Energy Return on Energy Invested (EROEI)

Or, How I Learned to Stop Fearing the Future and Learned to Love "Green"

Basics

An interesting discussion regarding energy return on energy invested (EROEI) has developed in response to an article posted on The Oil Drum by Charles Hall and David Murphy called "What is the Minimum EROI that a Sustainable Society Must Have? Part 2: The Economic Cost of Energy, EROI, and Surplus Energy". My own initial comment got a bit of response, though not entirely satisfying. You can read all the comments following the article itself. But I had been working on a presentation on EROEI as part of my energy talks curriculum and decided to enter the fray. In turn that gave me inspiration to write this blog. And as I started to do so, I got an e-mail from a colleague who has just started a blog asking me to write up an executive summary on EROEI and net energy! When it rains it pours.

As long-time readers of QE know I spent my fall quarter in Syracuse New York on sabbatical visiting Charlie Hall and Dave Murphy (and their many fine colleagues) in order to study Charlie's approach to the subject. Charlie pretty much invented the subject from having been a systems ecologist and studying the methods of trophic ecology under Howard T. Odum, the father of systems ecology. Charlie transferred energy flow and physiological work ideas to the world of economics, esp. the energy sector, recognizing the fact that the human economy operates essentially like a complex ecosystem that is largely driven by solar radiation through photosynthesis in primary producers. These 'green plants' are effectively the energy capture and conversion capital (below) that produces the primary energy sources for all other life in the system. They become food at the base of the trophic networks that lead, eventually, to some number and form of ultimate consumers, e.g. the top predators in the system. The result has been the field of Biophysical Economics.

Charlie's approach, and now that of a number of scientists and a few economists, is to treat the energy sector of the economy as the primary producers of energy forms that can be used in the rest of the economy. Below is a diagram I was working on when the Oil Drum article was posted. It is a generalized version of a system able to actively capture some raw energy form (like sunlight or oil) and convert it into a form usable by the production part of the system. The latter is the work process that converts the inputs of materials and energies (labor is shown as an input here to capture the essence of an economic system) into some kind of usable product or service (as output). For example, in an ecosystem the capture and conversion process would be chloroplasts in the plant's leaves. The energy return would be the sugars produced by the chloroplasts The 'prime mover' would be the mitochondria that supply the motive force to the production system, e.g. ribosomes, and other sites for biomass construction. The product (goods and services) output is the biomass that ultimately contains energy in the form of high potential chemical bonds, e.g. starches. That output is the food eaten by primary consumers (grazers) and eventually by top carnivores.

Biophysical economics is an effort to map this fundamental energy flow and work/production patterns to the human economy. This isn't just an analogy. The mapping is based on the reality of the laws of thermodynamics. The medium may be different, at least as far as artifactual production is concerned — food production for humans is obviously a direct mapping — but the principles applied are precisely the same. Thus trophic ecology has much to teach the economists who would sincerely seek to understand science-based principles of economics.

 

Figure 1. Energy flows from raw sources to economic production. Energy return in the form of exergy (energy available to do useful work) is the net of raw (gross) energy processed by the capture and conversion capital/operations and the heat losses due to the second law. The produced energy is sufficiently concentrated (high potential) and in a form (electricity, mechanical rotation, etc.) to be used by the prime mover used in the production subsystem.

 

In the system shown in figure 1 some of the output products are shown fed back into the system, to the energy capture, the prime mover, and the production process itself. This represents a reinvestment in terms of repairing worn out parts and possibly increasing the capital equipment in order to grow the whole system. At minimum the system has to be able to maintain itself by this reinvestment. Growth is possible only if there is a sufficient surplus of product, above and beyond the consumption demand of other, not shown, consumers.

There are two forms of reinvestment to the three different subsystems. First there is operational commitment to keep the capital equipment running. This can be thought of as repair work that needs to be done from time to time. The second form is the replacement of capital equipment that wears out with use and time (entropy). In other words, maintenance & repair, and replacement (possibly with improvement innovation or expansion). This reinvestment, in business, is usually categorized as operational expenses, which includes the power to run the equipment as well as the short-term repair activities, and capital investment (replacing major components, for example). The former are considered real-time expenses accounted for in the current period. The latter are usually amortized over longer time periods since they are only required infrequently, have a large incremental cost, and are expected to contribute to production over the long haul.

