Wednesday, January 4, 2012

Renewables do not require a fossil fuel subsidy


Recently I was reading the comments at the excellent blog, do the math, when I found this claim:

"Solar and wind capturing devices are not alternative energy sources. They are extensions of the fossil fuel supply."

This claim is similar to the "fossil fuel subsidy" argument, which crops up very frequently in peak oil forums. Basically, the argument is that renewables are "subsidized" by fossil fuels, because renewables are built using energy from fossil fuels. For example, windmills require coal to smelt the iron ore, to extract aluminum from their oxides, and so on. So it could be said that windmills were "subsidized" by coal, and could not have existed independently.

The argument is incorrect. While it is true that the first generation of rewnewable plants would have a "coal subsidy", any subsequent power plants would have a "renewable subsidy". That is because we build everything using the prior energy source. Once renewables are established, we will use them to smelt ores, extract aluminum oxides, manufacture parts for renewable plants, and so on. Thus we do not have a permanent fossil fuel subsidy; instead, we have a fossil fuel ladder, which we use and then kick away.

The transition from coal "subsidy" to renewable "subsidy" will happen automatically, as a result of basic market mechanisms. When renewable electricity and heat are cheaper and more prevalent than coal, they will also be cheaper sources of energy to manufacture subsequent power plants.

Of course, the transition away from the coal "subsidy" will not happen all at once. What really will happen, is that the first renewable plant will have a 100% coal subsidy for its construction, then each additional renewable plant will have a declining coal subsidy and increasing renewable subsidy, until the coal subsidy reaches zero.

As an example, look at early industrialism. The energy for early industrialism came from British coal. British coal “subsidized” the subsequent energy sources, even those in the USA. Does that mean we can never transition away from British coal? Does that mean all power is subsidized by British coal? Why didn’t civilization collapse as British coal declined?

Here is another example. The initial metals for early industrialism were smelted using charcoal, from WOOD. Thus, coal had a “charcoal subsidy”. Does it still have a charcoal subsidy? Do all subsequent power sources also have a charcoal subsidy? What about the subsequent nuclear plants? Do they have a charcoal subsidy? No. Charcoal was the first step; it provided a subsidy once.

Of course there is also the issue of oil. Oil subsidizes renewables because oil is used to power the mining machinery. However, even oil is replaceable with renewables. We can substitute batteries, or can manufacture hydrocarbons using the fischer-tropsch process. At some point this will be cheaper than diesel fuel from oil, because diesel fuel will become more expensive and batteries less expensive.

The "subsidy" argument has already repeatedly failed in the past. Every source of energy was subsidized by the prior one. Coal was originally subsidized by WOOD (charcoal) because steam engines originally ran using wood. Oil extraction was subsidized by coal, because the components of early oil wells were manufactured using coal. Natural gas was subsidized by oil and coal. Nuclear power was subsidized by coal and oil. At present, in France, about 5 million cars per year are manufactured which have a nuclear subsidy, because part of the energy for their manufacture came from nuclear power plants. In this case, a fossil fuel-burning engine has a nuclear subsidy.

Does this mean it's impossible to transition from one energy source to another? No. We have already transitioned between energy sources, repeatedly, despite subsidies. The subsidy is temporary.

In conclusion. Fossil fuels are not necessary for any purpose. They were a cheap and easy first step; that is all. Fossil fuels are like a ladder we used to climb upwards to industrial civilization, but now we could kick the ladder away.

7 comments:

  1. Tom, once again I respectfully disagree.

    This claim is similar to the "fossil fuel subsidy" argument, which crops up very frequently in peak oil forums. Basically, the argument is that renewables are "subsidized" by fossil fuels, because renewables are built using energy from fossil fuels. For example, windmills require coal to smelt the iron ore, to extract aluminum from their oxides, and so on. So it could be said that windmills were "subsidized" by coal, and could not have existed independently.

    The argument is incorrect. While it is true that the first generation of rewnewable plants would have a "coal subsidy", any subsequent power plants would have a "renewable subsidy". That is because we build everything using the prior energy source. Once renewables are established, we will use them to smelt ores, extract aluminum oxides, manufacture parts for renewable plants, and so on. Thus we do not have a permanent fossil fuel subsidy; instead, we have a fossil fuel ladder, which we use and then kick away.


    I think the problem is that fossil fuels are so energy dense that the threshold for minimum investment before industry takes off is so much lower for fossil fuels than it is for renewables. For windmills to be able to power the creation of more windmills, you need a lot more infrastructure, cabling and management. All the additional batteries, the adaptation or replacement of mining technology etc etc etc. Instead of a ladder, think of it as scaffolding permenantly holding the renewables in place. Renewables powering renewables is less flexible and requires a much greater investment. I'm not saying it couldn't happen, but don't think it will - especially given the current state of the western worlds finances; there just isn't the cash around to invest in replacing whats already in place.

    You're also assuming that its easy to stick renewable energy sources near to the places we get ores, oxides, stone etc. Lets think of an example such as an ore mine in a remote African country. In the past all you had to do was to have a road to the mine, then fuel as well as machinery could be hauled up to this remote location quite easily and cheaply. They would have a big tanker there with all the fuel waiting to refill the mining machinery. In your new model, the mine needs to either have renewables on site, or some strange setup of batteries being constantly delivered then taken away to where ever they are recharged. Either way, its more expensive and impractical. Additionally as soon as that mine is depleted/unsafe, operations can move easily 50 miles down the road to another mine, without the huge task of rejigging infrastructure, moving windmills etc.

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  2. The transition from coal "subsidy" to renewable "subsidy" will happen automatically, as a result of basic market mechanisms. When renewable electricity and heat are cheaper and more prevalent than coal, they will also be cheaper sources of energy to manufacture subsequent power plants.

    Of course, the transition away from the coal "subsidy" will not happen all at once. What really will happen, is that the first renewable plant will have a 100% coal subsidy for its construction, then each additional renewable plant will have a declining coal subsidy and increasing renewable subsidy, until the coal subsidy reaches zero.


    When coal and oil are more expensive, so will 'renewable energy' due to the reason above.

    As an example, look at early industrialism. The energy for early industrialism came from British coal. British coal “subsidized” the subsequent energy sources, even those in the USA. Does that mean we can never transition away from British coal? Does that mean all power is subsidized by British coal? Why didn’t civilization collapse as British coal declined?
    Here is another example. The initial metals for early industrialism were smelted using charcoal, from WOOD. Thus, coal had a “charcoal subsidy”. Does it still have a charcoal subsidy? Do all subsequent power sources also have a charcoal subsidy? What about the subsequent nuclear plants? Do they have a charcoal subsidy? No. Charcoal was the first step; it provided a subsidy once.


    This argument is flawed because each successive transition was to sources that were more energy dense. Muscle to wood to coal to oil is a progression where each iteration is more energy dense. Additionally each iteration is more practical and more profitable. The 'wind power iteration' after this is less practical and less energy dense than oil.

    In conclusion. Fossil fuels are not necessary for any purpose. They were a cheap and easy first step; that is all. Fossil fuels are like a ladder we used to climb upwards to industrial civilization, but now we could kick the ladder away.

    From my answers I respectfully disagree with the conclusion. Fossil fuels are embedded in each stage of production and maintenance of 'renewables' and will be for a long time to come. The ease, convenience and profit-to-production ratio of fossil fuels dwarfs any renewable. When the price of oil increases, either the economy will have long collapsed (as it is doing so now) before renewables can reach 'critical mass', or renewable price will also increase. Lastly, the cost of investment in infrastructure to service these changes is another burden on already terminally indebted economies. The only realistic fuel source is 'conservation' - the last thing anyone really wants to discuss.

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  3. "Tom, once again I respectfully disagree."

    gJ, your posts have always been both appropriate and on point.

    "For windmills to be able to power the creation of more windmills, you need a lot more infrastructure, cabling and management."

    I definitely grant that renewables require a larger electricity grid. However, once that grid is established, the electricity can be very easily transported to anywhere else on the grid. Manufacturers do not care where the electricity comes from.

    "You're also assuming that its easy to stick renewable energy sources near to the places we get ores, oxides, stone etc...In your new model, the mine needs to either have renewables on site, or some strange setup of batteries being constantly delivered then taken away to where ever they are recharged. Either way, its more expensive and impractical."

    I'm claiming that we can manufacture hydrocarbons, using the fischer-tropsch process (or many other similar processes), for applications where electrical energy is impractical. So mining machinery will continue to operate using internal combustion engines. Also, there are other small users of hydrocarbons (like tractors) which will continue to use hydrocarbons, and for which we'll manufacture hydrocarbons as natural ones are depleted. Bear in mind that we won't need to undertake adjustments like these until oil is nearly 100% exhausted, since the economy will sacrifice the less important uses of oil first and all such uses will be transitioned or abandoned first. In other words the use of manufactured hydrocarbons for mining etc won't be required for at least 100 years and the transition will be very gradual.

    Also, some large mines do not require truck transportation. Mines of bulky and plentiful materials (like coal, iron ore, components of cement, etc) frequently have rail going to the mine mouth and rail can be easily electrified. Of course the equipment operating inside the mine will be internal combustion but this can be dealt with.

    -Tom S

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  4. gJ:

    "When coal and oil are more expensive, so will 'renewable energy' due to the reason above."

    Yes, but there is a limit to how much more expensive energy will become. Energy will never become more expensive than added the price of solar thermal and wind energy including the added price of the solar and wind energy needed for their construction. My back-of-the-envelope calculation suggests that retail electricity will never be more than twice as expensive as now, and will probably never be more than 50% more expensive.

    Heat sources are different. Some manufacturing processes require heat, and natural gas is used for this purpose now. Solar thermal alternatives like heliostats etc are more than twice as expensive for a given unit of energy.

    "This argument is flawed because each successive transition was to sources that were more energy dense. Muscle to wood to coal to oil is a progression where each iteration is more energy dense."

    This doesn't matter. My argument doesn't rely on increasing energy density. Even if energy density is decreasing, renewables still do not require a fossil fuel subsidy because they can be constructed using less-dense sources.

    In fact, energy density doesn't matter much in this case. Lower energy density means that more space will be used at the power plant. For example, a solar thermal plant requires 16 square miles while a coal plant with similar output requires only 4. This makes no difference to the manufacturers which use the electricity. Energy density would only be an issue when we start to run out of space for power plants. This is not imminent.

    Energy density is usually only important for internal-combustion powered transportation, because those users must carry their energy. Even for transportation, we could withstand a 10x reduction in energy density by increasing the size of the fuel tank and by requiring more frequent refueling. At some point the energy density would become so low that it would be impractical but we're nowhere near that. Only a few forms of energy (like thermal storage and hydrogen) are so sparse that they're impractical for transportation.

    "Additionally each iteration is more practical and more profitable... The ease, convenience and profit-to-production ratio of fossil fuels dwarfs any renewable."

    No, because profit is a function of price. If retail electricity becomes 50% more expensive then renewables are all profitable.

    -Tom S

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  5. gJ:

    "When the price of oil increases, either the economy will have long collapsed (as it is doing so now) before renewables can reach 'critical mass', or renewable price will also increase."

    Definitely not. If oil starts to deplete then it causes prices to increase, which causes the economy to adjust. There is no danger whatsoever of collapse. I'll touch on how the economy adjusts in my next post.

    Look at it this way. We have been wrongly grouping fossil fuels into categories like "coal", "oil", and so on. In fact, coal includes a variety of different materials, like anthracite, lignite, etc, coming from different sources with different mining techniques. Similarly with oil; oil now includes tar sands, and other things which weren't even considered oil a few years ago. In all cases, the density of energy has been decreasing continuously for a century, and the difficulty of its extraction has been increasing. Therefore your claim that we have always transitioned from lower-density and easier energy, to higher-density and harder energy, is incorrect. Quite the opposite, most of the time we've transitioned in the other direction. Despite this, the world economy did not collapse, but rather grew by about 10x during the same time period that energy quality was declining. How did this happen? It happened because the economy adjusted. The economy adjusts to declining density or EROI, by increasing the amount of energy to compensate. The economy is like a big searching algorithm which will do anything rational to adjust. Therefore, collapse will occur only when there are no other possible options, not when the first option is depleted. Collapse will not occur at the first sign of inconvenience like a higher price or lower density. Since the economy can easily adjust to lower energy density, the economy is not collapsing because of declining density. Since the economy has many other options for acquiring energy, the economy is not collapsing for lack of energy. Since the economy has available "backstop sources" of energy which are practically inexhaustible, like solar thermal, the economy will never collapse from energy descent, not even 100 million years from now. Other bad things might happen, like an asteroid hitting earth and killing us all, but energy collapse is not happening and will never happen.

    "either the economy will have long collapsed (as it is doing so now)"

    Do not misinterpret a recession as the first phase of energy collapse. The current recession has nothing to do with energy descent, and is not the first phase of collapse. Bear in mind that the energy descent community has repeatedly misinterpreted recession as the first phase of collapse, starting in the late 1970s.

    I'll deal with the topic of economic adjustment at greater length in my next blog post.

    -Tom S

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  6. If retail electricity becomes 50% more expensive then renewables are all profitable.

    Tom what I don't get is that as electricity becomes more expensive, economies slow as businesses have greater overheads. I disagree with your theory that an increase in fuel costs generally forces new developments and spurns economies to 'do the right thing'. As I see it, an increase in energy costs is the equivalent of pouring grit into the economic machine and everything starts to grind to a halt. In the UK, and other countries, the subsidies to alt.energy are being cut. The high cost of fuel to businesses isn't spurning firms to invest in hybrids (at least at any scale), but sack employees to compensate for higher running costs. Unemployment rises, economic growth hence alt.energy investment slows as we are seeing now.

    Im finding it difficult to put into words what I'm trying to say - theres an interesting speech in the first part of this 'eco' podcast, by Jeff Rubin, who explains concisely my thoughts: http://www.ecoshock.net/eshock12/ES_120104_Show_LoFi.mp3

    Of course there is also the issue of oil. Oil subsidizes renewables because oil is used to power the mining machinery. However, even oil is replaceable with renewables. We can substitute batteries, or can manufacture hydrocarbons using the fischer-tropsch process. At some point this will be cheaper than diesel fuel from oil, because diesel fuel will become more expensive and batteries less expensive.

    I guess but then the infrastructure for the fischer-tropsch reactors, the chemicals and metals for batteries, the factories etc all then require their own energy inputs. I still have doubts that all these individual systems can smoothly and syncronously transition

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  7. Good post Tom.

    There's also the fact that since EROEI is mathematically equivalent to financial principle and interest, if you take a barrel of oil and burn it to get twenty barrels of oil you get diminishing returns as predicted by the doomers.

    The doomer case is the same as spending the principle so you get declining returned interest every time till the system winds down.

    In the case of renewable energy, however, it runs in reverse and you get compound interest and the system ladders up.

    If you assume that your EROEI is a 40% return on wind (it's higher but let's use that percentage to illustrate the point) and you build four windmills then you could build two windmills with the energy interest. In fact this wouldn't happen because you'd use some of the energy provided by the windmills, but let's say you use half of the energy return, giving you a useable 20%. At the end of the year you have five windmills instead of four. Now you have a 20% return on five windmills instead of four.

    Now the interesting fact about renewables is they are a non-perishable resource. Meaning the four windmills were not burned to get a fifth windmill (unlike the barrel of oil to get the twenty other barrels of oil). The original four windmills are still there at the end, still producing energy. Likewise the infrastructure. It doesn't go away.

    Another point worth noting about compund interest is the principle-doubling-time. What is the doubling time for 20% interest? five years. At the end of five year we'd have eight windmills. At the end of ten years we'd have sixteen windmills and so on.

    That couple with the infrastructure sitting in the ground give the kaibosh to the theory of diminishing returns.

    Additionally the idea that shifting some of the dollars in the economy temporarilly to higher cost oil & gas will collapse the economy for all time is ludicrous.

    It *would be* if there were no substitutes, but there *are*.

    In the case of e.g. $122/barrel oil, the oil producing countries get richer. Those dollars to pay for the extra cost of oil have to come from somewhere else if demand remains static. That makes oil companies and their highly paid employees richer, even as others get poorer. The industrial economy still functions, however, and there is surplus cash available in the oil producing regions which buy manufactured goods.

    The high prices lead to innovation in order to capture some of the excess profit. Even in the oil industry you see substitution taking place for example wind turbines to power electric pumps et cetera.

    The only possible way that rising prices could lead to collapse is if they continually rose with no end in sight because otherwise the economy would adjust once the higher plateau is reached.

    As you have pointed out, however, there is a ceiling for price rises and that means that while price rises are possible, they will never be infinitely elastic and once the higher plateau is reached the economy will reconfigure round the optimal price points in order to continue making profit.

    The perfect example of that is Denmark compared with the USA.
    In the USA, gasoline taxes are low and essentially variable. There is higher reliance on personal transport and they are more vulnerable to price shocks.
    In Denmark, there is high fixed gasoline taxes which are used to build electrified mass transportation systems.
    The net result is that the Danish economy is partly insulated from any rise in oil prices both because of high fixed taxes which mute any rises and also the ability to substitute, thus further muting any rises.

    That an advanced mature (some might say "stodgy") economy like Denmark can do it speaks to the possibility that the rest of the EU or the USA could do it also.

    If they do *not* do it, it's for political reasons or reasons of too much banking debt, NOT anything to do with "peak oil".

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