When will the world reach peak fossil fuel production?

[TubbaBlubba]

A person's actual living conditions are based on what they themselves earn, not what someone else earns. If Bill Gates's net worth suddenly doubles over the next year due to a recovery by the stock market, my ability to afford my mortgage will not disappear.

Besides, the worth of money is relative. I doubt Bill Gates uses his money to buy a million gallons of milk.

 

[mheslep]

I don't believe that when the rubber meets the road, people's view of their economic situation is based primarily on envy. While that view has a lot of traction on internet forums and maybe even in front of a bar - and other places where people like to complain/vent, if your boss called you into his office and gave you a 15.9% raise, your first thought will not be "gee, I wonder what the other guys got", but will rather be "gee, I wonder what I can buy with this".

A person's actual living conditions are based on what they themselves earn, not what someone else earns. If Bill Gates's net worth suddenly doubles over the next year due to a recovery by the stock market, my ability to afford my mortgage will not disappear.

I believe people have a mix of both: 1) 'Yes I can prosper on my own' and 2) envy. In my experience and reading, the balance between the two varies around the world. In the US in particular I think we are much more oriented to #1, i.e. I can prosper without tearing down the other guy, that the pie is dynamic and grows. This mindset is exceptional to the US in my view, and most of us don't realize the extent of the difference from the rest of the world.

Example:

BONO: I don't know. Ireland has a very different attitude to success than a lot of places, certainly than over here in the United States. In the United States, you look at the guy that lives in the mansion on the hill, and you think, you know, one day, if I work really hard, I could live in that mansion. In Ireland, people look up at the guy in the mansion on the hill and go, one day, I'm going to get that bastard. It's a different mind-set. KING: I'll say.

http://transcripts.cnn.com/TRANSCRIPTS/0212/01/lklw.00.html

 

[mheslep]

This wasn't the study I was looking at, but it is a meta analysis of the energy/GDP correlation of 88 countries.

As I said above:

It may be that energy production and GDP is more closely correlated in developing countries like China, which strikes me as intuitive, but I doubt the correlation holds very tightly in developed countries (i.e. how many yachts can one water ski behind?).

That MPRA paper mixes in, for example, The Congo with the USA. I'm curious about the breakout.

The authors of that MPRA paper also cite other conflicting studies, e.g.:

One of the first studies was by Kraft and Kraft (1978). They use data for the
USA for 1947-1974 to study the causal relationship between gross energy consumption and GNP. They find uni-directional causality flowing from GNP to energy. Their conclusion is that energy conservation would not adversely affect GNP.

 

[mheslep]

OK, cherry-picking the outlier,

It would more useful I think to stick with author's description of the cases:

Following a critical review of the literature, included in this study, three cases were adopted. CASE 1 and CASE 3 being lowest and highest recent estimates, respectively, and CASE 2 being author’s best guess based on the information available.

A high side estimate is not the same thing as an outlier.

we still have a story where fossil fuel energy falls off the cliff circa 2020, plummeting ~100 EJ/yr. So it is not a gentle linear decline rate out to 2100 but an energy plunge from 2020 to 2050 (co-inciding with peak population of course).

I'd like to avoid mixing the hyperbole (cliff, plunge) with a discussion of the results of the study. Can we stick to the numbers therein? In case 3 between 2020 and 2050 Mohr shows a decline of approximately 3 EJ/yr. Cases 1 and 2 show a slightly steeper decline in that period, starting a few years sooner. If we agree so far, then it seems to me the interesting question becomes is replacing this loss rate feasible? If the US share of the decline is say 1 EJ/yr then it appears to me that via some combination of the replacement scenarios I put forth https://www.physicsforums.com/showpost.php?p=2810804&postcount=25" that replacing that loss rate is feasible.

And then things level out a bit for the next 50 years - based on the one huge compensating factor of shale oil.

So your optimism rests on the US being willing to dig up its backyard when the time comes? Is this what you are saying?

<shrug>I suggest that you are conflating two issues here (and above) that simply leads to confusion: the first being political barriers, and the second is what fossil reserves are economically retrievable over time (the subject of Mohr's thesis). Granted both are important, but mixing them up leads to errors in my view.

Also, I don't know that open pit digging is required for shale oil recovery. It appears in-situ techniques are possible.
http://www.shell.us/home/content/usa/aboutshell/projects_locations/mahogany/technology/
http://en.wikipedia.org/wiki/Shell_in_situ_conversion_process
http://www.nypost.com/p/news/opinion/opedcolumnists/item_6mUUAG1W7YrQDbbKn8M2WP/1

 

[Office_Shredder]

That's tripled after inflation. It says so right on the side bar of the graph that all the numbers are adjusted for parity with the 2005 dollar value.

Woops, I missed that. My bad... I thought it would be pretty weird for GDP to decrease so dramatically after inflation was included

 

[mheslep]

An update -

One EJ/yr (1e18 J/yr, ~32 GW-yr), possible non-fossil equivalent replacements:

• Nuclear: 30 http://en.wikipedia.org/wiki/AP1000" reactors running at the US average ~93% capacity factor (or 15 of the common two reactor plants), plus transmission.
  -
• Wind Turbines: 32 times the one year increase in Texas wind capacity seen in http://www.windpoweringamerica.gov/wind_installed_capacity.asp" at 37% capacity factor ( or 32 * 1850 1.5 MW wind turbines), plus transmission.
  -
• Conservation: A 3.5% increase across the board cut in US electrical generation via load efficiency, generation efficiency, or both. (assuming a 900GW(e) average US electrical load)
  -
• Conservation: A 2% across the board cut in US petroleum usage through increased efficiencies such as higher vehicle mpg, or migration to electric vehicles (1 EJ = 167 million bbls oil, http://www.eia.doe.gov/energyexplained/index.cfm?page=oil_home#tab2")
  -
• Solar PV: 20 by 20 mile solar PV farm, 192 GW peak (225 W/M^2 mono-crystalline silicon panels, 1/6 capacity factor).

 

[apeiron]

The study doesn't discuss them, so any discussion of them stemming from the study is essentially just idle speculation.

You think that is a rational statement?

Just say this study is valid (and you are not disputing that yet) then the likelihood of peak fossil fuels in seven years is not really worthy of further comment?

We all go ho hum. Technology will always find a way round things?

Will the economy collapse? Will we adapt by building nuclear plants and buy electric cars? The study contains no discussion of those issues whatsoever.

Broadly there are two responses - the technological and the social. One says a way will be found to continue business as usual despite peak fuels, peak population and global warming. The other says ecological limits will actually bite and growth-predicated economics will collapse. This will require deep social change - energy descent, relocalisation, etc.

I am quite happy to consider the arguments for both. But the issue for this OP is really about timescales. What do we actually know about peak fossil fuels? This study impressed me. If you have good reasons to doubt its timescales, then please state them.

 

[russ_watters]

You think that is a rational statement?

Certainly.

Just say this study is valid (and you are not disputing that yet) then the likelihood of peak fossil fuels in seven years is not really worthy of further comment?

I didn't say it wasn't. What I said was that speculation about "dire" consequences doesn't exist in that study and doesn't have any evidence behind it. It is pure speculation and is worth very little.

 

[apeiron]

It is pure speculation and is worth very little.

And that reads like evasion born of cognitive dissonance. If you can provide some kind of technical road-map study that looks at energy alternatives and their EROEIs, then that would be a contribution. At least mheslep is attempting to look at what might plug the gap.

For me, responses like biofuels and deep water drilling are evidence of how difficult it actually is to find technical outs. A nuclear rennaissance is easy to dream about, but harder to see happening.

There is in fact huge shortsightness on both sides concerning these kinds of fixes. The greenies and nimbies are effectively opposing even wind turbines as they don't like the view being messed up. They will be an effective brake on nuclear for sure.

This is where the speed of the peak is the issue. It is not just about technical fixes, but about the ability even to take rational decisions in societies with short-term mindsets.

What you call "pure speculation" I call taking the future seriously.

 

[Jack21222]

If the US share of the decline is say 1 EJ/yr then it appears to me that via some combination of the replacement scenarios I put forth https://www.physicsforums.com/showpost.php?p=2810804&postcount=25" that replacing that loss rate is feasible.

You're completely ignoring costs. The question isn't whether we can replace the energy, but at what cost? You're also completely ignoring the rest of the world. The United States doesn't exist in a vacuum.

The price of oil is due to shoot up dramatically in the coming decades due to the combination of flat or declining production coupled with increasing demand as more of China and India get "developed," along with other such countries. Even if the United States is able to make a successful conversion away from oil in the next couple decades, how about India and China? Will they have the resources to reconfigure their economies? What happens to the world economy when oil is $300 per barrel?

 

[Office_Shredder]

The US regains its manufacturing jobs

 

[mheslep]

You're completely ignoring ...

No, I'm focusing on one part of a very large problem at a time, a part I happen to have some familiarity with. That's how one generally solves problems. The costs of most of the replacements are roughly known. Meanwhile, introducing nationalistic 'what about the rest of the world' lines derails the discussion.

 

[mheslep]

Technology will always find a way round things?

Visibly it has.

 

[apeiron]

Visibly it has.

Easy to say. But I guess many decades of close exposure to the gap between the hype and the reality makes me less confident. AI, fusion, nano-technology, SDI, space travel, neutropics. So many sci fi claims with rather pedestrian outcomes.

A fossil fuel replacement strategy has to match the EROEI and also the projected consumption curve of the world for it to be business as usual.

If the EROEI is markedly worse (and you have to factor in things like conversion costs of everyone going electric cars or whatever), or the consumption curve (GDP burn) is flatter or declining, then you will have to have a strategy for "socio-political" redesign as well.

 

[apeiron]

An update -

One EJ/yr (1e18 J/yr, ~32 GW-yr), possible non-fossil equivalent replacements:

• Nuclear: 30 http://en.wikipedia.org/wiki/AP1000" reactors running at the US average ~93% capacity factor (or 15 of the common two reactor plants), plus transmission.

• 
  
  What your analysis neglects is...
  
  a) the need to replace existing ageing reactors, most coming to the end of their 40 year lives.
  
  b) BAU depends on rising energy consumption - standard projections are that energy consumption globally will double by 2050 (or quadruple without expected energy efficiency measures).
  
  http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/07/2
  http://www.worldenergy.org/documents/scenarios_study_online.pdf
  
  So the equation for nuclear reactors would be replacements + those needed to offset fossil fuel decline + those needed to allow for BAU energy consumption = (some unfeasible number ).
  
  Say half the energy gap could be filled by biofuel and renewables, then how many reactors does this require?
  
  The world figures, rather than just the US figures, do matter. