the high proportion of wind and solar generation for the state is viable without storage does not confirm that intermittency is not an issue. This would be established empirically only if the overall level of intermittent renewable generation for the grid as a whole matched that of South Australia viewed in isolation.

EROI implications for renewable energy’s technical potential

Previously I’ve discussed how neglecting EROI when thinking about the availability of fossil energy sources significantly overstates resource potential (see posts here and here). As the comparatively low EROI figures for electricity supply from solar, wind and biomass suggest, the overall situation for the major non-hydro renewable energy sources is even more pronounced. This has major implications for estimating the technical potential of renewables—the upper bound on the rate at which they could in principle provide end-use energy to enable economic activity other than energy supply itself, taking into account constraints associated with system performance, topographgy, land use and environment.

Technical potential will necessarily be significantly less than overall resource potential—the energy ultimately available based on physical considerations. To illustrate the difference, the incident solar radiation at the Earth’s surface is approximately 3,900,000 EJ (exajoule, 1018 J) per year, compared with conventional estimates of technical potential for solar electricity generation ranging from around 120 to 2,600 EJ per year.[7, Table 3] For wind, total Earth energy flow is around 28,400 EJ per year, compared with conventional estimates of technical potential between 48 and 600 EJ per year.[7, Table 3] For reference, world primary energy supply in 2011 was 13,130 Mtoe (million tonnes of oil equivalent) or around 550 EJ.

The ratio of input to output energy over a system’s lifecycle is a central consideration in relation to system performance and hence for estimating technical potential. But as Patrick Moriarty and Damon Honnery discovered in drawing together the figures above on technical potential for solar and wind generated electricity, it’s rarely apparent that this is adequately taken into account.[7] This is reflected in the order-of-magnitude range in estimates.

Variation in EROI from the first to the last unit of production plays a significant role here. Moriarty & Honnery point out that the energy ratio (their preferred term for EROI) will change as a resource is exploited. Initially, as the best sites are developed, EROI is typically high, but declines as production expands to more marginal sites. If exploitation of the resource expands far enough, eventually the remaining sites will have EROI less than 1. At that point, overall production has reached its maximum, and any further expansion will reduce the net rate. Consequentially, overall technical potential must take into account the way that EROI varies from the most to the least productive sites. It is not appropriate to take the highest attainable EROI as typical.

Moriarty & Honnery illustrate this for global wind potential, using an analytical approach based on siting a 2 MW turbine on each square kilometre of the Earth’s available land area. The energy ratio across all sites ranges from around 22:1 down to zero, but around half of the annual gross electricity output is delivered at energy ratios of less than 8:1. Similar distributions of gross energy return versus energy ratio can be determined for any desired generation scenario. For instance, Moriarty & Honnery also consider a land constrained scenario, in which environmentally sensitive forests and wetlands, urban areas and irrigated farm land are excluded. Correcting for the marginal energy ratio as further generation capacity is added from highest energy return sites to lowest, the net energy can be determined for a given generation scenario. In the unconstrained case (where all land area is treated as available for turbine installation), this leads to net energy return reaching a maximum value of around 420 EJ/year, corresponding to gross energy supply of around 500 EJ/year—that is, a reduction of 16 percent. This can be compared with the difference if we simply assumed that all wind generated electricity was available at the best energy ratio of around 22:1. In this case, net energy would be around only 4.5 percent less than gross energy. For the land constrained case, net energy peaks at around 290 EJ/year net, against 350 EJ/year gross—a reduction of 17 percent.

These scenarios exclude the effects of energy storage. As discussed earlier, storage becomes increasingly necessary for system reliability as the proportion of intermittent generation included in the total electricity supply expands. Storage, or buffering, allows a degree of decoupling between generation and demand, by diverting excess electricity towards an appropriate storage system during periods where available supply exceeds demand. When instantaneous demand exceeds generation capacity, stored energy, if available, can then be converted back to electricity to make up all or part of the shortfall.

Recognising the importance of storage for electricity systems with high proportions of intermittent renewable generation, Moriarty & Honnery also consider a third scenario in their study of global wind energy potential. For this situation, they start with the land constrained case and consider the implications of adding energy storage in the form of hydrogen, produced via electrolysis of water. Storage of any type comes at a further energy cost. This includes the embodied energy associated with the additional equipment and infrastructure, and the losses associated with the conversion cycle from electricity to the stored energy form, and from this back to electricity again. This additional energy cost will vary with the type and scale of storage employed, but in all cases it will reduce the overall energy ratio for the system, and hence the net energy.

For the scenario that Moriarty & Honnery consider, the net energy output reduces to 105 EJ/year, for a gross output of 170 EJ/year. Notice that in this case, the addition of storage entails a 38 percent reduction in net output compared with gross output, compared with a 17 percent reduction without storage. While the absolute figures involved here are dependent on a wide range of variable parameters associated with the specific technologies involved and the way they are deployed, it is the relative difference between the net output with and without storage that tells the important story here. From the initial unconstrained gross output of around 500 EJ/year (recalling that this is based on the assumption of situating a 2MW turbine for each square kilometre of the Earth’s available land area), and accounting only for a series of realistic constraints associated with land use and supply reliability (i.e. ignoring other plausible constraints), the net energy available may be reduced by as much as 80 percent.

While the specific example here focuses on wind, the general principles involved apply to all renewable energy sources. It’s particularly noteworthy that for all three scenarios considered, adding further capacity beyond the maximum or peak level—that is, adding sites with energy ratios less than 1:1—results in a net decrease in energy output. In other words, the reduction in energy ratio at the margin implies that as renewable energy resources are developed, if this development proceeds far enough, we should expect to converge eventually on an optimum or peak supply level. If the aggregate optimum level with all sources added falls within the range of anticipated or desired future energy supply, then this implies that humanity faces fundamental energetic limits.

Moriarty & Honnery argue that the maxima for all sources do indeed sum to a level within the range of typical expectations for global growth in energy use out to 2050.[7] Furthermore, when a range of other constraints associated with environmental (especially climate change related), political, social, economic and transition timing factors are taken into account, it appears highly unlikely that renewable energy sources have sufficient potential to meet even current global energy demand.[8]

Next week, in Part 2 of this three part series, I’ll take this extended look at EROI a step further by examining dynamic consequences related to the rates of energy expenditure and return, and how these are staged throughout the life-cycle of an energy supply installation. These dynamic effects usually remain hidden from view when we take the overall life-cycle as the basic unit of analysis. Following this line of inquiry, I will build the case for introducing power return on investment as a complementary indicator to EROI for assessing and comparing the viability of different energy supply systems.

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