Let's take a look, in particular, at the energy capture and conversion process. It produces the exergy needed to drive the prime mover and the production process. If it is fairly efficient it will convert a good fraction of the raw energy input into usable energy (right form and potential). But its work (converting energy from one form to another) requires input energy for operations (e.g. electricity to pump oil) and repair and replacement of capital equipment to make it work as required. These investments are the energy investments in EROEI. Because they are extracted out of the output stream of the production system, their emergy value must be subtracted from the exergy input to the prime mover to get an energy return on energy invested in the energy capture and conversion process. This is net energy, or the energy profit that we get from that particular energy capture and conversion process. EROEI is calculated fairly simply as the ratio of net energy available to the economy divide by the energy (emergy) needed to produce that stream of profits, just like financial analyses of ROI.

 EROEI = exergy / emergy used to produce that exergy

Consider the oil industry as a complex energy capture and conversion process. Oil fields must be found; that takes a lot of energy to send search parties out exploring, drilling test wells, etc. Once found they must be exploited (assuming they are large enough) by building and deploying oil rigs, pumps, pipe lines, storage facilities, transport vessels, and so on. Furthermore, somebody had to expend energy to build those vessels and oil rigs (think about deep ocean drilling rigs!). Then it takes energy to run the drills, the pumps, and the people doing the work. Finally, the oil must be delivered to a refinery, these days usually by ship, where more energy is expended cracking the oil into its various usable products like gasoline and heating oil. The final products must be delivered to markets. Transportation and distribution takes even more energy. Finally the gas gets into your tank and your car does some useful work taking you on vacation (we'll assume that you really needed that vacation in order to be more productive in your job!) It took a lot of energy to get that gas into your tank. That has to be subtracted from the total energy delivered into your tank, amortized appropriately, of course.

But further consider the factories that built all of the equipment that was used in exploration, extraction, and delivery. Many of those factories have equipment dedicated to the oil industry, to manufacturing stuff that is used by the oil industry. They used a lot of energy to do that manufacturing. And what about the companies that supplied the materials and equipment that was used to build those factories. They used energy too!

This is the central problem with EROEI. Where do you draw the line on counting energy inputs as reinvestment into the energy capture and conversion/delivery process? That is no simple question.

Complex Webs of Energy Flow

This raises what is often called the boundary problem in EROEI analysis. Where do you draw the boundary of what constitutes an energy input to the energy capture and conversion process. In the widest sense, the energy used by the agriculture system, or at least that portion that supplied all the workers who contributed labor to the finding, extraction, and refining/delivery of oil products to end users should be counted as energy investment toward the gas going into your tank. As you can see this is no simple problem. How do you conceivably tease this complex web of energy relations out?

In one sense this is exactly the problem facing trophic systems ecologists who are trying to understand the complexities of ecosystems. Why a particular number of a particular species of a fish should be able to be maintained (by biomass) in a particular stream in a particular valley at a particular time is a scientific question (Charlie started out doing this kind of work!!!) Understanding how some American consumers can afford to attend particular NASCAR races in a particular location (e.g. Talladega) at particular times should be a similar scientific question. Of course, in traditional economics it isn't.

But with the tools and conceptual thinking of systems ecology we can provide a way to make it so. More importantly, the total framework of economic activity, both energy sector and all others should be approached in this way. EROEI could be a scientific framework for doing so.

Figure 2 shows a slightly more realistic representation of the energy relations between differnt but mutually interacting work processes. One supplies raw materials (albeit low entropy) to another process which can produce products that can be fed back into the first process as investments into the continued activity of the former. As remarkable (and possibly ridiculous) as it may sound, this is not at all unlike the relation between cattle and a grassland. The cattle graze on the grass (which captured and converted sunlight) and deposit cow dung which contributes to the fertilization of the soils (I'm sort of conveniently leaving out the role of microbes and earthworms, but you get the idea). There is a mutual reinforcement of activity here.

