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Some Thoughts on the Energy Transition (2)

Some Thoughts on the Energy Transition (2)

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Published by: ajm on Jul 12, 2010
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Some Thoughts on The Energy Transition
It’s tempting to conclude that because we have almost 68% inefficient power production that efficiency
gains or clean sources of power are going to be sufficient to perpetuate a growth economy. All scientificevidence points to the fact that this is just not true. I could be wrong, but let me state my case.Let me start by addressing what I believe are the two most important concepts to understand aboutenergy. Until I see these two items officially addressed, you can consider me skeptical of our chancesfor making it through the next 10-20 years without witnessing something resembling a 3rd World War
and/or some kind of a major phase transition in of global money, financial & economic markets(…and
then, of course, war)(reference)  First, is the almost never discussed reality of Net Energy or Energy Return on Energy Invested (EROEI). Ittakes energy to get energy and a society runs on the net amount of energy available to the non-energy"producing" sectors of that society (in reality though, nothing is "produced" - it is extracted orharvested as per the 1st Laws of Thermodynamics which states energy cannot be created or destroyed
 –
 
we just call it “production” because of the our utilitarian obsession with being “productive”). Gross
figures are essentially meaningless unless compared to the amount of energy required to get thatenergy.(reference)  So, if someone is
talking about the global energy situation, and they’re not talking about Net Energy or
EROEI
 –
 
they’re lips may be moving, but they’re essentially saying nothing. Net Energy is probably the
single most important concept that policy makers, the market, and even otherwise well-informedpeople are almost completely blind to. For example, if we took EROEI as a primary factor in energydecision making, then corn ethanol would never have happened. Policies and market signals whichencourage the production of low (or negative) EROEI sources are essentially steps down the wrong path,
unless those efforts have a realistic chance of increasing that energy source’s EROEI to a level above theminimal threshold to maintain the complex civilization we “enjoy” today.
(reference)  If we want to avoid war, people I respect say that we should take our remaining net energy from fossilfuels, and invest it in high-EROEI, non-fossil sources of energy with low environmental externalities.Unfortunately, everything comes with tradeoffs. So, my sense, is although it still has a lot of problems, if 
we don’t go nuclear immediately, I don’t see how we’ll be able to produce enough energy to “fund” the
transition to more sustainable sources of energy
 –
 
and even then, it’s probably too late to avoid a
serious liquid fuels crunch within the next 3-5 years (my best guess). Not to mention, ore grades of fissionable uranium are continuously declining (as are all mineral resources) and so, exponentially moreenergy is required to extract it (i.e. the net energy goes down
 –
even for nuclear energy sources).The idea behind net energy analysis is so basic, but it can get very complex when you get into thequestion of analytical boundaries (i.e. would you include in the calculation of the net energy of aparticular oilfield, the energy required for the guy that drives his car to the oilfields to drill the wells?).The total amount of energy left over from what you put in to get energy is what society has to use.
When you think about it, oil, coal, and natural gas are really just like your “energy bank account” –
and
“we” (in reality “we” didn’t even exist back then) were accumulating savings for
over 100,000,000 years
 
before we tapped into that bank account (interestingly, an energy bank account knows no such thing as
compound interest…hmmm…implications?). Within 250 years, we’ve depleted about half of this“energy bank account” that took, liter
ally, millions upon millions of years to form.And of course, because we always use up the good shit first (the high quality crude oil (the light, sweet),
the blackest coal (anthracite), and the easiest to get at conventional natural gas), we’re left
with theshitty stuff that is harder and harder to extract and yields continuously lower amounts of net energy (tarsands and oil buried under 25,000 feet of ocean floor, lignite (shitty, brown coal), and shale gas (shittynat. gas)
 –
not to mention the
“renewables”). The reality is we’ve subsidized our entire way of life (as a
global civilization) by depleting our ecological capital. What we get in terms of ecological income (hereunderstood to be renewable resource stocks & flows managed sustainably) is laughable when compared
to what we get from drawing down the savings in our “energy bank account.” (see Chris Clugston’s eye
-
opening “Societal Overextension Analysis” in Chapter 3 of his tour
-de-
force
)
So, as the net amount of energy available to non-energy producing parts of society declines (aka, the
savings in our “energy bank account” are depleted) what kinds of 
events or trends might you expect tosee? Some possibilities might include:
1. The untethering of the U.S. (and hence the world’s) monetary system from the thermodynamicrealities of a physically constrained economic system, with the closing of the ‘gold window’ by Nixonin 1971. “Coincidentally”, this happened only one year after U.S. gross domestic oil production
 peaked in 1970.
 
2. Ever increasing levels of borrowing from the future (i.e. debt)…at compound interest of course…in order to compensate for the fact that we could no longer fund today by “borrowing” 
 from the past as easily as we once did.3. A situation where ever-more complex financial instruments used to price and distribute the risksassociated with growing levels of debt.4. The continuous seeking out of the lowest cost operating environments and the transition to
“service” economies.
5. The shift to defined contribution pension plans.6. The institutionalization of the temporary & contract worker.7. Serial speculative bubbles.
I could probably go on for quite a while.
 
The harsh reality is that as net energy declines, less physicalwork can be done. So to keep the party going, the music gets louder, the smoke & mirror showbecomes ever more elaborate, to hide the unpleasant reality that it is becoming physically harder andharder to create real wealth (not the paper claims on that real wealth). If we have reached peak
production of the most important energy resource (oil), and Liebig’s Law of the Minimum (see b
elow)states that the growth of a system is constrained by its scarcest, most important resource, would this
not suggest that we’re at Peak Everything?
Our entire way of life is dependent upon a system which is itself dependent on high EROEI sources of energy. For example, Financial Return on Investment (FROI) is ultimately dependent upon EnergyReturn on Energy Investment (EROEI) given that physical asset accumulation requires the energy to
“fund” it. So, if we’re at peak gross energy, then we’re already passed peak net energy and hence,
would it not make sense to conclude that we are passed Peak FROI?The second major point about the problems facing the energy-economic nexus, is Liebig's Law of the Minimum. This law (inbiology) states that the growth of a system is constrained by itsscarcest, most important resource (see image).Eliyahu Goldratt kind of talks about this inhis book "The Goal," but we so rarelyextend our specialist knowledge of things to the bigpicture (i.e. the microeconomic concept of declining marginal
utility doesn’t get extended to the macroeconomic landscape). If 
we did, we would realize that the most important drivers of economic growth (net energy & debt) are most likely already interminal decline or permanently impaired, and IF THIS IS TRUE,then economic growth (as currently conceived) couldconceivably be over.

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