Articles tagged with "eroi"
My major point when I gave my talk at the Fifth Biophysical Economics Conference at the University of Vermont was that our economy’s overall energy return on investment is already too low to maintain the economic system we are accustomed to. That is why the US economy, and the economies of other developed nations, are showing signs of heading toward financial collapse. Both a PDF of my presentation and a podcast of the talk are available on Our Finite World, on a new page called Presentations/Podcasts.
My analysis is with respect to the feasibility of keeping our current economic system operating. It seems to me that the problems we are experiencing today–governments with inadequate funding, low economic growth, a financial system that cannot operate with “normal” interest rates, and stagnant to falling wages–are precisely the kinds of effects we might expect, if energy sources are providing an inadequate energy return for today’s economy.
Commenters frequently remark that such-and-such an energy source has an Energy Return on Energy Invested (EROI) ratio of greater than 5:1, so must be a helpful addition to our current energy supply. My finding that the overall energy return is already too low seems to run counter to this belief. In this post, I will try to explain why this difference occurs. Part of the difference is that I am looking at what our current economy requires, not some theoretical low-level economy. Also, I don’t think that it is really feasible to create a new economic system, based on lower EROI resources, because today’s renewables are fossil-fuel based, and initially tend to add to fossil fuel use.
Adequate Return for All Elements Required for Energy Investment
In order to extract oil or create biofuels, or to make any other type of energy investment, at least four distinct elements described in Figure 1: (1) adequate payback on energy invested, (2) sufficient wages for humans, (3) sufficient credit availability and (4) sufficient funds for government services. If any of these is lacking, the whole system has a tendency to seize up.
EROI analyses tend to look primarily at the first item on the list, comparing “energy available to society” as the result of a given process to “energy required for extraction” (all in units of energy). While this comparison can be helpful for some purposes, it seems to me that we should also be looking at whether the dollars collected at the end-product level are sufficient to provide an adequate financial return to meet the financial needs of all four areas simultaneously.
My list of the four distinct elements necessary to enable energy extraction and to keep the economy functioning is really an abbreviated list. Clearly one needs other items, such as profits for businesses. In a sense, the whole world economy is an energy delivery system. This is why it is important to understand what the system needs to function properly.
Posted by Rembrandt on June 10, 2013 - 4:27am
Tags: adam brandt, canada, energy return, energy return on energy invested, eroei, eroi, oil, oil sands, tar sands [list all tags]
Low energetic returns (e.g., EROI, NER) from oil sands extraction and upgrading have been noted as a potential limit to the development of the oil sands as a substitute for depleting conventional oil resources (e.g., Herweyer and Gupta, 2008). In this article we will examine this claim from a variety of perspectives. Specifically, we will examine the following questions:
- Are the energetic returns from oil sands extraction lower than conventional oil?
- How have the energy returns from oil sands extraction varied over time?
- What energy sources are used in oil sands extraction, and what are the implications of this sourcing for net energy availability from the oil sands?
- Will low energy returns limit the net output of energy from the oil sands industry?
This article is based on the peer-reviewed journal article: Brandt A.R., J. Englander and S. Bharadwaj (2013). The energy efficiency of oil sands extraction: Energy return ratios from 1970 to 2010. Energy.
This is a guest post by Matthew Kuperus Heun (Calvin College) and Martin de Wit (Stellenbosch University & de Wit Sustainable Options) based on their recent paper in Energy Policy.
The Oil Drum Editors' Preface
The following analysis provides an interesting view on the relationship between EROI (Energy Return on Energy Invested) and market prices, but the strong inverse correlation that the authors emphasize may be an artifact of the underlying Cleveland (2005) EROI statistics that they use. Cleveland’s indirect energy intensity approach, based on calculating EROI from $/BTU and adjusting for energy quality using price indices, will plausibly result in lower EROI during periods of oil price spikes because of higher prices of inputs that do not correspond with higher energy inputs, and will, therefore, overstate changes in EROI that are unrelated to “energy quality.”
