Eye on Energy: Red Flag

The European energy crisis is barreling toward a winter cliff. Will it avoid going over? Will economies collapse?  Will people die? European dependency on Russian natural gas and other fossil fuels has countries scouring the planet for alternative energy supplies, especially natural gas. Being willing to pay above-market prices to secure LNG cargos is distorting global energy markets. Prioritizing the security of energy supply seems the highest dictate for the moment. But leaders refuse to adjust clean energy mandates, potentially at the expense of their citizens.  

Besides buying LNG cargos, countries are pushing citizens to reduce gas use so storage capacity can be rebuilt ahead of winter. In anticipation of a possible catastrophic winter supply situation when and if Russia cuts off all gas shipments, the E.U. ordered member countries to prioritize storage. Countries were told to reach 80 percent of storage capacity by November 1 and 90 percent by that date in future years. If the target is not reached, they’ll be ordered to ration gas use.  

Record LNG imports, combined with milder weather and reduced gas use, enabled countries to meet their targets ahead of schedule, pushing continental gas prices down, although they remain four times higher than last year and multiples above U.S. prices. Europe’s gas storage traditionally supplies about a quarter of continental winter consumption, or a month or two. Traditionally, most of Europe’s supply comes from pipelines hauling cheap gas, primarily from Russia, although meaningful volumes come from the North Sea and North Africa.  

High storage volumes bolster E.U. officials’ confidence about the upcoming winter. The cost? High gas prices have elevated electricity costs, pushing vast segments of populations into energy poverty. Families and businesses are struggling to pay elevated power prices now and are fearful of managing higher prices this winter.  Utilities are straining to pay for expensive gas supplies, resulting in bankruptcies and forced nationalizations and creating the specter of a massive financial crisis on top of the energy crisis.  

European governments are moving to socialize high energy costs, even though the need arises from poor energy policies. Although working to ease citizens' financial pains, many continental leaders seem more focused on doubling down on renewable energy investments while doing the minimum necessary to get their populations past the upcoming winter. They are counting on renewable power to solve longer-term energy challenges, despite its weaknesses.  

Measuring Rods

Europe is learning about the Seven Desired Qualities of Energy. Those qualities include Affordable (cheap), Abundant, Reliable, Pure, Universally available, Environmentally friendly and Safely produced and delivered.  Unfortunately, they cannot all occur together.  

Renewables lack several of these qualities. Intermittency (unreliable) necessitates backup supplies dispatchable at a moment’s notice. Thus, renewables are much more expensive than advertised. Renewable energy promotors argue for batteries to counter unreliability. Batteries do not create energy. They merely deliver power for brief periods. Employing batteries boosts the required generation capacity since they must be recharged along with the renewable energy necessary to power the economy. The fallacy of battery backup emerges when wind is still for days on end as experienced in 2021, or when bad weather and night eliminate solar power.  

When rated by the Energy Return on Energy Invested measure, the fundamental problem with renewable energy becomes clear. EROEI is a somewhat obscure but critical concept. It measures how much energy is needed to generate a usable unit of power. 

For example, for each unit of energy invested in the natural gas eco-system (finding a gas prospect, drilling the well, processing and transporting the gas, building a combined cycle gas turbine power plant and generating electricity), 30 units of usable power are released in the form of electricity.  Thus, natural gas power generation is said to have one of the best EROEIs at 30:1.  

An analysis by natural resource investment managers Goehring & Rozencwajg covered the history and significance of EROEI. G&R pointed out that for most of history energy systems were largely static. Most energies came from food and animal feed while wood was used for heat and as a building material to provide housing. Energy historians estimate this mix of biomasses produced an EROEI of 5:1 or one-sixth of the EROEI of natural gas. It means for every unit of energy consumed five units of energy were generated. 

Until modern times, energy production averaged 17 gigajoules per person annually. Human food intake consumed four GJs. Providing shelter and feeding work animals used another 10 or more GJs, leaving little surplus energy to build economies and support additional population. G&R calculated that between AD 1 and 1650, the global population grew only 0.02 percent per year while annual energy increased at a 0.04 percent rate.  

