EROeI and Net Energy
I’d like to thank George Mobus, Ph.D. for his collaboration on this brief description of two very important and related concepts. George is truly a creative and well-read critical thinker who is able to sense and articulate complex systems. I encourage everyone to visit George’s blog – Question Everything.
All economic activity requires energy, and this energy must be made available in the appropriate forms (e.g. you need electricity for a computer but diesel fuel for a delivery truck). To get the desired amount of energy in the right form delivered to the right place at the right time requires that a significant amount of energy be ‘consumed’* by the energy system itself.
In other words, ‘It takes energy to make energy‘.
The vast majority of energy analysts (the folks that advise policymakers) narrowly evaluate ‘production’ and ‘consumption’ trends. But looking only at the amount of energy ‘produced’ or ‘consumed’ paints a partial, static, and misleading picture of the energy landscape. We must also know how much energy is being ‘consumed’ by the energy system itself, and the rate at which this quantity is changing over time.
EROeI** – energy return on energy investment – is a measure that allows just such analyses. EROeI is the energy equivalent of ROI (return on investment). Your typical ROI analysis divides the dollar value of returns by the dollar value of the investment. For instance, an independent trucker could invest in aerodynamic fairings that increase fuel economy and reduce fuel expenditures. If over the life of the $2,000 investment, the fuel savings amount to $6,000, then the ROI would be 300%.
EROeI is a simple ratio of energy inputs to energy outputs.
If it takes 100 units of natural gas energy to produce 100 units of diesel energy, then the EROeI for this process is one. From an energetic perspective, this process yields one unit of energy output for every unit of energy input. This appears to be a net zero process, but – and this is important – the energy is embodied in a different form. In this example the ‘conversion’ was from natural gas to diesel. Such a conversion makes sense because the properties of diesel and natural gas are quite different. Diesel is stable, easily transported, and it can power any of the millions of diesel engines that exist today. By contrast, natural gas has a much more limited market (at least at this point in time), and it can only be used in a very, very small percentage of vehicles. Typically fleet vehicles offer the only real market from a transportation perspective, but even among fleets, the vast majority are gasoline or diesel powered.
Similarly, nearly all coal mining equipment is powered by either diesel or diesel electric engines. Perhaps 2 units of diesel energy may be consumed in mining 100 units of energy embodied in coal. In this case, the EROeI of coal would be 50:1, which is to say that fifty units of energy output are ‘produced’ with one unit of energy input. Because of the relatively high EROeI, this process makes sense despite the fact that coal is a much less flexible and much more highly polluting energy source (this is even more the case because the pollution of the diesel/diesel electric engines should be added to the carbon footprint of the coal-fired power generation facilities).
From these examples we see that some portion of the total quantity of energy ‘produced’ must be reinvested in energy ‘production’. Some of the energy output must be fed back into the process simply to keep it running, and some portion must go into the production of new capital equipment so that total energy output can grow.
What is less obvious is that over time, the amount of energy needed to support the energy sector has increased as a fraction of the energy produced. In other words, EROeI has declined across the board for each of the big three fossil fuels. This is true despite the fact that the efficiencies of various machines have increased. This apparent paradox has occurred because most (88%) of our energy comes from depleting fossil fuel resources that are ever more difficult (read: energy intensive) to both find and extract. In other words, the oil, coal, and natural gas producing industries picked the low hanging fruit first (i.e. the highest quality and most readily available reserves). Now they must climb ever higher to find yet more fruit, and in order to meet the energy requirements of society, fossil fuel producers are forced to pick rotten and unripe fruit.
In the case of coal, this means mountain topping. In the case of natural gas, this means hydrofracing shale gas formations. In the case of oil, this means mining Canadian tar sands, producing ‘heavy oil’, or building offshore production platforms that are capable of drilling in deep, or even ultra-deep water.
Analogous situations exist in the economy. Companies increasingly find that the costs of investing in a replacement plant climb ever higher because real estate prices have gone up, equipment prices have gone up, and, for operations, labor costs have gone up. The result is that the net gain or profit is squeezed.
From an energy perspective, then, we are looking at the following identity:
Net Energy = Gross Energy – Energy ‘Consumed’ by the Energy Sector
All of the non-energy sectors of the economy compete for net energy, not gross energy, yet analysts (those folks that advise policymakers) look only at gross energy. This is a serious shortcoming that will disrupt economic, social, and political institutions and result in the accelerated degradation of human life support systems.
Because EROeI is in irreversible decline across all fossil fuel sources, the amount of gross energy ‘production’ must increase just to maintain a stable level of net energy. And in order to increase net energy ‘production’, gross energy ‘production’ will have to rise at an ever-accelerating rate.
Of course the problem is that each of these industries is either already at, or rapidly approaching, the seventh fold – when raising production rapidly turns from easy to difficult to impossible. As Bertolt Brecht once said, “Because things are the way they are, things will not stay the way they are”. It is possible that net energy is already in decline at the global level, and this means that we either need to find the magical techno-solution asap, or we need to consciously and thoughtfully manipulate individual and social behaviors and expectations so that the economy can maintain basic functions under an entirely new energy paradigm. (Preemptively, let me say to any of you that jumps to the conclusion that I am advocating social engineering, that one of the most negatively impactful social engineering projects in the U.S. is the corn subsidy… and in this case, I am simply advocating that the subsidy be removed. I prefer to think of this as social un-engineering.)
The continuing decline in EROeI is a fundamental problem not just for the U.S., but for all societies (especially industrial and post-industrial societies), but it will likely unfold and be experienced in very different ways depending on where you live and what position you occupy in the global society. While increasing efficiencies in energy extraction and production can help offset declining EROeI and net energy to some degree, recent evidence suggests that we are approaching the maximum practical limits on process efficiencies. The law of diminishing returns applies to improving efficiencies in machines. It is not clear how long incremental increases in efficiencies will compensate for the increasing rate of work required to produce net energy.In other words, technological gains in energy efficiency are reaching the seventh fold.
As my good friend and colleague Ron Swenson likes to say, “Incremental innovations yeild excremental results!”
Trends in EROeI and net energy are signposts marking the seventh fold. We can continue to struggle to do the impossible – to conform the laws of physics to our desire for unbounded exponential growth – or we can adjust our mental models and expectations to the biophysical limits confronting us. The most effective mitigation strategy – voluntary conservation – is a simple concept but in some ways an elusive goal. We now confront the choice between voluntary conservation and involuntary conservation. My vote is for the former. What do you choose?
* Throughout this article, I put ‘production’ and ‘consumption’ in quotes because energy is not ever really produced or consumed. In fact, in a closed system, energy is both non-growing and non-shrinking. Energy is a constant, but also constantly changing form. Unfortunately, the second law of thermodynamics insists that this conversion can never be 100% efficient. Conversion will always create high entropy ‘waste’ energy. By ‘waste’ energy, I am referring to chaotic energy – energy which is hard to capture and put to use (like the heat absorbed by tires and brakes). In technical terminology, what this means is that in a closed energy system, entropy always increases. Now some may quibble that the earth is not a closed system from an energy perspective. This is, indeed, TRUE! But, the earth is a closed system from a mass/material perspective. We can neither create nor destroy matter; we can only recombine existing matter into new forms. The problem is that 88% of the energy that we put to work is derived from fossil fuels which are a finite and non-growing material resource. Another 6% of the global energy budget comes from nuclear ‘generation’, and nuclear energy is bound by the same material laws. So, if 94% of our energy is derived from a one-time conversion of mass from one form (like diesel) to other forms (carbon dioxide and water vapor), then we may as well say the energy system behaves as if it is a closed system!
** While many commentators use the acronym ‘EROI’ to refer to energy return on energy investment, I believe it is important to include the second ‘e’ (as in EROeI) so that energy return on energy investment does not become confused with energy return on dollar investment – what I call ‘ERO$I’. In addition to EROeI and ERO$I, I will also occasionally refer to ‘ROeI’ for dollar return on energy investment. Evaluations of each of these formulations provides insight into our seventh fold predicaments.
References: coming soon!