EROEI Short #3: Price-Estimated EROEI
Posted by jeffvail on August 31, 2007 - 11:05am
We have previously discussed the difficulty in accounting for all relevant energy inputs to a given energy production process. Drawing a boundary for what energy inputs will be accounted small enough to facilitate practical accounting necessarily excludes energy inputs that, I have argued, are quite relevant to the resulting EROEI ratio. Today I will argue that, while certainly imperfect and limited in application, it is possible to use a proxy calculation to resolve this problem: price.
This theory, what I am calling Price-Estimated EROEI, attempts to use the market’s ability to fix price as a representation of a huge mass of amorphous data. As with a complete EROEI calculation, price tends to account for more individual data than we can possibly consciously account for, identify causal relationships, and resolve by some formula. Price in a free-market solves a very similar problem to the accounting problem presented by a full and accurate EROEI calculation. So, at least according to my theory, we can use this price mechanism to create a proxy for EROEI. This methodology seems especially apt for evaluating the EROEI of things such as wind power, solar power, and biofuels.
How? Let’s consider solar photovoltaic panels. We begin with a fundamental assumption (and one that is certainly problematic, but more on that later): the price of the solar PV system is a proxy for the totality of energy used in its production, in terms relative to the price of its product—electricity. Assume that a 2KW solar PV system installed on a residential roof in Phoenix, Arizona, costs $16,000 (grid intertie, no battery). [1] Assume that this system, in Phoenix, will generate 4,000 KW-hours per year. [2] At prevailing Phoenix-area electricity prices of $.10/KW-hour, this is the rough equivalent of $400/year. What is the present value of $400/year for the 40-year life-expectancy of the array? Accepting the Treasury’s inflation adjusted rate of return, an annuity that will make 40 annual payments of $400 costs $8500 today. [3] That gives us an Price-Estimated EROEI of grid-intertie solar PV at 0.53.
Why bother? What does the Price-Estimated EROEI methodology do that a standard EROEI calculation not do? Let’s take a look at just one example—the “energy” component of the labor required to build, transport, and install the PV system. There is an obvious energy prerequisite to this—food, housing, health care, etc. for the individuals involved. If these people aren’t being fed, they certainly won’t be installing PV on your roof. Feeding, housing, etc. all requires energy. But how much? Calculating this energy requirement brings us right back to the devilishly difficult (or impossible) accounting problem discussed in the first installment of this series. But it can’t be ignored if we want to create a realistic EROEI for solar PV, can it? Price acts as an efficient proxy for these labor costs—enough money must be paid to provide for the needs of the people involved. When all the price components of installing the PV system are accounted for, the sum is a representation of the energy required to get that PV system intalled and operation on a residential roof. It has no meaning in Watts or Joules or other traditional means of measure, but it does have meaning in a ratio with the value of the energy produced. That’s Price-Estimated EROEI.
As I mentioned above, there are certainly weaknesses. Subsidies and tax-incentives (to both sides of the price-ratio) can greatly distort the result (especially evident, for example, with corn ethanol or nuclear power). Similarly, while free-markets may be more efficient than command-economies, they are by no means perfectly efficient. Nor are our markets perfectly free. Finally, there are elasticity and fungibility issues. But even with all of those problems, is Price-Estimated EROEI any less accurate than “traditional” EROEI calculations, with their limits on what energy inputs are accounted for and their varying methodologies for calculation? At the end of the day, I submit that Price-Estimated EROEI represents a valuable way of looking at the broader issue of EROEI. If nothing else, it certainly says something if investment in energy source A outperforms (has a higher Price-Estimated EROEI) investment in energy source B.
[1] http://www.solargenerations.com/faqs.html
[2] Id.
[3] http://www.uic.edu/classes/actg/actg500/pfvatutor.htm
See also, http://www.jeffvail.net/2006/11/energy-payback-from-photovoltaics.html
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Jeffs piece on EROI (or EROEI as TODers prefer), alludes to an Energy Theory of Value. Essentially we need something to evaluate scarce resources that are currently measured in infinite resources (dollars). This concept has a rich history over many decades dating back to Howard Scott and the Technocrats who stated that “A dollar may be worth –in buying power – so much today and more or less tomorrow, but a unit of heat is the same in 1900, 1929,1933 or 2000”.
An excellent overview of this topic can be downloaded at:
From Technocracy to Net Energy Analysis: Engineers, Economists and Recurring Energy Theories of Value" (pdf warning)
Here is another good piece on Value Theory by Charlie Hall that explains these concepts.
My advisor, Robert Costanza has also offered empirical evidence for an energy theory of value using a parallel method to the one Jeffs suggests in order to explain relationships between GDP and energy. His phd thesis 25 years ago was actually on this precise topic Embodied Energy and Economic Valuation"
A main problem in the assumptions of EROI analysis is it keeps all inputs constant. For example, if a biofuel has a 3:1 EROI then water, land, labor, soil, etc are all assumed to be equivalent ratios in the input. In reality this is far from the case. This assumption doesnt matter as long as ENERGY is the primary limiting input. The problem the planet faces now is that there are potentially MANY limiting inputs, as we attempt to scale energy production to meet growing human demand.
At some point in the not to distant future, we may run into a shortage of a central good that has no ready substitute. Using net energy analysis, or something similar, will give us a better head start to this event, and more holistic plan alternatives. EROI has many problems. Conventional economics has more.
Unfortunately, concepts like the X theory of value - for example Henry George's land theory of value - also have a rich history of deep problems, inasmuch as individual commodities of whatever sort, even patently finite ones like land or oil, pose individual and idiosyncratic problems. Among other things, these X theories neglect substitution. The unavailability of perfect substitution is not the same as the unavailability of any substitution, a point I think some hard-core doomers tend to miss.
And yet, for the purpose at hand, so what? We call the variation in buying power inflation or deflation, and as long as the variation is not so severe as to convert the dollar into pure noise, we can readily apply a 'deflator'. And for evaluating whether ethanol really produces a return, inflation hardly matters unless it reaches Zimbabwe levels, as many of the key issues seem to play out within a single harvest season.
I can't parse this, can you elaborate just a little? For example, even the Dutch have pretty much stopped making more land, so the notion that anyone with a functioning brain cell would be assuming that there is a 3:1 return of land on land is patently incomprehensible. I suppose they might be assuming 3:1 on something to do with land, but what could that something possibly be?
We'll probably need a whole toolbox, not just a wrench or a voltmeter. However, I'm not fully in sync with the hatred of economics often expressed around here. Like all viewpoints it has intrinsic limits, but at least it examines the world more broadly than through the lens of a single commodity. And even economics can tell us, for example, that if substitutes for oil - a central good for aviation at the moment - become highly problematical, business people will simply need to pick up the phone more often, and physically travel less often. Well, duh.
I mean that when a net energy analysis is undertaken, they dont adjust for other inputs. So the movement from a 3:1 to a 5:1 EROI assumes a concomittant increase in non-energy inputs, like land, labor etc from 3:1 to 5:1 as well. A 3:1, 5:1 20:1 EROI all say nothing about labor, time, land, etc. WHich is why even the low EROI numbers on ethanol are too favorable - there is a huge land input needed for biofuels that is not needed for most conventional fossil fuels, or wind.
.
I donthate economics as its part of my doctorate studies. Conventional economics has been a great allocation mechanism on an 'empty' planet. But by definition, the pursuit of 'utility' through growth,and concomittant allocation mechanisms will not work on a planet full of people and high quality resources already spent - some tweaks are needed as a minimum, and a total overhaul might actually be in order.
Ah. In other words, for the purposes at hand, we can only regard an energy analysis (EROEI, net, or other), as useful if it takes scalability into account. And this remains so if I use price as a proxy for energy, which is an additional viewpoint that may shed light on the matter. Or, to put it another way, if someone manages to put together a magical 'zero point energy' device that extracts one nanowatt-hour per year from the volume of the Earth, we can, for our purposes, disregard it absolutely and utterly. Yup, I'm OK with that.
So we add scalability analysis as a criterion or requirement to examine when refereeing energy-source analysis.
Precisely
Perhaps a start would be to examine the possibility that resource constraints (i.e. a non-'empty' planet) introduce significant correlations between some variables currently treated as uncorrelated in statistical and/or econometric models... ?
YES !!!!!!!
And correlations lead to positive feedback loops.
Thats the problem once you start looking at a finite system driven by a decreasing critical resource you get correlation and thence positive feedback.
Think of the microphone feedback case right before they go into exponential feedback their is a correlation event where the inputs and outputs become shared then boom you go positive feedback. So increasing amounts of correlation implies positive feedback. So if your concerned about correlation your really talking about positive feedback loops forming.
This is why strained complex systems tend to crash too many routes exist for positive feedback as the system becomes highly correlated.
Yes. I totally agree with this but I don't know how to do it. I think the classic example are economists who think the long term price for oil will tend to around $40 per barrel because that was the cost of CTL produced Oil when Oil cost $20 per barrel.
As memmel says above, there are almost certainly feedback effects that cause the general price of all inputs to rise so that $40 CTL Oil in a world where Oil from from the ground costs $20 is unrealistic where Oil from the ground costs $100.
The escalating costs of the Oil Sands projects are another.
Another is here in Australia where we are benefiting from a mining boom which is inducing massive investment in projects all over the place. However the costs of the these projects keep rising because they're driven by the rising costs of the commodities that is inducing the investment in the first place... etc.
How does one go about scaling input costs to projects that will increase supply to meet the demand for the commodities?
I dunno. Seems like a good Ph.D. project to me.
The Henry George link is broken. I was surprised to learn that georgism (which is apparently not so much the idea that land is the fundamental unit of value, as the idea that land ownership, and possibly only land ownership, should be taxed) is apparently quite appreciated by theorists. A bunch of liberal and quite respected economists even sent a public letter to Gorbachev arguing that he should keep land government-owned, in order to implement this idea!
I can't see that land or energy have even poor substitutes. Whatever you want to do, you need a place to do it, right? And a substitute for energy does not make physical sense.
Nate, thanks for posting that link to the Berndt's summary paper about the Technocrats. I studied Georgescue-Roegen, Howard Odum, Bruce Hannon, Herman Daly, Robert Costanza and others in the 1970's and early 1980's, but was not aware that such ideas had been discussed much earlier. It was quite an eye opener to learn that Hubbert was so active before WW II. I guess I'm a Technocrat in the sense that I think the U.S. will need to ration transportation fuel, once Peak Oil kicks in. I thought I had some profound "new" idea, but it's just another of my re-inventions of the wheel, as we engineers say (note oblique reference to Hermann Hesse's "Beneath the Wheel"). Looks like I need to do more reading...
E. Swanson
Thanks - Ive had many similar 'light bulbs' go off in my head in the last few years - thinking Ive stumbled on some new important synthesis, I google it and many of the ideas are 30 years old. And alot of them lead back to Herman Daly or Howard Odum.
