Energy Return and Rate of Return

I was just laboring over a post designed to explain the relationship between energy returned over energy invested and the importance of the *rate* of that return for our expectations about future resources, when I found out that Dr. Tom Konrad had already done this - yay! I think this is a useful and clear way of articulating the problems of future renewables. While I don't agree with all Konrad's conclusions as they are expressed (more on that in a second), I think he makes the relationship between EROEI and Rate of Return very clear and does so in a remarkably useful way. He writes:

The general trend is clear: the energy of the future will have lower EROI than the energy of the past. Low carbon fuels such as natural gas, nuclear, photovoltaics, wind, and biofuels have low EROI compared to high-carbon fuels such as coal and (formerly) oil.

The graph also clearly shows the decline in the EROI over time for oil. Other fossil fuels, such as coal and natural gas, also will have declining EROI over time. This happens because we always exploit the easiest resources first. The biggest coal deposits that are nearest to the surface and nearest to customers will be the first ones we mine. When those are depleted, we move on to the less easy to exploit deposits. The decline will not be linear, and new technology can also bring temporary improvements in EROI, but new technology cannot change the fact that we've already exploited all the easiest to get deposits, and new sources and technologies for extracting fossil fuels often fail to live up to the hype.

While there is room for improvement in renewable energy technologies, the fact remains that fossil fuels allow us to exploit the energy of millions of years of stored sunlight at once. All renewable energy (solar, wind, biomass, geothermal) involves extracting a current energy flux (sunlight, wind, plant growth, or heat from the earth) as it arrives. In essence, fossil fuels are all biofuels, but biofuels from plants that grew and harvested sunlight over millions of years. I don't think that technological improvements can make up for the inherent EROI advantage of the many-millions-to-one time compression conveys to fossil fuels.

Hence, going forward, we are going to have to power our society with a combination of renewable energy and fossil fuels that have EROI no better than the approximately 30:1 potentially available from firewood and wind. Since neither of these two fuels can come close to powering our entire society (firewood because of limited supply, and wind because of its inherent variability.) Also, storable fuels such as natural gas, oil, and biofuels all have either declining EROI below 20 or extremely low EROI to begin with (biofuels). Energy storage is needed to match electricity supply with variable demand, and to power transportation.

And:

Round trip efficiency (RTE) for energy storage technologies is equivalent to EROI for fuels: it is the ratio of the energy you put in to the energy you get out. You can see from the chart, most battery technologies cluster around a 75% RTE. Hence, if you store electricity from an EROI 20 source in a battery to drive your electric vehicle, the electricity that actually comes out of the battery will only have an EROI of 20 times the RTE of the battery, or 15. Furthermore, since batteries decay over time, some of the energy used to create the battery should also be included in the EROI calculation, leading to an overall EROI lower than 15.

The round trip efficiency of hydrogen, when made with electrolyzers and used in a fuel cell, is below 50%, meaning that, barring huge technological breakthroughs, any hoped-for hydrogen economy would have to run with an EROI from energy sources less than half of those shown.

Taking all of this together, I think it's reasonable to assume that any future sustainable economy will run on energy sources with a combined EROI of less than 15, quite possibly much less.

It's Worse than That: The Renewables Hump

All investors know that it matters not just how much money you get back for your investment, but how soon. A 2x return in a couple of months is something to brag about, a 2x return over 30 years is a low-yield bond investment, and probably hasn't even kept up with inflation.

The same is true for EROI, and means that users of EROI who are trying to compare future sources of energy with historic ones are probably taking an overly-optimistic view. For fossil fuels, the time we have to wait between when we invest the energy and when we get the energy back in a form useful to society is fairly short. For instance, most of the energy that goes into mining coal comes in the digging process, perhaps removing a mountaintop and dumping the fill, followed by the actual digging of the coal and shipping it to a coal plant. Massey Energy's 2008 Annual Report [pdf] states that "In 2008... we were able to open 19 new mines, and ten new sections at existing underground mines." This hectic rate of expansion leads me to believe that the time to open a new mine or mine section is at most 2 years, and the energy cycle will be even quicker at existing mines, when the full cycle between when the coal is mined and when it is burnt to produce electricity requires only the mining itself, transport to a coal plant, and perhaps a short period of storage at the plant. Most coal plants only keep a week or two supply of coal on hand.

In contrast, Nuclear and Renewable energy (with the exception of biofuels and biomass) present an entirely different picture. A wind farm can take less than a year to construct, it will take the full farm life of 20 years to produce the 10 to 30 EROI shown in the graph. Solar Photovoltaic's apparent EROI of around 9 looks worse when you consider that a solar panel has a 30 year lifetime. Only a little of the energy in for Nuclear power comes in the form of Nuclear fuel over the life of the plant: most is embodied in the plant itself.

Note, Dr. Konrad's analysis does not include climate change - this is not a criticism of him, but it is worth noting that the implications of his analysis, when applied to a society that can't burn all the high EROEI fossil fuels that are still available to them at reasonable prices, are considerably worse.

I personally would reframe Dr. Konrad's conclusions - I don't so much disagree with them as believe they could be more clearly stated. What he says is that the return on investment of conservation is vastly greater than new energy resources (something that will not be a big surprise to people who have done research on this issue - the famous "negawatts" always win any kind of EROEI calculation, and many of them can be rapidly put into place.

His conclusion, however, that we can continue with the kind of economic growth that most people would like to see while dramatically reducing resource consumption seems unlikely, however In a society where 70% of our economy relies on personal consumption, maintaining a stable economy through a transition to vastly lower energy consumption seems unlikely - it seems to imply that we can reduce the embodied energy in our economic activity without actually reducing economic activity - but while that's demonstrably possible at a very low level - ie, you can recycle more content or otherwise engage in efficiencies - our efficiencies have never led us to use less as a society - instead our resource consumption has always grown. So I remain a skeptic that we can get over the "renewable hump" intact, while finding his reasoning extremely useful.

Definitely worth a read, folks!

Sharon