Applying Time to Energy Analysis

Is a BTU today worth more or less than a BTU ten years from now? It's seemingly an easy question. A BTU will heat one pound of water one degree whether its 2010, 2020, or 2100. And, in a world of entropy where the easiest and best quality energy sources (generally) get used up first, one unit of energy should increase in value over time, as its ability to accomplish work becomes more valuable to society as time progresses. However this is solely a physical perspective, one that ignores biology of time preference. Once humans with finite lifespans and cultures with sunk costs enter the picture, a BTU today, behaviorally, becomes worth more than one in the future. This fact has pretty big implications for biophysical analysis of energy alternatives, which will be explored below.

This post is an adaptation (first a shrinking, then an expansion) of Chapter 5 of my dissertation, which was co-authored with my colleague Hannes Kunz.

Executive Summary

Biological organisms, including human societies both with and without market systems, discount distant outputs over those available at the present time based on risks associated with an uncertain future. As the timing of inputs and outputs varies greatly depending on the type of energy, there is a strong case to incorporate time when assessing energy alternatives. For example, the energy output from solar panels or wind power engines, where most investment happens before they begin producing, may need to be assessed differently when compared to most fossil fuel extraction technologies, where a large portion of the energy output comes much sooner, and a larger (relative) portion of inputs is applied during the extraction process, and not upfront. Thus fossil fuels, particularly oil and natural gas, in addition to having energy quality advantages (cost, storability, transportability, etc.) over many renewable technologies, also have a 'temporal advantage' after accounting for human behavioral preference for current consumption/return.


The concept of 'energy gain' - how much energy remains for an organism or process after the energy to procure it has been accounted for - has been a popular topic on this website for many years. Here is a short list of essays/analyses previously on TOD explaining that biophysical concept:

A Net Energy Parable - Why EROI Is Important?
Ten Fundamental Principles of Net Energy Analysis
At $100 Oil What Can the Scientist Say to the Investor?
The Energy Efficiency of Energy Procurement Systems
The True Value of Energy is the Net Energy

Basically, over time, natural selection has optimized towards the most efficient methods for energy capture, transformation, and consumption. In order to survive, each organism needs to procure at least as much energy as it consumes (Lotka 1922pdf, Odum 1973). For example, lions that expend more energy chasing a gazelle than they receive from eating it will not survive. In order for body maintenance and repair, reproduction, and the raising of offspring, a lion needs to obtain significantly more calories from its prey than it expends chasing it. This amount of energy left over after the calories used to locate, harvest (kill), refine and utilize the original energy are accounted for is termed ‘net energy’. In the human sphere, this same concept applies. Irrespective of dollar costs, which are often distorted due to inflation, subsidies, debt induced affordability, and myriad other economic distortions, energy sources need to return more energy than is used in their retrieval. And in order to secure an average modern human lifestyle including shelter, amenities, leisure activities and many more benefits beyond the bare necessities, this energy surplus needs to be significant.

Human history consists of transitions in energy quantity and quality. Generally, the value of any energy transformation process to society is proportional to the amount of surplus energy it can produce beyond what it needs for self-replication. (Hannon) Over time, our trajectory from using sources like biomass and draft animals, to wind and water power, to fossil fuels and electricity has enabled large increases in per capita output because of increases in the quantity of fuel available to produce non-energy goods. This transition to higher energy gain fuels also enabled social and economic diversification as less of our available energy was needed for the energy securing process, thereby diverting more energy towards non-extractive activities. (Cleveland).

Examples of EROI Values/Studies -Table from Murphy (2010)

Figure 1 - Net Energy Cliff (based on Hagens, Mearns, Balogh etc. based on work of many before)

As fossil fuels become more difficult to extract and thus are more expensive, a move from higher to lower energy gain fuels may have important implications for both how our societies are powered, and structured. As illustrated in Figure 1, declines in aggregate EROI either mean more energy is required by the energy sector (light blue) leaving less energy available for other areas of an economy (the dark blue), or that energy is less affordable for aggregate society in general. Declines in amounts of surplus energy have been linked to collapses of animal societies and historical human civilizations. (Tainter)


Energy gain, though prominent, is but one of several factors that defines the value of energy to an organism or utility of an energy system. Consider time for instance. Energy output occuring after the energy input can be disadvantageous to an organism. If the lion in the above example can't access the calories from the gazelle until 1 week after the kill, this would pose a problem. Similarly, energy that is accessed beyond ones lifetime wouldn't be benefial to an individual. Thus time beoomes an integral variable in the energy gain calculus. At the intersection of time and energy is power. In physics, power is defined as the rate at which energy is converted into work. Some have suggested that power (or energy transformed per unit time) has been a primary driver of both human and nonhuman biological systems (Hall, Lotka). This “Maximum Power Principle” which was referred to as the Fourth Law of Thermodynamics by H.T. Odum states:

“…that systems which maximize their flow rate of energy survive in competition. In other words, rather than merely accepting the fact that more energy per unit of time is transformed in a process which operates at maximum power, this principle says that systems organize and structure themselves naturally to maximize power. Over time, the systems which maximize power are selected for whereas those that do not are selected against and eventually eliminated. ... Odum argues ... that the free market mechanisms of the economy effectively do the same thing for human systems and that our economic evolution to date is a product of that selection process.” (Gilliland)

As explained here, there is a tradeoff between the energy return on energy invested, and the energy return on time invested. We see this tradeoff between energy and time in many areas. Airplanes get us to our destination much faster than cars or trains, but are less energy efficient per unit distance travelled per passenger. Similarly, people speed at 70 mph so as to arrive faster while driving 55mph would use less energy. In an economic sense, 'power' is maximized in our current culture via digital wealth, as the instantaneous survival/status benefits of burning/using energy have physical limits whereas digital markers do not.

Figure 2 - Maximum Power schematic (source)

The above graphic depicts the Maximum Power Principle. At zero efficiency power is also zero because no work is being done. Also, at maximum efficiency, power again is zero because to achieve maximum efficiency one would have to run processes reversibly, which for thermodynamic systems means infinitely slowly. Therefore the rate of doing work goes to zero. It is at some intermediate efficiency (where one is “wasting” a large percentage of the energy) that power is maximized. (The implication that 'waste' has been evolutionarily selected for, is also referenced in the field of biology (Zhahavi)).

Discount Rates and Time

(For a colorful overview on the evolutionary origins of steep discount rates, see Climate Change, Sabre Tooth Tooth Tigers, and Devaluing the Future)

Humans prefer present over future consumption in most situations (Frederick). The extent of this preference is measured using a discount rate - the rate at which an individual or society as a whole is willing to trade off present for future benefits. The behavior of discounting future returns has an evolutionary background (Robson). Most organisms in nature do not live as long as their biological potential. Thus in most animals, emotions and instincts drive behaviors with short-term goals, such as eating, drinking, resource acquisition and mating. These automatic behaviors, rooted in older brain regions like the limbic system, are inherently myopic - e.g. while they are active the future carries little weight (Berns]. Essentially, all biological research finds positive preference for current versus future returns, and if returns are equal, most experiments show a large preference for immediate reward, (other than for situations when the immediate needs of the test subjects have just been satisfied) (Bateson). However, humans differ from other animals in that we can worry about and/or experience immediate pleasure from considering delayed consequences. As such, our emotional systems also have the potential to motivate behaviors with long-term positive trade-offs. Thus it is the extent to which we prefer the present over the future that is at issue, not whether or not this preference exists.

The reality of temporal risk is present in many forms for both animals and humans, including but not limited to: entropy risk, risk of destruction, risk of non-survival (e.g. a healthy 30 year old male in the U.S. has a 7.96% chance of not experiencing his 50th birthday), risk of limited access or government expropriation, risk of obsolescence, etc. These and other risks underlie the logic for favoring current returns over delayed future returns or, stated differently, require sufficient excess returns to justify the risks of waiting for the arrival of future benefits.

Decades of research in multiple disciplines have indicated that discounting of the future is also prevalent in human societies. In meta-analyses on individual discount rates, it seems that a relatively constant non-financial discount rate is applied after a certain period of several months, which seems to range between 5% and 50% for individual decisions, with an average near 20% (Frederick). Research on long term discount rates associated with durable goods purchases and energy saving devices show extremely high discounting (>100% annualized) (Hausman, Ruderman). Though some degree of time preference is present in all of us, certain cultures and demographics exhibit even steeper discount rates than others. Studies on young people, gender differences, alcohol drinkers, drug users, gamblers, smokers, risk takers, low IQ individuals, individuals with full cognitive load, etc. all exhibit a stronger preference for immediate over delayed consumption with variations across these life-style and genetic differences (Chabris). Unsurprisingly, people under stress exhibit higher preference for immediate versus delayed consumption. (Takahashi).

Figure 3 - Conceptual graphic of societal vs. individual risks

It is clear that human decision-making cannot be accurately predicted without reference to social context. Moreover, many decisions, particularly pertaining to energy and related infrastructure are made by groups as opposed to individuals. The social rate of time preference is the rate at which society is willing to substitute present for future consumption of natural resources. Overall, due to less risk of appropriation, longer life spans, etc., society-level discount rates should be lower than personal discount rates, but perhaps not significantly so. In fact, there is considerable debate on what level of discount rate to use in policy decisions. The arguments center around what rates should be used (prescriptive) versus what rates people and societies actually use in real decisions (descriptive). Many environmentalists assert that social discount rates should be less than 3% to properly weight future generations and the environmental costs they may face. In fact, in the Stern Review on climate change, the authors propose using a range between zero and 1.4% (Stern). However, some advocate using higher discount rates in policy so that enough infrastructure and investment takes place in the near term so as to build a bridge to the future. A meta-analysis of social discount rates from countries around the world showed a range between 3% and 12%, the higher numbers not surprisingly from countries of the global south (Zhuang). The United States Office of Management and Budget has applied a 7% discount rate towards civic projects in each year since 1992. This post does not weigh in on the prescriptive versus descriptive debate on discount rates other than to accept that some non-zero preference for immediate over future consumption exists for both individuals and societies.

Time and Financial Risk

Because a dollar received today is considered more valuable than one received in the future, time is also an important factor in financial and economic decisions. First, in a modern (and historical) leveraged banking systems where money supply increases over time without regard to underlying physical assets, positive rates of inflation diminish the purchasing power of dollars as time passes. Also, since dollars can be invested today and earn a positive rate of return, this creates an opportunity cost for both monetary and scarce resource investments. Finally, there is uncertainty surrounding the ability to obtain promised future income which creates risk that a future benefit might never materialize. For all these reasons, the financial world simply copies the principles of nature, as detailed above. In economics and finance, discount rates are used to compress a stream of future benefits and costs into a single present value amount. The net present value is the value today of a stream of payments, receipts, or costs occurring over time, as discounted through the use of some interest rate.

Time Value of Energy

Figure 4 - Sample Input/Output Timeline for an Energy Technology

EROI is represented as a static integer representing the ratio of energy output to energy expense for the life of an energy technology, simply Eout/Ein. This can be represented graphically using an energy flow diagram such as in Figure 4. The green shaded region represents the energy output beginning at time t+c (where c is the period required for construction of facilities) and ending at time t+e (where e is the total number of years with energy gains). The blue section is the initial energy investment needed from the beginning of an energy gathering project. The red section represents ongoing inputs in energy terms through time t+e. Depending on the boundaries, there may also be another energy expense at time T+n dealing with decommissioning and waste removal (the grey).

In traditional net energy analysis, an energy input or output is treated the same regardless of where it occurs temporally in the life cycle of the energy technology. However, human preferences across time periods have considerable influence on our energy use and our energy planning decisions. Even though a barrel of crude oil extracted today will have the same BTU content as one produced 10 years hence, its usefulness to society at any given moment will change as a function of economic, institutional, and technological factors. In this equation, time becomes an important variable.

Figure 5 - Equivalent EROI over 10 years or 20 years

A comparison of two graphs for energy extraction might show the relevance of time. Both depictions in Figure 5 represent technologies that offer exactly the same energy return (EROI), but the first returns the energy over 20 years and the second returns the energy within 10 years. The energy costs are identical at the start and during the life of the asset. Provided the quality of the energy is comparable, it is quite obvious that societies prefer the technology that delivers more faster (the graph on the bottom), though standard EROI analyses treats them the same.

Net energy statistics and Time

The following section applies the above theoretical framework to several real energy examples including wind turbines, corn based ethanol and oil and gas production. Since specific year by year energy data was largely unavailable in each case, the analysis assumed energy was expended at roughly the same time and in same proportion as dollars were expended.

Figure 6 - Wind turbine energy input/output timeline - undiscounted

When introducing net present value to net energy gain or EROI calculations, both inputs and outputs are discounted more depending on how far in the future they occur. Figure 6 highlights an example based on available EROI data for wind-power generation with an EROI of 19.2 (e.g. a net energy gain of 18.2) and relatively high initial investments, steady inputs and outputs for 20 years and comparably small ongoing cost or operations and maintenance, and a small cost of decommissioning. (**The average EROI in a recent meta-analysis for operational turbines was 19.8:1 (Kubiszewski)(pdf). One of the wind farms studied was representative of age, size and EROI (19.2:1) from the meta-analysis, and we allocated energy inputs to the various times of dollar investment (construction, operations and maintenance, and disposal) and graphed these relative to the 19.2:1 energy return occurring over 20 years.)

Figure 7 -Wind EROI discounted at 5%

When introducing a discount rate of 5%, which can be considered very low both in non-financial and in financial realms, and represents societies with high expectations for long-term stability (such as most OECD countries), the EROI of 19.2 of this particular temporal shape of future inputs and outputs is reduced to and 'effective' EROI of 12.4 after discounting.

Figure 8 - Wind discounted at 15%

But discount rates are not the same in all situations and societal circumstances. Investing into the same wind power plant in a relatively unstable environment, for example in an emerging economy, where discount rates of 15% are more likely, total EROI for this technology is reduced to a very low value of 6.4, nearly 1/3 of the original non-discounted value.

The graphical depiction shown in figures 6-8 is representative of most renewable energy systems with significant upfront investments followed by linear returns thereafter. Other energy technologies often see a larger proportion of the inputs at the time of output generation, and a comparatively smaller amount of upfront investment. This pattern more closely resembles traditional fossil fuel extraction projects, like the exploration of an oil field or a coal mine, although this is changing for many fossil sources as prospecting costs are rapidly increasing.

Figure 9 -Wind and Solar nominal EROI discounted at various rates

The above table shows the impact of discounting for typical wind and solar photovoltaic net energy. As most of the energy input required for wind turbines and solar panels is in the pre-production phase, the future (non-discounted) flow rates present an almost flat production profile as the ‘average’ energy return is modeled as a pro-forma. With such an energy input/output schematic, the future energy gain associated with the turbines has decreasing value to users when either a) the expected lifetime increases /or b) the effective discount rate increases. As can be seen above, an assumption of an 8% discount rate cuts the wind EROI essentially in half - from 19 to 9. A discount rate of 15%, common in emerging markets, brings the time-adjusted effective EROI from 19.2:1 down to 6:1.

Fossil fuels are quite different than renewable energy technologies both because of the timing of energy inputs and the shape of the energy outputs. Though there are large upfront costs, a larger percentage of energy input occurs after energy starts to be produced (contrary to wind, solar etc.). Also, the energy production trajectory, though sometimes lasting for decades, typically reaches its maximum within several years of first production. For example, a typical onshore gas well in North America produces 45-50% of its total energy output within 3 years. Most shale gas wells are 90% depleted within 18 months (Wolff). Even unexplored regions containing oil, like the Arctic National Wildlife Reserve, are projected to attain peak production within 3-4 years and only maintain it for a few years before entering terminal production decline (IEA 2008).

Figure 10a - Extraction technology - undiscounted

Figure 10b - Extraction technology - discounted at 15%

Figure 10a shows a hypothetical undiscounted flow diagram for the typical pattern of extraction related projects, a relatively steady (or even growing) effort yielding lower and lower returns over time after an early peak. When a discount rate is applied (10b -lower half of graph), the discounted EROI is actually slightly higher than undiscounted EROI.

Figure 11a - Leon Herbert Field energy input/output - undiscounted

Figure 11b - Leon Herbert Field energy input/output - discounted at 8%

Figures 11a and 11b were modeled using an actual oil and gas field (Leon Herbert) in Louisiana which had completed its (seven year) production life cycle. We assumed it had an EROI of 10 which is the natural gas average based on the literature (Source. We took real dollar expenditures for the drilling, completion, work-over (in year 3), production/maintenance and all other costs including plugging and abandoning the wells and (as in the wind example above) allocated their percentages based on the time horizon they were expended (Denbury Resources 2010 - personal communications). We then discounted both the inputs (energy) and outputs (barrels of oil/mmbtu gas in dollar terms) to arrive at the temporal input/output diagrams shown. This field (comprised of several wells), produced 3.37 million barrels of oil equivalent during its 7 years of production. 38% of production was in the first 2 years and 85% in the first 4 years. Applying a discount rate to the energy flows changed the NPV only slightly (10 down to 9.96).

