EROI = every energy source being used for energy production releases a certain amount of energy, which is divided by the energy necessary to build the plant, to supply the plant with energy, to operate the plant, and to take the plant apart at the end of its life span.
The same principle also applies to any other energy source we can possibly imagine, in terms of its output and input ratio.
Fukushima is a trauma for Japan. It is a disaster of epic proportions and will have dramatic repercussions for Japan’s energy landscape – for many many years to come. Fukushima had a measurable impact on Germany’s nuclear policy. Japan underwent a significant change in its energy policy, considering geothermal energy in the aftermath of the nuclear catastrophy.
Keep in mind that nuclear energy and uranium have a very high EROI. EROI, which describes the Energy-Return-on-Energy-Invested. As a starting point for what I will discuss below, nuclear energy has an EROI of around 75.
It depends on the exact type of a nuclear power plant and the security measures that have been put into place for these plants. It also depends on nuclear waste management which I discussed previously; as a consequence the EROI varies between 40:1 and 80:1. We also see that many Generation III+ reactors are currently being built. Generation III+ reactors are light water reactors with improved economics.
To elaborate on that further, EU countries frequently export their nuclear waste to countries like Russia. Depending on exact terms of the agreement, nuclear waste can be stored in Russia temporarily. Can nuclear waste be stored forever? Other countries like Australia have debated if accepting nuclear waste for long-term storage is an option, based on an assessment of Australia’s geology. Every country has to assess the risk nuclear waste poses individually.
On the other hand, a lot of nuclear waste is stored temporarily on site at the nuclear power plant. If we compare nuclear power plants just on the basis of their energy potential, we see that nuclear power plants compare very well with oil and gas production. Of course, we have to be very careful in assessing the long-term impact of storing nuclear waste and the energy that we need to cool the nuclear waste. That is particularly true since the EROI of oil production has fallen considerably.
We have to remember that oil production in the United States had an EROI of 80:1 at the lower end, going up to 100:1. But that was back in the early 20th century. Seen through that lens, the United States invested 1 barrel of oil in return for 80 to 100 barrels of oil. A great ratio! Just think of it, the EROI for Norwegian oil production in the North Sea was somewhere in between 40:1 to 50:1 until recently. It is hard to imagine any other energy resource in the 20th century that could possibly compare to that.
In the United States, nuclear energy was commercialized in the 1960’s. The first commercial nuclear power plant became operational in 1957, and was built in Shippingport, Pennsylvania. The engineers and managers were aware of the fact that for electricity generation, they had to compete with fossil fuels (oil, gas, coal). Everyone knew that renewable energy had a pretty low EROI, lower than that of nuclear energy and fossil fuels. Hydroelectric power was the exception, possessing an EROI of 35:1 to 50:1, which depends on the exact location and your capacity to store water in reservoirs. Reason number 2 is that renewable energy was extremely costly, which definately was the case in the 1960’s when it wasn’t clear that renewable energy would become as competitive as it is today. Serial production of solar panels and wind energy, all that came much later.
Without oil we depend more on nuclear energy
We are losing the world’s oil reserves! We have crossed the Rubicon.
Geologists pointed out there is a very good chance that we have already reached peak oil globally. Analysis show that oil production peaked around 1971 in the United States. Geologists discovered other world regions have peaked as well. If we take all countries together and put them into one graph, if we take their production curves and put them in there, what we get is a standard normal distribution (SND for short). We rise initially, we reach a peak, and then fossil fuel production declines steadily.
The implications of this are even more dramatic. We see the oil reserves are not as abundant as they were in the past. The large oil companies have exploited the world’s most productive oil fields for many years. As investors, these oil companies often had a leg up on state-owned oil companies in terms of designing and operating oil rigs. In the case of Great Britain, one could see how the most advanced equipment has been put to use in the North Sea basin to produce more oil and natural gas in less time. Efficiency and effectiveness meant that these oil fields were used up faster.
The oil (and gas) industry needs to make some major changes:
Oil wells that have been used for many years, they will go first as the flow rate slows down. When older oil wells have been exploited, less profitable oil wells remain. From a financial point of view, what we are left with are oil wells that do not have a cash flow that is as good as older oil wells. We have to keep in mind that investments in the oil industry are compared with investments in other sectors and industries, including renewable energy installations. We are left with the oil fields that have high capital costs and high maintenance costs, with considerable costs to maintain the complex technical infrastructure and difficulty to commercialize the project.
The main problem for oil producers are the high capital costs and operating expenses required to maintain all of that modern infrastructure, for oil rigs. We are left with two options:
- Option number 1: We exploit smaller reserves, oil wells with a slower flow rate. That means financing is often much more difficult to acquire, many oil fields are not even profitable when the price of crude oil is low. Crude oil prices were somewhere around 60 dollar per barrel of oil (Brent and West Texas Intermediate) since 2015 and they are unlikely to go much higher in the near future. The world economy is unlikely to absorb a price increase of crude oil above 100 US dollars per barrel of oil. We should keep in mind that the flow rate of shale oil and shale gas wells rises quickly, but then also diminishes quickly.