Because this post is excerpted, we suggest that readers refer to the full paper in Energy Policy for details of the analysis not mentioned below.
The economical and sustainable provision of energy to run modern economies and meet human development goals is one of the Grand Challenges facing the world today. There is increasing evidence that the physical scarcity of fossil fuels is a serious possibility to reckon with. An important question to ask is whether price signals of physical scarcity will be sufficient to cause transitions to alternative fuel sources.
One proposed physical indicator of energy supply scarcity is energy return on (energy) invested (EROI). Little work has been done so far to model, test, and understand the relationship between oil prices and EROI over time. This post (based on our recent paper) investigates whether declining EROI is associated with increasing oil price and speculates on the implications of these results on oil policy. The questions addressed are:
- ‘‘How is EROI related to energy prices?’’
- ‘‘What implications do EROI trends over time have for economic and energy policy?’’
- ‘‘What is required to ensure a smooth transition away from oil toward substitutes?’’
We propose a physically based model of the interaction between physical scarcity and market prices, with a focus on the behaviour of EROI and oil prices over time.
The post below is a reproduction of a paper published in the open access journal Sustainability by Michael Dale, Susan Krumdieck, and Pat Bodger (Vol. 3). The article is a first in creating a dynamic function where Energy Return on Energy Investment changes of an energy resource are estimated over time. In this manner it becomes possible to get an estimate of how much net energy a given fossil oil, gas, coal or renewable energy source yields during its lifetime. The created EROI function is based on theoretical considerations of energy technology development and resource depletion.
Any errors in the version below the fold relative to the original are solely the responsibility of the TOD editorial team. The original version can be found via Dale M., Krumdieck S., Bodger P. A Dynamic Function for Energy Return on Investment. Sustainability. 2011; 3(10):1972-1985.
Hall and Day (2009) report that the EROI for coal might be as high as 80 and that for hydropower, EROI is 40. Does this mean that coal is twice as ‘good’ as hydro? The answer is no, and in this post I will discuss how this relates to the idea of an EROI Threshold.
The Net Energy Cliff
This post is based on a presentation that I gave at the recent ASPO conference on November 4th, 2011.
In recent years, we have heard statements indicating that it is possible to decouple GDP growth from energy growth. I have been looking at the relationship between world GDP and world energy use and am becoming increasingly skeptical that such a decoupling is really possible.
Prior to 2000, world real GDP (based on USDA Economic Research Institute data) was indeed growing faster than energy use, as measured by BP Statistical Data. Between 1980 and 2000, world real GDP growth averaged a little under 3% per year, and world energy growth averaged a little under 2% per year, so GDP growth increased about 1% more per year than energy use. Since 2000, energy use has grown approximately as fast as world real GDP–increases for both have averaged about 2.5% per year growth. This is not what we have been told to expect.
Why should this “efficiency gain” go away after 2000? Many economists are concerned about energy intensity of GDP and like to publicize the fact that for their country, GDP is rising faster than energy consumption. These indications can be deceiving, however. It is easy to reduce the energy intensity of GDP for an individual country by moving the more energy-intensive manufacturing to a country with higher energy intensity of GDP.
What happens when this shell game is over? In total, is the growth in world GDP any less energy intense? The answer since 2000 seems to be “No”.
It seems to me that at least part of the issue is declining energy return on energy invested (EROI)–we are using an increasing share of energy consumption just to extract and process the energy we use–for example, in “fracking” and in deep water drilling. This higher energy cost is acting to offset efficiency gains. But there are other issues as well, which I will discuss in this post.
If GDP growth and energy use are closely tied, it will be even more difficult to meet CO2 emission goals than most have expected. Without huge efficiency savings, a reduction in emissions (say, 80% by 2050) is likely to require a similar percentage reduction in world GDP. Because of the huge disparity in real GDP between the developed nations and the developing nations, the majority of this GDP reduction would likely need to come from developed nations. It is difficult to see this happening without economic collapse.