Figure 12 - Corn Ethanol energy input/output timeline

Similar to the wind and oil calculations, we used real data on corn production and ethanol processing to establish time horizons for energy inputs for each component in percentage terms of the total (Patzek, Pimentel). Since corn is grown and processed each year, most of the energy inputs, other than the capital equipment, (which we assumed needed replacement every 10 years), occur at roughly the same time as the energy output (the ethanol). Out of the many corn ethanol energy balance studies, the Patzek model showing sub-unity EROI was chosen because it had the widest boundaries. The above dynamic - that discounting doesn't really impact corn ethanol returns, is robust irrespective of the nominal EROI figure used.

Figure 13 - EROI Time shifts after discounting

Figure 13 provides a clear indication that time discounting implies significant changes in present values of various energy technologies. The x-axis represents EROI. The y-axis represents expected lifetime of an energy technology. The darkest circles of each color represent nominal (non-discounted) EROIs from the literature for each energy source. The light circles represent the same energy output and input discounted at 15% and the intermediate shaded circles represent discounting energy flows at 8%. Particularly for renewable generation methods such as solar and wind, the implications of discounting change their position, even at relatively low discount rates. The impact of applying discount rates to corn ethanol and offshore gas is negligible on EROI. Based on the typical timing of oil flows (a near term peak followed by long tail), discounting actually slightly increases the nominal EROI for oil.


In summary, this analysis has shown that regardless of financial incentives, people discount the future to varying degrees. The timing of energy inputs and outputs has an important impact on their ‘time-adjusted EROI’ - in effect a combination of future energy flows and human time preference. Energy technologies with a high upfront investment typically show significantly lower EROIs after discounting, whereas those with a relatively low upfront investment and comparatively high cost during extraction are less affected by discounting. The same pattern applies for energy conversion technologies, for example in electricity generation. This may partially explain why many renewable energy technologies show a very slow adoption rate in situations that do not include subsidies.

In social circumstances where lower discount rates prevail, such as under government mandates and/or in generally more stable societies, longer term energy output becomes more valuable. Less stable societies with higher discount rates will likely handicap longer energy duration investments, as the cost of time will outweigh the value of delayed energy gains. It is interesting to note that the initial government/central bank response to the financial crisis - buying/guaranteeing sovereign debt has depressed what would normally have been an increase in interest rates - these artificially low rates make long duration energy assets (wind and solar) look better than fossil fuel generation options - something that would quickly reverse if rates went to market clearing levels sans government support.

Also in the context of general limits to growth, it is worth noting the evidence that stressed individuals exhibit higher discount rates. Thus, the discount rate may be viewed as the rate at which societies implicitly signal their desire to turn a present energy surplus into an energy transformation process so that greater energy services can be consumed in the future, in lieu of their immediate consumption. There is a tradeoff between energy costs and time costs that depending on the context will alter energy investments. Decisions made by energy modelers and policymakers are quite sensitive to the discount rate used. A big question is whether the social discount rate should be the same as the market return required by private investors. Given energy’s primary role in the production (and survival) function, one can infer that energy producing projects may use lower discount rates than other competing projects.

Final thoughts

Is a BTU today worth more or less than a BTU ten years from now?

The answer depends - on if you're a robot, or a human. As much as we'd like a biophysical statistic as an alternative to distortions in monetary analysis, it is clear that nominal EROI is not a strictly physical measure and its meaning changes when we introduce the biology of decisionmaking.

The above essay does not attempt to answer the longstanding debate on what discount rate is appropriate for energy projects and comparisons, but rather shows that some positive discount rate is inherently present in biological organisms, and therefore the net energy from human plans and projects will be affected, for better or worse, by the timing of the inputs and outputs. Like many aspects of sustainability /new paradigm discussions, there exists a dichotomy between the prescriptive and the normative - what should be versus what is. Ultimately, discount rates for future energy deliverables may differ between individuals or entire societies, but it seems important that the timing of energy flows is a variable that needs considering. As society potentially moves away from the maximization of money, the timing of energy flows may matter a great deal.

Selected References

Bateson, M. (2002). Recent advances in our understanding of risk sensitive foraging, Proceedings of the Nutrition Society, 61, 1–8.

Berns, G., Laibson, D., & Loewenstein, G. (2010). Intertemporal choice – toward an integrative framework. TRENDS in Cognitive Sciences 11(11) 482-488.

Chabris C., Laibson, D., Morris, C., Schuldt, J.,& Taubinsky, D. (2009).The allocation of time on decisionmaking, J Eur Econ Assoc., 7(2), 628–637.

Cleveland, C. J. , (1992). Energy surplus and energy quality in the extraction of fossil fuels in the U.S. Ecological Economics, 6 , 139-162.

Frederick, S., Loewenstein, G., & O'Donahue, T. (2009). Time discounting and time preferences: a critical review. Journal of Economic Literature, Vol. 40, No. 2. (Jun., 2002), pp. 351-401.

Hall, C.A. (2004). The continuing importance of maximum power. Ecological modelling, 178(1-2, 15), 107-113.

Hannon, B. (1982). Energy discounting. Technological forecasting and social change, 21, 281-300.

Hausman, J. (1979). Individual discount rates and the purchase of energy-using durables. Bell Journal of Economics, 10(1), 33-54.

Kubiszewski, I., Cleveland, C.J., & Endres, P.K. (2010). Meta-analysis of net energy return for wind power systems. Renewable energy, 35(1), 218-225.

Patzek, T., ‘Thermodynamics of the Corn Ethanol Cycle”, Critical Reviews in Plant Sciences, 23(6):519-567 (2004)

Pimentel, D. and T.W. Patzek, Ethanol production using corn, switchgrass, and wood; biodiesel production using soybean and sunflower. Natural Resources Research, 2005. 14(1): p. 65-76.,133

Robson, A. (2002). Evolution and human nature, The journal of economic perspectives, 16(2), 89-106.

Ruderman, H., Levine, M.D., & McMahon, J.E. (1987). The behavior of the market for energy efficiency in residential appliances including heating and cooling equipment. Energy Journal, 8(1), 101-124

Stern, N. (2007). The economics of climate change – the Stern review. Cambridge, England: Cambridge University Press.

Takahashi, T., (2004). Cortisol levels and time discounting of monetary gains in humans. Neuroreport, 15(13), 2145-2147.

Wolff, J. (2008). Marginal cost for North American natural gas production. Credit Suisse Equity Research.

Zhuang, J., Liang, Z., Lin, T., & de Guzman, F. (2007). Theory and practice in the choice of social discount rate for cost-benefit analysis: a survey. Asian Development Bank, Manila, Phillipines.

(Full reference list available on request)

From an article addressing the discount rate by Stoneleigh a little while ago;

"The fortunate in the developed world have lived through an unprecedented period of wealth and relative peace, hence longer term concerns have made it on to the political agenda. Concern for the environment and for other species always peaks in times of plenty, as the discount rate falls and people take on broader and longer term concerns. Unfortunately, this state is unlikely to last, meaning that the environment is not likely to retain its current level of protection, and that level is already insufficient to prevent continued degradation of our natural capital."

Call me a pedant but

A BTU will heat one pound of water one degree whether its 2010, 2020, or 2100

is not necessarily correct unless one assumes constant atmospheric pressure! One BTU at sea level will heat one pound of water by a different number of degrees than the same BTU at the top of Everest.

Will climate change change the atmospheric pressure significantly by 2100? mmmm...




Certainly atmospheric pressure affects boiling point, but small changes in pressure will be at most a second order effect on the specific heat capacity of water. At altitude, more heat will be lost through evaporation as the water approaches the lower boiling point.

All the more reason to use SI units, which are defined to take out as many as possible of these annoying little details.

There are about eight different values for the BTU which vary depending on assumptions about standard atmospheric pressure and temperature, etc. The various standards bodies never could get together on the same definition.

SI units - joules (J), kilojoule (kJ), megajoules (MJ), gigajoules (GJ) - would be more consistent. The conversion to and from kilowatt-hours is certainly easier (1 kWh = 3.6 MJ, exactly)

Natural gas in Canada is sold in gigajoules (GJ), which is convenient because 1 thousand cubic feet of gas (Mcf) has approximately 1 GJ of heat content. The exact conversion depends on the composition of the gas, and also the definition of Mcf, which again involves assumptions about standard atmospheric pressure and temperature, because gas is compressible.

Reasonable departures from one atmosphere will have negligible effect. It's an old (and obsolescent) engineering unit, so not to worry about the specific heat of water in the depths of Jupiter or something like that. Various definitions range from about 1054 to about 1060 joules. This is devoid of importance in the context of the keypost.

True, and an excellent keypost it is.

Of course, on Jupiter a pound of water has a lot fewer molecules in it.

That depends on one's definition of pound. If one takes it to be the usual 0.454 kilograms, that defines it is a unit of mass, and the number of molecules is the same. If it's pound-force, then owing to the stronger gravity, there would be fewer molecules. Or maybe it was supposed to be a poundal. :=O

As of this posting, a pound is 1.5864 US dollars. Or a way to prepare poi, or a place to send stray dogs. It's also the weight of .454 kilos at some locations on earth, but it ain't mass.

So few of Nate's posts deal usefully with gravity as a variable.

If people haven't looked closely at the post, I would suggest looking at Figure 13.

It says that taking into account discounting, the EROI of oil tends to get higher (that is better), while the EROIs of wind, solar, and corn ethanol tends to get worse. To me, this is the main take-away of the post.

I would note too, that this analysis assumes that we can use all of this new equipment (wind, solar, corn ethanol plants) for the full lifetime of the equipment. If in fact we cannot, because of indirect impacts of lesser oil supply (perhaps leading to less growing of corn, or more difficulty in servicing wind equipment), then the discounted EROI drops even further.

It says that taking into account discounting, the EROI of oil tends to get higher (that is better), while the EROIs of wind, solar, and corn ethanol tends to get worse.

Yes, but aside from putting ethanol wind and solar in the same basket, which to me makes little practical sense, unless I misunderstand what Nate is saying, I draw a different conclusion.

Figure 9 -Wind and Solar nominal EROI discounted at various rates

The above table shows the impact of discounting for typical wind and solar photovoltaic net energy. As most of the energy input required for wind turbines and solar panels is in the pre-production phase, the future (non-discounted) flow rates present an almost flat production profile as the ‘average’ energy return is modeled as a pro-forma. With such an energy input/output schematic, the future energy gain associated with the turbines has decreasing value to users when either a) the expected lifetime increases /or b) the effective discount rate increases. As can be seen above, an assumption of an 8% discount rate cuts the wind EROI essentially in half - from 19 to 9. A discount rate of 15%, common in emerging markets, brings the time-adjusted effective EROI from 19.2:1 down to 6:1.

So while to me sitting here today, the future energy gains associated with the turbines may have decreasing value because the turbines will be producing electricity for longer than originally expected and the EROI is brought down to 6:1, the way I see it this is a good thing since the current paradigm of an oil based growth economy isn't sustainable and I'd much rather have that lower EROI energy produced for longer in the context of a sustainable economy. In other words I see this as a good thing and in comparison the increasing EROI of fossil fuels as being bad, especially in a post peak oil world.

I would note too, that this analysis assumes that we can use all of this new equipment (wind, solar, corn ethanol plants) for the full lifetime of the equipment. If in fact we cannot, because of indirect impacts of lesser oil supply (perhaps leading to less growing of corn, or more difficulty in servicing wind equipment), then the discounted EROI drops even further.

The effect of discounting would actually be to decrease rather than increase the influence of this "lost" or abandoned capital on ultimate EROI - since, presumably, if the SHTF/EOTWAWKI scenario does arrive, it will be at some point in the future rather than the immediate present. This actually makes sense in thinking about why discounting is helpful in general, i.e. it reflects the risk or uncertainty inherent in any attempt to predict the future, including (as in Nate's examples) future energy returns or income from capital investments.

FWIW, I happen to think the discounting as a concept makes sense, but the much more difficult problem is figuring out what discount rates are appropriate. Hydropower is a helpful example - facilities built today should still be operational 50+ years from now, but the electricity and other services they will provide are valued at zero under standard discounting. However, those BTU's will still be worth about the same as a BTU today to people living 50+ years from today, and especially if (as Nate suggested early on) a BTU at some indeterminate point in the future may actually be worth more than a BTU today thanks to mineral depletion. Our grandkids may appreciate our having the foresight to invest appropriately in such long-term projects, but only if we make correct assumptions about the value of energy at that time. Since the question of how we discount future returns (esp. compared to up-front costs) is at its heart psychological in nature, it is impossible to assess the proper role of discounting unless we understand how many social and cultural norms regarding energy and resources are likely to change over time.

I agree that discounting would decrease the impact of abandoned capital, but the issue is that current calculations (undiscounted and discounted) don't even consider the possibility of abandoning capital investment before the end of its planned lifespan. So, to me, most EROIs (especially those of renewables, which require considerable front-end investment) seem overstated.

I suppose that the rationale is that the assumed lifetime is an average lifetime, and we don't know how that varies, or how other limits will affect it. But if the average lifetime is under a BAU scenario, it would seem reasonable to me to reduce it for changed conditions, both in the undiscounted and discounted approach.

Adjusting for this impact could be done with or without discounting. I agree that the impact would be bigger without discounting.

Ethanol plants are questionable from the get-go owing to marginal or conceivably sub-unity EROEI. But beyond that I'm wondering how far we need to overthink the analysis. If things are allowed to go so utterly pear-shaped that serviceable wind turbines or solar arrays must be abandoned on a scale that matters, for sheer lack of maintenance, won't the starving survivors be far too busy poking for grubs to eat to care a whit about the analysis?

There is one dimension that this article fails to address, and that is the relationship of the energy producer to the energy consumer. This article sees energy as a traded commodity, which for most forms of energy (particularly oil) this is the most probable form. However there are a small group on energies where the primary resource is free solar energy where the energy end user can also be the energy producer. Where this is possible the energy end user has very significant cost advantages. In the energy producer to energy user relationship the energy product is only available to the end user at a retail price, therefore the cost benefit to an end user to become a producer is significantly different to that of a mass energy production enterprise .

This scenario applies to a small group of energies including biofuels such as palm oil, cellulosic ethanol, as well as solar photovoltaic and solar thermal energies. It is a mistake for governments and energy producers to misunderstand the scaleability of these energy possibilities and their potential impact on the final new world energy mix.

Can you come up with a discounted EROEI diagram for nuclear? The large decommissioning costs (in energy terms) comes at the end of about 40 years of operation. That must massively affect the figure.

Is it realistic to discount energy costs at the same rate as energy gains? It will take the same number of physical BTUs to decommission the plant, and once operating, that expense becomes inevitable (in a BAU world).

Of course, in a non-BAU world we can discount 100% of those costs....

Oil companies do not decommission all their rigs in the gulf of Mexico for example. They sink them and leave them behind without concern for the waters they leave them in. I guess that helps their EROEI bottom line as well.

But more importantly, why not look at the historical use of wind and water mills in agriculture?

How long did those structures last and how much economic production did they achieve?

To me at least, guessing the depreciation % of wind, solar and water is kind of difficult without physical datasets.

Go with actual historical data on wind and start there.

Finally, not including the declining EROEI in oil production as we shift from conventional on-land crude to offshore or freezing arctic or oil sands is kind of like tricky accounting is it not?

Historically, decommisioning did not happen, the old infrastructure was re-used and adapted to new functions, or left to rot. Decommisioning is part of the health and safety and environmentalist cultures. These are luxuries of an expanding energy society, and will not persist.

Windmills (or at least locations with windmills) lasted for centuries. As parts broke or wore out, they were replaced. As new technology developped, it was patched and botched up into the existing designs.

Did we decommision anything before 1919 ? (first world war munitions)

I find it absolutely amazing that a wind mill today is so maligned when they were so versatile and useful in the past.

Why would windpower generation which requires no fuel be uneconomic in the future?

There is a difference between using a windmill to do an activity that can be done intermittently (like pumping water) and using it to generate electricity, which is normally needed as a continuous flow, in a regulated amount. Wind does very well at intermittent activity, but it doesn't produce the dispatchable electricity that is greatly in demand.

If the same power generation outfit decided to couple a natural gas peaking plant and/or a power storage plant with a series of windpower plants using good transmission and computer controls, then as a unit, the intermittent issue could be effectively resolved.

As for the cost, I do not know, but has this sort of option been considered?