- How does this effect us?
- The increased use of high tech implies that oil reserves have a much lower EROI. Looking at oil exploration we clearly see that complexity comes at a huge cost. We already see that the remaining oil fields worth exploring are in OPEC countries, most often in non-Western countries, or countries that do not belong to OPEC such as Russia. It is hard to compete on that basis if your own oil fields are diminishing rapidly. The cash flow is not enough back home, but with new technology one could take on new projects and explore oil fields in OPEC countries. Western oil companies have the advantage that they possess technical knowhow that is of great interest to OPEC countries and oil producing nations. Western knowledge in the mining sector is also of interest.
- What we see is that many oil companies have opted to enter cooperative agreements with state-owned oil companies in OPEC countries and oil producing countries like Russia that have undiscovered recoverable oil reserves worth exploring. Russia has many interesting locations for oil exploration in the north of the country.
- The second option is as follows: The worldwide oil exploration is centered on ever fewer oil producing nations. Among them we have OPEC nations such as Iran, Saudi Arabia, Venezuela, Nigeria and other oil producers such as Russia. For historical reasons, Russia did not join OPEC.
- The global oil business has changed. There is healthy competition between the growing East Asian economy and European economy, which grows at a much slower pace. Both world regions rely on energy imports, they are dependent on oil exporting countries. Both world regions need energy imports to maintain their trade with each other and the rest of the world. I didn’t include the United States. That is because the United States has been able to increase oil production and its share in world oil markets. At least in the short term the United States can draw on shale oil and shale gas, and has access to additional reserves in NAFTA region. American shale oil and shale gas production requires much higher oil prices, to maintain investments in shale oil and shale gas. It is possible that investments in shale oil and shale gas will decline over the coming years, because quite a lot of them aren’t profitable.
- I see the problems somewhere else. Problems are mainly centered on the long-term viability of oil prices on commodity markets. Western and Asian nations are in direct competition with one another and sustain countries in the Middle East with imports. Many OPEC countries would need prices above 100 US dollars per barrel of oil to avoid a recession in their national economy. I think that is a huge risk: Lower prices lead to instability in oil producing nations.
- We can conclude from this: The EROI of fossil fuels (oil, gas, coal) depends on geological conditions of rock strata and fossil fuels compressed in the rock. Geological conditions influence overall capacity, flow rate and chemical composition. The production of fossil fuels (I have mentioned oil mostly) follows a standard normal distribution curve – a statistical concept that we apply to resource exploration. That means the EROI of fossil fuels can only decrease in the future. Due to market pressure, many oil companies will have to explore new sites and tap into oil fields that are less profitable in the long-term. That might include Canadian tar sand.
- From my point of view, there are three reasons to do this: Reason number one is that interest payments are near record low. Reason number two is that there are tax incentives to invest in oil exploration and production. Reason number three is that oil reserves are real assets. The problem with it is that shale oil and shale gas in particular depend on a higher oil price (gas price) to be profitable on the world market. Prices are low at the moment. As I have said, that doesn’t help with the EROI.
What about solar and wind energy?
Solar energy is worthwhile, but PV really depends on the exact location. The yield (kWh for every kWP) of solar panels in regions with low solar radiation, as it is the case in Europe, is much lower than in regions near the equator. In addition, cloud coverage is much higher in Europe, higher then almost anywhere else on the planet. At first glance photovoltaic installations appear less suitable for Europe, seasonal variations and the earth’s tilts contribute to this.
Let’s take Desertec for example. Desertec was supposed to provide base load electricity to the European electricity grid. The plan was to generate electricity in North Africa, with high voltage direct current that electricity had to be delivered to Central Europe, through the Mediterranean. Friction would have meant that a significant portion of the electricity would have been lost on its way to Europe. It is particularly noteworthy that until now, the project could not be financed. But it is also the case that Northern Europe and Germany aren’t ideal locations for photovoltaic installations.
In Northern Europe, wind energy makes a lot more sense. Wind velocity in the North Sea is much higher than on mainland Europe. Wind velocity is easier to predict. Whoever takes a look at the map of Europe realizes that all these countries located along the North Sea basin (the Netherlands, the UK, Belgium, Germany, Denmark, Norway) are all pretty close to each other. So that is not an ideal situation, because when the wind doesn’t blow in England it is likely to be a similar situation in the Netherlands. For Europe it is crucial to avoid weather-dependency and intermittent electricity production.
But the North Sea basin is not the only region suited for offshore wind energy, and coastal waters off Massachusetts are ideally suited for offshore wind energy. There, offshore wind energy could make a significant contribution to our electricity production. In fact, coastal waters along the eastern seaboard off the United States are known to have high wind velocity, making them ideal sites for offshore wind parks.