The good news is, that if independent thinking minds come to these conclusions on their own (without being taught), it lends robustness to the concepts.
An energy theory of value is true - its just how to make it practical is the problem - as Schlesinger said - we have two modes towards energy - complacency and panic
"Why bother? What does the Price-Estimated EROEI methodology do that a standard EROEI calculation not do?"
Well, what if the price of electricity doubles every 3 years when NG and coal get more expensive? That will change the equation dramatically.
Also, you may be able to untie your PV's from the grid eventually, to run, say, a freezer, which may come in handy with permanent blackouts. This makes price-estimated EROEI irrelevant.
If the price of electricity doubles in three years, are you getting back double the energy when you pay that higher price? Of course you are not, so if you introduce an adjustment for future price changes, you are only fooling yourself.
As far as thinking the EROEI is irrelevant, what if you did this price estimated analysis and it showed you how to pick an alternative that would cost half initially and keep your freezer running after permanent blackouts? Would not the analysis have been relevant? The whole point of EROEI estimates is to help conserve resources by using them in the most wise manner. Just looking at the benefit (keeping your freezer running) without looking at the cost can result in poor choices in using up resources today. And in a world with limited resources, if you remove from the resource base twice what you needed to remove (even if you are willing to pay the money price) then the excess you remove is not available to someone else so your considering EROEI to be irrelevant could deny someone else having a freezer running in the blackout future your anticipate.
I asked the following question a few months ago:
I used this analogy in regard to the Texas oil production peak and decline. From 1972 to 1981, nominal oil prices went up by about 1,000% and the industry responded with the biggest drilling boom in history, which resulted in a decline in production from 3.5 mbpd in 1972 to 2.5 mbpd in 1982.
In other words, how fast did Texas have to drill in order to keep oil production rising? The answer is that it appears to be physically impossible.
We have seen a similar situation in the North Sea, where we have seen a crude oil production decline rate of about 5% per year since 1999 while oil prices have increased at about 18% per year.
IMO, Saudi Arabia--which is currently showing lower crude oil production in response to higher oil prices and increased drilling activity--is at about the same stage of depletion as Texas in the Seventies.
While we can make money finding smaller oil fields, the case histories and mathematical models suggest that we will not be able to increase our aggregate conventional oil production, i.e., the function of oil companies in post-peak regions is to slow the rate of decline.
So, an interesting question would be to determine what energy sources will show increasing flow rates of net energy, with more investment.
BTW, in my opinion, we are looking at years, probably decades, declining aggregate net energy flow rates, until such time that the rate of increase in alternative/non-conventional energy production equals the rate of decline (BTU's per year) in conventional energy production.
Well Uranium Mining looks pretty good.
Rio Tinto plans to double output over the next decade
http://www.iht.com/articles/2007/08/05/business/sxrio.php
BHP-Billiton will triple output from Olympic Dam
http://odx.bhpbilliton.com/expansion/index.asp
Just for a start.
I think this is a valid approach. Money is a medium of exchange and the "value" measured in money, while subject to some imperfection, is the best way going to compare apples and oranges.
One question I have about the present analysis is the future cost of maintaining the system which further reduces the return. If you think you are going to have a system last for 40 years without maintenance, you are ignoring an obvious reality. Even with maintenance, I think 40 years is overly generous, so the paltry EROEI of .53 maybe is closer to .25. Anything less than and EROEI of 1 is an obvious loss; remember that oil is estimated to currently have an EROEI of 6, which translates into a 500% gain.
Since resources are limited, it is critical to direct those remaining resources into the best return. It should be a clue that if a subsidy is needed to justify an action, like building an ethanol plant, or installing solar panels, the action is not justified and the resources are being misdirected.
I agree that I think my .53 figure is conservative. But, as suggested above, there is a fundamental problem of using the price of fossil-fuel generated electricity as a metric, as that will likely dramatically increase in price (or at least scarcity) in the future. This measure also cannot incorporate the likelihood or lack thereof of technological improvements that will make a technology "cheaper" (a big argument from Solar PV advocates). Just my opinion, but the best use of this "price-estimated" methodology is to get a current snapshot comparison between two non-fossil fuel, "renewable" resources. I don't have the numbers because pricing seems so erratic at this point, but I'd be interested in the price-estimated EROEI (using this methodology) between thin-film solar and concentrating solar power.
Also worth noting that variable pricing (value) of electricity at different times of day and year further complicate this... just because, at the moment, most public utilities don't charge a 24/7/365 variable rate for electricity doesn't mean there is no variation...
This is why the big wind farm project in New York has just been scrapped (or about to be scrapped). Because people did an economic analysis as opposed to an energy analysis. The committee concluded that it was just uneconomical to put that many tens of millions into the wind projects, when coal, nat gas and nuclear electric were so cheap. I seriously doubt they did much sensitivity on what happens when electricity prices triple.
Buying wind power as a utility is like buying long maturity bonds as a pension investor in anticipation of interest rates going down. Wind has a HUGE 'duration', and will make the MOST economic sense if energy prices go up dramatically. Yes, if energy prices stay where they are, wind will underperform. But we all know government forecasting records on energy.
(I'll try to find the link on the scrapping of this wind project - if anyone has it - please post)
The question that always bothers me is whether wind will really prove to be sustainable. I think wind turbines need a moderate amount of maintenance. In order to do this maintenance, one needs roads, fairly big equipment, replacement parts, and workers who can drive (or otherwise be transported) to the location. If the replacement parts are currently made overseas, one needs to either be able to continue importing them, or one needs to be able to make replacements here. I don't know about the finer points. Does one also need diagnostic equipment? If so, that has to be manufactured someplace and transported to the place where it is used.
There seem to be so many tie-ins of wind turbines with the current oil industry (and the financial system) that assuming that there is huge duration for wind seems like a moderately big assumption. It really seems to assume that we will be able to maintain technology at our current level. I would feel better if our replacement energy system were smaller and had fewer moving parts - more like solar thermal.
You are correct about wind turbines, and the same can be said for solar etc.
of course the whole discussion here is on will full ignorance of these facts cause they can't make things work otherwise.
"The question that always bothers me is whether wind will really prove to be sustainable. I think wind turbines need a moderate amount of maintenance."
Wind turbines need constant maintenance in fact and the Godzilla turbines , 125m high, will never be able to be replaced in an energy starved economy. Wind farms at best produce at 35 % of their rated output over time and their constant variabilty of output means that thermal backup is essential, thus virtually cancelling out the "benefits" of carbon emmissions savings. Der speigel has some interesting images here :
http://www.spiegel.de/fotostrecke/0,5538,24219,00.html
Article here :
http://www.spiegel.de/international/germany/0,1518,500902,00.html
More here:
http://www.energytribune.com/articles.cfm?aid=509&idli=1
http://www.energytribune.com/articles.cfm?aid=588
Gail,
There may or may not be problems 30 years in the future getting replacement parts. The wind farms tend to be large, at least in Texas with a hundred turbines or more, so I don't anticipate that there will be much of a shortage of labor available locally for maintinence on either wind or solar in commercial size applications.
Engineering should always be prudent, and design needs to incorporate consideration for our descendents. But, if we do nothing we assure the future won't be nice-its a suicide through neglect. It will be their problem to solve along with a bunch of other 21st century problems. But, its their problem, not ours just as we have inherited erosion and deforestation from the past. Does it provide any part of the solution to know which clan leader ordered the last trees cut down on Easter Island?
Bob Ebersole
The price mechanism is the best we have for estimating EROEI. In a perfact world, there would be no subsidies of anything (save perhaps basics for people, such as food, shelter, education).
A few caveats. The price signal does not capture externalities. If we have to maintain a $600 billion a year military to gain access to oilfields, that reality is not captured in the price signal. Nor is environmental damage. Nor vulnerability to future cutoffs of oil.
Lastly, there is the oddity of world oil markets, and that is the short-term inelasticity. A minor surfeit of demand to supply (at least perceived) can shoot prices to the moon. So, investment in liquid feul sources whch replace some portion of demand might actually be worth it, if we can bring demand fossil oil down a notch or two.
And maybe lastly (unless I think of something else), when we engage in production (such as ethanol), we learn things. New and better ways of doing it. The E3 plant is talking about 5-1 EROEI. This is sometimes known as the infant industry argument.
So to wrap it up, free markets and price signals are best, unless the situation calls for taxes (on pollution) and subsidies (for alternative fuels).
Free markets, taxes and subsidies: The American Way!
Maybe not.
Value is in the eye of the beholder. Maybe to the music mad mobs, one crooner on American Idol is far more "valuable" than the other, but as far as Mother Nature is concerned, they are all crazed apes who intake carbohydrates at one end and output noise at the other.
Rejecting measurement in terms of money just because of some failures of economists, seems to me to be a case of throwing the baby out with the dirty bathwater.
Decisions about resource use are complex. Some people would have us all living with a subsistence level use of resources, while others want to party on, living to the hilt. In either case, I think it is prudent to consider alternatives for achieving the same objective and to make choices bases of efficient, rather than wasteful use of resources, if both produce the same end result. Generally, higher EROEI is a better use of resources than lower EROEI since fewer resources are consumed to produce the same result.
Money measurement certainly has a place in evaluating alternatives. I think you will find that results between traditional financial analysis and EROEI accounting give similar indications when considering alternative choices, and certainly both approaches can highlight the weakness of the other, hopefully with the end result of a logic based decision.
All I'm saying is that "price" is set by the mob (a.k.a. the market).
Sometimes the mob is mad rather than being a wisdom driven crowd.
We need to be wary.
Can I interest you in some sell-you-lossic ethanol (a.k.a. corn-shine)?
Henry,
It depends on the subjective value that any person puts on the resources and the product whether the resouces are misdirected or not. Say the corn for ethanol results in a prairie pot hole being plowed up and therefore fewer pintails in a marsh in Texas next winter. Are the ducks more important than the jobs of the people making the ethanol? Seems pretty clear to a guy making ethanol and the field hand farming, and also pretty clear to the ducks and the duck hunters, and the guys making shotguns and shells.
So what's the deciding vote? Whose job is more important? Whose values are more important, the values of a Ducks unlimited hunter, an ecologist vegan, a documentationally challenged farmworker driving a tractor in Iowa? Or even just the poor old duck? And while we're at it, we might as well throw in God's will.
Bob Ebersole
Arthur Robey
I like it. Everything is free. Gold is free. Expences start when you pay someone to extract it. This is the true value of money. It is an equivalent of labour. Period.
The way to magnify labour is to use another scource of energy. Eg. a Dozer to magnify the power of your muscles. This is the conection between energy and the dollar.
No energy and our ability to produce collapses.
This is all an attempt to measure things by physical principles. But when economics and politics are the drivers of a system, almost nothing in that system is purely physical.
Take corn ethanol for example. Let's take an aggressive claim of 1.6 EROI. A good 33% of this energy return is because the coproduct dry distiller grains is given an energy credit, thus reducing the energy input going straight for the ethanol. However, what if everyone was vegetarians, and we had no use for dry distiller grains to feed cattle? Then the EROI, supposedly a physical measure, would shrink by (about) a third.