 

Figure 2. More complex interactions between several processes. Here only two processes are shown interacting. One (lower) provides raw material input to the other (upper). At the same time the upper process produces a product that can be an investment in the lower process (e.g. like a replacement motor produced by the upper process). Note that the whole process has been drawn to represent both energy capture and conversion within the system.

 

This basic pattern can be elaborated far beyond what this simple diagram represents. The output products of any number of producers can be the inputs (raw material and investments) in any other number of producers. This is a systems problem and not impossible to tease out.

Of course it takes effort and care.

Why is EROEI Important?

Fossil fuels are finite resources. They are depleting with every passing day. In fact the latest data indicate that we have already passed the halfway point in recoverable volumes of oil. One of the effects of this depletion phenomenon is that it gets harder and harder to find and extract the next increment of oil (or any natural resource that is non-renewable). In other words, the energy required to extract that next increment of usable energy is increasing over time as the energy resource depletes. This is physical reality. The law of diminishing returns applies. With each increment of energy we extract and provide to the production system we need to reinvest a slightly greater amount of energy. The marginal return on energy invested is declining precisely because it is getting harder to find and extract that next increment of fossil fuel.

The EROEI of fossil fuels has undergone a significant decline since they were first extracted. For example, if we were to use a very simple surrogate metric for oil EROEI we would find that when oil was first being pumped in earnest in the late 1800's each hundred barrels of oil (assuming an average standard energy content per barrel) took only one barrel of oil's worth of energy to obtain. In other words, the EROEI was approximately 100:1 for a net gain of 99 barrels of energy left for the economy. Imagine that! That is a huge profit and you can do a lot of non-energy sector work for that kind of return. In fact you can throw one hell of a party, which is, of course, what we did.

But what about today? When oil was first being exploited it literally gushed out of the ground and you only needed wooden derricks to drill for it. Today you need a massive steel structure anchored at sea, long pipelines, and extravagant refineries to take advantage of the dense energy content of oil. It takes a lot more energy investment today to get that next increment of oil out and to your tank in the form of gasoline. The EROEI for oil has declined rather dramatically. And that isn't a good thing.

Naturally we look to so-called renewable energy sources to replace oil and other fossil fuels once these have realized such a poor EROEI that we cannot economically rely on them. Real-time solar inputs, such as photovoltaics and concentrating solar heating, wind, and hydroelectric generation (the hydrological cycle driven by solar-driven evaporation) are touted as possible candidates. Here is the basic and very dangerous problem. We do not know if these sources can produce the favorable EROEI ratios that compare with oil, natural gas, and coal from an historical perspective. In other words, while these alternative energy capture and conversion technologies may have EROEIs greater than 1, e.g. 2:1 ratios, is it sufficient to both supply the reinvestment for self maintenance and the supply to the production processes of our economy? Hall, et al, ask what is the minimum EROEI that is needed to maintain our civilization (or some acceptable form of civilization). Clearly, energy capture and conversion that can barely support itself cannot be a candidate for the level of population and consumption demands that we currently have.

Our civilization was built on EROEIs of perhaps 50:1 or greater. To maintain it may actually require similar EROEIs, especially if we anticipate growing the global economy to bring underdeveloped nations out of poverty.

What do we really know about the EROEIs of wind and solar? The sad truth is very little. We have a lot of claims from industry advocates. But we have no idea if they honestly take into account all of the energy input factors that would be needed to do a complete job. The EROEI calculations for corn ethanol provide a good example of this problem. Corn-based ethanol production was seen in the early days as a means of replacing gasoline and (especially) dependence on foreign oil. Advocates argued that corn ethanol had a higher EROEI in order to justify its production and inclusion in E10 (10% ethanol in gasoline). Insufficient analyses had been done. The government bureaucrats bought the arguments at face value. And politicians seeking reelection bought it (promoting it to the farm lobby). Result, we now have a law that mandates ethanol in gasoline. The only problem is that further and more comprehensive analyses have shown that corn ethanol has barely a 1.5:1 EROEI. Worse yet, some preliminary work that includes opportunity costs of diverting corn from the food stream indicate a less than 1:1 ratio. This whole policy is turning into a nightmare for net energy available to the overall economy. The politicians were looking for a simple solution. They thought they had found it and acted before the science had been adequately done. Now they will regret that policy decision.