These are complex systems but they seem to have technically achievable solutions.

Maybe that dispatchable energy is in demand now, but if we're facing a likely energy crisis, isn't it reasonable to look to scenarios where we will highly value ANY energy source as basic as wind, and will find ways to use it when it's there? Maybe 'demand' will have to start being described as 'preferred'.. I think 24/7 energy supply might start costing a serious premium, while most customers become used to the idea that there are times of the day/week when power is there, but the price makes it simply a luxury to consider using it.

Just because Wind Turbines were built to feed the grid today doesn't mean they can't be repurposed to preheat a bunch of homes, charge up the refrigerator tanks and feed a couple factories right next to them, which are designed to use energy when it's present.

Unlike a hundred or five-hundred years ago, we now have enough ability with electronic controls to allow many processes to commence at 1am if necessary, without having to assemble an entire workforce first.. heating up batches of tin or glass smelting pots, stamping out a few thousand sheetmetal components, baking a few hundred loaves of bread or preheating materials that will fire up the ovens at 3am.. If you can produce your product with a flex schedule to meet energy availability, you then have a level of resilience and hence value that competitors may not.

Of course, that is all only if we're facing a potential destabilizing of either Grid Availability, or even just wild price swings in grid power. What are the odds?

"we now have enough ability with electronic controls to allow many processes to commence at 1am if necessary..."

Electronic controls help but are not sufficient. That scenario only works out OK if you have enough energy storage or foreknowledge to guarantee or very nearly guarantee that the power will stay on long enough to finish the process step once you start it. Otherwise you end up with ruined materials and possibly, with some processes, wrecked equipment. Given the vagaries of the wind, it might be impracticably hard to know when, if ever, to start up - or occasions when sufficient certainty can be had might prove too infrequent to support having the equipment in the first place.

Well that would be why I said "Many" processes, and not All, for starters.. and clearly it requires a design approach that understands this point from the start.

If it's simply preheating a thermal mass, of course this isn't a problem at all, since you are simply feeding a storage medium, and if a given process is specifically depending on it, then (clearly) you have to set it up with triggers that proceed with the process when 'enough' heat has been gathered. Beyond that, there can be processes that would simply function at varying speeds, depending on the energy available, or would have certain backup supplies of fuel to offer follow-through, or would function within a fairly short 'burst cycle', and the control systems would be gauging just how many cycles ahead they are 'charged' for.. with expected forms of 'follow through' storage such as flywheels or capacitor banks, etc..

Beyond all that, there are wind patterns that come fairly consistently, and so these vagaries aren't quite as mysterious as they're often painted to be.

The point remains, a manufacturer or energy customer who can find ways to take advantage of intermittent energy has a clear advantage over those who are stuck relying on an unvarying supply that is delivered at varying rates.

One also has to remember that many of those processes were designed around abundant, cheap energy. So what if the oven doors leaked heat. So what if the walls were way too hot to touch. Hours to warm up, no problem. It is not just homes that have to address using energy efficiently. With many existing plants a night time pre-heat would be lost by the morning. With efficient insulating that would change. As well as using cheap, overnight power they would use less, a double benefit.


I often worry that the US has chosen a bad policy path with regard to our system for generating and delivering electricity to the end users. The US has adopted policy that emphasizes the use of minimally-regulated markets. Dispatchable power becomes more valuable in a that situation as the time between order and delivery increases. A wind farm can make reasonable promises about the power that can be delivered in the next hour; still somewhat reasonable for power for a particular hour the next day; but it's a pretty random guess as to the amount of power that can be delivered in a particular hour next month.

Other countries have adopted priority dispatch rules for wind power. That is, subject to grid congestion problems, over short time periods available wind power is dispatched first and other power sources are forced to throttle back. In November 2009, this type of rule made it possible for Spain to use wind power to meet just over 50% of the total power demand during some overnight hours. In addition, almost all the wind power generated in Spain gets dispatched (less than 1% does not, IIRC).

Theoretically, the US market approach could get results similar to Spain's if all power were purchased in short-term markets (eg, only an hour ahead). However, analysis of California's debacle in the early 2000s suggests that if all power is purchased in a short-term market, you get extreme volatility in prices unless there is substantial excess generating capacity. One of the fundamental things enabling the kinds of misbehavior that occurred in California was a drought in the Pacific Northwest that took large amounts of generating capacity out of the California market. The Cato Institute, as pro-market an organization as you're likely to find, has concluded that the overhead costs associated with making short-term power markets work make the market solution no better, and quite possibly worse, than regulated vertically-integrated utilities.

Perhaps the abandonment and sinking of oil rigs has become or soon will be a thing of the past-scrap steel in large quantities is worth megabucks today-and it seems to me that it would be quite profitable to tow such otherwise useless old rigs to a scrap yard-copper is now around three bucks a pound,and there must be a lot of copper wiring, motor windings, etc, there to be salvaged.

I know. I thought that too. Why don't they collect all that steel? Seems like a waste to me. Some say it makes artificial reefs for the fish.

I've always dreamt ob buying my own decomissioned oil rig and build a sea side castele for me and my friends on it. With a heli-platform! Would be ultra cool. How much do you think you would have to pay up to get one of those who would have been sunk otherways?

A new meaning for "sunk cost" eh?

I've always dreamt ob buying my own decomissioned oil rig and build a sea side castele for me and my friends on it.

You could even start your very own micronation and declare yourself king.

@oldfarmer, I personally toured a company in Louisiana that built and decommissioned offshore rigs. Unfortunately because of the psychotic way the EPA does things, a rig that was built on land, towed out to sea and comes back is now treated as if it contains hazardous nuclear waste. If they repair something and send it back out, that's one thing, but if they try to cut it up for scrap, it is now in a totally different category, and the EPA ensures that there is NO ECONOMIC WAY to do so. Whether they do this out of malice or misbegotten concern for our welfare I'll never know, but I have my suspicions. Companies aren't stupid, but government regulations and bunglecrats often are. There's your reason they sink them offshore instead of properly salvaging them.

Well, it's that 'misbegotten concern for our welfare' that makes this unfortunate blossoming of bureaucracy such a complicated mess. There is real reason for concern, of course. We've been suffering from the byproducts of casual treatment of industrial waste for a long time. Unfortunately, the overreaction is not just built on pure imagination. BP, Valdez, Bhopal, Love Canal..

There are a couple projects here in Maine that have shown some hopeful signs of Gov't, Business and Nonprofits working together at the table to find a middle-path. (This is the one I'm involved with, ATM.. , power company, Penobscot Nation, Enviro. Groups, Commercial Fishing Community and State Agencies.. )

Here's hoping for reasonable people meeting somewhere in between!


Ok Bob, I'll bite. At what time does a ship become industrial waste: When built, when floated or when decommissioned?

The EPA is not helping us when they turn these ships into sunken waste heaps. Which is worse, dealing with the metals on land or under thousands of feet of water? Do the fish enjoy higher iron concentrations? What makes the EPA act as if it is so hazardous now? Bhopal on your list above is specious, obviously that is in India so EPA has no authority. Nor were they involved with any of the other problems until AFTERWARD. Did they contribute ANYTHING WHATSOEVER to the solution? I leave that for the intrepid reader to decide for him/her self.

I do not claim to be an expert on this, so consider my recollections as iffy. We are sinking these derelict rigs in order to create marine habitat for critters that live where it is done. Like a coral reef, the sunken rigs, and ships I suppose, will be colonized. We could be seen as making amends to the denizens of the deep by replacing some of the reefs we have destroyed.

At one time, the Earth's oceans contained much iron... which combined with free oxygen to form rust, and which precipitated out onto the sea floor and formed iron deposits that we mine today. So, I don't think the iron will have any enormously harmful impact, and that the benefits outweigh the possible negatives.


I live in Hollywood Florida and the Tenneco Towers are oil rigs that were sunk for the purpose of making artificial reefs and are just a few miles from where I live. I have dove them, a really nice dive if I do say so myself.

I mention the 'celebrity' industrial waste stories because they have all added to the public and government knowledge of the dangers that have been exploited by the energy and chemical industries.. here and there. EPA might be stuck in its narrow jurisdiction, but noone is fooled to believe that stops Union Carbide from doing what it did with impunity on distant shores, leaving us all to wonder what other transnational firms (BP) will get away with here. so it's not specious, I'd say.

Honestly, I don't disagree that the bureaucratic response to this familiar predicament will frequently be ineffective or even counterproductive.. but in part these regulators are stuck with 'putting good money after bad', trying to clean up our messes after we've had a century of spilling industrial wastes that we until recently trusted the earth to just 'take away' for us.

As we are seeing with BP right now, or Massey Energy and Entergy at Vermont Yankee a few months back, there are clear and repeated instances of hiding the messes, of ignoring warnings or denying complaints that are feeding into this hostile environment against accountability and public trust. It's a vicious circle in so many places, which is why I've pointed to situations where once opposing groups may be all swallowing some pride, and are sitting down together to start the difficult business of finding a series of compromises, instead of an endless stream of Tit for Tats.

It's easy to blame 'the other guy' .. I see our kids doing it all the time. As OCT was saying earlier.. 'we need the grownups to start leading the discussions again.' and we need to BE the grownups we want to see in the world.

There must be some de-regulated nation some place with no standard what so ever to have them scrapped. They can do so to operate ships that are to old. Why not to scrap rigs?

Both India and Bangladesh do a lot of work scrapping old ships. I do not see any reason why they could not do the same for old oil rigs. Of course the workers are on starvation wages, and there is no EPA, so this enterprise could be quite profitable.

And they work with hand tools like sledge hammers. And when they die (in hundreds every year) the workers families get no compensation. There must be loads of money in scrapping the rigs there.

Well too bad we throw stuff away the way we do. I'd bet the higher value items are stripped from the rig and reused by the company.

The remaining steel, if it is toxic, which is hard to believe, but I have to believe your word or the EPAs classification, should be processed and used again on other such rigs. But I am not a "bunglecrat" I guess. ;-)

Interesting and relevant comments all on scrapping old rigs and other infrastructure-one more way of looking at this is that our regulatory apparatus-meaning the govt in general- has gotten so big and so disconnected from reality that not only does it enact policies that result in waste and likely MORE environmental degradation occasionally, but that the various regulatory authorities enact incredibly short sighted and contradictory policies, the left and the right hands each being totally ignorant or callous as to the stated mission of the other.

Perhaps they should all be locked up together every year os so and not allowed any food opr drink or bathroom privileges until such time as they send out an outline of thier proposed new unified regulatory rules that meet with the approval of a select committee of us Oil Drummers.

But we shouldn't be surprised -after all, lots of environmentalists with their hearts in the right place but their heads in cuckoo land are unable to recognize that we can't deal in absolutes.

Sometimes we must simply accept that a wind turbine will kill some birds, and get over it, given that the alternative, as a practical matter, is to continue bau and kill many more birds, as well as other creatures, someplace else.

The first order of business , in any organization, or at the individual level , is to preserver, protect , and if possible, to grow-either the organization or the career.

So on the last big welding job I worked on, the foreman wanted me to move a considerable quantity of very heavy scaffolding by hand a hundred yards across a parking lot in hundred degree heat and high humidity, and then up four flights of stairs, by hand , to work a half an hour over an opening in the floor-this would have taken a day at least,probably longer, but cost was not considered-going by the book was the only consideration on the foreman's mind.

Fortunately I knew the job superintendent well, and he was more than willing to listen to my analysis of the job-which was to use a ladder and a safety harness, which we did daily, fifty or sixty feet up or higher-a fall was just about certain to be fatal from that height.

So he "held me over" for an hour after everybody else was gone, and pulled my fire watch for me.Of course nobody said anything when they saw that the super signed off this work order personally.

Fortunately, this engineer was smart enough to realize that the chance of me dying from a stroke or heart attack,or suffering a serious injury, such as heat stroke, moving all that scaffolding, was many times greater than the chance of me falling off a ladder , when properly harnessed and tied off.

I have been high pressured to drive to work by a supervisor who needed me badly at a time when the roads were so bad that the chances of actually getting there were vanishingly small-but the chances of having a bad accident were extremely high.This same super was in the habit of writing up every chickenshit safety violation on the job, but perfectly ready, even eager, to get me killed on my own time, and at my own expense, on the way to work .

Such is humanity.

Hi OFM, great story! May critical thinkers win the battle with mindless rule followers as often as possible.
Been there a few times myself.

In a National Lab, like Argonne National Lab, you need to take a training course to certify your ability to climb a stepladder. I have a someone working at Lawrence Livermore National Lab and he needed to get a full body scan to get into that place ;-) They don't let you onto the premises until you have a detailed background check.

I am right there with you guys. The rules are too steep in some cases or they are not coordinating objectives. Save the resources in a responsible way.

There may be some controls or other chemicals that are used in the oil rig that have a little radio-isotope in them. Smoke detectors have Americium for example. This government does panic over the isotope issue. We are not talking about nuclear fallout or anything. It should be that those bits can be checked for radiation levels and dismantled to allow the good steel to be recovered. The geiger counter would be a great tool in this instance.

Good news:

Texas Company Will Recycle Offshore Oil Platforms for Wind Turbines

Wind Energy Systems Technology (WEST) will use old oil platforms to support new wind turbines. Herman Schellstede, CEO of WEST, holds sixty-seven U.S. patents and ten international patents, and is a naval architect and marine engineer. His partner, Harold Schoeffler, is a longtime Louisiana environmentalist, having co-founded Save Our Coast. The company is presently engaging in wind monitoring activities, shown in the picture at left. Still, I haven’t seen any announcement of any turbines actually being built on these recycled oil platforms. Wired has a nice story with great visuals dating from Feb. 2007. If anyone has more recent news, please comment below. Remaking old oil platforms into clean energy sources is a beguiling idea, but it would be even more charming to actually see wind turbines producing wind off the coast of Texas.

AND there are a lot to recycle. Look at this map.

Maybe there is a little hope on the oil rig recycling front.

This company says things are booming:

I've seen those radioactive sensors ontop of boiler towers at paper mills. But what I can't see is what is the problem? Send in trained technicians to remove them upon decomission, then just scrap the plant/rig once they are properly removed.

All things mined have low level radioactivity which accumulates in sludge and in scale deposits on the rigs. Just like coal ash.

So that is one of the problems with radioactivity I understand in these oil rigs.

@all, I wasn't addressing radioactivity per se, just that the onerous regulations in place for salvaging metal made it SEEM like radioactive waste. Note that the vast majority of steel from the World Trade Centers was shipped all the way to China so we could buy it back in consumer goods. No one can tell me it was more economical to collect and ship all the way there than to Pittsburgh, but add in expensive regulations and that is easily possible. Now we just have to MINE the steel all over again, and at what environmental impact? Anyone remember the old Bureau of Mines? They were shut down during the Reagan administration when it was discovered that 1/4 of their budget was consumed in lawsuits with the EPA. From an economics viewpoint, the wrong agency was closed down.

Oldfarmer hit it right on the head. The bunglecrats are operating in silos and are incapable or unwilling to look at the big picture. Even where I live, which is flyover country hundreds of miles from any port, our community has an excellent recycling program for collecting aluminum etc. Unfortunately, when I dug into why the system was so costly even though scrap is at record highs, I discovered that WE ship scrap all the way to China, because no one can profitably PROCESS the scrap in this area. Therefore the value to the scrap is say, 70 cents a pound for aluminum MINUS shipping costs to get it to the coast and then on to China or wherever. Unfortunately.

Those who have read my posts on this site know that I have pet peeves against the EPA. I live 70 miles away from an EPA superfund site that they have NEVER DEALT WITH AT ALL, but they've spent $10's of billions along the way. They destroyed numerous employers, destroyed thousands of jobs and haven't moved a single shovel full of dirt. What the hell good are they? Their budget is too large, their accountability too low, they are reactive and constantly seek more power and budget. They are literally drooling at the prospect of "regulating" carbon, that gets them EVERYWHERE, in everyone's business and I heard a talk by their second in command bragging about the 100's of thousands of new employees they were going to need. The big picture view says they will sink our economy, but their myopic view says they will be the largest federal agency before they are done, therefore the most powerful federal agency. Too bad their lawyers won't help us when the shooting starts.

One could look at the skies over Chinese cities and contemplate a trick that they are employing in China: reduce or eliminate pollution controls to gain near-term edge in production.

No one can beat China with its cheap/younger labor force and minimalist pollution control standards.

Hard to think what we could/should do about it.

We could have the EPA relax the clean-up standard on these waste sites including oil rigs and nuclear (low level contaminated) metals. That would be smart but of course limited by the BAU government model we have.

Another way to help these things along, I try to buy products made from recycled products here in the USA to make sure that our manufacturing objectives are supported. One company is using polypro #5 plastic to make pretty nice plastic ware which my wife likes.