Similarly, the EROI of sugarcane goes up because we increase the non-energy inputs (labor) compared to US agriculture. With 10 people working on a crop instead of 1, we get a higher energy return on ENERGY invested, but no one does an analysis on energy return on LABOR invested, because labor is not scarce. Again, EROI is more physical a statistic than dollars, but it is still influenced by them
I think people inherently know that net energy analysis is important (except the diehard neoclassical economists). It has so far eluded full time operationalization because its unwieldy and people talk apples and oranges in their EROI discussions. In my opinion, it serves well as a blunt instrument, but cannot carve our way to energy independence with the accuracy of a surgical tool.
Bingo. All viewpoints about these matters are approximations. It cannot be otherwise. Deal with it.
All viewpoints are approximations. The very fact that it is necessary to split hairs to this degree tells me that cornstarch ethanol is overwhelmingly likely a fool's errand. Politicians mostly exist to self-arrogate fame and power, not to carry out the fine words of the Constitution and the Declaration of Independence, nor even to care about the distant future.
That can go down as an understatement of the century. It's the core reason why every "planned economy" ever devised has ultimately been dumped onto the ash heap of history. The dataset of millions or billions of people making decisions, and countless thousands of goods, services, commodities, and even the order of a dozen major sources of energy, plus the uncountably multiplicative interactions between all those items, makes for a rather non-analytical wad. Which inevitably leads us to the approximations of economics, EROEI, and so on.
Well, for the purposes at hand, it is and it isn't. In the absence of large distortions caused by taxes, subsidies, and inadequately regulated monopolies (including government, the granddaddy of all inadequately regulated monopolies), a supposed source of energy that isn't much of a net source simply won't fly. EROEI and price study will give us roughly the same answers. For example, cornstarch ethanol would wither away in a heartbeat without massive subsidies and massive tariff walls. In a sense, we need EROEI and other tools to clarify our understanding by correcting for the effects of these and other distortions, just as we need, in long-term analyses, deflators to correct prices for the effects of inflation.
So perhaps, in this context, a "diehard neoclassical economist" is one who would not need energy analysis on the assumption that distortions do not exist? But I find this hard to parse, because, in ordinary discourse, I tend to think of "diehard neoclassical economists" as railing against distortions caused by excessively meddlesome government, such as corn ethanol subsidies, even though I might also suspect them of not railing enough against inadequately regulated private monopolies. But the very fact that they are railing exposes at least a tacit assumption that distortions exist, and surely, if they exist, they need to be corrected for in any reasonable analysis.
I don't think our takes on the situation are too different.
You are the king of the "blockquote" I might add...
(though that is an approximation)
PaulS,
Your cliche metaphor "ashheap of history" is an old revolutionary Communist metaphor. The very fact that you use it at all, along with the Federal Reserve notes in your pocket which we are discussing as a possible utitilitarian description of EROEI shows that at least some parts of a planned economy do exist and are very long lived, even if they're not effective. The company towns with credit and company script of the sugar plantations in Brazil have analogs going back to ancient Roman plantations at least, and to the Sumerian theocratic city states. So I don't see how you can make such sweeping statements about free market theology.
The question really raised by this post is how well does financial cost of the various subsidies reflect the actual costs? How do we describe the problem better? And, this is a venerable topic on The Oil Drum, if you can have a venerable topic on a site that is 2.5 years or so old in the medium of the internet which is only about 20 years old itself.
A couple of Keyposts ago of Jeffs I really jumped on a guy who was going into high shreik because Jeff was a philosopical anarchist, which may or may not be true, but is irrelevant to the discussion at hand. I really enjoy jeffvails work, it makes me think, and I don't have to agree or disagree with somebody's position to enjoy what they've worked on, thought about and shared. I really think this question is unanswerable. Too many subjective evaluations. But its damn interesting! Bob Ebersole
I wish more people had this attitude.
I have a lot of reservations about price based EROEI calculations (and about looking at solar PV but not considering thin film solar or solar CSP) but I'm always gald Jeff takes the time to explore these ideas.
And there is nothing wrong with a bit of ideological diversity (Jeff probably is a philosophical anarchist but who cares ?).
It is possible to gasify the distiller grains, and use the synthesis gas as a substitute for the natural gas which is used in distillation and in drying the distillers grains. If this is done there is a big win, because the energy of the natural gas will be removed from the denominator of the EROEI calculation. So why wasn't this done in the first generation of refineries? The gasification equipment has substantial capital cost, and it was cheaper to buy natural gas instead. That situation will change as the price of natural gas rises. In spite of the capital cost, gasification is already being implemented in some ethanol refineries. What EROEI would you get with this technology? AFAIK, the only web page which discusses this issue is a dKos diary on 2007-03-05 by somebody with the alias "deb9":
Anybody who is seriously interested in the future EROEI of ethanol refineries should read that dKos diary, because it discusses many other technical options for refineries. My conclusion from reading it is that corn ethanol refineries are likely to achieve EROEI greater than 5 eventually.Perhaps you will say that only about one-third of the distiller's grains are needed for distillation energy, so what should we do with the remaining two-thirds? "deb9" did not discuss this question, but the answer is obvious: add a Fischer-Tropsch unit and produce liquid fuel from the synthesis gas not needed for the boilers! An interesting question here is how much diesel fuel for tractors, harvesters and trucks could be produced by a refinery with this technology? Certainly it could offset yet more of the fossil fuel inputs to the entire corn ethanol process, and thereby raise EROEI even higher.
One calculation I've seen claimed that using all of the U.S. corn production would only replace about 12% of U.S. gasoline consumption. I do not know what assumptions went into this calculation, but your suggestion that using the DDGS as fuel removes them as input to be used as animal feed. It would seem that the same amount of ethanol would result whether DDGS or NG were used at the distillery, thus the substitution of DDGS for NG would result in a major cutback in meat production. Don't we need food more than fuel? Or, must we all become vegans so some rich guys can drive Hummers?
E. Swanson
Black_Dog on September 1, 2007 - 8:57am said:
My comment was a response to a comment by Nate Hagens on August 31, 2007 - 10:19am, in which he said that use of DDGS for cattle feed would not work if we were all vegetarians. I pointed out that the distiller's grain solids are a potential fuel, not just food for animals. I also pointed out that gasification technology would enable the grain solids to be converted to liquid fuels, which could be used for agricultural machinery. That is one path for the corn ethanol industry to pursue, but it is not the only path for evolution of the technology!For example, it is likely that the 12% number you quote assumes that only the corn starch is used to produce ethanol. But already various ethanol refineries are adding cellulosic units alongside their conventional fermentation plus distillation units, so that they can produce ethanol from other parts of the corn plant, such as the stover.
Furthermore, there is yet another trick that is being pursued: the idea of a semi-closed cycle combination of an ethanol refinery with a cattle feedlot. The idea is to feed the distiller's grain solids from a refinery to the cattle in an immediately adjacent feedlot. Because the grain solids are eaten soon after they are produced, there is no need to dry them. Skipping the drying step saves energy, and boosts the EROEI of the refinery! The feedlot captures the manure, and composts it, and captures the methane which is emitted. The methane is then substituted for (much of? most of? almost all of?) the natural gas that would otherwise be used in the refinery. The result is again a boost in the EROEI. Although no official estimates of EROEI have been published, one estimate posted to TOD by Robert Rapier from a spreadsheet calculation was that the combined cycle scheme can probably achieve EROEI of order 4. See E3 Biofuels; the press release claims that their Mead,NE facility is able to completely replace natural gas fuel with the methane from 28000 cows.
The market will determine what mixture of all these technologies we use. Probably it will be some of each.
If everyone were vegetarians, we probably wouldn't even be having this problem. The resources wasted in meat production are probably greater than the potential contributions from biofuels.
I don't think this is possible. Humans are very poor converters of energy and non-efficent workers. Logically, mechanically cultivated cane should require less, not more energy.
Now, you may be right that only one of those inputs (mechanization) is included in the typical EROEI calculation, but that is fairly trivial.
The EROEI gap between sugar cane and corn does not depend on the energy input in the harvesting process alone. If Brazil or Thailand used mechanical harvesting, they could still produce EROEI positive ethanol. Likewise, if the US tried to harvest corn by hand, they would still not improve the figures much.
http://science.reddit.com/info/2kjxe/comments
our authors appreciate your efforts to help them spread their pieces around the internets. :)
I see the problem slightly differently with respect to money, energy and costs.
I always use houses as an example. Building a well insulated passive solar house with incorporated in ground geothermal heating, solar cell array and high efficiency appliances always costs much more up front than a conventional stick house. Almost no one can pencil out how all these new fangled approaches would pay for themselves at todays prices. And it has been this way for 30 years.
However people that actually do build these houses find that the operating costs in the future are always less than predicted in future money. The investment becomes more valuable over time, not less. Conversely conventional houses often cost more to operate as all energy costs go up and incomes stay flat. Attempts to upgrade to more energy efficiency always costs much more than the original estimate making conventional houses less valuable over time compared to a new passive solar or equivalent.
So there is this constant dilemma between higher capital investments now vs unknown operating costs (fixed cost? I don't think so) in the future. My experience, with nothing to back it up says that current economic theory underestimates the value of capital costs and overestimates the fixed part of the fixed operating costs.
This inability to correctly link costs with energy efficiency is the problem. The efficient use of energy is not in the equation - only the cost of energy and that cost is always in todays dollars. In my opinion it is not just the cost of energy that should be included in EROI but also the total amount required.
Including the total amount allows substitution of different forms (passive solar, coal, wind electric, NG, biomass burning, what have you) to achieve the same end goal. In my opinion just economic EROI assumes too much with respect to the cost of different forms of energy when looking into the future.
NC: IMO, there is a societal component to all this. Planning for the future well being of the society is inherently a left of centre concept. It is not just a coincidence that countries like Sweden, Germany and France are openly working on dealing with oil depletion and its consequences. IMO, the USA circa 2007 is no longer capable of addressing oil depletion and its impacts. Any superficial attempts to deal with the issue will actually be poorly disguised programs to transfer taxpayer wealth to the connected. IMO, there is a bit of a fantasy/ wishful thinking trip that occurs on TOD whereby many posters pretend that the USA is still functioning as a society in which the well being of the society as a whole is important. IMO, the societal changes in the USA over the last 25-30 years whereby the government has come under increasing control of the elite are understated and will greatly impede the transition to a sustainable economic model. MexAmerica is the future, not a European economic model.
BrianT,
I hear what you say and don't discount the validity of most of that point of view. It bothers me that most citizens have come to value money above just about everything else. Having said that I must now be part of the connected as Peak Oil activated me enough to volunteer for (and have been appointed to) a position on my city government.:-)
I can assure you that I am not the only voice in my community who is actively planning on how to use mass transit, green space, alternative energy, etc. to reduce energy and be more sustainable. The makeup of policy makers is no longer of one viewpoint about what progress is - honest debate is taking place that leads to true problem solving. Things don't change over night but there is more civic work in this direction, at the local level, than I have seen in 30 years.