When forests around cities were denuded, residents expended greater energy bringing wood from further afield. Often, the energy expended exceeded the energy the wood provided, forcing people to seek alternative energy sources. Coal, often abundant around those cities, turned out to be a very effective source of energy when burned. G&R wrote that “early coal-based steam power had an EROEI of 10:1, twice as productive as the biomass that had been used for thousands of years.” Surplus energy quadrupled.  

From the Coal Age, energy transitioned around 1900 to the Petroleum Age, ushering in an extremely high EROEI of 30:1. Nuclear energy has an even higher EROEI in the 50:1 range but carries the stigma of danger associated with past accidents and the horror of the atom bombs exploded to end World War II.  

With human food needs and other necessities remaining unchanged for the first 16 centuries, the coal and petroleum transitions enabled surplus energy to surge, supporting the world’s population growing from two to eight billion people.  

Recapping the history of energy transitions and their impact, it took 1650 years to go from 17 GJs of annual energy supply per person to 20 GJs, 250 years to go from 20 GJs to 25 GJs, but only 120 years to go from 25 GJs to 75 GJs. G&R pointed out that “By 2019, OECD energy consumed was 175 GJs – seven times greater than in 1900.” Such high energy consumption is what supported the huge economic and societal gains experienced in lifespans, living conditions and dealing with changing climate conditions and carbon emissions.  

Lower Standards of Living

Switching to wind and solar power means embracing lower EROEIs. Wind and solar EROEIs are approximately 3.5:1 after adjusting for intermittency and redundancy. Even without considering intermittency, renewables at best have an EROEI of 16:1, half that of fossil fuels. Such low EROEIs threaten to return our economy and society to the world of our first sixteen centuries. 

Embracing renewables to power the world’s economy means slower population growth and lower standards of living. Is that really what we want?  

An additional consideration when contemplating energy transitions is the impact of the materials needed to produce energy. Nuclear power plants require massive amounts of metals and cement when built, but based on their energy output they generate lower environmental costs per unit of output than renewable power. 

Measured by tons of metals per terawatt-hour of output, wind has a 6-10 and solar a 30-55 times higher material-to-energy ratio than fossil fuel plants, according to a 2015 U.S. Department of Energy study. Renewable material intensity is an under-reported consideration, especially when many of the metals needed are in limited supply or controlled by China. Building new supply chains will take decades and cost trillions of dollars.  

Europe is leading the renewable energy push at the expense of dispatchable power – coal, natural gas, oil and nuclear. Renewable energy needs backup power when it fails to deliver. This requirement adds significantly to ratepayer bills and carbon emissions. The clean energy narrative assumes that eliminating emissions by stopping fossil fuel use will slow global warming. The narrative ignores those countries with large populations that are building more fossil fuel power plants because it assures cheap energy critical to keeping their people safe and employed. Those countries’ emissions are swamping the emissions reductions from switching to renewable energy.  

Our modern world is the direct beneficiary of efficient, abundant and cheap sources of energy. The increase in carbon emissions has fostered concern over their impact on our climate. Fear that carbon emissions will devastate our economy and society has driven policies to switch from fossil fuels to renewables for powering our economy. 

But we’ve learned to reduce carbon emissions while keeping power costs low. Those technologies have enabled countries to transition from using dirtier fossil fuels to cleaner ones with lower carbon emissions. The U.S. has led the switch from coal to natural gas, reducing emissions meaningfully.  

A Better Alternative

The global energy crisis has forced an increase in dirtier fuel use and increased carbon emissions. Powering economies just with wind and solar means embracing lower EROEIs. That means slower population and economic growth and reduced living standards. 

A better alternative exists in nuclear power with its high EROEI. With nuclear power, we can have high economic and population growth, rising living standards, low emissions and safe and cheap energy. What’s not to like? – MarEx