EROEI is fundamentally important to our civilization. Having good, sound, scientifically-based numbers is critical to making good policy decisions in the near term for the long-term. Suppose wind electricity doesn't have the industry-claimed 20:1 EROEI. Suppose it turns out, once all the relevant cost factors are taken into account, that the true EROEI is only 2:1 (an order of magnitude less). Then what? Should we spend billions of dollars setting up wind farms to supply the grid (no matter how smart)? More to the point, what is the EROEI that is necessary to have a sustainable energy source and supply society with the needed power to sustain some particular life style?

These are absolutely critical questions that, unfortunately, our politicians don't even realize they need to ask. The suppliers of these new technologies are in it for the profit; they are not motivated to tell the truth, or, for that matter, even understand that there is a truth that may differ from their own desires! Green is the new bottom line generator. But very few actually grasp what is green, what is a net energy gain versus a wowy-zowy technology that has the appearance of green.

I guess this is why I am pessimistic. We humans want to believe in progress and are willing to let ourselves be fooled by the appearance of progress. Anything that claims to provide greater energy out than was put in gets our support. Even if we don't know that, in fact, the claims are true. I know how to address the scientific issue of EROEI but will probably never get the chance. There are many other scientists who know this as well. But as with global warming, our message isn't hopeful for the masses. So it will be ignored.

Comments

[Shoudaknown]

George, I think the key question you mention is why decision makers don't know to ask about the values of EROI that are possible. I think the answer is in a similar puzzle. Why is it that economists have known for a long time that profitable efficiencies tend to stimulate resource consumption, not restrain it, and have not mentioned it to either policy makers or the environmental movement?

Both seem to go back to your comments on critical thinking, and my "Wandering minds" model of the barriers between languages. I think the answer is that each social culture develops its own language. Without a way to link people can neither ask or understand answers in the language of another social cultures. It strongly looks to me that the intellectual languages of different social cultures are just not connected. So for "environmentalists" energy saving efficiencies save the earth's resources whether for the "systems ecologists" they physically cause ever faster resource use or not, and the "economists" don't seem to see a reason to mention what they know about it or respond to the questions of either.

People, especially the "..ists" variety, seem to seclude themselves in their own "preferred reality" rather than struggle with the more interesting problem of connecting different conceptions though the natural commonality of referring to the same physical things...

Did I mention my EROI paper, for May's ASME-ES meeting, a method of calibrating whole system EROI measures? fitting right in with what you sketch out above with not much giggering at all I think. http://www.synapse9.com/pub/EROI.Wind-UT&HDS.pdf

best phil

[Larry Shultz]

Hi George,
Another worthy posting!
I hope to see some non biased eroei studies on PV, wind, solar thermal and geothermal. Other than run of the river hydro,dams fill up with silt and the energy cost of removing it may be higher than the cost of a new dam. Apparently some dams have been built with faulty figures for lifespan, I believe Glen Canyon to be an example. Do the eroei studies for hydo use real world silt deposit rates?
With fat tail high precipitation events rising i would expect that in a grenhouse world siltation rates will also rise.
I forested environments much of the erosion occurs in about 1 day in 50 years as I recall from the studies done at Hubbard Brook NH. By the way the WMNF forest had the lowest erosion rates of any forest studied up to that point when Pattern and Process in Forested Ecosystems was published.
Climax forest of Sugar Maple, Beech, and Yellow Birch are "wicked" tenacious in their preservation of soil capital.
With a warmiming climate and higher water stress this type of climax forest will be moving north as they cannot stump sprout like oak, or hickory. They are not adapted to fire. The natural fire regime in northen NH is (was?) on the order of 800 years.

[Robin Datta]

Thanks for a synopsis of what is now burgeoning field of study, of which general public ignorance is slowly waning.

The impression that I had got from The Oil Drum, the Energy Bulletin, etc. has been that the EROEI needed to sustain anything close to BAU is in at a minimum in the high teens.