NC: You're right about concern at the local level. I think I overstated the case- focusing too much on the federal government.
Didn't Thomas Jefferson write some Declaration or other about our responsibilities when this happens?
"Gentlemen, we shall all hang together, or surely, we will all hang separately." -Ben Franklin?
auntiegrav
The oligarchy that rules Latin America is pretty clearly derived from the Hapsburg oligarchy that ruled most of Europe before the First World War, IMHO.It was a pretty clear improvement over the native oligarchy who favored ripping peoples hearts out with obsidian knives (Bernal Diaz, The Conquest of Mexico). But there seems quite a bit of evidence that this is the human condition.
Its also useful to remember that Thomas Jefferson was a slave owner-about 100 humans-so all he was complaining about was which oligarchy received the benefits, favoring his own group.
The only thing that has relieved a large part of humanity in the US from slavery has been the exploitation of fossil energy to do drudgery like plowing fields and picking fiber crops. And what have we done with this freedom? Who did you say won American Idol? Its not very pretty.
Bob Ebersole
The Aztecs did not represent the behavior of all of Latin America. Most historians, I believe, would aver that Cortes and the Pizarro brothers caused a net negative effect on the native populations of Latin America. That effect is still in evidence today.
By the way, the English translation of Bernal Diaz's book is titled "The Conquest of New Spain" not "Mexico". There is a definitive book by that title. The author is William H. Prescott. He wrote a similar book about Peru. Both better than any fiction.
jjhman, you're right those books are better than science fiction. It must have been like being transported to an alien world to walk across the causeway into Tenochtilan. But, many dominant civilisations in Mexico had human sacrifice. Check out a translation of the Popul Vuh, the sacred book of the Mayans.
The particular slur used above said the US was being turned into MexAmerica, so I related it to the dominant culture of the central valley of Mexico and took the liberty of a little generalisation myself, but I think still a lot more accurate.
Dragging in a founding father to a conversation like this is about like dragging in Adolph Hitler in that its an appeal to emotion and authority that may not be very accurate and is suspect almost immediately. It was the leisure granted Jefferson from his slave plantation that gave him time to be a philosopher king, and meanwhile his slaves lead hard working lives that had a lot more poor food and clothing than he had. Its been the slavery of our machines that gave many of us the wealth to read and think and the wealth of free education, the use of that extra energy return that we are free to use and enjoy or just plain waste.
Bob Ebersole
Housing costs and the way our U.S. finance system has evolved are very much part of the overall problem. Back in the good old days when people got jobs with companies and stayed with them until retirement, one would purchase a house with a 30 year fixed rate mortgage. The amount of the loan would be limited such that the payment would be some fixed amount of the borrower's income, say 40%. That process resulted in the demand for houses that had the lowest possible cost per square foot and the typical spec house builder did not bother with all the little details that go into building for energy efficient space. The Building Codes (then and now) set minimum requirements for energy efficiency, such as insulation standards, but there was little incentive for adding extra insulation. The same applies to the HVAC and hot water systems selected, again, the least expensive devices were installed.
I would guess that the latest bubble in housing has only led to more of the same, especially as the houses are not built by individuals, but crews of specialists that are rewarded for doing the work as quickly as possible. The poor construction that has resulted makes the finished house even less efficient than what one would calculate from the ideal application of the Codes.
I see the problem as another example of the financial mess we've been trapped with. The Banks and Mortgage companies don't consider the fraction of one's income which would be spent on energy in today's world and they have no clue about future energy prices or availability of fossil fuels after Peak Oil. Of course, they ignore the energy cost of the transportation on the buyer's budget as well. So, we've tended to build the suburban nightmare that Kunstler's written about, which will become the slums of the future, much like the tract houses of Southern California, which have been taken over by drug gangs with guns.
E. Swanson
This effort at reduction of a very hard problem reminds me of my own desire to make rational choice and fear of going into a losing proposition. I want to be a part of the solution to sustainability, not adding to the problem, not supporting things like ethanol if it can't be produced with an honest profit.
And I'm mostly wondering how "debt" comes into the picture? I mean my intuition says it should be somehow. I mean it's easy to be given $100 million dollar "windfall" and build a wind farm, and take out whatever income can be generated, and reinvest any profits into more wind power! It's another to NEED a certain level of income to cover debt interest.
A $16k "investment" is a different beast depending on whether you paid cash or are borrowing it!
What's the "EROEI" of borrowing money in an unsustainable economy? I must admit a debt economy always confuses me. Nature doesn't have negatives - a farmer can't borrow from next year's yields, only last year's. (or last 100 million years I suppose by fossil fuels!)
Fossil fuels need a "banker" model perhaps. Rather than SELLING oil at $70/bbl, oil could be valued at an honest biomass equivalent of say $700/bbl, and then "lent" for perhaps $1/bbl/month interest rate. The interest stops being paid when the interest and principle is all paid. How many barrels would you like today?
Well, a fun thought, demonstrating the silliness of our economy - consumers focusing on budgeting monthly payment rather than debt lifetime costs...
You have picked an example that illustrates problems with your approach. Price does not reflect net energy, it reflects supply and demand. The supply of silicon is constricted now owing to a transition in the solar power industry from using scrap silicon from chip fabrication to becoming the dominant user of purified silicon. You anticipate generating 4000 kWh/year or 11 kWh/day, with your example system. With a resource of 6 kWh/m^2/day in Phoenix, you need a 1.8 kWp system to do this. You are thus estimating an $8.70/Wp system. But, the cost of fabrication for panels is as low as $1.19/Watt for thin film and is likely to be close to this for silicon with a ramped up raw material supply (2009). So, what you are seeing in price is the the temporary supply crunch, the margins from which are being reinvested to take care of the problem. Your method would run into similar problems if you looked at gasoline prices during the oil shocks.
For a technology that is in an early investment phase, your method is going to give misleading results since you can only hope to get an idea about relative price once deployment is relatively wide spread and then it is too late to be able to make the decisions you are contemplating. Your method will nix any new technology even if it is superior simply owing to startup costs. I suggest you look at the entire time a resource is used.
Further, in your method, you assume that $0.10/kWh electricity has an EROEI of one which is unlikely to be the case. In Phoenix we offer a rate of $0.1061/kWh to APS customers for solar power and a rate of $0.083/kWh to SRP customers right across the street. The systems have the same EROEI because the solar resource is the same but your method would find a difference just because our pricing scheme is to not have people pay more for solar than they pay for electicity now. Your method is sensitive to market conditions but not to physics in this case. Since we offer systems down to $0.07/kWh, you method, taking our base price, would say that the solar EROEI is higher than whatever APS or SRP use in their energy mix. This is likely true, but not necessarily for the 25 years of fixed rate we offer, you'd need to count the aftermarket. Yet, this is a much fairer comparison since it is electric rate to electric rate. Still, you would want to look at the possibility that utility electric rates will rise while ours won't.
I would say that if your price test is to have any use, it must be applied historically after markets, including finance markets, have sorted things out, and even then one must apply it carefully by picking periods of high supply and low demand so that production costs set price.
Chris
You offer some excellent information, but I think it is, itself, quite skewed. For example, the 6 KWh/M^2/Day in Phoenix says quite clearly on the chart that it is total radiation. It would take a PV system with 100% efficiency to capture that, and PV is not even close to this--well under 50% at present. That alone cuts your claimed EROEI more than in half.
If the price of thin film is $1.19/W, then that's great. I'll believe it when it can be purchased by the consumer at that price, not claimed in some PV company's promotional website. The next installment in this EROEI series will address "bootstrap-EROEI," but suffice to say that your assumption that the dollar cost of silicon will decrease may be predicated on current, not future post-decline, world oil production, etc.
That said, I hope you're right that PV becomes cheap, scalable, and implemented. And I certainly agree that changing market conditions throw a wrench in the price-estimated methodology. The problem with assuming that we know which direction the market conditions will change is that if we knew that, we'd all be rich... There are some pretty safe bets, to be sure, but I think for present comparison, using the current market prices is a valuable means of overcoming the difficulty of actually counting all the energy inputs...
The efficiency of the array does not come into the calculation. Peak insolation for a tilted panel is 1 kW/m^2 so in Phoenix you have 6 hours equivilent of that per day on average. So, to get the $/Watt of you example we just get the peak wattage from your production estimate and divide that into the price. Systems are usually specified in peak wattage.
The price of thin film is over $2/Watt but the cost to produce it is $1.19/Watt. The markup goes to building more fabrication capacity. This means greater future volume and so greater ultimate profits. Most solar manufactures are refusing to be cash positive right now. If they are public, you can ride their stock, but don't expect a dividend.
I doubt oil prices impinge on solar power fabrication much since it uses electricity and its growth can keep up with a shift in transportation off of oil given automaker retooling times.
Chris
I think your 1 kW/m^2 in Phoenix represents the direct beam insolation. If the flat panel is fixed to a roof at the proper angle, that value would apply only at local solar noon. To intercept that same amount of insolation for 6 hours, one would need a tracking mechanism, which would require more capital investment and maintenance and would also require the spacing of the panels to allow for shadowing, thus fewer panels could be installed per unit roof area. Then too, the power produced would be only a fraction of that 1 kW/m^2, perhaps 0.2 kW/m^2 for an efficient PV array.
If one wanted to produce 10 kWhr/day with such a system, assuming 6 hours of available insolation, the PV array would need to be able to produce 1.67 kW, which would require 8.33 m^2 in area. And to produce that, the roof area with a tracking system might be 3 times larger, or 25 m^2. If the efficiency is only 0.15, the required area becomes larger. Without tracking, the area becomes larger still, as the insolation is reduced as the cosine of the solar incidence angle at the surface of the panels.
Sorry, efficiency DOES COUNT.
E. Swanson
In this calculation it does not. You are correct that there is a difference between tracking and non-tracking systems. Near Phoenix it is between 6.5 and 7 kWh/m^2/day for tracking concetrators. The lower number earlier is for latitude tilt panels. The reason efficiency does not come in is that m^2's divide out. We care about the power produced, and cost per watt not about how much of the roof it takes up. At the price Jeff is quoting, he's getting premium 20% efficeint panels at close to $5/Watt. It is a small system so it will fit.
You can get amorphous silicon panels for $3/Watt retail. These are less efficeint but for the small system Jeff envisions they might still fit.
Chris
It's still not that simple. The cost per kWhr is not computed the way you have done it, as the resource on any day is not the same as that of the annual value. And, concentrating systems are more complex, especially the 2-axis kind that have been used to give the best overall conversion efficiency, but cost more per kW.
