Net Energy Return

An even more fundamental issue is that of net energy return. It takes energy to get energy. Fossil fuel resources have been such an abundant source of concentrated energy that the investment of energy we make in exploration, mining, transport and processing has been relatively small. Even when we consider all the energy embodied in equipment and infrastructure, the net energy return or profit has been very high. Adding all the energy and resources needed to train and support all the engineers and other employees in the energy industries still leaves a huge net energy profit which explains why the oil industry has been such a profitable one. However now that we have passed the peak of production of conventional oil,  the net energy yield from new projects tapping the heavy, deep ocean, arctic and small remaining amounts in old oil fields, using advanced recovery methods, is less and less.

This decline in net energy yield results in an increasing proportion of society’s real wealth being devoted to the energy harvesting sectors of the economy, leaving less and less for all other sectors. 

Other resources sectors with rapidly increasing demand for energy include mining and metal processing, which currently use about 10% of world energy supply, have an escalating demand as lower quality ore bodies are mined.27See Universal Mining Machines by Ugo Bardi on The Oil Drum, 2008. The implications of declines in Energy Return On Energy Invested (ERoEI) are so shocking that there is much confusion and denial about the concept of net energy.

The idea that biofuels or coal to liquids will simply replace oil and gas the way oil and gas have replaced wood and coal shows an astonishing degree of ignorance of the concept of net energy. When we moved from wood to coal and on to oil, the increase in power available to humanity was not just from the increasing quantity of energy, but from the increasing quality. The quantity is easily measured in joules (heat energy released) but the quality is something scientists are more confused about. It is widely accepted by scientists that energy quality is real and determines the usefulness of energy, but without an agreed way to measure quality, it is largely ignored.

The net energy concept is just beginning to surface in the media and policy circles as a way to assess alternative energy sources and strategies, especially in the debate over corn ethanol in the USA. While different methods of accounting for net energy produce substantially different net energy profit figures, they all show a pattern of higher returns for current and past sources of fossil energy than new ones. Economic power and profit from past development of different energy sources also reflects these general patterns revealed by net energy calculation methods. This suggests they can be used to predict real economic impacts of future energy systems.

The declining net energy yields of our energy resources results in an increasing proportion of society’s real wealth being devoted to the energy harvesting sectors of the economy, leaving less and less for allother sectors.

The promotion by the US dept of Agriculture of research showing a Energy Return On Energy Invested of 1.628EROEI (Energy Return On Energy Invested) is a measure of the degree to which any energy source (those with a EROEI above one) can sustain the rest of society outside the energy-harvesting sector and so lead to the creation of real a good result, indicates how the understanding of these issues is very poor, even by the scientifically literate. A society based on an energy source of this quality would be constantly investing 62% of its energy back into the energy industry (the 1 in 1.6), leaving only the remaining 38% of the total energy in society for everything else, ie. health, education, culture, food production, law, leisure and so on. Our modern industrial society has been fueled by energy sources with Energy Return on Energy Invested as high as 100 and at least 6 (requiring between 1% and 17% of the wealth created being invested to get the yield)

Ironically conventional economics is blind to this shift because one type of economic transaction is considered as good as another, so growth in the energy sector at the expense of say personal consumption is not seen as indicative of any fundamental problem.

The dramatic effect as ERoEI falls below 10 is illustrated by the above graph.

My own tracking of these issues over the last thirty years leads me to the conclusion that the next energy transition is to sources with lower energy production rates and lower net energy yield which in turn will drive changes in human economy and society that are without precedent since the decline and/or collapse of previous complex civilisations such as the Mayans and the Romans.

The most sophisticated method of evaluating net energy, with the longest history of development, is EMergy Accounting developed by Howard Odum and colleagues.29See Emergy Systems for a current explanations of these methods.It has informed my own development of permaculture principles and strategies over the last 30 years but unfortunately it remains unknown or at best misunderstood in academic and policy circles. EMergy accounting includes ways of measuring energy quality (called “Transformity”). This makes it possible to account for small quantities of very high quality energy in technology and human services that undermine many of the more optimistic assessments of alternative energy sources including biomass, nuclear and solar. 

To test the relative impact of net energy compared with declines in energy production rates, I used a recent assessment of global energy production through to 2050 by Paul Chefurka published and discussed on The Oil Drum website30See Paul Chefurka, World Energy to 2050, The Oil Drum: Canada, November 2007. See original article at  Paul Chefurka’s website, The study was well referenced and its assumptions and methodology were clear. It took account of likely reductions from oil, gas and coal but included reasonably optimistic figures for future production from renewables and nuclear. It shows a peak in total energy production about 2020 followed by a decline to 70% of 2005 production by 2050. This is a very serious reduction given an expected global population of 9 billion. Below are the key production projections and energy mix pie charts from the study.

The above graph models gross energy availability.  Due to decreasing net energy yields of many of the above resources, actual available energy for society will likely decrease more dramatically.

Using published EMergy accounting studies31See Howard T Odum, Environmental Accounting, Wiley  1996. I multiplied these current and projected global energy sources by their net EMergy yield ratios. This shows that the energy quality of 2050 energy mix will be 58% of the 2005 energy mix. This suggests that declining net energy is a greater factor than projected declines in production. Multiplying these factors together suggests real energetic power available to humanity will be 40% of current yields. This does not allow for the energetic cost of carbon sequestration (still unknown) to ameliorate the otherwise disastrous impacts on the climate of the increased use of coal.  

The net energy return from fossil fuels including coal will decline so thatthe above calculation of humanity having about 40% of current net energy by 2050 may still be optimistic.