My kids play with some toys made from old milk jugs from a US company also.

A drop in the bucket but worth considering.

But regrettably these recycled things tend to all make their way to China. I expect with rising fuel prices mean scrap may remains nearby but that is based on declining steel imports only.


Great post, as ever.

But I think we need to look again at assumptions in relation to discount rates.

The fact is that there are literally trillions of $ quite prepared to accept at or near zero interest 'risk free' rates which, with inflation, actually give rise to negative real returns. If Japan is any guide - and I think it is - there will be no exit from zero rates within 20 years if ever.

As the Scottish Futures Trust (a non-toxic quasi public investment bank) puts it, there is a difference between financing of new productive assets, which is short term and high risk; and funding of productive assets once complete, which is long term and low risk.

If assets are publicly owned and used then the long term - virtually 'risk free' - real return from funding such assets these days is undoubtedly 1.0% or less. eg UK's Wessex Water utility a couple of years ago raised a 50 year loan at 1.49% index-linked, and they have (some) political risk.

The return from development financing productive assets will typically be higher, of course, but the problem is that historically the bank credit used for the purpose is 'hybrid' in use with the same rate applying through both the periods of development and operation. This has clouded the true risks and given rise to unrealistic expectations on the part of investors.

I believe that it is now straightforwardly possible to 'fund' completed energy assets simply by creating and selling to investors Units redeemable in payment for energy. There are many $ billions invested in energy markets through ETF and ETC funds which receive no return - and are being pillaged by the currently entirely dysfunctional energy markets, both physical and derivatives - who would be only too pleased to invest directly in energy production in this way.

Unlike 'unitised' renewable energy or energy saving projects, a conventional non-renewable carbon fuelled plant would have to enter into risk sharing 'tolling'/partnership agreements in order to fund themselves by 'unitising' energy in this way, eg with fuel suppliers, managers and other costs. It would also be necessary to cover maintenance/depreciation costs, and decommissioning costs.

There was an interesting historical perspective - A Farewell to Alms - a couple of years ago from Gregory Clark. In his economic history he demonstrated that the(real) return on 'risk free' capital had fallen from 25% pa in Babylonian times; through 10% pa in medieval times and 5% pa at the dawn of the Industrial revolution and has kept on falling since through 2.5% in 1900 or so.

The world is now awash in financial claims over productive assets (aka dollars) to the extent that the risk free global market rate of return may even be less than 0.25%. It follows that this would be the discount rate that should be applied to long term 'funding' of energy assets, as I see it. If investors require a higher rate of return , then they must take development risk by financing new assets.

That is a brilliant analysis, Chris. Thank you. I've long suspected that "investment capital ain't worth what it used to be", mainly because there is now so much more of it chasing fixed opportunities, even after factoring out inflation and all risks. That concept needs to be taken home to owners of capital.

What is the key difference between this analysis and engineering economics?

It seems like a recapitulation of the same math using energy units instead of monetary units.

One of the economic factors that doesn't seem to be taken into account is the scarcity value of a consumable resource. For example, once a particular vintage of a grand cru has aged several years and established its reputation for greatness, the owners of that vintage can anticipate a rise in the price / bottle over time. While some of the appreciation may be due to further improvements in quality with age, much of the appreciation will be due to its increasing scarcity as bottles are consumed. The price would also be affected by externalities, such as the number of people weathly enough to want wine at the going prices.

I think you mean the scarcity rent, based on the scarcity value (which is one sort of resource rents), right?

In fact your example of an old wine follows the special rule of a veblen good (i.e. people want more of it *because* it gets more expensive) - unlike normal goods which follow the law of demand" (i.e. people buy more if things get cheaper).
Generally, the veblen goods can only be "luxury" goods that people don't really need and not basic goods, which people do need (like fuels, basic food, water). This is interesting, because for example the price of oil, which is now a primary good, cannot rise above a level that the world's consumers can afford. Only when oil eventually has been substituted by other resources, and thus has become a true "luxury" good there will be no limit for the price of oil.

Yes "rent" would be more correct. If one owns an oil field where a barrel of oil can be produced at a cost of $40 and sold for $75, the difference of $35 is technically a "rent".

Oil would not be a veblen good (except maybe in the case of owners of very large motor yachts, where the cost of fuel certainly helps keep out the riff-raff). However, it is an input to a highly diverse set of sub-markets such that the rising cost of oil as it becomes more scarce will mean the collapse of volumes in particular sub-markets. For example, power boating and recreational vehicle fuel usage is much more price elastic than railroads.


Thank you for your economic analysis. In purely physical terms, the energy required for transportation is dependent on process reversibility, which is also a measure of friction. One may travel faster while with less power by making a smarter vehicle choice. Aircraft and oil tankers are far more thermodynamically optimized than our automobile fleet. Most oil is moved very efficiently, only to be squandered at the point of use in an oversized personal vehicle. I especially liked your reference to Zhahavi, which seems to explain the SUV craze.

However this is solely a physical perspective, one that ignores biology of time preference. Once humans with finite lifespans and cultures with sunk costs enter the picture, a BTU today, behaviorally, becomes worth more than one in the future. This fact has pretty big implications for biophysical analysis of energy alternatives, which will be explored below.

This is quite an assertion, Nate! To me it seems to embody the very question we are supposed to be thinking about. It quite obviously holds true for some people at some times, but I don't think there is any underlying, broadly applicable fact that can form the basis of any kind of a thesis. Many people live more for their children as part of a continuum than as hedonistic engines of present-day consumption.

I agree that as choices are removed and basic needs are put in jeapardy, that the focus on the future as a continuum is overcome by the present. I've worked in refugee camps where hundreds of thousands of people are thinking of nothing except finding somehting to eat, and obviously the same would hold true a heat source. A BTU now means I live for another few minutes. A BTU in a few minutes means I'm already dead...I get that.

But I don't think placing the debate in a context where no real choices remain is very useful - only where some range of choice remains available will discussing behavioral patterns have any use at all, and hence I don't think the idea that humans are "present-centric" to the point of systematically "wanting" to burn their children's inheritence is a useful or even a justifiable starting point.

Interesting post.
Intuitively it seems to make sense that energy has a time value component. The direction of the value of that time value component has several underlying forces.
On the individual level discounting (even energy) makes sense because there is a greater than zero possibility that there will be no tomorrow. Collectively however one can make the case that future energy consumption has more value than presently because of increased efficiencies, technologies etc and therefore one should apply a negative discount rate.
I noticed that the energy extraction technologies with heavily frontloaded expense structures behave differently from technologies with more ongoing expenses. Is that a function of NPV netting (between expense and revenue)?


I noticed that the energy extraction technologies with heavily frontloaded expense structures behave differently from technologies with more ongoing expenses. Is that a function of NPV netting (between expense and revenue)?


Collectively however one can make the case that future energy consumption has more value than presently because of increased efficiencies, technologies etc and therefore one should apply a negative discount rate.

One can and many do make that argument (e.g. Stern - Climate Change report). Part of the point of my post is it there is a difference between what we 'should' and actually do. And I expect that difference will widen not narrow, if economies/societies become more stressed.

Exellent article, Nate. But I find there are quite a few points to be discussed: which maximize their flow rate of energy survive in competition.

This would suggest that evolution leads to species that are consuming more and more energy - increasingly turning the biosphere into a hot pot of popcorn, whereas all "slow" species die out. But this is not the fact: There is still a huge amount of niches left for sloths, reptiles etc. In fact our planet stays a "biotope" for all sorts of life speeds.
All in all, in nature overall efficiency counts - and what is most efficient depends on the specific niche.

The same applies for the human example:

Airplanes get us to our destination much faster than cars or trains, but are less energy efficient per unit distance travelled per passenger.

This would mean that people movement increasingly change from walking --> cycling --> driving --> flying. This was indeed happening all over the world until recently. However, since a few years at least in many places of Europe there is a backwards trend: People drive less and go more by biclycle. For example some of them have learnt that under the bottom line cycling is more economically efficient for them, as the cost for driving is much higher than the value of the few minutes of daily time saved.

Humans prefer present over future consumption in most situations...The behavior of discounting future returns has an evolutionary background

Sure. But the background is not only evolutionary or psychological, but also plain rational: In economics, discounting is an important element for determining the present value of an investment, which depends e.g. on the comparision with alternative investments (opportunity cost) (see e.g. Wikipedia at Time value of money

Most organisms in nature do not live as long as their biological potential.

Yes, I fear that individual lifetime is a problem, that poses a limit to our foresight and planning for a sustainable world. For example studies show that according to the rules of investment planning (see above) most homeowners in Germany should add a thermal insulation when renovating their house's facade. But in fact only few do. According to a homeowner association this is why many homeowners are already quite old and don't like to invest into something that doesn't amortize during their lifetime. This means: They don't care about the long-term economy that would pay off for their children (if their heir the house) or of those who would buy it - let alone other sustainability effects, e.g. the effect on global warming.
Interestingly, even enterprises, which are supposed to know about the investment calculations mentioned above, are reluctant to invest in thermal insulation although it would pay off on the long term. Instead they only look at the payback period - which shouldn't be longer than a few years. According to scientists this method is rather appropriate for a risk-based approach - which is appropriate for investments in a very uncertain environment (e.g. "I don't know how long my enterprise can survive here - so I should get my money back as soon as possible"). This sounds like a sad hidden message from our industry.

The sloth example had also occurred to me. The actual tendency is for species to multiply and become optimized for smaller and smaller ecological niches so long as the environment and resources are more or less in a steady state. This continues until some environmental change or extrinsic event reorganizes the ecological system back to lower complexity.

Here are few more comments:

Discounting is a topic being discussed among scientists in many topics of sustainability. For example this year a big report has been issued about the monetary value of biodiversity (The Economics of Ecosystems and Biodiversity - TEEB). Surprisingly to me, many scientists think that the monetary value of a deteriorated natural environment can be discounted with time: they expect that in future mankind will find technical innovations to deal with the challenge of dealing with the deterioration. However I think that also a "negative" discount rate should be considered: Our environment can become so stressed leading to increasing shortages of energy, arable land, water, food etc. that the value of the remaining resources will increase - including the value of a healthy environment. Sadly, still few of the experts involved seem to have the broad view to see the challenge...

As for the Time Value of Energy I think we shouldn't forget a speculative aspect:
The future value of an energy resource (or an energy facility investment) depends very much on the question if the supply of a resource is (almost) unlimited (e.g. renewables or fossil fuels from a cornucopian's view) or if it is limited (e.g. fossil fuels from a peakist's view). In a limitless world the investment rules mentioned above, which apply a (steep) discount rate apply - this is for example how the UK plundered its natural gas resources during the past few years. However in a world of limited resources a different rule applies: Hotelling's rule, which determines the maximum rent that can be obtained while emptying the stock resource. It shows that in an efficient exploitation of a non-renewable and non-augmentable resource, the percentage change in net-price per unit of time should equal the discount rate in order to maximise the present value of the resource capital over the extraction period.
This also means that it may be worthwhile to stretch the resource extraction as the price paid per resource unit may increase with time. This is for example how the Netherlands manages its natural gas resource extraction - and perhaps also Saudi Arabia its oil wealth.

that systems which maximize their flow rate of energy survive in competition.

This principle does seem to apply to agriculture and forestry. In particular, these economic endeavors have evolved by restricting the species employed to those which maximize the flow of energy into products useful for shelter, fuel, food, fiber, and so forth. Nonuseful species are excluded by mechanical means or by the use pesticides so that they do not compete for sunlight, as well as for the water, nutrients, and other resources needed in order to most advantageously convert sunlight to economically useful products. Species which might cause disease or feed on the plants are also eliminated. Meanwhile the species which are useful are themselves selected for those varieties which do the energy conversion most efficiently.

Thus, forestry and agriculture demonstrate that less biodiversity is better from an energy economics perspective.

However in a world of limited resources a different rule applies: Hotelling's rule, which determines the maximum rent that can be obtained while emptying the stock resource.

Great comment D. I don't think one can really do a good job of determining future value for things that we are running out of, or that compete against things we are running out of. We just don't know how the price trajectory will play out. I also don't think those making the investment (or not) have sufficient market power to control the price either.

Also as Nates graph about individual versus societal risk implies, the return on investment calculus looks differently from the perspective of society as a whole, versus the investor. Unless
externalities both positive and negative can be priced in, the two may diverge. If they diverge
in known ways, then the case for some sort of public (government) intervention can be made. Clearly
applying high discount rates like the oft quoted 15%, unless the risk is very high, is not going to produce a desirable result (optimal buildout of appropriate technology).

It is possible, in fact common, to deal with increasing value of the resource in finance, but it is done in the cash flow portion (top) of the equation, not the bottom (denominator).

If you forecast increasing energy prices, discounted returns could still increase, even if the discount rate was applied. However, it would take a large price increase and or big profit margin for this to overcome the impacts of a discount rate anywhere near 10 percent.

In any case, it would not result in. A negative discount rate.

Hotelling works under conventional economic times, when price acts as accurate signal and 'maximum power' in the social sense is not maximizing energy (because there is plenty of it) but the proxy for energy - profits. Basially Hotelling works under assumption of rising price which was only the case for last decade - not the 20th century trend and probably not in the future. Costs will certainly go up as extraction becomes more difficult, but prices? I'm not so sure. Yet another juxtapostion of monetary and biophysical perspective.

The other aspect which is counterintuitive (and I didn't include it in this overview post) is that in a demand collapse scenario (due to twin engines of economic growth - cheap energy and cheap money both leaving the scene), much of the new long term energy infrastructure may not be used -therefore the 'proforma EROI' of such investments would be overstated (the later years of payback might not have demand for them).

Costs will certainly go up as extraction becomes more difficult, but prices? I'm not so sure.

So you mean that profit margins will decrease for oil producers due to the overall economic deline, Nate? Otherwise please explain.

I agree that the complex situation of a post-growth economy (including demand collapse) will make price predictions even more difficult: In a booming world economy (like in 2008) the oil price may rise to USD 150 per barrel and more, whereas in a crash economy (like in 2009) it may be as low as USD 40 per barrel. It would be more elegant to use the relative parameter "ß", which is the relation between the oil price (op) and the specific purchase power for oil (products) (ppo).

ß = op / ppo

To determine the specific purchase power for oil may be a new task for research, as I don't know specific data for this - although some work has been done in order to determine the demand elasticity (which is pretty low).

For example some of them have learnt that under the bottom line cycling is more economically efficient for them, as the cost for driving is much higher than the value of the few minutes of daily time saved.

Yes, this can be an issue. I can remember, back in graduate school in oil-crisis days, a few of us amusing ourselves by calculating a 'net effective speed' for means of transportation, by way of adding in the time to earn the money to the time required to do the trip. So, let's say, if one drives 10 miles at 30mph and this costs $5, then at an after-tax wage of $10/hour, the effective time would be 20 minutes to do the trip, plus 30 minutes to earn the money, or 50 minutes, yielding a 'net effective speed' of 12mph. (European readers can recompute in SI units. But is a 'kg of diesel' really a proper SI unit?)

Like any simplistic analysis, this gets us a ballpark number but it also suffers from some defects. For one thing, useful jobs in most countries come in one size, called "full time", since part-time wage rates are usually derisory. So it would oftentimes be impracticable to retrieve the 30 minutes spent earning the trip by working less. For another, a certain phenomenon called "winter" is encountered in northern regions. It greatly diminishes or even eliminates the utility of bicycles, and strongly discourages waiting around indefinitely for municipal bus drivers too lazy to keep track of the time, or sometimes even to show up.

But I was in graduate school when oil was very, very cheap in chicago a very cold northern city in the wintertime and I biked yearround, every day in snow, sleet, rain using a bike with thick tread. Not a problem if you are biking on well cleared streets of course. Of course you bike slower but you bike nonetheless.

You can even put studs on your tires. Not a problem at all.

Of course without street clearing of snow no one gets anywhere unless they walk or take a train in which the rails have been cleared of snow.

But I was in graduate school...

Well, yes, so was I. And people do all kinds of crazy things in college. However, the keypost here is more about broad society than about some outlying minuscule niche. For example, once people have kids, the costs of even a fairly minor injury become much more serious - so if they're still biking around in the ice and snow, the relatives will 'set them straight': "what are you thinking - how can you do that when you're responsible for those kids?" (In one hard case, I did suggest studded tires as a means of mitigating the conflict, which the relatives duly gave as a Christmas present.) For another example, people are not young forever; as the muscles and tendons stiffen and the bones grow more brittle, they tend to become more risk-averse.

Oh, and more broadly, you can't train people into permanent abject hyped-up fear over bazillion-to-one risks, as all 'developed' societies now do, and then turn right around and expect significant numbers to bike around in ice and snow. It just isn't on.