You present annual values, then jump to a conversion in the form of watts x hours. One would need to do the same calculation for monthly data, at least. For example, for the case with latitude tilt, the June data shows about 7.0-7.5 kWh/m^2/day, while the December map shows roughly 4.0-4.5 kWh/m^2/day. The 2 axis tracking case shows June at 8.5-9.0 and December at 5.0-5.9 kWh/m^2/day. Tracking systems don't work as well as flat plate PV under cloudy conditions either.
The overall cost of a kWh of electricity is not just that of the average, because the system peak output would be that during summer. Peak output occurs at local solar noon, which will be different than the annually averaged kWh/m^2. If one really needs 11 kWh/day every day of the year, then the system would be sized for the minimum insolation in winter, thus the cost in $/kWhr actually produced will be higher than the amount your calculation indicates. Conversely, if one needs 11 kWh/day in summer, but 5 kWh/day in December, then a much smaller system can be installed to meet the demand and the overall cost of the power provided is less.
Of course, roof area is important if you don't have enough roof to support the resulting system...
E. Swanson
The system that was used as an example was grid tied in Phoenix so that will come in under net metering (only recently for APS). Thus, the annual lattitude tilt figure, which I think is an average of data from about three years, is the value to use since this is how the system will be sized. Off grid systems need to consider seasonal variations in addition to periods oc cloud cover, as you note. But net metered systems just need to be scaled to annual use. Actually, with time-of-use rates there can be a sweet spot where your system produces less than your annual use but your electic bill is still zero, so you want to consider the rate structure as well.
BTW, I cited you on rationing here.
Chris
Can I buy that $1/watt thin-film panel today? I didn't think so. Believe it when I see it. This is another case of "receding horizons". I do not mean to disparage the work done to improve PV technology, but let's not jump the gun. In any case, the rough EROI "calculation" was for present tech PV, and does not apply to future tech if any such does show up.
Also, the manufacturing cost (in money and energy) of the panels is only the start. For an installed system, the costs of transportation, installation, cables, inverters, etc ends up being the majority of the cost. Which was part of Jeff's article: there is embedded energy in labor and all the rest.
Finally, I wouldn't conclude anything from the prices "offered" by Citizen-RE, since that offer is, so far, vaporware. (I wish it were otherwise.)
You do buy that thin film today when you shop at Walmart, do business with FedEx, or drink a coke. Those guys have the clout to buy with only a 100% markup and so they use the advantage of the lower electricity price they get to compete with other businesses. Now, if you are ready to buy in volume too, say sign a contract for 20 80kW systems, you can get the same deal. If you want First Solar you might have to wait for a year or two. I think a lot of their production is bespoken. If you won't buy in volume, you'll have to take the 3-400% markup that residential buyers get.
At that markup, the panels are still the majority the price with inverters at about $1/Watt being the next big chunk.
I agree that CR, with only one installation so far, has mainly a wait list.
Chris
Third Generation Copper Indium Gallium Diselenide thin film company Nanosolar looks incredibly promising.
See this interview.
Apparently they're still on track for volume production this year, are forecasting production costs of 60 cents per peak watt and aim for a wholesale price of $1 per peak watt.
That is a good interview, thanks! He's still not giving away
his efficiency though. The comments about chinese panels kind of fit with what I've heard too, but I doubt they'll stay in that mode.
I don't agree that the industry is closed now though he has a point that it is getting close. Places where there is room to enter include concentrator design and efficeincy breakthroughs. Distribution methods are also an open area. I would also not be too surprised if processes get licensed and replicated. Evergreen, for example, does not have the North American growth plans that it might.
Chris
While it is true that there are a variety of ways that the initial capital investment can be spread out over the operating life of an industrial project and a variety of ways that the cumulative revenues from future production can be discounted into so-called 'present value', it's been my experience that there is a built-in bias against high-capital-investment/low-operating-cost alternatives. And I think this bias is inherent in our current business culture, tax structure, and general short-term thinking. One can see this in the current rage for outsourcing, where a company would rather pay a contractor or consultant several multiples of what it would have to pay an equivalent permanent employee so as to create the illusion that overhead has been reduced.
This bias works to the detriment of energy systems that have low operating costs but which require high capital investment, such as wind farms and solar energy systems. In conventional economic analyses, such systems often come out on the losing end because the assumptions tend to include dubious and overly optimistic projections of future fossil fuel prices.
Therefore, I have come to the conclusion that there is something fundamentally flawed with the way we have conceptualized such economic principles as depreciation, present value, the time-value of money, etc. However, I am not smart enough to know how to fix it.
I am highly doubtful that the 'free market' will ever come close to causing a massive changeover to renewables. For example, it is highly doubtful that such mega projects such as the TVA system or say Hoover Dam would ever have been built if they had to be justified on the basis of conventional economic analysis. As much as massive government projects are anathma to me, I see little hope of anything short of a massive government effort on the scale of the TVA system being capable of causing a rapid and major switchover from fossil fuels.
But given the current political situtation in the US, I doubt that such an effort will ever take place. So, it looks like we will continue implementing our only real energy policy, which is to secure energy sources by attempting to militarily dominate the Middle East. Ergo, a perpetual state of (at best) low-level war.
Our future discount rate is too high. Nate Hagens has presented some wonderful material on "how steeply we value the present over the future, a trait with ancient origins."
I suspect that temporal discount rates are themselves variable, and that the ca. 2007 rates embodied in the aggregate of true decision makers / power brokers in our economic world are far steeper than historic rates.
As far as fixing it, don't bother. It will fix itself. Just not in a nice way.
The problem is not in the theory.
The problem is in the cash-out option.
A bad-actor can cash out with a large profit and walk away to leave someone else "holding the bag".
That's the way it is done all the time. And it can be made to appear "legal" through manipulation of the system.
Think about all the people who invested in Enron and lost lifetimes of built up wealth. Somewhere in the middle of the scam, a mid-level manager cashed his stock and ran away with the booty. Ken Lay got caught hanging on because he was probably an unsuspecting simpleton. But somewhere in the mix of things, there were a bunch of sharks who "profited" hugely (at other people's expense, OPE) and then moved on to make their next "killing" under some other corporate umbrella.
It's not about present-day value of money. It's about grabbing the cash and making a run for it without getting caught. It's about getting off the sinking ship before the other rats even realize the hull is starting to rot away.
Ken Lay was not an unsuspecting simpleton, he had a doctorate in economics and had mostly cashed out, sticking Jeff Skillings with the blame, although Skillings also richly deserved plenty.
Watch the money. Ken and Linda were given a year by GWB to get their cash out of the country, as a reward for funding the Florida recount suppression. When Linda Lay turns up with the missing billion, we'll know more for sure, IMHO. Bob Ebersole
Arkansawyer
That's right.
And I hate convenient deaths that prevent/alter justice.
Most of us have "degrees".
That's not the way it works.
Having a degree doesn't actually make us smarter than the next humanoid, it merely fools us into (convinces us to) believing we are superior. "Economics" is the worst possible degree to hold on its own for understanding how the world is put together. It is a religious cult, not a science.
Ken was probably so deep into the religion he could not see the fraud even though it was flashed in front of his eyes time and again. Skillings and Fastow were probably so caught up by the greed they did not realize it was time to jump ship. I betchya a bunch of rats whose names we will never know did jump ship. They didn't take a king's ransom with them. They took a joker's. They knew about the law of pigs. The fattest pigs get taken to the slaughter.
Step back, I'm sorry, Ken Lay was a no good. Before he built Enron, he worked for Transco gas pipeline in Houston. He came from Florida Gas. While he was at Transco he was the primary archetect of their investment in coal bed methane in the early 80's, and that collapse is what led Transco nearly into bankruptcy and forced their sell out to Williams Brothers.
He, as a little personal aside, brought his wife Linda over from Florida Gas and kept her as his mistress while he divorced his first wife. A real Christian-just ask him
He then put Enron together by buying, very well leveraged , Houston Natural Gas and then Florida Gas. He was not a simpleton. He also prided himself on telling everyone what a great American he was and hiring graduates of the Service academies. He was very careful in his strategic political contributions, he was the guy who appointed GWB's first energy secretary, key man on the energy task force of Cheney's, got deregulaation of energy through several state legislatures,had a US Senator's wife on the board so that her husband, Phil Graham would push deregulation at a national level and had first rate public relations to convince you he was an innocent simpleton.Innocent simpletons with good christian values don't put an operation the size of Enron together, really, it just doesn't compute. Ken Lay was very smart, extremely focused and hard working and never relaxed in this. he just also happened to be a corrupt sociopath as well as a Kansas farmer's son.
I grew up in Houston and have been around the oil patch for 30 years, I always thought he was fascinating and also the whole milieu of the pipeline business, although I've never been in it.In many ways its like the goose that laid the golden egg. Jerome covered the basics of getting a pipleline built a couple of days ago.
Once its built, it requires very little maintainence, maybe an engineer for new extensions, a couple of salesmen for new accounts and to purchase new gas from operators, a few data entry clerks and a CPA to handle payments, and a few guys to inspect the lines. The cash flow is phenominal, and the pipeline makes $0.50 or a dollar a thousand cubic feet as regular as clockwork- then the trouble starts. The guys with MBA's get in there and start creating futures and odd investment products, and the trouble begins, I guess they can't stand how easy the basic business is and just want to manipulate the cash flow instead of just going off to play golf every afternoon, and they all seem to get in trouble Bob Ebersole
Bob,
Thanks for sharing that.
The book I read (Conspiracy of Fools) painted Ken Lay as the hard working Kansas farmer's son who got done in by sharpies like Skilling and Fastow.
I was once in an MBA program but dropped out because I couldn't stand the disconnect from reality of the courses. It was all about writing mathematical equations telling you how much money you were going to make from one annuity plan versus another (at least from the initial courses). Also I thought my classmates were maroons. They are probably all rich maroons by now and I'm the dumb shmuck who didn't understand how to play the system. Oh well. I was young and naive back then. Thought engineering was the ticket to success in our disconnected society.
The MBA-Ken-Lays of this world are still out there; running loose in our civilization, selling Moa heads, junk bonds and subprime security instruments.
The invention that will probably go down in history as the greatest lubricator for MBA-style fraud is the computerized spreadsheet. Alvin Toffler was right in warning us about the instruments of deceit.
Jeffvail,
I read a great little history of a massive government project that had spectacular dividends for society the night before last. Was a fifty two page history of the "Big Inch" and "Little Inch" pipelines that made the real difference in winning the Second World War on the European front. They're available as a PDF on a file from culturalresource.com. I got the address by Yahoo.com searching under "Big Inch Pipeline, oil and I'd put it up but am having a hard time making it link.
