Snippets on Energy #3
Flexible, scalable and unlimited supply
Energy is the economy. There is no value added activity whatsoever without it. Whenever the real economy of goods and services grows, it always comes at the cost of additional energy use. A new factory can only be built by using up a considerable amount of additional energy. The same goes for manufacturing an increased amount products, be it cat food or sports cars.
What is this? This is a mini-series on the energy transition dilemma. If you are new to the topic, please read the kick-off article for the sequence titled: The crux of the energy transition. ..and now, back to the show:
In order to achieve growth however, the economy desperately needs a flexible, scalable and unlimited supply of power. As well as the technology and raw materials on hand to harness it. Whenever a company wants to increase its production of goods and services, it must be able to buy more electricity, natural gas, coal etc. preferably at the same (or lower) price.
This is nothing new however. In fact this was the question throughout the entire human history. How do we grow more food to feed the population? (Who then can produce stuff, more food and babies in return.) Should we conquer more land? Should we colonize another nation so that they produce more food, exotic trinkets and minerals we consume? Or should we build machines to produce more stuff and food for us (at the cost of destructing the only livable planet we have)? How do we power more of these machines then? Should we feed them coal, oil, or uranium?
All this boils down to the ultimate question:
How do we power civilization?
All throughout human history it was the availability of readily accessible energy what has put a constraint on economic growth. It is true, that the energy emanating from the Sun is infinite. Our means to capture it however has proved to be rather limited… The size of arable land to grow crops. The size of coal, oil or uranium deposits. The amount of metal we can obtain from a given mine and turn into “renewables”. Without the raw materials to build technology we could have all the energy of the Universe — and still screw it.
This is where all magic bullet solutions tend to have difficulties: scalability. They look good in theory, if only we could produce enough of them… But how much is enough? Well, whenever you encounter a new “this will solve our energy problem” type of solution, just do a quick math. Divide world energy use (the total, not electricity only (1)), with the touted mega and gigawatts the wonder solution offers. You will be surprised how far they are from being an actual salvation. Truth to the matter: the same is true for oil discoveries. They are touted as wonderous (if deposits of planet wrecking fuels can be called so), while they are shy in comparison to the total amount we burn, and the amount of production we loose every year to depletion.
The question of how long growth can continue in a finite world bombarded with infinite energy is really just a question of time. What we, our parents and grandparents have experienced in the past 70 years — the great acceleration — was really nothing more than a short anomaly in the hundred-thousand years of human history. It was a brief period when we had for once a flexible, scalable and (seemingly) unlimited source of energy. Oil. This was best described by the ruling sentiment of this age:
‘The best thing about the Earth is if you poke holes in it oil and gas come out’ — Rep. Steve Stockman
The growth of human population and the economy was, and still is powered by oil, natural gas and coal. I’m not saying that any of this is good. Far from it. We have wrecked this planet with them: eaten it alive and defecated it.
This chart is to remind you what has made this enormous growth possible. Not nuclear. Certainly not “renewables”. It was the power of dirty, polluting, climate wrecking fossil fuels. The reason for all this growth after WWII was that for a short period of time we did have a flexible, scalable and unlimited energy supply. Need more oil to power all those new cars? Just drill a hole! Want more electricity? Burn more coal, we have lots of it!
2021 has shown us however, that the age of unlimited energy is over.
Demand for energy has been growing exponentially in the past 150 years. The growth in supply could keep up with this demand, but only for a while… Up until 1970. Three years later the first oil crisis hit. History holds that this was a large part due to international politics… But consider this: if the US could expand its supply of oil responding to demand (as the primary myth of economics hold), then the rising prices would have created ample additional supply and OPEC could not ever grab the steering wheel.
Back in the real world however extraction kept falling after 1970, despite rising prices. Alaskan oil was barely enough to keep production flat for a couple of years. Then came 2005 — the peak of conventional oil supply —but this time: globally. The story has repeated itself: oil prices rose for three years, economies crashed, food riots erupted, governments failed. The extremely high prices of oil (backed by freshly printed then quickly spent trillions from central banks) gave rise to unconventional and enhanced oil recovery. This has kept production levels rising — but only for a while. Up until November, 2018… when world oil production peaked again — this time conventional plus unconventional all together. Globally.
The steady rise in prices has was lagging behind however. By the end of 2019 the over-indebted world economy could not support meaningful growth anymore (certainly not at prices above $60/barrel). The specter of recession was haunting the world. Then came COVID-19. Demand crashed, and so did oil prices. Wells were shut in. Some permanently. Investments in new production has dried up almost completely after a long slow decline since 2010. Up until recently oil prices were rising steadily again above 2019 levels, while production has still failed to reach 2018 levels. With new coronavirus variants the future seems to be even more uncertain. Will the world reach — or even surpass — the previous peak in production? If yes, for how long? A year or two?
Oil is not the same business as it was.
We used to have have a flexible, scalable and unlimited energy supply in the form of fossil fuels. An imperative they can no longer fulfill. Supply has become very inflexible —the USA struggles to crawl back where it was 2 years ago and it is still very far away from that goal.
As for scalability: look what Europe is experiencing with natural gas. Russia is struggling to scale up supply in response to the increased demand from China. As a result there is now a shortage at both ends of the continent: Europe could not fill up its reserves before the winter, while China tries to grab every LNG supply they can. So much for an unlimited supply…
We live on a finite planet, where reserves of fossilized energy as well as reserves for metals — the basis of our “renewable” future — are very limited. In fact most of them are in the process of depleting. They are providing a lower and lower return on investment. It seems that maintaining civilization at such a high burn rate is becoming slowly impossible. The requirement of high EROEI might help us understand why is that so, but that is a topic for another installment of Snippets on Energy.
Until next time,
(1) In 2019 alone, before the pandemic hit, we have consumed a mind boggling 173 340 terawatt-hours (that is 173 million gigawatt-hours, or 173 billion megawatt-hours, or 173 trillion kilowatt-hours). Remember, electricity generation took up a mere 15% of this figure (25 900 TWh), the rest was used (mainly) as heat, for smelting metals, or moving heat engines (our cars, trucks, ships, planes, etc.). You need not only to replace electricity, but the other 85% of our energy use as well. God speed, and good luck!
(1) I have already touched on the topic of depletion and the finite nature of mineral resources in the previous installment of this mini series, and how it affects the adoption of certain technologies. I’ve highlighted how the availability of raw materials (especially metals) sets an economic, ecological and ultimately a geological limit to the widespread adoption of “renewables” — as well as on the use of oil, natural gas, coal and uranium.