Not a problem if you are biking on well cleared streets of course.

And therein lies a rub. In the depths of winter here in southern Wisconsin, city streets might be 'well cleared' on about one day in three, if that. On the first day it snows. On the second day they get it plowed, but only if it exceeded three inches. On the third day, if it's not too cold (good luck), and if it got plowed (good luck), then the streets might be somewhat clear, otherwise there's plenty of packed, rutted ice. On the fourth day, it snows again. Rinse and repeat from very early December through mid-March.

Right now, firmly rooted hard-edged patches of rutted ice wait almost everywhere to tramline would-be cyclists into doing the noseplow or something of the sort. So I stand by the statement that the utility of the bicycle is greatly diminished. It simply can not serve broadly as wintertime primary transportation in the here and now, irrespective of what might or might not come true someday in just the right doomer scenario, and irrespective of what a handful of college students might do.

And good luck biking in London-Sarnia, Ontario area this week, just a bit due east of Wisconsin. A blizzard with about 1.5 meters of snow and 50 kmh winds has had the 402 freeway closed for several days, hundreds of cars stranded, 300+ people needing to be extracted by helicopter and snow machines. Many stranded in doughnut shops and golf course clubhouses etc.

There's 4 to 6 months a year when biking would simply be suicidal on a "you'll be stranded out there all night" basis, and not much further north west, with -30 to -40 degC "without the wind chill factor" weather, locals would simply offer you last rites in advance of your venturing out.

I also understand however, that Chicago can get some nasty weather, eg. worse than Toronto. You'd be somewhere between a dedicated enviro and a maniac to try to raise a family with two babies with only a bike for transport there.

I do not want to clutter up this post at all, but you are posting the biking-in-winter problem. Wear a mask and a scarf and ride on home if you live close if you choose to. Why spread disinformation about biking -- like it is dressing down, dangerous, bad for society, or wrong?

Biking isn't for everyone, but saying that it is not possible when it gets cold is disingenuous to those that do ride bikes throughout the season. Using as your example, say somewhere far North is not very general to much of the US. Why live in all that snow anyway -- just joking?

I see biking as an important activity for fun, health and to save some money. I do bike my kids from work once a week (when my wife has a meeting) using a dedicated bike trail. It is a little work but it is fun for them so why not? I know society does not value bicycles and bike lanes or bike trails in all parts of the country/world but in my local society they thought to put in adequate bike/walking lanes using taxes (gasp the same ones they use for the roads and bridges).

It is a public good to promote exercise -- but it is a delayed gratification.

Call me a "maniac" or some other "enviro" pejorative for simply stating that biking in winter is possible in Chicago. Oh brother.

OK, let's pretty please not make ourselves stupid about this or any other niche mitigation that trades time, comfort, safety, or whatever else for energy savings (or in this case merely for energy-consumption postponement, since someone will eventually burn the accessible FFs, and in less than one CO2 lifetime.) Here in Madison, Wisconsin, which is colder than Chicago, as the big radio and TV stations in Chicago incessantly point out at this time of year, we have a New Year's Day bike ride (which I've done myself.) However:

... On New Year's 1975, for example, the weather was a balmy 45 degrees and all kinds of fit young men turned out. I got dropped on the way to Belleville. 1978, in contrast, was just below zero with ten inches of fresh snow We rode to Nakoma, had a whiskey, declared victory and went home. ...

That says it all, better than I did. When the target audience, as it were, turns out to be fit youngsters, and when even they may need to cut it off, declare victory, and go home, it seems eminently reasonable to conclude that one is dealing with a mode of transportation that the great majority can not rely on in wintertime. (Some places, of course, don't have significant winter. No problem for them. And the rhetorical point about "possible" is of course taken, but so what? It's "practical" that counts.)

Practical scalability of this sort is the issue I often take with folks who come galloping in waving magic wands on behalf of niche mitigations that, even all together in the aggregate, may not shift the Big Picture very much. You even said it yourself: "biking is not for everyone". Amen, and especially when and where there is winter. Let's simply call it supplementary transportation, declare victory, and go home.

For example, once people have kids, the costs of even a fairly minor injury become much more serious - so if they're still biking around in the ice and snow, the relatives will 'set them straight': "what are you thinking - how can you do that when you're responsible for those kids?"

I had done many years of hardcore snow mountain biking, most of it after I had kids. Biking on snow/ice is not dangerous, being on an icy roadway which
allows motor vehicles is however unacceptably dangerous! I never worried about getting hurt sliding/falling (got a couple of bruises in a dozen winters), but worried a great deal about out-of-control vehicles which might
hit me. For that reason I'd say commuting by bike is unsafe for over 99%
of commuter routes (i.e. any that mean you have to share icy roads with motor

I agree that riding busy streets is not a good way to go in summer or winter especially. Dedicated bike lanes are optimal and perhaps required for safe biking, hence they should be debated as a value-added benefit to society.

Find the least busy route and go that way. I biked via a park when I could on trampled or snow-blower-cleared wide sidewalks. It was the city--chicago--no one can drive much faster than 15-20 MPH with all those lights and stop signs. Kind of fun but slow going with winter biking. Don't turn too fast ;-) Not impossible. Not for everyone or all places certainly.

It was bad on chains and components -- but road salt is pretty bad stuff. After 5 winters there and 3 in Boston (equally wicked) the bike is still with me. In boston, I used to just walk to the T stop in the winter snow or rain, since I lived on a hill and it was only 1/2 a mile away. I could also bike to the T (subway system) and take it into the city. My cheapest, most-reliable mode of transportation, lasting 15 years now.

With decent public transportation and biking, you can do quite a lot with little quality of life adjustment from my personal experience.

That's an issue too - you don't want to be where cars are sliding sideways; the pavement needs to be fairly clear, which is very often not the case. And you don't want to slip and fall into the path of a motor vehicle. Oh, and right now, not long after a blizzard, there's yet another issue: chunks of ice still falling from trucks.

The gigantic ice chucks from trucks are brutal but they are discrete rather than continuous.

I would say that chuncky, pebbly beaten down ice is good stuff.

Black thin invisible continuous ice is what is truly dangerous -- do not turn fast when in doubt.

Chicago isnt Wisconsin but it is good fun winter riding at least. I liked it but I was in my twenties. In my fifties, I would likely walk for thirty or forty minutes. In my thirties-forties I may have still been riding if I lived in that neighborhood--saves a lot of time over walking. Parking is such a drag in Chicago. Walking and riding give you time to think and enjoy the air.

You mention practical and that is of course the question. How practical trades with the money for the second car? For me, I decided not to have a credit card bill to support a second car in Chicago. My wife had a little Honda and that was that.

One can usually find a way around an occasional chunk that's already on the road. It's the gigantic chunks that have yet to fall off the trucks, but might slide off sideways onto you as they go by, that I'd worry about :(

"You mention practical and that is of course the question... For me..." (emphasis added.) Exactly, and this is where in a sense we've finally come the long way round to the original subject of discounting. With both this subject and that one, there's a lot of gray area that can't be derived from science or econometrics, but instead, ultimately comes down more to subjective value judgments.

"I liked it but I was in my twenties. In my fifties, I would likely walk for thirty or forty minutes." Precisely. As they say, different strokes for different folks. And therein lies the rub with one-size-fits-all prescriptions. (And even more so with, for example, prescriptions that call for going back well into the peasant past with a population that, being far older and frailer on the whole than those who managed to stay alive back then, is for the most part no longer suited to such an existence.)

"outlying minuscule niche" ... "a handful" ... ok? I get it you think biking is absolutely useless. Good for you. I don't. To each their own. LOL.

It's a very long leap indeed from my "greatly diminished or even eliminated utility" in winter (when in plain fact I see only a tiny handful riding, as against far larger numbers or even occasional crowds in more hospitable seasons) to your flat-out, unconditional "absolutely useless". Let's simply call it what it is in regions that get snow and ice: supplementary transportation. No need to get all Manichean about it.

I concede. (white flag waves) Point taken.

You're not a retired Muni Bus driver are you? I've ridden many buses here and in NYC, and I've never met this kind of driver you seem to think is universal. Sure, the ridership can reintroduce you to parts of the society we are often shielded from, young and old folks, disabilities, minorities, 'Extremely Ordinary' folks, just off to get their shopping done.. but then, that's the point, isn't it?

We have winter here in Maine, too.. and the bikes are out there zipping around as soon as it's plowed.. and slipping around until then. Of course there's trikes and skis, too. All sorts of great options.

I grew up in NYC though I don't live there any more. Even in an outlying area with comparatively moderate traffic, the buses would often turn up in groups instead of coming regularly every ten or fifteen minutes like they were supposed to. Poor skill at timekeeping or pacing...

the buses would often turn up in groups instead of coming regularly every ten or fifteen minutes like they were supposed to. Poor skill at timekeeping or pacing...

It's a well known problem called "platooning". There are solutions, such as enforcing maximum dwell times and having buses slam the doors and depart without picking up all the passengers, leaving them for the next bus, but that upsets people unless they are given an explanation of what's going on.

Experienced commuters can institute their own anti-platooning measures by ignoring the first bus or train to arrive and getting on the second or third one, but that requires a little understanding and cooperation from the passengers. A flashing sign that indicates there's a half-empty train following 30 seconds behind the overcrowded one that just arrived helps considerably.

Here's an explanation of why three buses come at once, and how to avoid it

"You're not a retired Muni Bus driver are you?" No, I've never even lived in San Francisco. Is the Muni notably unreliable?

If the table of EROEIs is going to include decommissioning costs then it should also include CO2 cleanup costs. Therefore the EROEI for coal should allow for 80 or 90% carbon capture. However that works out it will be less impressive.

I think we struggle to think 5 years ahead let alone 40 years. If the human planning horizon is say 20 years then I think we should not discount in that period then ignore everything after 20 years. More formally that means the annual discount weight of (1+r)^-f(t) has f(t) = 0 for t =1,2,..20 and f(t) = ∞ for t = 21, 22... Thus r is irrelevant.

Alternatively, it could include the cost of damages of the CO2 during the period it is in the atmosphere.

Nate, an extremely important concept to have embedded in our thinking. If only we could get net energy embedded first. The Leon Herbert field example makes it quite obvious how this works. And it also explains why wind - so sexy with eroei of 20 - just doesn't work with our current socio-economic model, especially when you also penalise it for the costs of mitigating for intermittency. Pity Scotland's future has been nailed to this hope.

The subsequent chapter of my dissertation (which I'll adapt and put up here eventually) does exactly that - "Net Energy and Variability", handicapping energy gain for the costs from intermittence, etc. And yes, that drops the EROI from wind even lower (but sure makes hydro and natural gas look great).

To me I think none of this biophysical analysis will be recognized as important as long as organizations and institutions think money and technology can create energy. Though with the world private GDP already likely having peaked in 2004 (if you back out government), and increasing budget and fiscal deficits, net energy analysis and other biophysical metrics that measure our natural resources in natural resource terms themselves might start to be recognized as central. All we can do is hone in on what is relevant and 'more correct' in meantime.

Am looking forward to your next chapter.
Curious stuff electricity.
We accept very large energy conversion 'waste', say from coal base-load provision where around 60% (?) is wasted, in exchange for a non-storable energy source where the only 'storage' is provided by a large interconnected grid infrastructure. (Yes, here in UK, natural gas (NG), which is storable up to a point, is used for the controlled intermittent generation needed to match variable demand). We even accept the costs (we have existing infrastructure) of moving coal from the mine-mouth. A percentage of around 30% (?) of UK electricity is thus supplied by Russian coal.

For NG, a large consumer region and a very large supply (for normal discounting = 'infinite'?) will attract infrastructure pipe lines, but Jerome a Paris has explained why many proposed pipelines actually will not be constructed, and that is under recent financing methods. Much NG remains as stranded assets.

Scotland has had much of its industrial landscape central belt de-commissioned and/or redesigned round natural gas and oil in recent decades, while we continue to live in Victorian and later houses built pre-oil/NG where the majority still have a legacy of coal-based 'town gas' distribution infrastructure. And we still use a significant amount of coal-based electricity.

Legacy infrastructure seems to shape investment opportunities?

For 'the future' though I contrast in my minds eye the rice cultivation terraces of parts of Asia (whatever the attendant pressures on those agrarian communities) and the perhaps ephemeral auto-city of Detroit?

world private GDP already likely having peaked in 2004 (if you back out government)

Why would you back out government?

Why would you back out government?

Economists would say that since government takes from the economy (in the form of taxes) their spending is not a net additive to said economy. The complexity is that governments can PRINT money, which works for a little bit until everyone catches on that the emperor is wearing no clothes. Then we end up with Zimbabwe, and soon to be: Greece, Ireland, Spain, Portugal, Italy, France, the USA and several others... :)

Economists would say that since government takes from the economy (in the form of taxes) their spending is not a net additive to said economy.

I don't think economists would say that. Just because a government provides a service doesn't make it not a net additive.

Now, some government costs are debatable - does the DOD add value? Some think so, some disagree. Does government road construction add net value? Again, opinions differ. Still, just because these things are done by someone with a government hat doesn't affect their value.

"Thus, the discount rate may be viewed as the rate at which societies implicitly signal their desire to turn a present energy surplus into an energy transformation process so that greater energy services can be consumed in the future, in lieu of their immediate consumption."

I have the same criticism here that I had of your work on "consumer" psychology: Where is your sociology? "Societies" are not merely aggregations of rationally calculating individuals. They have power elites and power structures composed of entrenched institutions. These things alter, often intentionally and at great effort and expense, the choices of ordinary people.

Indeed, I find it strange that a TOD leader posits that old reduction, homo economicus, as his core frame for analyzing human and ecological issues. What type of energy-use arrangement would people choose if a) the topic were a matter of serious democratic debate; and b) not hugely warped by overclass priorities and framings?

Nobody knows.

And isn't moving from here to there the very purpose of TOD?

Do people prefer comfort now to comfort tomorrow? Sure. Would they also choose to question and check that default preference, if matters were amenable to doing so? Maybe, hopefully.

I just don't see how recognizing the "discount" does much to address what needs addressing. Our problem is our institutions, as Einstein argued.

Nate's post raises some very profound questions, many of which tend to be dismissed by those wedded to the existing conventions and dogma of modern mainstream economic analysis.

As I see it, this all gets down to whether something available in the future but not in the present is more or is less valuable than something available now. Of course, present-value analysis says that a bird in the hand is worth at least two in the bush, and even more if that bush is a future bush. We want the goodies now, and let the future take care of itself.

But the question that gets little attention, and what this is really all about, is: Valuable to whom? A BTU generated in the year 2040 is worth nil to me and to present financial interests, but will be worth a great deal to my grandchildren, particularly when it starts becoming increasingly scarce. My grandchildren's BTU can be discounted in value to me now, but not to them, as MY FUTURE will soon enough become THEIR PRESENT. In which case it will again be time-zero in the present-value calculus.

An elderly couple planting a tree, fully knowing that they will never see it mature, is not doing it for themselves. They are not engaged in idealistic mush, but rather a highly rational effort to maintain the viability of our species, which is far more fragile than many of us would care to admit.

Short-term thinking is going to be our undoing.

Short-term thinking is going to be our undoing.

Unfortunately, not! Given what you've just said, it is going to be our children's undoing.

So if we really valued our children's future then a BTU in 2020 should be worth more to us now and if we acted like grown ups it would be.

Not sure if you said quite what you meant - if it's worth more to us now, it's perforce worth less later, so let's consume it now, or so it would seem. I'm figuring you meant the opposite. One of the issues in deciding when to consume the BTU is whether it will be easier to produce it now or in 2020. The standard answer is 2020, which implies that we can let the kids worry in 2020 about their own BTUs because they'll be having an easier time of it anyhow. (And after all, it's not really the obligation of the current generation to plan out the trajectory of humanity for all the rest of eternity.)

The problem, then, is not so much expressions of lofty sentiment about the childrens' future. It's more about being persuaded that both: (1) it will be enough harder to produce BTUs in 2020 that it's worth forgoing some BTUs now; and (2) that forgoing BTUs now will be an effective way to make matters easier in 2020. For better or worse, I doubt that a significant portion of the voting public is convinced of either proposition, much less both of them (vide the last US election.)

Yep. That is, less to us now than in the future.

In a world with a steeply declining "net energy for hairless apes" trajectory, a negative discount rate on anything durable & useful makes a lot of sense. Energy used to build infrastructure now would otherwise likely be just as wasted as flared gas. Then again, maximum power and high discount rate will probably wind up depopulating the apes faster, which might be a good thing from the point of view of other species out there...