Before the Second World War the US produced 60% of the world oil supply, and Germany was embargoed about 1940. This was the reason they invaded the Soviet Union and lost a million soldiers on the drive to Baku through Stalingrad, plus all the tanks in North Africa trying to secure the Libyian oil fields. Germany sent five submarines to the Atlantic and Gulf Coasts of the US, and they sunk over 70 tankers, a third of the tanker fleet. There were no pipelines linking Texas and the East Coast, and railroad tank cars could only carry about 10% of the needed oil and gasoline to the refineries in the East. The U.S. rationed gasoline and the Secretary of the Interior, Harold Ickes asked the oil business to step up in 1942. They set up a non profit, headed by Alton Jones , President of City Service Oil Company, and began to build. The major oil companies and large independents tore up their pipelines for pipe and valves and in a year built the pipeline for a cost to the USA of $70 million. I remember being taught about it in my eigth grade Texas History class, but being only semi-attentive, too many cute girls.
The Allies could not invade at Sicily and Normandy until they had fuel, and the convoys could take material and men to Europe with tankers full of gasoline and diesel much quicker than they could have if they had to from the Gulf Coast. The men who did this were true patriots and heroes. I know I rattle a few cages when I call the oilmen heroes, but they were, and they didn't just brag and wave flags, these men did what needed to be done out of love of country and of society. There is no group of men who are more right wing than Texas oil men, I know, I grew up in the oil patch in Houston. I mentioned Mr. Alton Jones of City Service, he was the grandfather of a high school friend, and I never knew what he'd done for this country before Tuesday night. He didn't build the pipeline for glory.
Jeffvail, that's my problem with the doomers in this crowd. We do have that kind of altruism as a legacy. People will even work against their best interest, like the oil companies destroying their pipelines. We do lack leadership in Washington-and I mean both parties. Peak oil and energy supply is not a right or left problem. Changing to sustainable energy is something a lot of people are doing because its right. Most people try to to be good, to do the right thing. and that can't be quantified as EROEI.
Bob Ebersole, Hippy. All we need is Love!
Sorry, I can't buy into the Price-Estimated EROEI. "Money" is an intellectual construct and, therefore, has no defined physical paramenters. I'll stick to jolues in versus joules out even if this leads to tedious arguements as to what should be included.
Todd - there needs to by a hybrid, otherwise no decisions will be made. Otherwise a man with a pile of coal will get the same amount as a woman with the same amount of BTUs in neatly stacked containers of gasoline, ready to be carried off.
If 6.5 billion of mankind just fell onto the planet in all of our naked glory, we could start from scratch on our BTU endowments, but as it stands there is a large fixed infrastructure which requires certain cocktails of energy and other stuff. "dollars' as you rightly say, are primarily an abstraction not based on anything physical, but we are still a long way from E certificates, and even those would be 'money' representing or backed by energy. Would be very tough to carry around ones oil bank account with us...A real(ist) rats nest we are in....
Nate,
This whole Energy-Price relationship of EROEI would be rejected by any college senior seminar on the basis that ZERO stastical supporting data has been presented and a ZERO statistical relationship has been proven.
What is being posited is an unproven theory. While people may seriously disagree with Pimental, his analyses are still the "gold standard" of EROEI.
Now, if anyone wants to dispute Pimental using a shortcut like "price" then it is imcumbent upon them to demonstrate a statistical correlation that verifies their theory.
It isn't that big a deal to take Pimental's calculations and "reprice" them to "prove" this new EROEI price theory is valid. Without that is is more BS.
Todd
I didnt disagree with the rest of your post - and I am not convinced of price-EROEI - but I dont think Jeff is either - he is just putting it out for discussion.
My only contention with your previous comment was that joules dont equal joules.
And how could I say anything negative about D Pimentel when he just accepted one of my papers for a chapter in his book...;)
(but by gold standard, I think you mean widest boundaries)
Nate,
That's really GREAT that he accepted your contribution. I've talked at pesticide applicator continuing education seminars for years and I have to admit it gives my a pat on the back each time I'm asked...but this isn't anything like your's. I'm often the guy who does the controversial topics like endocrine disruptors or GMO's.
I obviously meant widest boundries. I've looked at his work and there are times I shake my head - why did he allocate so much to....
I guess we either are looking at this differently or have different definitions regarding joules and EROEI. It's late so maybe another thread is the place to discuss it.
Todd
We need to define money--
1. As a medium of exchange (no problems here, humans have been doing this fro a long time)
2. A a commodity (a little more dicey, but in the end, you can still make wallpaper or jewelry out of it)
3. As a virtual depository of wealth-- This is what has created the madness we are in, and was one of those turns of evolutionary significance. Humans just lost touch with thermodynamics, and consume the Blue Pill everyday, and want nothing to do with reality, nor do they want off the path. The suicide economy was created.
Joules-to-Joules is great. However, as Nate pointed out, it does nothing to capture the quality, portability, density, etc. of those joules. Additionally, it runs into exactly the problem that this series started off with: you can't possibly count for every joule that goes into exploiting an energy resource because it leads to an infinite regression. Using the market, and money, as a proxy is one way of circumventing that problem--perhaps not the best, but that's one aim of this discussion...
We can't possibly account for every factor affecting any system we analyze. We know that increasingly accurate measurements change the something we attempt to measure. Heisenberg showed there was a limit to what could be measured and known. Chaos and complexity showed long-term predictions of arbitrary accuracy were doomed because of sensitivity of initial conditions, or "the butterfly effect".
Life, and the very reality we exist in, is the result of those complex, unknowable, inestimable processes and all of our scientific machinations will always be an approximation of that reality.
Regarding the criticisms and complaints of EROEI: Correct, you cannot precisely identify and quantify all the relevant factors. Correct, nonlinear systemic analysis leads to an infinite regression.
So three questions now need to be answered:
Yes?
And?
So what?
Arkansawyer
That's right.
Inflation ends when the payment is measured in BTU's.
The Toyota Prius is one item where price gives an indication of embedded energy. After looking at the high price, the availability of lower-priced relatively high-mileage alternatives, and the little I was going to drive the car, I decided it didn't make sense for me.
I am sure some readers have done some more specific calculations related to the Prius.
Here is a video on "Greensumption" done by Jerry Mander, and others, that uses the Prius (in a negative way) as an example.
Its a tad farcical, but does show the fallacy of everyone driving PHEVs - if so we still need all the energy to mine the nickel, steel, carbon what have you. We still need the infrastructure for roads, lighting etc. Without saying it explicitly, its another example of needing to pay attention to wide boundary systems. The tragedy of the capitalism commons.
Not really. Toyota says that materials cost less mostly because of the smaller engine but their tooling costs more. They expect to charge the same for the Pirius and what ever non-hybid they consider comparable in a couple of years. The time to compare is when both have been in production for the same time with the same volume of production. But, even then are you really comparing energy? If GM bites the bullet and licenses Toyota's IP will Toyota apply their royalty to discounting the Prius to retain market share?
It's not so easy I think.
Chris
Jeff,
I am a little baffled as to what you are going after here.
The facts (as you also state them)
1. EROEI calculations have accuracy issues and results can be contested
2. Full EROEI is time consuming and expensive, not to say that it requires special expertise to do it correctly
So, you take a price proxy approach to EROEI, in order to try and cut down difficulty, time consumed and expertise required.
However, now comes the big issue.
Is it anywhere near the same accuracy as full EROEI?
Again, you correctly state the facts:
1. Price externalities are left out, cannot be allocated even roughly
2. Price externalities may not have an even distribution from one price to another (may throw of calculations completely off the base)
3. Brains are left out, all abstraction errors (known-knowns, known-unknowns and unknown-unknowns as Rumsfeld would have said) from price proxification cannot be seen through the abstraction layer.
My take:
It needs to be proven. Somebody needs to do price EROEIs for things that we already know full physical EROEIs for. Hopefully the most accurate ones and the least contested.
Then we compare the results.
This is how EIO-LCA has been tested and yes, in certain circumstances, when you used a well defined price source, EIO-LCA can indeed give you roughly similar results to LCA. For much less work than a full LCA. But there is still a significant uncertainty involved.
So, price proxy _can_ under some circumstances work.
But if we don't know under which circumstances, the only way to find out is to verify through testing.
No amount of thinking or argumentation is going to prove it, because we do NOT know all price externality mechanisms nor their distributions or any of the possible unknown-unknowns.
We need data based proof, not conjecture.
I would suggest the following : what really matters is not the amount of energy needed to produce one unit energy (EROEI), but the amount of human work needed to produce one unit energy, EROHWI (energy return on human work invested).
This can be expressed by a dimensionless physical number, if you know the amount of man-time spent to produce one unit energy, and adopt an average human power of around maybe 500 W.
Why is it for me a more significant quantity?
a) consider simple traditional agriculture, without fossil fuels and fossil produced fertilizers. Isn't the EROEI infinite? why is it not the best way to get energy? no, because the EROHWI is not infinite, and in fact rather low.
b) EROEI does not put any limit on the energy available per human being, as long as it is > 1. If you wast 50% of the energy to produce your energy, who cares? you just need to produce twice as much energy , don't you? no, because it would require also twice as much people to produce it, and you have to pay them (or at least to feed them). So again EROEI is not the really significant limiting factor.
c) EROEI does indeed enter partially in EROHWI, because you need to consider net energy production to define it. So if you consider a gross energy production by human work Q, the net EROHWI will be Q(1-1/EROEI). Of course this vanishes when EROEI = 1, but even with a large EROEI, the value of Q matters (this is the case for agriculture for instance).
d) whom are you paying exactly when you buy energy? you don't pay an oil well or a windmill. You pay eventually only human workers. So what really matters is the amount of human time you need to produce one unit energy, that is, once taken into account an average human power, the EROHWI (of course most of the workers do not need to work physically : the amount of available fossil energy is so large (around 50 times human power on world average, may be 250 for an average US citizen) that you can easily substitute the human physical work by the corresponding energy. But you still need human beings, for all difficult or clever tasks that cannot be achieved by machines.)
of course the price can be modulated by the level of salaries, the speculation, etc.. but the real cost is dtermined fundamentally by the number of people you need to hire to produce energy (which is of course much lower for oil than other energies).
I suspect that this quantity is so fundamental that it determines eventually the amount of energy available per human being, which measures the real wealth of the society. I have indication that the second quantity is rather simply related to the first one (approximately the square root) because a stable economy will tend to share the activity between energy production and consumption, and for a higher EROHWI, the best choice is to reduce the number of people producing energy and to raise the total amount of energy you produce - a square root law seems reasonable, but I don't have still a definite proof for this ..
"but the real cost is dtermined fundamentally by the number of people you need to hire to produce ..."
Sounds a lot like the Labor Theory of Value. I believe that that Theory had a very poor record as an engine of social justice in the real world. But maybe a reincarnation, under new circumstances, will do better than the original ;-).
Not exactly. I am not saying that the real price is determined only by the human labor, because it is also modulated by the laws of supply and demand, including the supply and demand of the labor itself. Of course a barrel of oil does not require three times as much work to be extracted than 5 years ago, and the difference between brazilian and american ethanol is partly due to the big difference in wages. But I'm mainly interested in the question of physical efficiency of energy sources, and what determines the amount of energy available for each human being, on average. I argue that EROEI is only part of the problem, and that the "human efficiency" to produce energy is the real key factor (and it includes the EROEI issue). I'm also saying that on average, and barring any strong supply/demand effect, the average price is a good indicator of this "EROHWI".