Let us take another look at the transmission system operators (TSO for short): To make use of offshore wind energy one has to connect the offshore wind park to the grid network, which can be very costly. Very often, it is not clear who has to pay for this, the cost to connect offshore wind parks to the grid network on land. This is the case when investors of the offshore wind parks aren’t the same ones as for the grid network. It lowers the EROI significantly for solar and wind energy, often the EROI is less than 10:1 without energy storage. Solar and wind energy and intermittent energy sources. It means the EROI is lower than it would be with other energy sources that are available at any time of the day. Solar and wind energy cannot serve as base load for transmission network operators.
Of consequence is the fact that wind parks on land have a much lower EROI then offshore wind parks. That is not ideal.
To compare, hydropower is available every day of the week, the whole year. It remains relatively impervious to short term weather changes. Water reservoirs make hydropower an ideal energy solution. As far as the electricity grid is concerned, we can respond to these changes ahead of time.
Seen from this angle, nuclear power and hydropower can serve as future alternatives to fossil fuels
I may have touched on this previously: Scientific studies alluded to the fact that industrial societies require an EROI of maybe 15:1 to 10:1 to function smoothly. Some authors are even more conservative when they measure the EROI of solar and wind energy. They put the EROI necessary to maintain modern civilization at around 10:1 or even 9:1. With energy storage in batteries and so on, solar and wind energy are at just at that tipping point where they provide enough energy to ensure most aspects of modern industrial life. Should it be the case that storage options for solar and wind energy do not improve significantly in the near future, we face considerable damage to our economy.
Let us take another look at the EROI of renewable energy sources. Renewable energy cannot guarantee the living standard we have come to enjoy in the western world, the wealth of industrial nations relies on an energy surplus. We can’t possibly build that many hydropower plants in Europe, to compensate for the loss of fossil fuels.
I just want to put this into perspective to understand the actual importance of hydropower in global energy markets: Not all countries possess water resources sufficient to meet the needs of their local population. So many nations have problems to provide drinking water to their population. Hydropower seems like a mirage, disguised as an energy solution. Water, agriculture and energy issues intersect, and hydropower dramatically lowers ground water levels downriver. But many of these countries require energy solutions with a high EROI ratio.
Let us think of it this way: Not all countries possess enough water resources for agricultural production. Many countries face difficulties just to allocate water, for agricultural production and other purposes. Declining ground water levels are a serious issue in some of these countries.
Many countries located along the equator face less of an energy problem and more of a water problem. Water resources often do not meet local demand, and energy should be expended converting salt water into fresh water. To do that, nuclear energy would be a good option, but that would come with certain risks in some of these locations, including security concerns how nuclear power plants are being handled.
The risk of technical failure remains with us for a long time to come; human error cannot be excluded completely from nuclear power stations.
Civilian use of nuclear power stations is on the rise globally and has prevailed as a technological solution in developing countries, that being said, nuclear power has some major drawbacks when it comes to safety as has been shown by nuclear incidents in Seven Island, Fukushima and Chernobyl.
Fossil fuel use is not without its risks either. The transportation business is closely linked to fossil fuel use. In fact, looking at it factually, there simply is no energy resource without its associated risks. Statistically, there remains quite a high risk that you face from traffic and individual exposure to fumes and dioxins, NOx and other volatile compounds simply by walking down the street. The health risk from diesel engines can be much greater.
In fact, it is quite difficult to demonstrate that your health suffers from car emissions, possibly from diesel engines. Nuclear incidents loom large because they are single events that often have an immediate effect. So in effect, one should not underestimate the risks of nuclear incidents, though we are entering a new age, constructing new plants such as Generation III and Generation III+ reactors. Generation IV reactors generally allow for a much better level of safety and less radioactive waste is produced in the process.
The actual problem with nuclear power plants is the radioactive waste being generated. In a previous article, I went into more detail on this topic, and have examined this particular issue so that we may gain a proper understanding of what we can do to resolve our energy predicament.
The good news first, we do have alternatives to the fast breeder reactor that we currently use for generating electricity from nuclear power stations: Dual fluid reactors can use thorium, but they do not have to.
A considerable amount of research analyzes the use of thorium for generating electricity in an environmentally-friendly way. Most research activity is conducted in Asian countries. Generally, the focus is on specific aspects of its design and researchers examine if it is possible to commercialize dual fluid reactors and using molten salt in various forms as a sort of moderation effect. For that purpose, thorium can be used as breeder material. It appears the EROI exceeds that of conventional nuclear power plants by multiples. Nevertheless, it has to be measured more precisely, for proper assessment. Radioactive decay of thorium is minimal compared to uranium.
Thorium is an ideal breeder material. We would have two separate systems which means safety is greatly improved. One system is for the breeder material and another one for the cooling process. The EROI depends among other things on the design of the reactor, on safety measures that have to be taken.
There are different waste disposal options available for molten salt reactors, so the EROI should be above Generation III+ reactors because waste disposal is less energy intensive, especially the cooling of nuclear waste. Thorium is a byproduct of rare earth mining, there is a considerable cost associated with processing the material. So we see that the EROI for nuclear power can vary considerably.
Many thanks for the shared interest in the energy world!
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