RE: Short Term thinking..

and it strikes me again, as I tried to form a response to Michael Dawson above, that the people I watch are caught up in a system that has set the terms for them. People are trying to eat good foods, make decent economic choices, plan for the future.. but the Business model is so slanted towards profits from addictive behavior, from short-term 'I want it now!' products and approaches, that we have simply surrounded ourselves with 'Economically Legitimate' voices that echo this rallying cry, constantly, every day, really loud. There is SOME good information out there, you could blame the 'sheeple' for not reading more .. but with everybody working, and then self-medicating with TV/SOMA.. who has the time? 'Misinformed', .. ain't hardly the word for it!

My daughter is faced with classmates who have all the latest 'Collect them all' dolls and accessories, these kids are dosed with Sugary foods and Brightly colored junk. But the neighbors who are just trying to get by didn't invent this crap.. it's Highly Profitable, Highly Habituated behavior.. last year every kid in America needed to have 'Silly-bands', fun-shaped rubber bands, and they 'needed' hundreds of them.. just as the adults needed Iphones, Kindles and the Coolest Flavored Vodka, etc..

It's not just the Red States that vote against their own best interests.. we vote with our dollars, and the Trolls we are feeding are big ones, they're not the imps that buzz in our ears around here.. We feed them, and they feed on us.

Morpheus: The Matrix is a system, Neo. That system is our enemy. But when you're inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy. You have to understand, most of these people are not ready to be unplugged. And many of them are so inured, so hopelessly dependent on the system, that they will fight to protect it.

So do you think its better to prepare your children for the harsh realities outside of the Matrix? Already the Matrix is becoming very unstable, soon it will shut down completely for most of us...

I got rid of my TV in 2005 as a start and when my son is with me we spend as much time as possible outdoors. Typical afternoon in the park conversation might go something like this. There is a one mile circular path for joggers around the edge of this park, calculate the volume of a sphere to two decimal places based on that circumference and tell me how much an equivalent volume of hydrogen would weigh? Granted he is a math whiz and is taking chemistry but he can do it without a calculator. Then we'll go snorkeling out on the reef and identify sponges and corals or tropical fish.. Then we'll have a pizza before he goes off to play soccer with his friend.

Silly rubber bands?! Are you kidding me?

We're doing what we can to help our daughter notice the features around us that show that we're in the belly of the beast. Some of the media and books that do make their way home with her (2nd graders, here) are already laced with very loaded Sexual and Violent messages.. familiar cliche's about peoples' roles in the world, etc.. so we're very busy trying to give her a vocabulary that is both connected with the people in our community and small city, but also able to see the kool-aid for what it is. It's interesting, but when we're giving her the 'real dope' (as we see it), she pays attention. Kids are actually hungry for real information, and want to know how things stand, what makes it all tick.

We just found out that the 'Cheerios' that was the barely tolerable breakfast option provided in the school meals program was in fact 'Fruit Cheerios', and as you might have guessed, basically FrootLoops. Tons of Sugar and Untested preservatives and colorings. We don't even bring regular bread into this house anymore with some rare exceptions... but they're still serving Chocolate Milk in the schools.. and she comes home with a note about a possible cavity yesterday.. go figure.

Yeah, (sigh), 'teach them skills, let them learn analytical and critical thinking, and let them oppose you and object as they need to. Make sure they know themselves well, strengths and weaknesses, joys and fears.. and that they know who we are, and how we understand the world.'

She still has me skipping home from school. It's mildly embarrassing, but it's pretty aerobic, and very fun to be silly and laugh at the same time! I liked what Marylyn Manson said to Mike Moore in Fahrenheit 911 when asked what HE would say to the kids in his audience. Essentially, "I wouldn't tell them, I would listen to them.. they have a lot to say." ..

Excellent probes into Net Energy, Nate Hagens, sparking a number of really thoughtful responses… (If this is the new editing for more focus and less rant, I applaud it.) I will be chewing over the diamonds embedded here for many a night.

Without citing or acknowledging each contributor, let me try to focus a few thoughts—especially about discounting and, in Nate’s words, “the difference between what we ‘should’ and actually do….”

Start with me: an old guy with some funds and grandchildren. Peak Oil says growth economies are on a plateau and likely to head downward in the near future. Inflation has been built into money since the end of the Great Depression. But without growth, today’s digital money steadily loses value as the supply is increased to continue pumping hot air into the growth bubble.

(Example: Enroute to the latest Harry Potter flick with grandkids, a billboard advertised as a bargain four Krystals for $2.40. Half a century ago they were a dime apiece.)

So where to invest today’s money?

(Example #2: We gave our granddaughter a clutch of silver eagles for graduation in June. The going price was then just under $20. Today they are just under $30. An almost-50% return in six months ain’t bad. She’s impressed. But maybe that was just speculation, a well-timed bet against money, not really “an investment.”

So if I am concerned about survival and long-term energy availability for my grandkids, where do I invest my shrinking dollars? Look at Nate’s graphs.

Under short-term Net Energy accounting practices, solar collectors and wind generators may not have such a good payback. But suppose I had a family retreat that they all wanted to keep? Suppose I just bought several solar collectors and wind generators and a lot of the supporting spare parts and locked them away in a secure storage area.

In another half a century, if our over-expanded economies, societies and populations go through a painful contraction, and if we can assume that my heirs, or someone, managed to survive and hang on to take over the retreat property, undamaged and un-plundered, (a big assumption, perhaps) couldn’t the BTUs generated by this old technology in this greatly restricted future society be worth a great deal more to its users than (say) the BTUs we burned in our ICE-auto going to see a movie back in 2010?

Couldn’t the cheap, plentiful BTUs “stored” in these old-fashioned technologies (that perhaps in 50 years might be too “expensive” to reproduce) be worth more in the future? Couldn’t the BTUs produced—even intermittently—50 years from now, be of greater life-sustaining, life-enhancing value to those future folks, than the steady flow of electricity that we may thoughtlessly squander on piffle today?

We’re talking about worth and value here, not price. Much of today’s economic babble comes from those of whom it is said, “They know the price of everything and the value of nothing.”

So IMHO what we must begin talking about is investment in “credible assets.” These are situational, varying with time and circumstance. In extremity, a pistol, a liter of water, or a gallon of gasoline can each be worth more than a handful of rare coins.

All of which brings us back to Nate’s conundrum “expecting the difference between what we ‘should’ and actually do to widen if (or as) economies/societies become more stressed.”

Who is this “we?” The collective “we” (society) will continue BAU for far longer than is wise. So Nate is correct. But individually, “we” do not have to absorb every painful bump as the BAU mob drags us all down the bumpy road.

When a society is stubbornly foolish, then aware individuals must “look out for their own.” An intuitive understanding of Net Energy, coupled with a realistic and historical understanding of the drift of the world, can give anyone who is paying attention a leg-up.

Change must start at the individual level. It will not come top down. All true teaching is by example.

So keep on plugging, Nate Hagens. Net Energy is the key. And you (and your colleague) are asking the right questions.


Nate and his sort will be thought of fifty years from now in the same fashion as we think of the founding members of the modern environmental movement.

In a hundred years, a hard sciences professor outlining the history of our civilization may well mention Rachel Carson and Nate Hagens in the same lecture, giving each a few minutes-this assuming Nate becomes well and widely known as the result of writing a good popular book or two of course.

You are right about the books. They must be good and popular.

For me, the godfather of Net Energy Analysis is H.T. Odum. His books are good, but were never popular. His writing style, like his speaking style is sometimes dense reading. At times his mind seemed a geodesic dome of lightning-speed cross references that left even PHDs gasping to keep up. I always regretted that Odum’s best students faithfully followed him down the complex rabbit hole of eMergy analysis. Net energy was hard enough to explain to the lay public. EMergy analysis might as well be ancient Tibetan.

That is why Nate’s pursuit of Net Energy is so important. What he, his teachers and his colleagues (at SUNY?) are evolving is no less than a rational way to evaluate which energy sources society should be pursuing. What will work fairly well…. What will work for a while before sliding into heavy expense….What is a smoke and mirrors perpetual motion machine…. And where society should begin thinking about trimming back our BAU if we don’t intend to float into the whitewater and over the waterfalls. The need for it was yesterday. There are dozens of universities and governments all over the world that are plowing millions of dollars into marginally productive gimcrackery that would not pass simple Net Energy analysis.

Meanwhile I trust your farmstead is surviving the cold and that your own practical understanding of Net Energy is guiding your preparations for a sustainable lifestyle for you and yours.

Capn Daddy

Thanks You CapnDaddy! Many of us "geezers" are ready to make an appropriate investment in the future, whether it be our grandkids or someone elses. One of the old posters at this site used to recommend buying shovels and wheelbarrows, storing them in a shed and handing them out after the crash. As you point out, they will have been made with "old" cheap fuels and very useful. More useful than a bunch of gold bars!

Well, for anyone who wants old shovels and wheelbarrows, I've got a shed full of them and I'm trying to give them away. My wife and I sold our two houses in the city and retired to our house in the mountains, so we have a surplus of garden tools, particularly since you can't grow a garden here without the deer and the elk and the grizzly bears getting all the plants.

We got married rather late in life, immediately retired, and found ourselves over-housed, so we had to downsize from 3 houses to 1. This worked out extremely well from a retirement income perspective, particularly since we sold both houses at the top of the market. We're not exactly rich, but we're not exactly living on cat food, either.

The only thing is, I think people will be able to buy all the shovels and wheelbarrows they need at an extremely low price considering they will all be made in China from iron imported from Australia.

If one of the limits to growth (perhaps the most important one) is capital, then it seems like energy sources that tie up capital for a disproportionate length of time before yielding an adequate return would be a problem. If capital is limited, then this requirement would seem to limit total energy that can be generated for society.

This is really a separate issue from discounting. I mention it in this short post I wrote.

Well, Gail, Dennis Meadows is wrong. The limit to growth is not capital. It is energy. As an actuary you understand that “Capital” does not actually “exist.” It is information, an accounting device, shorthand for reality. It’s utility lies in its ability to deliver energy, human or machine, to any task; and this utility can quickly evaporate if any of the parties involved in an exchange lose faith in the specific capital that is “on the table.”

I agree that to be a useful analytical tool, EROI should be calculated to the end user. I am troubled by your insistence on analyzing alternate energy utility via grid delivery. When the plentiful fossil fuels that built massive grid systems begin a descent from their peak of production, the grids that they built will become increasingly unsustainable and a resource drain to maintain, and therefore of decreasing usefulness.

So the wind systems that you mention must be at or very near the site of energy consumption or they will not be practical. (At some point wind farms in West Texas may no longer be practical suppliers of Dallas air conditioning.) For society this means the winding down of present energy usage patterns as different fossil fuel energies begin dropping down the backside of their Peaks. Every place will not have an equal access to all of the energy that people will want to consume. That’s a big change to BAU—which change, as an avid reader of your posts, I have always thought you believed to be, in the long term, unavoidable.

What am I missing?

Dennis Meadows was right. So are you.

Tim Garrett has shown that money equals power (i.e. capital equals energy). More specifically, $1 US adjusted for inflation to 1990 equals 9.7 mW.

(i.e. capital equals energy)

Now I know what 'C' in Einstein's equation, E=MC^2, really stands for and that money actually does fall from the sky >;^)

Aha! So when the mass of money expands at the speed of light...stand by for a really big BOOM?

...Or perhaps Bust would be more appropriate.

He found a loose correlation. He didn't show cause and effect, or in which direction causality might flow.

@Nick, How about this? The US consumes 25% of the world's energy and produces 25% of the world's GDP? China is second, coincidentally consuming the 2nd largest percentage of the world's energy, Japan is 3rd coincidentally doing the same and so on. The formula falls apart of course once you hit the 3rd world countries, for some reason.

I agree, there's a reasonably good correlation. It's not surprising: bigger economies do a lot more moving around of things and people, and those things are currently mostly moved with oil.

But, if a commuter gets to work in a Prius, is it less valuable than getting there in a Chevy Tahoe, which uses 5x as much oil? Or, more valuable than getting there in a Nissan Leaf, which uses none?

Does freight moved by rail add less to GDP than freight moved by trucks (which use 3x as much oil)?

Diversification of energy inputs is likely far smarter.

Heavy oil dependence in US suburbs is showing that they are experience negative GDP effects as housing prices fall there due to transport cost of living increases.

The winning solution for a suburb to survive well is of course a hybrid or electric car or adding connections to the rail/subway system -- the SUV has shown it is poorly economic.

I would not rule out the judgment of the consumer that find themselves in a burb. They are doing the math -- at least those who are my age. I may be among a different subset of folks, but the math for a pure ICE guzzler is not looking as good today.

Diversification of energy inputs is likely far smarter.


Heavy oil dependence in US suburbs is showing that they are experience negative GDP effects as housing prices fall there due to transport cost of living increases.

Again, that's correlation, not causation. Exurbs are much poorer, and have much more new construction which can't be sold.

The winning solution for a suburb to survive well is of course a hybrid or electric car or adding connections to the rail/subway system -- the SUV has shown it is poorly economic. I would not rule out the judgment of the consumer that find themselves in a burb. They are doing the math -- at least those who are my age. I may be among a different subset of folks, but the math for a pure ICE guzzler is not looking as good today.

I agree. People do the math. GM and Nissan won't be able to produce enough Volts and Leafs to meet demand for quite a while.

This is a very important concept, and something I've been concerned about for some time. EROI has been bandied about with absolutely no definition or methodology attached to it. Anyone in the commercial sector knows that energy = money and so if money has a time value (it does) then so does energy.

Investing a huge amount of (relative) energy totally up front in making a PV cell is clearly very different from the high ongoing energy cost of e.g. oil sands or biomass power.

In the former case (PV) a huge amount of energy (relative to the output) has to be removed from society prior to any being given back. In the later case (oil sands, biomass) society is never actually down very much relative to the future net production, even though a considerable amount of energy has to be constantly re-invested.

The obvious analogy is capital investment versus ongoing cash-flow OpEx, which are of course treated very differently for good reason.

I have seen the general concept articulated previously as an "energy hump", but time discounting is clearly a much precise way to measure the effect. To me the obvious way to quantify the effect is to turn the equation around into an equivalent of Internal Rate of Return - initial energy investment versus future net production, rather than try to guess at a discount rate. This measures something different from today's EROI because it doesn't care about the energy consumed in production at all, only initial investment and net production.

I personally don't care (ignoring climate change issues which worry me a lot less than the energy peak) that oil sands require a lot of ongoing energy to produce, the point is that the net energy is highly positive (much more is produced than consumed) so why should I care? What I care about is how much energy society had to give up BEFORE it got paid back (net of ongoing consumption), and this is what will be measured by EIRR (Energy Internal Rate of Return) and will allow various energy technologies to be compared much more accurately against each other in terms of paypack against commitment.

I love the economics that ignore the environment and the future. In general, in America we do not care at all about tomorrow.

It is uncool or not macho to care about our children and their children. Only people with poor economic sense care about their children. Is that the lesson to share with my children?

It is not a winning one for longevity.

This philosophy is the "me" society, which is miserably failing, as can be seen by the current status of the economy and the condition of average citizens around the world.

"Me" essentially means to produce the most pollution and waste possible per capita.

Only the rich can possibly see that further deep investments in diminishing and difficult to extract fossil resources will yield lasting benefits to their lives, since they are the ones so heavily invested in this unsustainable model.

Oil and NG and Coal cannot physically be increased per capita on this planet, while the population grows. The only way to make this business model work is to take people out of the economy (as 10-20% unemployment reveals) or the condition of life in Africa shows us.

How's that business model working? As evidenced so far today, it is not well at all. The stock market has not gained value over its highs in the late 90s. The growth model has failed on all counts it appears for 10 years. Oil production cannot keep up with population growth since 1979. The industry has had plenty of time to grow its yearly supplies but it has no idea how to, because it is physically impossible

Investment in renewable sources which cannot be depleted easily such as solar, hydro and wind and geothermal (which was not addressed here) provide long term sources of energy. The additional risks in the investment in these sources should be shared/shouldered by governments that want a future source of electric power as coal and ng supplies become limiting. Oil is already limiting and deteriorating or declining in its quality (it is more heavy and sour and diffuse). Coal is less energy dense and harder to extract. NG is now extracted with many more smaller wells using Fracing.

Furthermore, these fossil industries enjoy a great many tax benefits and breaks and subsidies to make their prices lower.

Nuclear requires public money, why can't renewable sources, which do not require fuel, also use similar levels of public dollars?

In any case, I disagree with your stance on oil sands/shale, coal to liquids, and so forth; these are diffuse technologies, which only are basically keeping the economy just above water. They are only medication for a patient on the table that is nearly unconscious.

I don't necessarily disagree with the things you have said, but you have answered a technical call for more rigorous measurement and understanding of energy dynamics with a subjective tirade against modern life and economics.

