The energy required to produce energy

by Richard Douthwaite

This book is based on the papers given at a conference, Ireland's Transition to Renewable Energy, held at the Tipperary Institute in Thurles over three days in Autumn 2002. The event was organised by Feasta, the Dublin-based Foundation for the Economics of Sustainability, the Renewable Energy Information Office of Sustainable Energy Ireland and the Tipperary Institute itself. It drew its inspiration from the work of Dr. Colin Campbell, who has been arguing authoritatively for some years that the world's oil supply will begin to contract during the current decade as a result of resource depletion.

Feasta has been interested in Dr. Campbell's ideas since it was established in 1998 and he spoke at the Money, Energy and Growth conference it organised at Trinity College, Dublin, in March 2000. The three themes indicated by the title of the Trinity conference ran through the Thurles one and will be apparent in this book. This is because although the Thurles conference was designed to be an impartial enquiry into Ireland's energy future rather than the presentation of a particular point of view, the questions the enquiry was designed to answer were naturally those that the organisers - and in particular, Feasta, since it took the main responsibility for assembling the programme - thought were significant.

Feasta sees its task as to identify the characteristics that the world will have to possess to become economically, environmentally and socially sustainable. Once it has done this, it should be able to establish which features of the present system need to be changed and how this should be done. Feasta's work so far has led it to believe that continual economic growth is incompatible with sustainability and that a sustainable world can only be powered by energy from renewable sources. It has also identified the present money-creation system as a barrier to the achievement of sustainability. This is because, since almost all the money now in use was originally issued as a debt, unless people borrow just a little more each year than than they or others repaid during the previous one, (the increase is required because the retained earnings of the lenders have to be borrowed back), the money supply will contract and this will limit the amount of trading that is possible.

If this happened, the poor trading would discourage further borrowing and could thus lead to a depression setting in. The only way to avoid this is by ensuring that economic growth takes place every year, so that is what every government on the planet seeks to do. The snag is that generating the necessary growth almost always involves higher levels of energy use. Consequently, if fossil fuels are no longer available in increasing quantities, unless nuclear energy or renewable power sources can be developed rapidly enough not just to make up the increasing shortfall but also to provide extra energy each year, the world economy could go into a serious decline.

Accordingly, the Thurles conference opened with Colin Campbell putting his case, a representative of a major oil company responded by saying that oil will be abundant for at least 25 years, and after some discussion, the meeting went on to explore what other sources of energy might become available and how well they might be able to compensate for the missing oil when it became necessary for them to do so. In particular, the meeting asked, would other power sources enable current rates of economic growth to continue?

It became very clear during the event that the depletion of oil and gas reserves would leave few areas of human life unchanged and that, to bring about a favourable outcome, it was crucial to take the right decisions now. Perhaps the most important decisions involve deciding how the remaining fossil energy supplies should be used. At any time, the size of the world's energy supply is determined by the amount of energy that has been invested as capital into developing energy sources and by the amount of energy these sources require as a regular input to produce their energy output. So energy as capital is the energy required to sink coalmines and oil wells, to build nuclear power stations and to erect wind turbines, while input energy is the power required to use that capital equipment. In the case of the coalmine, it is the energy required to pump out water, to pump in air, and to run the conveyor belts, the cutting equipment, the cages that lift the coal to the surface, the washery and the rest. And, of course, energy is needed to transport the energy to the consumer, whether this is via an electricity grid or a road/rail/sea delivery system.

The point being made here is that energy both as capital and as an input is needed to produce an energy supply. Renewables and nuclear stations usually require much more capital energy during their set-up stages than do their fossil equivalents but the latter generally consume more income energy to produce a continuing power supply. Moreover, as the most easily exploited sources of oil, gas and coal are gradually used up, the amount of input energy required to continue to supply these fuels to the market tends to rise. Eventually, the point will be reached at which the amount of input energy used for their production comes close to the output energy that the fuels deliver usefully when burned. At that point, it will be useless to continue production because, although there might be a lot of fuel left in the earth, it will no longer be a net energy source. Unless improved extraction technologies cut energy inputs, it might as well not be there.

The portion of the fossil fuels still in the earth that can be extracted and burned in a way that delivers a net energy gain is an endowment that can either be spent on meeting humanity's daily running costs or invested for the future. However, the current generation does not have a completely free hand in deciding the split between these two uses because over the centuries since coal began to be mined, people have developed ways of supporting themselves that require a lot of energy to run. Until renewables and/or nuclear sources have been developed enough to supply that energy, a lot of fossil fuel will have to be consumed to do so instead. In other words, for some considerable time, the world will only be able to turn a fraction of each year's gas, coal and oil output into capital energy to use to develop energy alternatives.


This means that, even leaving climate-change considerations apart, the world's transition to non-fossil sources of energy must not start too late or proceed too slowly. If it does either, there could be insufficient energy left to be spent as capital on the construction of energy sources to replace fossil fuels and the world could be trapped for generations in a miserable lowenergy- use economy that would lead to the premature deaths of hundreds of millions of people.

The question of when a determined switch away from fossil fuels should begin and how quickly should it be carried out cannot be left to the energy markets to decide because once oil and gas prices start to rise as a result of increasing scarcity, it will already be too late. Too late, that is, to make the transition without denying energy supplies to the weakest, most marginal consumers in the world - in other words, to the really poor - unless some sort of rationing is put in place. This denial would not merely mean that the poor had to use less kerosine for their lights at night and for their cooking stoves. The price of tractors, transport and fertilizers would rise, pushing up the cost of food, which would mean that, although undernourished already, they would have to manage on even less.

On a world level, then, the availability of energy is determined by the amount of fossil energy left in the earth, the amount of energy it takes to extract it, and by the amount of energy that has been invested in developing fossil, nuclear and renewable energy supplies. Until now, there has been enough readily-extractable fossil energy left for the supply of fuel to increase year after year. As a result, the availability of money rather than energy has been the constraint governing the level of economic activity. However, when the global production of fossil energy begins to fall because sources which once supplied fuel for little effort are becoming depleted and considerably more energy has to be put in to fossil sources to get any energy out, the money supply will cease to determine how much economic activity goes on around the world. The energy supply will do so instead. From that day on, increasing the amount of money in circulation will have no effect at all on overall energy supply. It will simply cause an energy-price inflation. Indeed, energy will replace money as the true measure of value and conventional money will be valued according to how much energy it can buy. This will be, of course, a complete reversal of the present situation in which energy is valued in money terms rather than vice versa.

Because this fundamental change in the nature of money is almost certain to happen within the next 25 years, a lot of the discussion in this book is in terms of how much energy it takes to produce energy rather than the monetary cost of producing it. A related reason for discussing energy sources in this way is that money costs and benefits have already shown themselves to be false guides to energy policy and prospects. For example, as David Morris describes in his paper in this book, tax reliefs have enabled alcohol produced from grain to provide 10 percent of Minnesota's transportation fuel. A praiseworthy step towards a sustainable energy supply? Not at all. According to David Pimentel of Cornell University, producing a U.S. gallon of alcohol consumes 131,000 BTUs from fossil sources in planting, growing and harvesting the corn, then crushing, fermenting and distilling it. That same gallon releases only 77,000 BTUs when burned. "Put another way, about 70% more energy is required to produce alcohol than the alcohol actually contains" Pimentel says. If energy was being counted rather than money, this wasteful activity would stop overnight.


The American Petroleum Council also has also fallen into the trap of counting money rather than energy. It forecast in 1972 that when the price of a barrel of oil exceeded $6, shale oil extraction would be economic. Although the $6 price has been exceeded by a factor of two, three or four for most of the period since, the shale oil has stayed in the ground. The faulty forecast arose because the APC thought that the costs of extracting shale oil were unaffected by current energy costs whereas the extraction costs are essentially determined by the price of oil to the industries that make the inputs and the capital equipment that the shale oil processors require. An energy-in/energy-out analysis would have shown just how sensitive the extraction process was to changes in energy prices.