Gilles,
In point d) you say" you don't pay an oilwell or a windmill. You eventually pay only human workers" that's true, but there are other very high costs incurred which are not being accounted for by the monetary system. An oil well is always going to produce greenhouse gasses from its products. Its ridiculous to suggest that we're going to capture and use every molecule of methane from the solution gas, or all the CO2 from auto exhuast. And the negative value of the greenhouse gas changes over time too. The natural gas of the Lucas gusher at Spindletop in 1901 was 25% CO2, but the methane and CO2 that escape today are a heck of a lot more distructive because the natural systems are overtaxed and it seems to be getting worse all the time for the greenhouse gas distructiveness. How are we accounting for this fact in the world economy?
We can get high falluting and call it the tragedy of the commons, or all verbally loaded and call it liberal secular humanist propoganda, but there are some real concrete datum that suggest its a real cost, that its increasing quickly, but there is no valuation except subjective values loaded on to the price of an oil well or lump of coal except these distorting subsidies. And Wind Turbines and Solar stop adding to the problem, while helping maintain a high civilisation, which I personally value and I think most of us do. Global warming is a real threat. Running out of inexpensive, low cost fossil fuel is a real threat, and the Bengali farmer whose rice patty will soon be flooded while Lee Raymond lies about global warming to hold up the value of ExxonMobil stock is an injustice that will never be righted.
In other words, I don't care philosophicly whether it infringes on freedom or not, I don't want someone with cholera to take a dump in my water supply. In just that way we need to ban internal combustion engines and take radical steps to change the economy, it has to do with a common human good . For whatever reason humans surrender their freedom to sociopathic governments all over the globe, always have and always will. And, I really don't know what to do about and nobody's thought up a better way in the 60K or 70k years since we acheived conciousness.
Bob Ebersole
A couple of things that seem intuitively important to me: the time factor and the per-capita amount of energy. Not only do they help define total scale, but they bring up secondary questions: if a person/business/society has only half the energy, how does it get used? The relative values of different qualities of energies might change. Maybe not much at 1/2, but certainly by the time we got down to 1/8. And they would change at different points for different entities. No way to sort that out in advance. It is, however, the sort of thing markets are good at [roughly including banditry, slavery and feudalism as a form of "market"].
cfm in Gray, ME
Yes.
The world is using about 450 quadrillion btu of energy (link), which at 3400 btu/kWh corresponds to about 130 trillion kWh. At US market rates of $0.10/kWh, that's $13 trillion out of a total world GDP of between $48 trillion (nominal) and $66 trillion (PPP), or around 20-30%.
And that's a huge overestimate, since electricity is the most expensive energy source per btu; coal, the most common energy source, can typically be purchased for well under $100/ton; at about 20 million btu/ton, that's less than two cents per kWh-equivalent.
So any attempt to pretend that energy makes up the entire price of a product will hugely overestimate the energy embodied in that product. The result of such a calculation should not be misunderstood to have any bearing whatsoever on energy requirements, and is - as near as I can figure - fundamentally useless.
Of course, that's hardly surprising: assuming that all costs are energy costs means assigning a value of zero to everything else, including human effort, which is an enormously myopic view of the world.
The problem with using price as a proxy of EROEI is that ultimately energy isn't what typically drives scarcity. At least for now. As the price of oil goes up, that will almost certainly change.
Yes, for solar panels, there are energy costs all along the supply chain, but a large part of the cost of solar panels is the raw materials to make them and the manufacturing costs that are independent of energy. The material costs are partially based on energy, but they are more directly based on scarcity. If the materials were cheaper, the solar panels would be cheaper, but the energy input might remain the same. A solar panel that had to be made using platinum would be obscenely expensive, due to the rarity of platinum, not because it takes a lot of energy to get platinum out of the ground.
Gasoline prices fluctuate, not based on the amount of energy it takes to get the gasoline, but on it's relative scarcity. If you pump 1,000 gallons out of the ground or 10,000 gallons out of the ground, the cost per unit energy is almost identical. If demand was for 2000 gallons though, the price for that 1,000 gallons would be very high, but the price for that 10,000 gallons would be very low even if the energy input was almost identical.
To simplify the math, you could have 1000 gallons go for $10/gallon or 10,000 gallons go for $1/gallon and ultimately the energy cost of the 1000 gallons would have been much much lower even though the price was the same. The price fluctuated enormously even if the EROEI was almost identical between the two.
Re: The price fluctuated enormously even if the EROEI was almost identical between the two.
This is the reason I call EROEI a religion and nonsense. Few if any understand it and as a practical matter it is irrelevant. Market prices determine what is done with energy resources. To have it any other way implies a command economy with all its pitfalls. Many here imagine that some clever analysis and mathematical modeling can be used to make economic decisions if only it is accurate enough. No way. The world is full of complexity and unpredictability and only a market with all its imperfections can even partially deal with it. Until market prices reflect the scarcity of oil, little of substance will be done to conserve it. Tough, but that's the way it is IMO.
I'm delighted to see some discussion of the problems with EROEI instead of the blind faith acceptance of most posts here at TOD.
To have it any other way implies a command economy with all its pitfalls....
I don't know - ANY other way is "Command" - that just does not sound right.
We may be limited by the conceptual tools we have on hand.
1) Could someone please explain where "infinite regression" is a real problem.
I thought that EROEI etc. were realistically calculable within some uncertainty by modeling numerous societal system or process, and solving the multiple equations for the energy intensity of each system or process. That would appear to give the energy intensity for each process to reasonable uncertainty.
2) Use energy quality
jeffvail's "Price-estimated EROI" appears to have some benefit of providing a proxy for energy quality. e.g. we value automotive or aviation fuels higher than the energy in bath water or a warm pond because of the higher ability to do work.
Part of the difficulty will be that the apparent "Price" varies highly depending on the degree of "development" and the 1000 fold variation value placed on human labor in the particular society between $0.5/day vs $100/hr etc.
A more quantitative approach would be to evaluate not just first law energy, by exergy and the efficiency of the energy process in calculating the EROEI. e.g. for solar whether it is concentrated to 10,000 suns (~10 MW/m2) and generates hot gas at 2000 C, (if we had an engine that could use that) or used in a flat plate water heater at 50 C.
In calculating the EROI of corn-ethanol, as one example. Do we count the energy of the bacon that went into feeding the farmer who raised the beef that fed the farmer who helped install the irrigation pipes needed to bring water to the corn that eventually went to the ethanol plant?
In our latest paper, we recommend that wide boundary energy analysis should encompass 90% of the energy costs. There exists a tradeoff between accuracy and scope in any analysis.
Yes, but Nature DOES use infinite regression to 'calculate' a response. At the same time, it also infinitely credits all of the creative functions (diversity of DNA in wild pigs, disease resistance of the farmer, insect propogation by monocropped fields, loss of wild diversity at forest edges, ability of the collective DNA pool to cope with disease and climate change and overpopulation, etc.) This ultimately leads to the determination of the continuation of a species: its Net Creativity: the amount of usefulness a species contributes to the future of the universe after subtracting the resources that species consumes.
ag
"Can we spend enough for Africa?"
As close as this thread will come to Chaos Theory IMO.
Chaos is explicable; there is a rigorous mathematical theory for it. The explanation is not reductive. To define chaos, we need to expand the scope of generalization to include various initial conditions and the divergence between various processes. This is possible only from a high-level perspective where we can grasp and compare different processes as wholes. This is the perspective of synthetic analysis.
If we are to use chaos or complexity theory, or any system of nonlinear iterative equations, for modeling, we need to define the correct area of analysis.
No, we cannot quantify and measure every relevant variable. No, we cannot actually preform infinite regression. And no, neither of these problems is a significant obstacle to a nonlinear synthetic analysis of the situation.
Yes, we can sufficiently define the relevant processes regarding humans, food, technology, and energy.
Yes, we can sufficiently estimate the initial conditions for the purposes of a model.
The goal is not accurate prediction (which, again, is impossible without a completely accurate model and completely accurate measurements).
The goal is understanding how the system works in the face of changing conditions.
An understanding of how our complex system works and responds is necessary so that we don't waste time with Plan A (electrification of rail), which will fail without also being concurrently run with Plan B (social awareness), Plan C (city planning), Plan D (corporate change), Plan E (environmental impacts), Plan F (food distribution localization), Plan G (governmental interference), etc.
Hello TODers,
First my thxs to Jeff for the Keypost and the opportunity to comment my feeble two cents.
I believe there is also an important time component to ERoEI that is not reflected in the normal economic price of an object.
Consider NPK fertilizers and how the 2007-adjusted price of Potash rapidly went to $10,500/ton back in 1914 [see earlier post]. At a minimum a farmer would not be able to recoup his investment till the harvest, but generally the soil beneficiation extends for years into the future if the farmer can get all his requirements met.
The blowback opposite of this is the shutting down of mineral mines in Zimbabwe. The farmers will experience over time lessening yields and increasingly unhealthy plants as the topsoil loses vitality.
Even simple objects such as an axe do not currently reflect their true energy-harvesting value. If Peakoil Outreach were to instantly occur: maybe the proper ERoEI price for an axe might equal $2,000 USDollars.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
I'm somewhat amazed nobody has mentioned HT Odum's work in relation to using $$ proxies for energy inputs. I don't have a link for it, but I remember his (in)famous analysis of a PV system (I think it was in Texas) in which $$ are used for proxies for certain parts of the input such as administrative, etc. Of course Odum goes another step in trying to quantify inputs in 'emergy' terms relating everything to original solar input, a system that has elegance but problems IMO in dealing with realistic human timelines.
One place to look for how price affects the availability of a commodity and how prices respond exponentially to small supply/demand ratio changes is the fluid milk market. As much as a .5% difference between demand and supply can cause a doubling of price, and that is before the energy costs fluctuate wildly. Once energy costs start behaving like milk prices, then milk prices will get the tail end snapping effect.
Other than that, I think you're onto something useful. I don't know how to get there easily, though. Take the above scenario and then tie the value of the dollar to the price of oil, and the ability to determine oil behavior by price gets into that chaotic exponential feedback loop again.
Rather than human labor, I submit using an average day's food as the anchor of value. As inflation and deflation affect the money, the average amount of food should stay relatively steady. As it's cost increases due to energy costs, the types of food may change accordingly, but people will still have the same desire to eat mostly the same things (notwithstanding that little discussion about horses we had the other day..).