I will always argue in the strongest terms possible against those who would seek to obstruct the quest for knowledge.

By the way, I'm a renewables developer, that's my job and my business.

To me the role of our society (which is really a government) is to level out the issues that seem to make renewables uneconomic via policy and some form of subsidy.

Here, NG peaker work with windfarm alpha, storage system beta and make the computer controls and get it done to produce stable power. You are now basepower subsidized at level X to make power at the cost coal will be in 5 years. Get it done. Oil imports are then taxed to favor domestic energy production and fund the whole nine yards.

This apparent headwind of the "me" society should be spoken to like adults, "Look we need to balance the energy/transport portfolio, because the future fossil supplies are not getting cheaper. Our efforts are not always economical right now, but the public sector will reward those that shoulder this risk so that others can use fossil fuels at a lower cost."

Where are the adults in this conversation? Or are present day economics more child-like than I was thought to believe?

I agree with and applaud your perscription, (society should recognize and prepare now for easily forseeable future problems), but have absolutely zero hope of it ever happening, because the problem is the benefits of the present-day "sacrifices" (voluntarily investing in strategies to get off fossil fuel dependence before it it strictly justifiable economically) would accrue to those in other countries (particularly poor countries with low current fossil fuel consumption and a higher marginal value of the saved fuels).

As long as we continue to band together in tribes (countries), we will refuse to allow our own tribe to make sacrifices so that another tribe can benefit. It's simple genetic survival, programmed in at birth or conception.

The only solution is to eliminate in some way all political divisions.


The real problem is resistance from those whose careers and investments in legacy industries are threatened.

It's absolutely in the best, short term, narrow interests of the US to get off of oil. We're spending perhaps $500B per year on security spending because of our dependency on oil.

Similarly, the external costs of coal that are paid by US citizens (pollution (sulfur/acid rain, asthma, mercury, radiation, CO2, etc), occupational health, mountain top removal, etc) are quite large.

It's simple genetic survival, programmed in at birth or conception. The only solution is to eliminate in some way all political divisions.

I agree. OTOH, it's very possible for people to expand their definition of "us". People do it all the time. I suspect that somehow tricks the lizard brain, but it works.

People expand their definition for "us" from family to tribe, from tribe to city, from city to state/province, from state/province to country, from country to world, from world of humans to all mammals, from mammals to things with faces, from faces to all life.

Ok good. Lemme know when any majority of red state voters agree with you...

That'll be hard with Fox news manipulating people. Of course, that gets back to those legacy industries:

"A dark ideology is driving those who deny climate change. Funded by corporations and conservative foundations, these outfits exist to fight any form of state intervention or regulation of US citizens. Thus they fought, and delayed, smoking curbs in the '70s even though medical science had made it clear the habit was a major cancer risk. And they have been battling ever since, blocking or holding back laws aimed at curbing acid rain, ozone-layer depletion, and – mostly recently – global warming.

In each case the tactics are identical: discredit the science, disseminate false information, spread confusion, and promote doubt. As the authors state: "Small numbers of people can have large, negative impacts, especially if they are organised, determined and have access to power."

I "deny" climate change for the simple reason that the "science" is beyond sketchy, the methods are beneath contempt and the conduct of the scientific "TEAM" as exemplified by Climategate proves they are nothing but a bunch of poseurs ganging up on publications and anyone and everyone who dares to "deny" their pet theories, theories by the way they have NOT proven. Fox News has nothing to do with it, since I don't even receive it. I do stay informed, and the whitewashes by the so-called Climategate investigators are likewise beneath contempt. As we go through yet ANOTHER record COLD winter, the climate "scientists" will continue to bury their heads and the evidence of their stupidity (and all contrary data) in the sand, and scream bloody murder when anyone dares to say their emperor is wearing no clothes. Too bad, time will prove them as stupid as the millennialists who believed Y2K computer bugs would destroy civilization as we know it. They were wrong too. We have vastly greater problems to solve in this millennium than imaginary ones.

You may say what you wish about present "evidence" of global warming, I agree that it is at best questionable. However, that doesn't surprise me given the size of earth's ocean heat sinks, which need 300 times as much energy input to warm up one degree than the atmosphere does.

That said, though, the "science" of global warming, eg. the physics of what should happen to a planets temperature when you double the amount of infra-red absorber gasses in its atmosphere, is rock solid and absolutely unquestionable, especially when significant amounts of open water are available to multiply the effects. Providing the IR absorbtion band in the atmosphere gases is not saturated, and on earth they are not, the atmosphere's temperature WILL rise appreciably. That FACT is uncontestable, and well proven by a) the history of GHG vs. temparature levels for the past 600,000 years as recorded in antartic and greenland ice cores, and other measures; and b) the obvious difference in average surface temperature between the moon and earth, earth being +33 degC warmer amost entirely due to the existing greenhouse gasses in its atmosphere. Several others. These scientific facts are proven beyond doubt.

Bottom line is, those who claim "the science is still out" regarding GHG's are lying. What's still not proven is that significant measurable effects from GHG increases "to date" are evident in the measured temperature records we now have.

Advocating against GHG emmission mitigation now is advocating using the only spaceship we know of which can support our species to perform an obviously dangerous and risky experiment to find out whether there "might be something we haven't thought of yet to avoid dangerous GHG warming."


present "evidence" of global warming, I agree that it is at best questionable

Says it all right there. Apparently we'd have nothing to disagree about, unfortunately you go on to a "science" rant. Here's how "science" works.
1) Observation
2) Hypothesis
3) Experimentation
4) Proof (or in your words, evidence)
5) Publish

The "Team" is stuck on numbers 2 and 5 above, skipping the other steps completely. That is NOT science, but their methods do count for political partisanship. If politics is what you want to replace SCIENCE, then too bad for you. I am not so inclined.

I refer you to pages 6 and 7 of Lindzen's presentation. Bandying about terms like FACT and "beyond doubt" create an unfortunate "incontrovertible" atmosphere if you will, exactly what a TRUE scientist will warn you against.

1. Virtually by definition, nothing in science is ‘incontrovertible’ –especially in a primitive and complex field as climate. ‘Incontrovertibility’ belongs to religion where it is referred to as dogma.

The world has enough religions and enough wars about religion. We don't need a new one called "Global Warming" that equally relies on articles of faith rather than provable fact. Climactic systems are enormously complex, and regardless of the billions being spent studying them, we are no closer today to a true understanding than we were 100 years ago. That is the only FACT in evidence.

There are some things we can't test experimentally - that doesn't make studies in those areas "not-science". For instance, I'm not aware of any double-blind controlled studies of whether a bullet to the head will kill you. All we have are millions of anecdotes/uncontrolled field experiences.

Your example is patent nonsense. We don't need a HUMAN head to study ballistics and mortality. I suppose you've never heard of forensics have you? That is a SCIENCE! Unlike the crap being peddled by the "Team". Time for you to head to the children's table this holiday too.

We don't need a HUMAN head to study ballistics and mortality.

A valid medical experiment requires a human subject: all animals differ in important ways from humans, in the brain especially. Nevertheless, obviously ethics don't allow such an experiment. There are many less dramatic examples of medical experimentation that would be valuable, but which nevertheless cannot be done.

There are a thousand other examples: it's not possible for geologists to run an experiment in which they test different scenarios for a California earthquake. Further, we all know that there are very limited methods of predicting earthquakes. Nevertheless, we all recognize that geology is a valid science which makes many valuable contributions. Finally, no one suggests that a California earthquake isn't likely sometime in the reasonably near future, and that careful risk mitigation isn't a good idea.

There are some things we can't test experimentally - that doesn't make studies in those areas "not-science".


You are so right! Note that we can do no experiments in astronomy, but astronomy is one of the most exciting and advanced sciences. I've been reading SKY AND TELESCOPE since I was thirteen and recall no instance of an astronomical experiment. Careful observation is a good substitute for experiments in many cases.

How would slamming a large impactor into a comet to make a new hole count? I would tend to put it into the very small scale experimental category.


So, could you detail for us what you think is a legitimate "3) experimentation, 4) Proof" exercise which the scientists are avoiding performing? I've heard (and soundly refuted) several attempts to use that red herring. Your calling science "not science" doesn't make it any less so.

Lindzen. Are you serious? Science?

"we are no closer today to a true understanding than we were 100 years ago." That is simply patent nonsense, but I understand why the denial group is coming round to saying that, because otherwise they'd have to capitulate. Religion indeed!

@Nick, Wrong again buckwheat. Forensic SCIENCE can use human CADAVER experiments to determine what happens ballistically when bullets hit heads. Furthermore they have created ballistic gel, which does an excellent job of standing in as human skin, muscle and fat. They TESTED their hypotheses and PROVED that their substitutions were functional replacements for the living breathing variety. All you've done is proven for me that you are no scientist.
@Don, Other than NAOM's excellent example, and thousands of space missions I could name as well, there were indeed terrestrial experiments that were done to validate the theories of what was happening in space. Too bad your childhood magazine didn't include those details, or perhaps if it did, you forgot? Ever heard of JPL, LLNL and the other national labs where these experiments take place on a regular basis?
@Len, The fact that the "Team" refuses to engage in experimentation, but instead relies on computer 'models' that can be programmed to deliver any outcome desired (albeit, outcomes that come ridiculously short of reality) and "pretend" that they are engaging in the scientific method is patent nonsense. I suggest you say five IPCC briefings and three CRU apologetics before your next confession. Good luck with your religion, although I'm not so sure about your afterlife.

This will not make your day

Climategate emails proved the TEAM engaged in your: "discredit the science [of dissenting scientists], disseminate false information, spread confusion, and promote doubt."

You do realize that Lindzen is probably the most thoroughly debunked denialist of them all, right?
If he's all you've got, may I discretely suggest you fold and leave the table.


Ya right. IF is all YOU got, I strongly suggest going back to the children's table where you belong. Lindzen is a professor at MIT, a school that no doubt would not include you among its famous alums. Go through his powerpoint and actually READ it, skip the partisan rhetoric and attempt to do some science on your own. Lindzen makes perfectly legitimate points, ad hominem attacks on left wing sites notwithstanding. No need to mention that the Republican MINORITY pointed to on climateprogress is now a Republican MAJORITY and the climate subcommittee has been completely disbanded by the lame duck Democrats already.

I know for a fact you never even clicked on the link or if you did, immediately stopped when you saw the author. For others like-minded, I post this quote from the presentation page 4:
Here are two statements that are completely agreed on by the IPCC. It is crucial to be aware of their implications.
1. A doubling of CO2, by itself, contributes only about 1C to greenhouse warming. All models project more warming, because, within models, there are positive feedbacks from water vapor and clouds, and these feedbacks are considered by the IPCC to be uncertain.
2. If one assumes all warming over the past century is due to anthropogenic greenhouse forcing, then the derived sensitivity of the climate to a doubling of CO2is less than 1C. The higher sensitivity of existing models is made consistent with observed warming by invoking unknown additional negative forcings from aerosols and solar variability as arbitrary adjustments.
Given the above, the notion that alarming warming is ‘settled science’ should be offensive to any sentient individual, though to be sure, the above is hardly emphasized by the IPCC.

Slow and steady redirection of our economy is all I would expect. No sudden changes can or will happen.

If one sticks to a one-car family plan using public transit or bicycle transport in lieu of the 2nd auto, they could save money and invest in a solar heating and electric system and insulation for their house, effectively shifting capital costs from the second car to their electric and heating needs. In subsequent years, the older primary car can be replaced with a more fuel efficient plug-in hybrid.

Sadly this is a simple model taking ~4-5 years to implement and no one talks about it as being a means to relieving themselves of the looming energy problems out there.

I know it will not happen on a grand scale unfortunately, but it is a possible solution.

Slow and steady redirection of our economy is all I would expect. No sudden changes can or will happen.

Sadly, I think you're wrong. The change will be traumatic for a lot of people who have not anticipated the changes. Instead of living in a 3000 square foot house on a 2 acre lot in the suburbs, and driving their SUV 40 miles to work in another suburb, they will find themselves living in a cardboard box and pushing their shopping cart from dumpster to dumpster.

Unfortunately, this transition is already upon us. There are an awful lot of people who have lost their houses, lost their jobs, lost their SUV, and have no alternatives left.

For the urban yuppies who live in a two bedroom condo within bicycling distance of work, it's not going to be so bad. However, everyone else needs to sit down with an Excel spreadsheet and figure out what the consequences of $6/gallon gasoline means for their lifestyle. And what the consequences of $12/gallon gasoline will be, because that's what we'll be looking at 10-20 years down the road.

everyone else needs to sit down with an Excel spreadsheet and figure out what the consequences of $6/gallon gasoline means for their lifestyle.

They might need to carpool while they wait for their EV to be delivered.

Carpooling....the horror.

You're somewhat underestimating the consequences of a sharp rise in fuel prices. They will ripple through the economy with follow-on effects everywhere. Too many people in the US are too dependent on low fuel prices to support their lifestyles.

I chose $6/gallon because that's probably the point that EV's become competitive with gasoline cars. At that point the overall costs will be approximately equal. If you can't afford to commute to work in a gasoline car at $6/gallon, you won't be able to afford to commute in an EV either. You need to be closer to work and shopping, and you need to move while you can still sell your old house.

EVs are competitive at about $3 per gallon, over their lifecycle (slightly higher purchase cost, much lower operating cost). Consider the Nissan Leaf: $33K up front ($5k more than the average US new vehicle) which saves about $1,400 per year. Over 10 years, that's $9k less expensive. That tells us that the average new car buyer can indeed afford an EV.

Now, if we compare to a Nissan Versa, we'll find the 10 year costs are about the same. So, the cost conscious small car buyer can keep their costs at the status quo with an EV.

Now, "oil shocks" do indeed cause recessions - we hear that repeated endlessly on TOD. That doesn't mean that sustained high fuel prices will cause a sustained recession: the two aren't the same. High fuel prices aren't good: they suck money out of oil importing countries. More importantly, in the somewhat longer run we can get rid of our addiction to oil. N America is in an especially good position: US oil production is rising, while consumption has fallen sharply from it's peak: net oil imports are down by 25% from their peak, and not rising.

High fuel prices aren't good - but they won't cause TEOTWAWKI.

There is a lot of railing against "everyone else but me" in these posts. Many posters assume that they are the only persons with a true concept of value, or who care about "what really matters". I would beg to differ somewhat. It is clear to me that MOST of our fellow creatures are capable of discounting the present pleasure of eg. heroin or crack use against the probable future negative of such an act. More mundanely, most people are capable of correctly discounting the immediate pleasures of openly entering sexual liasons outside of their mariage against the probable future repercussions. Or smoking cigarettes. Driving impaired. Theft.

So I'd conclude that the required systems of evaluation of present versus future pleasures exist sufficiently in societies, in fact they must by definition else the societies couldn't have survived to this point.

Therefore, the problem is knowledge and information. Rather than moaning about the need to "change society's values" we need to be figuring out how to get the needed and accurate information out to them, as well as determining which parts of the information assumed common knowledge here stand up to the regular tests of scientific credibility.

"...the required systems of evaluation... exist[,]... they must by definition else the societies couldn't have survived to this point."

This is a key insight; a version of Boulding's quote, "If it exists then it is possible."

Since value-driven behavior (e.g., those using zero and negative discount rates) exist, then the issue here is "what are the conditions that bring out these sorts of behaviors more frequently." Rather than lamenting the difficulty humans have with such behaviors (an accurate if ancient observation) or working to re-establish that such behaviors can sometimes exist (we've done that, move on), we instead might focus on what supports such behavior.

I'm not sure that delivering to people "knowledge and information" is the only, better, or first place to start. That route might work better with some people (people like us?) than with others. At least, it seems to me, how we go about engaging people is as important as getting the correct facts in front of them.

The "Reasonable People Model" (Kaplan & Kaplan (2008) Bringing out the best in people: A psychological perspective. Conservation Biology, 22(4), 826-829) might help here. They argue that people are more reasonable, cooperative and helpful when the environment supports their basic informational needs. Different in interesting ways from the standard information-->behavior model of social change. A conference was held this summer of researchers exploring this model, some are applying it to the study of community responses to biophysical constraints (that would be me), others to understanding the success of the "eco-team" approach to behavior change that is working in western Europe.

Supporting reasonable behavior would seem essential to creating a durable society. It might be a part of the "inner transition" that the Transition Town folks talk about, but I doubt it. I think that it's more about creating the external conditions that bring out such behavior than it is about an inner change. But we probably need both, and right soon now.

"There is a lot of railing against 'everyone else but me' in these posts."