To avoid the discussion at the conference or in this book falling into this trap we asked those writing papers about particular energy sources to say, if they possibly could, how many units of energy the sources they were describing supplied for each unit of energy put in. This approach was so foreign to a major oil company that it changed its mind about sending a speaker. "Your suggestion to measure the energy intensity of all activities necessary in the provision of future sources of energy has certainly fallen on fertile ground here" a senior figure in the company wrote, asking to be sent copies of the conference papers. "We will be learning more from the results of the conference then we are currently able to contribute."

A spokesperson for another major oil company also found the approach novel and commented: "I am somewhat confused by the theme of the conference as you state it, that availability of energy is not a function of price, but rather the energy required to release or extract the energy. That all costs of labour and capital can ultimately be resolved to a cost of energy is true, but the purpose of price is precisely to encapsulate those costs." Up to a point, Lord Copper, but, as in the Minnesotan case, those prices can go wrong. Consequently, as energy is about to replace money as the real measure of value anyway, we decided that we had better start costing it in its own terms.

The book opens with the text of Dr. Campbell's conference talk. We are, however, unable to present the full counterview advanced by David Frowd, who was at the time the head of the energy group in Shell International's scenarios team. He has since retired. In his talk, Frowd flashed several slides packed with figures on the screen much more quickly than anyone in the audience could note anything down. He then left the conference before anyone could ask him privately for the full details. He subsequently refused to make the slides or the data on which he based his conclusions available and the transcript we had made of his talk was meaningless without these figures. "We don't want a debate," he said. It is hard to see his presence at the conference as anything more than a spoiling exercise designed to prevent firm conclusions about when oil and gas output might begin to decline from emerging. After all, once Shell's customers recognise that scarcity is going to make their oil deliveries much more costly in a few years' time, they will start switching to other energy sources, damaging the company's market now. Is that why a debate isn't wanted?


While we have done our best to present Frowd's arguments fully and fairly, we have also printed the opinions of the second in command of the world's largest oil company, Exxon-Mobil, Harry Longwell, who though he agrees with Dr. Campbell's views on the decline in the rate at which oil is being found (he uses one of Campbell's graphs in his article) nevertheless expresses confidence that the oil industry has the resources to meet future global energy demand for some considerable time.' Other oilmen have been even more forthcoming. In February, 1999, for example, Mike Bowlin, the chairman and CEO of a major California-based oil company, ARCO, better known by its old name, Atlantic Richfield, said that the world was entering 'the last days of the Age of Oil'. His company was therefore looking to a future in which motor fuels from renewable sources played a bigger part. ARCO has since been taken over by BP.

This introduction has been written to be as neutral as possible. The conclusions that I, personally, draw from the material in this book come at the end. It should be said that Feasta, the Tipperary Institute and Sustainable Energy Ireland do not necessarily stand over all the opinions expressed in these pages. Nor do I. The conference was designed to be a wideranging enquiry and that is exactly what it was.

This book is more wide-ranging still as we have taken the opportunity to print five or six items which cast an interesting light on, or supplement, the conference papers themselves. The advantages of a methanol economy over a hydrogen one, the prospects for oil from tar sands, and the sequestration of carbon dioxide are examples of the topics covered by these additional papers. So is the panel on Ireland's growing dependency on oil on the opposite page.

The major disappointment of the conference was that, although the speakers were all leaders in their fields and the attendance was good, very few of those responsible for making decisions involving energy issues bothered to come. Feasta and its partners hope that this book will enable them to pick up on the ideas they missed. Ireland's future will be largely determined by whether or not they do.

This is one of almost 50 chapters and articles in the 336-page large format book, Before the Wells Run Dry. Copies of the book are available for £9.95 from Green Books.


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