There are shortcomings in the Energy Return on Energy Investment (EROEI) model in assessing the value of renewables, particularly the omission of important factors like the mismatch of energy output timing and the necessity of energy storage.
- Jun 05, 2023, 3:00 PM CDT
As I analyze the situation, I have reached the conclusion that energy modeling misses important points. I believe that profitability signals are much more important. In this post, I discuss some associated issues.In Sections [1] through [4], I look at some issues that energy modelers in general, including economists, tend to miss when evaluating both fossil fuel energy and renewables, including wind and solar.
In Section [5], I try to explain one reason why published Energy Return on Energy Investment indications give an overly favorable impression of the value of adding a huge amount of renewable energy to the electric grid. The basic issue is that the calculations were not set up for this purpose. I think of the problem of rising energy prices for an economy as being like a citizen faced with an increase in food costs. The citizen will attempt to balance his budget by adding more debt, at least until his credit cards get maxed out. This is why we should expect to see an increase in government debt when oil prices are high; oil and other fossil fuels are as essential to the economy as food is to humans.
Section [1] shows that high oil prices seem to be associated with government deficits. A high-priced substitute for oil would almost certainly have a similar problem. This governmental debt tends to build up, and at some point becomes almost unmanageable. [3] It is uncertain in exactly which ways the economy might contract, in response to higher interest rates. Some ways the economy could contract would bring an early end to both the extraction of fossil fuels and the manufacturing of renewables. This is not reflected in models.
Figure [2] shows that, on an annual average basis, inflation-adjusted Brent oil prices have only exceeded $120 per barrel during the years 2011, 2012 and 2013. On an annual basis, oil prices have not exceeded that level since then. For a while, forecasts of oil prices as high as $300 per barrel in 2014 US dollars were being shown as an outside possibility ., showing how much oil can be produced at various price levels.
[a] The pricing scheme generally used for wind and solar electricity tends to drive out other forms of electrical generation. Figure 6. Chart prepared by the International Energy Association showing energy consumption by fuel through 2019. Chart is available through a Creative Commons license. At a minimum, the entire food production system would need to be modeled. What inventions would be needed to make such a change possible? What materials would be required for the transformation? Where would all these materials come from? How much debt would be required to fund this transformation? such a system could be put in place, the amount of fossil fuels used to operate the system low.
Both the need to overbuild the system and the need to provide storage are excluded from EROEI calculations. These are yet other ways that EROEI calculations provide an overly optimistic view of the value of wind and solar. We use oil products for long distance transport by ship, air, truck, and train.
The concept of Energy Return on Energy Invested has been used for many years in the field of biology. For example, we can compare the energy the fish expends swimming to procure that food One issue is that there are huge differences in the selling prices of different types of energy. These are ignored in EROEI calculations, making it look feasible to use a high-priced type of energy to produce a low-valued type of output . If profitability calculations were made instead, without mandates or subsidies , the extent to which there is a favorable return would become clear.
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