Umm...yes. Among other things, energy issues seem to serve as a Rorschach test bringing to the fore self-indulgent pre-existing notions about how others ought to be reformed (and this aligns well with the sometimes-ugly Puritan tradition.) In this connection, one also encounters "everyone else just like me", even when it's not workable. For example, as we touched on elsewhere on this page, it's no longer reasonable, as it once [almost] was, to demand that people ought to live as though nearly all are young and fit.

"...the required systems of evaluation of present versus future pleasures exist sufficiently in societies, in fact they must by definition else the societies couldn't have survived to this point."

However, a great many societies have come and then gone away again, so the systems that often but not always work for individuals need not be competent with respect to whole societies - much less the whole globe, which we seem now to have become able to affect seriously.


You are quite right in your last paragraph. The fallacy of composition is all too common. Economics harps on the fallacy of composition, and so does sociology, but it is all too pervasive.

Preserving energy for future use is problematic in that humans have evolved behaviors allowing them to gain considerable amounts of energy return with little energy invested by stealing and through violence or government mandate. The hyenas are always ready to step in and eat the zebra carefully stalked and killed by the lion. Useable energy and its proxies in human societies are targets.

The American saver thought they had a fat zebra saved in their homes, to be converted into energy in the future, but somehow financial maggots have diminished their hoard. After the bust everyone said a house was a safe place to invest because at least they would have a place to stay and perhaps that is true in some cases, but in other cases it will be a refuge without lights, water, AC and heat. As the surfeit of energy diminishes they will see that the only safe investment (energy invested) is one that actually does return a greater amount of energy (energy return). Those opportunities will become scarce and inflatable snowman factories will become scarce along with many other things.

The increasingly hungry rising population of lions will guarantee that the population of zebras will become very scarce and then the last few zebras will be maintained in protected territory for a few privileged prides. The hungry lions on the outside won’t like that but may become too weak to effectively contend for the energy. The United States is essentially turning the Middle East into its territory. It will be interesting to see if everyone else becomes too weak to challenge the U.S. for the energy.

I suspect the figure used here for wind E-ROI is way too low. I haven't found the Kubiszewski, I., Cleveland, C.J., & Endres, P.K article, but I suspect it uses the same info as Cutler Cleveland's summary of the literature:
which showed that wind's E-ROI was around 19.

If you study his sources, you'll see that that most of the studies are quite old. If you look at the turbines used in those studies, you'll see that the turbines studied were much smaller than those in use today - look at Figure 2, and read the discussion. If you study that chart, you'll see a very clear correlation between turbine size and E-ROI. It's perfectly clear that Vesta's claim for a current E-ROI of around 50 is perfectly credible.

If we discount 50 by a factor of three, we get back to something around 17.

An E-ROI in the range of 20 is more than enough. There isn't an important difference between an E-ROI of 20 and an E-ROI of 50. It's like miles per gallon: we're confused by the fact that we're dividing output into input, when we should be doing the reverse, and thinking in terms of net energy. An E-ROI of 20 means a net energy of 95%, while an E-ROI of 50 means a net energy of 98%: there really isn't a significant difference.

The shear simplicity of wind power is stunning. No steam, turbine, delivery infrastructure, no drilling, no scrubbers, no boiler, no fuel to burn. All of these things destroy the capital over time -- explaining some of the high costs of NG peaker plants.

To me simple is better but I may be more of a minimalist than most. Wind turns blades which turn gearbox and generator.

Too bad we have to then isolate each wind tower from the system and call that individual wind tower intermittent.

Why not directly couple a NG peaker with a wind farm to create a smooth stable source of power? Surely there is a way to manage this with minimal costs.

Why not directly couple a NG peaker with a wind farm to create a smooth stable source of power?

That's perfectly practical - many concentrating solar plants work this way: they take advantage of the already existing generating equipment that is necessary for the CSP plant, and just add portions of a NG peaker plant.

On the other hand....this is sub-optimal, especially for a wind-farm. It's far cheaper to have the overall grid deal with load-following, load-matching, load-balancing, etc. After all, part of the time the peaks in wind generation will coincide with peaks in demand, and lulls in production will match lulls in demand. It may be far cheaper to use hydro for balancing, or existing NG plant. Maybe someone in the next state has cheap power to sell, or needs some power when you have surplus.

Demand Side Management is the cheapest option of all: the utility signals the home-owner's meter that wind power will peak in 2 hours but be lower in 12 hours: the meter talks to the Nissan Leaf or Chevy Volt in the garage, and the EV decides when to charge to minimize costs. The EV driver gets cheap power, and the utility gets demand for windpower when it needs it.

This is all doable right now.

Really a landmark, must-read article to send folks to, and I will.

So saying, temporal risk and temporal advantage may not play out on a flat landscape. If one thinks that there are currently more abstract claims on tangible wealth than can be satisfied, it might not be crazy to invest in durable, long-payback tangibility while the gettin's good.


A few years ago, I used the idea of time-discounted BTUs as part of a public policy analysis. The government LIHEAP program (and associated state programs) provide low-income households assistance with their fuel bills. Alternatively, some of the money can be spent on fuel efficiency measures for those households. That is, a dollar spent today can buy either BTUs today (help pay the bill) or BTUs spread out over the next several years (pay for efficiency improvements). I was interested in the sustained price of NG that was needed to make the two options deliver an equal number of BTUs per dollar of government expenditure.

As at least one other commenter has mentioned, it looks a lot like engineering economics. And like such studies, the outcome can depend a lot on the choices of study length, discount rate, and end-of-study treatment of equipment. Many years ago I got paid to do engineering economic studies, and found it disheartening that in most cases, if you let me choose the values for those three variables, I could make the answer come out almost any way you want.

FWIW, the (superficial) solution I got was $15 per million BTU in 2005 dollars. In the US, call it $15 per thousand cubic feet. Outside of New England, and the period following Katrina/Rita, US gas prices have not been that high.

In your analysis you assume constant price of the energy.

Projects withs strongly delayed energy backflow have a low discounted EROI. But if the price increase of energy is higher than the discount rate, these projects might be economic.

One could argue that, that priceing is an artificial concept. So from the technical point of view, only the energy flows matter. Not the cash flows.
But I think price is also a measure of scarity of a resource. Therefore, increasing prices indicate increasing scarity of a resource. Therefore a higher priced comudity might also have a higher value.

To your question: Is a BTU today worth more or less than a BTU ten years from now?

Assume that you have 10 kg of wood. When energy is scare, you might use it to heat your room in a cold night. In this case this 10 kg might make the difference between freezing to death and life. So in this case the 10 kg wood have a high value.

When you have plenty of energy and already life in well heated house, you could use the 10 kg of wood maybe to heat your sauna. Than it is a nice-to-have, but the additional benefit/value is much smaller.

So, when you assume that energy will be scare in the future, than you can assume that its value will be higher.

In your analysis you assume constant price of the energy.

No, I assumed a constant EROI, for whatever energy harnessing/extraction technology is analyzed. Getting away from distortions of price is main objective of biophysical analysis.

In any case, I do see what you're saying, but I would argue (and do) there is a real possibility that energy prices will be lower than they are now for the next 10 years (or even longer). And of course 'value' can be measured in things other than price.


I agree that the price of energy might be lower in real (inflation adjusted) terms ten years from now than it is currently. How could that come about? Through a global Greater Depression that lowers real global GDP to levels substantially below the current one, that is how it could happen. Global financial collapse followed by global hyperinflation is entirely possible and cannot be ruled out. If the demand for oil and other fossil fuels falls enough, the real price will also fall.

On the other hand, I think it is unlikely that increased supply of energy will lower prices. We're at or near to Peak Oil, not far from Peak Natural Gas, and though the coal situation is controversial, we are probably not many years from Peak Coal. In other words, the real marginal cost of extracting energy from fossil fuels is going to increase as various Peaks appear in the rear-view mirror.

And of course 'value' can be measured in things other than price.

I agree. Maybe, before awnsering your key questions we first should agree on which definition of value we use for energy.

Possible Suggestions:
1) Joule
2) money: Euro, Dollar, ..
3) Other Cummunities: Gold, aliments, ..
4) Effect, which can substituted by it: Savings in human workeforce,
5) Effect on human condition: Happiness, health, life expectation

ad 1) This reflects your analysis. This basis always stays constant. In all the other definitions, the exchange ratio between Energy and the value basis can and will change with time. So to your question: The value of 1 BTU will always be the same. You can assume a discount rate of 0% herefore.
ad 2) This is classical engineering economics.
ad 3) similar to 2. but effects of currency changes are minimized
ad 4/5) These values strongly depend on the absolut energy and technology available
ad 5) I think these are the most difficult value definitions to measure. But on the other hand, these are most relevant for human.

For money, I'm aware of some investigations of this kind:
If you would replace the x-axis in the last figures by W/capita than you get an idea what I'm thinking about.

In my 10kg wood example also the differential change in value per energy is of relevance.
for Example: d_Happiness / d_Energy

Assume we have a similar effect of energy used per year on happiness as we seen above: At low energy levels a strong increase of happiness is seen at each energy unit added. At high energy levels the additional gain in energy is only limited.
Further, I assume that I have only a limited amount of energy I can distribute over several years. My goal is to maximise my average happiness over lifetime.
Under this assumptions there is an optimum energy usage. It will make sense to save some energy in the actual year in order to have more happiness in the following years.

Unfortunatly the human brain has a very strong discount rate. This has been discussed on TOD already. Therefore the human values near term happiness much higher, than at does with happiness wich is a bit further away. Applying this strong human discount rate to the analysis, the 'optimum' is to wasting much of the energy early and not worry about the furture.

It seems like the human race has chosen this path.

Hi Nate your analysis actually brings into question OPEC claims of vast reserves and a low depletion rate. Also consider most of the governments are relatively unstable.

It is impossible for what they are claiming to be true. Not almost not maybe not a high probability but flat impossible.

IMHO the primary message of this posting (discounting energy) is wrong. It is wrong because it violates one of the fundamental laws of nature: The conservation of energy dW/dt = 0. And although the earth is not a closed system with respect to energy, the energy input into the system is equal to the energy output and therefore the equation above still holds.

One may argue that the posting does not deal with energy as it is, but with the value we assign to it. But also the value of energy is a well defined quantity which is most easily understood by emphasizing that energy is composed of exergy and anergy. Its value is defined by the ratio of exergy to energy which, indeed, diminishes with time.

But I believe this is not what is meant in this posting. The faulty message stems from the assumption that energy is that quantity we (you) think it is. But when our (your) thinking violates the fundamental laws of nature it becomes irrelevant. It becomes irrelevant particularly in trying to predict what our (your) future might be.

I am sorry if my comment sounds too harsh to you. But as a physicist I could not resist the urge to point out that also humans are only part of nature and have to obey its principles.

The main point of this post is that nominal net energy statistics are misleading and that timing of flows matters. But implicit is that biophysical analysis (measuring resources in resource terms) is important, particularly in a system where its beomes less clear what a dollar or a yen is worth by the day. As a physicist Im sure you would agree that energy is special in our economic system - $90 of oil is 'worth more' than $90 of wine or music cds due to its kinetic potential.

One may argue that the posting does not deal with energy as it is, but with the value we assign to it

as a physicist I could not resist the urge to point out that also humans are only part of nature and have to obey its principles.

I don't think we disagree too much.

As a physicist Im sure you would agree that energy is special in our economic system - $90 of oil is 'worth more' than $90 of wine or music cds due to its kinetic potential.

I would agree under the condition that the equation energy = money is wrong. Because, if 1 bbl of oil is A, 10 l of wine are B, and 90 USD are C, then on strictly logical grounds one concludes:
If A = C and B = C then A = B.
We all agree that A = B is wrong, but then also A = C has to be wrong. If one wants to relate an economics quantity, like money M, to a physics quantity one should better choose the entropy S. The reason is that all processes in nature are irreversible and thus require the creation of entropy. Notice that entropy is not a conserved quantity. The basic process of creating real wealth is the conversion of energy (which is a conserved quantity) from one form into another form, whereby entropy is created and energy is devalued. Therefore it is more plausible to state M = f(S), where f(S) is a function of entropy and necessarily includes the conversion ratio (You may call it the efficiency, but I don't like this term in this context) of the conversion process. In a more general way: The entropy describes the dynamics of a sytem, whereas the energy desribes its static framework.

I also have my problems with your usage of flow. If you refer to the energy flow this is defined as W dx/dt. The flow will change if the velocity dx/dt changes but this does not imply that the energy W also has to change. Rather, if the energy flow changes the continuity equation demands that the energy density dW/dV has to change. One should not confuse energy density with energy, in physics these are two very different quantities.

Nice work nate. Btw, have you read the article on EB by Tariel Mórrígan? Here's the link: WOuld love to hear your comment on his views, especially the part about the "fast-crash within 5 years" and the claimed 4-10.5% annual declina rate.

Xpat - Re "fast-crash within 5 years", anyone with ability to think non-linearly and paying attention knows thats a possibility, though how you define 'crash' and what the odds are I don't know.. Any major downward trajectory that would happen won't be from high oil prices or shortages, but related to currency trade dislocations, in my opinion.

The more I interact with people working on mitigation, the more I see the limits to growth predicament first manifesting in a financial/currency speedbump that will trump all the source/sink problems that many are focused on (at least in the near term <10 years). Yes, energy depletion is at heart of the growth constraints, but by far the larger issue is the aggregation of digital markers, and accompanying expectations of a certain future that is unattainable. If/when these claims and expectations unravel there will be disruptions in trade and exchange that have been the real drivers of our living standards (yes built on cheap liquid fuels and extended with cheap money).

Thus, since you asked, its my opinion that the fragility and retooling of the global supply chain for basic inputs will have to be successfully dealt with first before we have a chance to build a more sustainable, ecologically sound, smarter etc. future. But crafting and planning for such a future can and should happen concurrently.

As to the piece you linked, I skimmed it - I believe energy depletion (peak oil) is a constraint on our current problems but not a near term driver.

but here are a few of the authors points I agree with:

•..climate negotiations may be abandoned or at least marginalized for a long time (if not permanently) as the crisis of peak oil and economic shock and awe overwhelms the stability and security of every nation

•There are probably no solutions that do not involve at the very least some major changes in lifestyles.

•..crises will soon confront societies with the opportunity to recreate themselves based on their respective needs, culture, resources, and governance responses

•One of the most important modern technologies to preserve post-peak oil may be the Internet, which can potentially help the world stay connected in terms of communications, information, and Internet technology services even after global transportation services decline.

As to the 4-10% decline rates, I am not qualified to say, other than I think the economic situation will dominate any purely technological/geological limitations for some time. But we need to understand our underlying energy situation and its constraints irrespective of how the currency situation resolves. (Hence this website)

nate, thanks for your answer(s), made some things clearer to me;) BTW when's the next fake fire brigade article due?

This thread just keeps getting better and better.

Please don't shut it down yet.

Threads get shut down automatically after 7 days. We still have 3 and 1/2 days.

"fast crash" and "aggregation of digital markers".... It occurs to me that those digital markers representing wealth, which can rapidly dissappear for a variety of reasons, are not the only risk. In fact almost all the "wealth", including apparently very solid assets, on which the present economic system depends absolutely is vulnerable to a "fast crash". Example, a home nominally "worth" $350,000 on the market is only worth that as long as someone else is willing to pay that, which Bernanke and the white house are only too aware of. Ditto that copper mine in Chile (and the pension plan invested in its shares), or that nickel mine in Canada etc., and the outputs of the mines, such as gold bars or coins. That ontario sunbelt corn farmland price could clearly crash off the high wall to 1/4 present prices or less with only a very small push, taking a lot of bank assets with it.

There is very little that is tangible wealth, particularly in this economy. Perhaps some basic skills sets, (blacksmith, tanner, specialised growers such as seeds, basic medical arts).

Its the old deflationary spiral buggaboo writ large I guess. How bad could it get?

Now I realize why my immediate neighbors think me financially silly for having a solar air heater on the side of my house, a solar water heater on the roof, and just wait, soon I can afford to install a wind turbine. That'll raise their present over future hackles!

However, now I wonder about the people reading such eye-opening nuggets of information as this article, AND STILL TAKE NO PERSONAL ACTION! Well, guess I am living on a..., higher plain...

soon I can afford to install a wind turbine... I am living on a higher plain...

Only makese sense: you get more wind on a higher plain...

The ramsey equation for discount rates is the rate of time preference + the degree of relative risk aversion * expected growth rate.

Therefore even for positive rates of time preference, it's perfectly reasonable to postulate, in a positive (rather than normative) fashion, that agents will discount the future using negative discount rates if they expect negative growth - especially if they are risk averse. The fact that we see positive discount rates being used today is perhaps because agents, on average, still expect the future to be richer than the present.

Once the reality of the energy situation dawns, perhaps discount rates will go negative, inverting your calculus for time adjusted EROI calcs on new fossil fuel versus new wind/solar investment.