This is a guest post by Leena Grandell, an independent energy analyst from Norway. Her research summarized in this post was carried out in collaboration with Charles Hall from New York State University and Mikael Hook from Uppsala University, and published in the journal Sustainability.
Norway is one of the few petroleum producing countries where data on the production details is abundant and to a large degree public. Even statistical data on energy consumption of the petroleum industry is available on an annual basis – which allows us to take a closer look at the evolution of Energy Return on Energy Invested (EROI) for Norwegian petroleum production. The following text is a short version of our EROI analysis published through Sustainability. Here we assume that the reader is familiar with the EROI concept. More details and theoretical background can be found in the original article, downloadable at http://www.mdpi.com/2071-1050/3/11/2050/.
EROI is a tool used in net energy analysis. EROI is a simple way to examine the quality of an energy resource. What really matters to our economies is the net energy flow (not the gross) provided by our energy sector and this can be estimated through the EROI approach. EROI is calculated from the following simple equation, although the devil is in the details:
The EIA published International Energy Outlook 2011 (IEO 2011) on September 19, showing energy projections to 2035. One summary stated, "Global Energy Use to Jump 53%, largely driven by strong demand from places like India and China."
It seems to me that this estimate is misleadingly high. The EIA is placing too much emphasis on what demand would be, if the price were low enough. In fact, oil, natural gas, and coal are all getting more difficult (and expensive) to extract. Prices will need to be much higher than today to cover the cost of extraction plus taxes countries choose to levy on energy extraction. The required high energy prices are likely to lead to recessionary impacts, which in turn will cut back demand for energy products of all types.
We live in a finite world. While it is true that huge resources of oil, natural gas, and coal are still theoretically available, we are starting to reach practical limits regarding extraction at prices that do not lead to economic contraction.
The idea that high oil prices cause recessions shouldn’t be any surprise to those who have been following my writings, those of Dave Murphy, or those of Jeff Rubin. Last month, though, the Wall Street Journal finally decided to mention the idea to its readers, in an article called “Rising Oil Prices Raise the Specter Of a Double Dip“. The quote they highlight as a “call out” is
When consumers spend more at the pump, they often cut back on discretionary purchases.
The WSJ shows this graph, linking oil price hikes to recessions:
A Financial Times blog by Gavyn Davies says something very similar:
Each of the last five major downturns in global economic activity has been immediately preceded by a major spike in oil prices. Sometimes (e.g. in the 1970s and in 1990), the surge in oil prices has been due to supply restrictions, triggered by OPEC or by war in the Middle East. Other times (e.g. in 2008), it has been due to rapid growth in the demand for oil.
But in both cases the contractionary effects of higher energy prices have eventually proven too much for the world economy to shrug off.
In this post, I explain what the WSJ and Financial Times articles are missing regarding the connection between oil and the economy. I also explain how the inability of oil prices to rise very far suggests that the downslope may be considerably steeper than most models based only on the Hubbert curve would predict.
Posted by David Murphy on October 25, 2010 - 10:45am in The Oil Drum: Net Energy
Tags: american, american petroleum institute, david murphy, economics, eroi, growth, institute, m. king hubbert, oil, peak oil, petroleum [list all tags]
After the conference, Jane Van Ryan from the American Petroleum Institute (API) asked to interview me for her weekly podcast for the Energy Tomorrow blog. You can listen to the interview by clicking below, or alternatively, I have copied the transcript of the interview below the fold. The interview is 15 minutes long for those who would like to listen.
The Oil Drum recognizes that API (and hence Energy Tomorrow) is funded by the oil and gas industry. But the interview here relates to my research, which is not funded by such interests. I think the interview serves a useful purpose, because it makes my work accessible to a wider audience.