fuels, we will want to keep as many high EIRR fuels in our portfolio as possible.
How quickly do we earn back the energy we invest?
Average data from literature review
PV = Photovoltaic, CSP = Concentrated Solar Power
CCS = Carbon Capture and Sequestration
THE AREA of each bubble represents the energy return on energy invested — EROI. The most valuable energy resources are those with large bubbles — a high EROI — at the top of the chart because this shows that they also have a high Energy Internal Rate of Return — EIRR. In other words, they pay back the energy invested in developing them rather quickly. Photovoltaic, nuclear and hydropower have low rates of energy return. Graph compiled and redrawn specially for Feasta by Jamie Bull, oco-carbon.com
Energy Efficiency and “Smart” Strategies
I have been unable to find studies of the EROI of various efficiency technologies. For instance, how much energy is embodied in insulation, and how does that compare to the energy saved? We can save transportation fuel with “smart” strategies such as living in more densely populated areas that are closer to where we work, and investing in mass transit infrastructure. The embodied energy of mass transit can be quite high in the case of light rail, or it can be very low in the case of better scheduling and incentives for ride sharing.
Many efficiency and smart technologies and methods are likely to have much higher EIRRs than fossil fuels. We can see this because, while their embodied energy has not been well studied, their financial returns have. Typical investments in energy efficiency in utility run demand-side management programmes cost between $0.01 and $0.03 cents per kWh saved, much less than the cost of new fossil-fired generation. This implies a higher EIRR for energy efficiency, because part of the cost of any energy-efficiency measure will be the cost of the embodied energy, while all of the savings are in the form or energy. This relationship implies that higher IRR technologies will generally have higher EIRRs as well. Smart strategies also often show extremely high financial returns because they reduce the need for expensive cars, roads, parking, and even accidents. See vtpi.org/winwin.pdf.
Brain Rather than Brawn
The Renewables Hump does not have to be the massive problem it seems when we only look at supply-side energy technologies. Demand-side solutions, such as energy efficiency, conservation and better public transport, enable us to avoid running into a situation where the energy we have to invest in transitioning from finite and dirty fossil fuels to clean renewable energy overwhelms our current supplies.
Efficiency and smart strategies are “Brain” technologies, as opposed to the “Brawn” of traditional and new energy sources. As such, their application requires long-term planning and thought. Cheap energy has created a culture where we prefer to solve problems by simply applying more brawn. As our fossil-fuel brawn fades away, we will have to rely on our brains once again if we hope to maintain anything like our current level of economic activity.
Energy and Water: The Real Blue-Chips
NATE HAGENS AND KENNETH MULDER
Today’s prices and costs provide a very bad basis for making investment decisions because they reflect temporary relative market scarcities rather than long-run underlying physical ones. The world needs to abandon money as its measure if it is to invest its scarcest, most limiting resources in the best possible way.
Because standard economic analysis relies on money that no longer has any link to the physical world as its measuring stick, it does not adequately account for the physical depletion of its resources. Money, credit and debt can be created with no underlying physical foundation whereas energy and scarce natural resources, not dollars, are what we really have to budget and spend.
Certainly, marginal cost pricing does not reflect true scarcity in a world of non-perfect substitutes. Oil this year (2010) is at roughly the same inflation-adjusted price as it was 35 years ago, yet the world has consumed almost 900 billion barrels in the interim as oil-powered transport became the foundation of global trade. Basing energy and economic policy on dollar-based signals alone may therefore lead to serious long-term dislocations. Instead, calculating our costs in terms of critical natural resources may be a more fundamentally sound investment paradigm.
The two most important natural resources are water and energy. In most cases, each is required to procure the other. First, we use water directly through hydroelectric power generation at major dams, indirectly as a coolant for thermoelectric power plants, and as an input for the production of biofuels. By sector, the two largest consumers of water in the United States are agriculture and electrical power plants. If we count only fresh water, fully 81% of US use is for crop irrigation. For American corn production, an average of 2,100 gallons of irrigation water is required per bushel which yields 2.7 gallons of corn-based ethanol.1 This means that 206 gallons of water is needed per gallon of gasoline substitute, ethanol, before refining.
Several studies suggest that up to two-thirds of the global population could experience water scarcity by 2050. The shortages will be driven by the agricultural sector, which is currently responsible for up to 90% of global fresh-water consumption. Water shortages could become much more acute if there is widespread adoption of energy-production technologies that require water as a significant input, such as biofuels. If large quantities of water are diverted to energy production because the market dictates this as society’s priority, there would be a significant loss of food production and a decline in human welfare.
The economy is a wholly owned subsidiary of the environment, not the reverse.
HERMAN DALY, STEADY STATE ECONOMICS (1977)
The interdependency between water and energy goes both ways. In California, for example, where water is moved hundreds of miles across two mountain ranges, water delivery is responsible for approximately 15% of the state’s total electricity consumption. Cities without nearby reservoirs require energy to pump water from below ground to their citizens. Irrigated crops also require energy, including those crops used for alternative energy production, like corn. Dryland farming produces significantly lower and more volatile crop yields. For example, from 1947–2006, irrigated corn acreage in Nebraska had a 43% higher yield than dryland corn.
Combining figures for the energy return on energy invested (EROI) with the water invested per unit of energy for various technologies suggests that fossil fuels also have a strong advantage in terms of their energy return on water invested (EROWI). The most water-efficient fossil electricity source we and colleagues examined yielded almost 600 times the energy per unit of water invested as did the most water-efficient biomass source of electricity reviewed.2 So, not only is the development of bioenergy on a scale sufficient to be a significant source of energy likely to have a strong, negative impact upon the availability of fresh water, but it would require energy inputs far in excess of what we have traditionally allocated to the fossil-energy sector.
| Water Requirements for Energy Production (liters per megawatt hour) | |
| Petroleum Extraction | 10 40 |
| Oil Refining | 80 150 |
| Oil shale surface retort | 170 681 |
| NGCC* power plant, closed loop cooling | 230 30,300 |
| Coal integrated gasification combined cycle | ~900 |
| Nuclear power plant, closed loop cooling | ~950 |
| Geothermal power plant, closed loop tower | 1900 4200 |
| Enhanced oil recovery | ~7600 |
| NGCC,*
|