I'm sure one of the geniuses here can take that idea and bury it or run with it...;-)
Darn! I forgot to get to the main point of food as the value anchor: As the price of energy goes up, then it becomes more attractive to grow food with labor and organic methods. A very large reduction in fossil joules per food calorie can be accomplished. The most recent data also shows that the yields will be improved more with scientifically applied organic methods than with conventional agriculture, due to soil improvements. This means that the current cost of producing organic produce (double or triple) could be more or less the maximum range of food prices under a less-oil agriculture system, even as the oil prices go up exponentially. Thus, the amount of food people eat won't change, but the methods to produce it and the value of the people(labor) to produce it will change as labor becomes more available and valuable to farms, while less valuable to cities, and petroleum becomes less available (assuming there is enough sense left in the species to accomplish this without reverting to soil-destroying command economics and politboro style central planning).
I know, too many 'if's.
Arkansawyer
"As the price of energy goes up, then it becomes more attractive to grow food with labor and organic methods."
You'll have to demonstrate this, please.
As a Farmer, I believe the correct framework in a Chaotic Model would/will be the Hunter/Gatherer Method.
The Amt of "food" needed will be less if one doesn't expend
so many calories.
"The most recent data also shows that the yields will be improved more with scientifically applied organic methods than with conventional agriculture, due to soil improvements."
Yields are not improved using organics.
The measure of work needed to get the same number of "calories" harvested is less. Yields are typically lower
or maybe the same as when using organic methods.
"Soil improvements" are there for sure but you're giving up
"capital" in your "Soil Bank" if you try to tap EROI
at the same time.
Re your last sentence:
"Thus, the amount of food people eat won't change, but the methods to produce it and the value of the people(labor) to produce it will change as labor becomes more available and valuable to farms, while less valuable to cities, and petroleum becomes less available (assuming there is enough sense left in the species to accomplish this (the following equates with EROI)without reverting to soil-destroying command economics and politboro style central planning)."
Sincerely, James
People have said this already, but given the amount of other people who didn't even see it, and even applauded the ignorant post, I am here to state it.
YOU ARE COMPARING VERY EXPENSIVE PV'S ELECTRICITY WITH VERY CHEAP COAL/GAS/PETROL ELECTRICITY. YOU ARE
NOT
MAKING A EROEI CALCULATION.
It is so wrong that I don't know even where to start. Let's see:
1 - you take for granted that 0,10$/KWh is EROEI = 1. It is not, obviously, as it comes from coal, oil, nuclear, etc. These things don't offer EROEI = 1, as it as been noted here in this site for so many times;
2 - you take for granted that electricity prices stay the same. I thought we were here discussing peak oil. Isn't one of the biggest consequences the surge in electricity prices? If you buy a PV now, you don't have the problem concerning receding horizons, because you already have the PV! So your math is plain wrong;
3 - the fact that your math is plain wrong shows that is not a EROEI calculator at all! The focus of EROEI is to show what energy production mechanism is really producing more energy than consuming. If your theory implies that PV's EROEI changes according to electrical prices, then is FALSE.
Now, before you rally me saying that electrical prices do have consequences in PV's EROEI, which is true as when the energy required to make a PV is larger, the EROEI is smaller, but in this case the exact contrary happens: if the electricity is more expensive, PV's EROEI is larger, because it doesn't depend that much of electrical bills FROM THE MOMENT IT HAS BEEN BUILT, and wins in comparison with oil, gas and coal (when these peak).
4 - you say that you counted on the people you have to feed, etc, etc. That's brilliant. But way out of line. Where is the evidence of this? I could otherwise say the price is high because the demand is high, not because it took much physical energy to build it. I could say the price is high because the factories are spending such money on the doubling of the industry per two years. That doesn't seem EROEI = 0.5 to me. That seems an incredible industry that feeds from itself, gives jobs, enters in the economy. Which gives to the fifth point:
5 - Have you deducted from your price the wages of people? Because with those wages, people will create more energy. More products. They will buy PV's! That's because these wages do not account for the food and drink these people need to be alive to build solar PV's. Its way beyond that. People will buy cars, houses, etc etc. This is already inside the economy and thus should not count on the EROEI calculation (unless you are counting on everything inside society, including waste and luxury, and thus reaching EROEI=1. If you have done such, you've just rendered EROEI as meaningless).
What you could have said was that you had found a way to
compare
EROEIS from different sources. In a way, you have found out what everybody knows: PV is still a bit more expensive than coal, gas and oil. Thus it has a little LESS EROEI than these, but not LESS THAN ONE. That is a blatant LIE, it would mean they are a energy hog and that is not true.
For these simple errors that would have been too easy to spot, I won't even bother to read your "thesis", and your reputation just hit the bottom with me. They are too damn important. Work these out and I might read them.
Thanks.
PS: you also fail to mention the high burden that is being paid in the iraq war and in the us army to secure oil markets. This is a cost you are not adding up. This will lower oil EROEI by a lot, and thereby inreasing PV's by a LOT.
Just for this, I'll bet PV's are even cheaper than oil right now.
Another side of the problem concerning the war in Iraq is that the oil products which the U.S. military are consuming are not produced within the U.S., thus this energy consumption is not counted by the EIA. This makes the U.S. energy consumption appear to be less than it is in fact. One wonders how this consumption is accounted for in the IEA figures. Do these many barrels appear as KSA or Kuwaiti consumption or are they somehow shifted to Iraq imports? What about U.S. military consumption in Asia or Europe, especially the fuel for military aircraft and ships? The next thought would be, once Peak Oil arrives in force, will all these other nations willingly part with the fuel for our military as their internal demand increases with resulting civil unrest?
E. Swanson
This has been true for many years when you consider the embodied energy of all the imports to the US that are effectively not being paid for with energy-equivalent exports. A lot of US energy consumption goes on in China and India and in other countries willing to gamble on the prospect that US dollars may retain their value.
luisdias opines,
"This is a cost you are not adding up. This will lower oil EROEI by a lot, and thereby inreasing PV's by a LOT."
The cost of military adventures to get and protect the oil is not "added up". The externalized cost of carbon release is not "added up". The cost to maintain transport for oil and the extra wear on highways, railways, pipelines ports, are not "added up". The risk of the cost of massive oil spills, pipeline ruptures, and offshore blowouts are not "added up".
There is a century of "sunk costs" already invested in the oil industry that cost somebody something at some time that are not "added up".
Now, an infant technology in it's first week of energy production will be expected to compete with oil head to head, to compete with all of oil's long invested infrastructure, all of oil's longstanding political influence, the whole of the transportation system (remember that oil not only has to have a heavily technical production system, but also a heavily technical consumption system infrastructure vested in it....gasoline without the decades of automotive engine development to use it would just be a dangerous liquid to have around if not for years of research in improved combustion, metals, valvetrains, cooling systems, fuel delivery systems, on and on....somebody paid for those man hours of research and development in the engine, auto, motorcycle, boat, aviation and truck industry)
Using price as some sort of indicator of EROEI or efficiency in general is a fallacy so great it is hard to even get the mind around where it could have been born from. The two (price and EROEI) are so different as to be almost completely unrelated and have virtually nothing to do with one another.
Back in the day, I was fascinated by wind power for example. At that time, there were several long winded reports from conservative think tanks proving that wind would never be needed at all from an economic viewpoint, because the cost of fuel (which was the primary cost saved by utilities going to wind) was one of the smallest costs for utilities, and all charts and projections showed that fuel costs were going to only go down, with the dropping price of natural gas (this was the mid to late 1990's) and the rising efficiency of combined cycle natural gas plants. One assumes by now we would know better, right?
Well, maybe not.
Once more, TOD seems to be saving the oil companies the trouble and cost of doling out their own propaganda against all alternative energy programs. This happens with such frequency that it is deeply troubling. Perhaps it is purely an accident. Either way, if you use price (not security, not future stability of price, not future stability of supply, not expense of transprot system to move the energy from place to place, not cleanliness or low environmental impact, not national or even local energy self determination, and not diversity and elegance of design) as the measuring stick, we should just go ahead and admit that all alternatives to oil and gas are dead in the water.
If I believed that for one second, I would go ahead and buy my V-12 S Class Mercedes, rocket down the interstate and party on out because the gig is up, the parties over.
(On that price thing, by the way, why will people pay an extra five or ten grand for "high performance" packages that reduce 0 to 60 acceleration by maybe a half second to a second, but refuse to buy a hybrid drive train version of a car due to a $4500 "hybrid penalty"..."the return just isn't there for a hybrid" they say.....what 's the EROEI return on that hot rod package?
Just one indicator of the absurdity of price as an indicator of anything, save one thing......human desire and vanity.
RC
This is a nice summary of problems with the approach. I suggested earlier that there might be some use to this as a comparison between widely deployed technologies, but one also has to do a bit of accounting beyond just looking at price for the systems we have in place. For central generation, for example, the two fuel based methods, coal and nuclear often serve as base load sources so that the the ratio of thier EROEI's might be indicated by their relative price. Yet, here it is clear that price does not reflect cost since many costs are not covered. Health and life insurance premiums are undoubtably higher owing to the uses of coal while the episodic nature of the nuclear accidents together with the Price-Anderson liability shield mean that the even greater risk to life and property from nuclear power is hardly funded at all. So, one needs to account for shifted or ignored costs to make a comparison. If it turns out that the health and casualty costs of coal (aside from mining) are mainly eliminated through conversion to sequestration, generally considered to be a 30--40% at-the-plant cost, it might still be cheaper than nuclear power were it required to post a bond to cover the eventuality of a large nuclear accident which would add 4 to 10 cents per kWh over 40 years to the cost of nuclear power depending on the causalty payout. That the EROEI for nuclear power is less than that of coal would make some sense physically; coal does not get purified since it is found in a directly usable state. But saying this from price, even with better accounting, would not be very persuasive. In the end, I think that this method cannot work to the accuracy needed to compare the EROEI of two methods of energy generation even under fairly ideal conditions.
Chris
Exactly. Same goes for coal, nuclear and gas. Who is paying for the carbon we are throwing into the atmosphere? Oh, exactly, we all are. Who is gonna pay for the nuclear waste problem? Oh, exactly, our children. So it's no problem for us, right?
The problem is that one is making huge assumptions, all of them false:
1 - that the economy is perfect. People will choose what's really best for them, and not what people are used to choose. If that was true, Microsoft wouldn't exist by now. This is a great example: people won't choose the best alternative until the infrastructure is ready. (I'm stuck with oil because the change to GPL is a burden in my country. There are few gas stations who have GPL, I have to put a horrendous plate in my car, I can't park in subterranean parks, I lose my car guarantee, the bureocracy is huge, etc, etc.)
2 - that the price isn't messed up with. Oil is severely subsidized, as noted, is cartelized, as seen, has false information around its availability, etc.
3 - that "market" is able to foresee the future, preventing crashes and resource depletions. If that was true, why the constant crashes in the wall street? Why the constant bubbles? Are you going to tell me the US houses were really worth the money people spent on them? Of course not. "Money" is volatile. Meaningless as indicator.
4 - that there aren't speculators.
etc.
100%. I agree. MdSolar too. Let's bury this idiotic reasoning. Like forever. Your example on wind is a perfect example. Let's move on to things of interest.
LD