Yet it would seem that efforts to point the way have not (yet) persuaded us to turn away from the present course: passing SNAFU on the way to FUBAR.

[Icarus]

Fascinating post, and I imagine a very difficult subject to get realistic numbers for.

The viability of any particular source of energy must fundamentally be limited by the total amount of energy actually available (amongst other things). David JC MacKay seems to have made a good attempt at realistic numbers in his book Sustainable Energy - Without the Hot Air. Here's an example:

http://www.inference.phy.cam.ac.uk/withouthotair/c4/page_33.shtml

Even if your source of energy has a fantastic EROEI, it may still not be viable if the *total* energy available from it is only a very small fraction of what you need. For example, why have a prodigious effort to cover an entire country in wind turbines if it still only supplies 10% of your energy needs?

Also there is an issue of raw materials. If you need (say) 1,000 wind turbines and maybe a huge pumped storage facility to (hopefully) replace 1 nuclear or fossil fuel power plant, is it even possible to generate all the necessary steel, concrete, electronics and whatever else is needed? At that rate we'd need 120,000 turbines and some huge storage mechanism to supply the UK with electricity from wind, not to mention thousands of square miles to site them all.

It would be nice to think that people in power were actually thinking about realistic numbers but I have my doubts.

[George Mobus]

Phil,

Thanks for the link. I will try to get to it by the weekend. I've been unmercifully slammed of late and was lucky to get any posting time at all!

Yes - Jevons' Paradox is virtually unknown by those who should know it. One of the things I've been bogged down with is developing a proposal to improve energy efficiency in buildings (new and retrofit). Asked to participate on a team of proposers. When I mentioned Jevons paradox everyone looked at me as if I were from another planet. They simply (and the government agencies requesting the proposal) assume that if you improve buildings' efficiencies you will automatically take care of a big energy problem.
----------------------------

Larry,

"Do the eroei studies for hydo use real world silt deposit rates?"

You know in all of the eroei stuff I have looked at I don't remember any studies on dams or transmission lines. But then I haven't actively looked. It's just surprising that such studies wouldn't have fallen into the same venues as all the other eroei studies.

"With a warmiming climate and higher water stress this type of climax forest will be moving north..."

So will I!
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Robin,

"the EROEI needed to sustain anything close to BAU is in at a minimum in the high teens."

I would bet BAU will require more than high teens because it assumes growth-oriented economy. I think we've established a lower bound for a steady-state economy with just development in developing countries spread out over many years in the lower teens. You need aggregate eroeis high enough to handle repair and replacement (maintenance metabolism!) and the larger a population you are trying to maintain in steady state at any given affluence level will dictate what sort of eroei you need. If everyone in the world lived the Northern European lifestyle (on average) it would probably require aggregated stable eroei of mid twenties. That is a reasoned WAG, but a WAG nevertheless. We just don't have good data!!!!
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Icarus,

MacKay will be talking at the UW later this month. I plan to go.

I'm not clear on the scaling problem you refer to. If you could build out more source equipment (windmills) and each source had a large enough eroei, how would this not increase the percentage of power supplied unless the population is growing faster than the sources can be installed?

Nevertheless, it does point out that the answers are likely to be counter intuitive. People in the power industry are aware and thinking about this. But they also have to balance that off against the need for quarter-end profits. And if they smell a government subsidy in the wind (no pun intended) they will pursue it regardless of the long-term consequences.

George

[Icarus]

Hi George, and thanks for your interesting comment. Here's another article that explains what I mean:

http://www.newscientist.com/article/mg20627546.600-tidal-power-no-thanks.html

This argues that the *total* energy that could possibly be extracted from wave and tides is relatively small, regardless of how much technology you throw at it (and how good the EROEI is). In that case is it worth pursuing, even if the EROEI is very good? That's all I was thinking.

[George Mobus]

Thanks Icarus.

I get your point. It all depends on scale-up potential (only so many tidal basins) and objective (how much BAU do you want to preserve.) I agree.

George

[Ajf 6]

Friendship is pure and holy, like love, it is a kind of "I'm able to you, there are you in me" mutual emotional.

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[George Mobus]

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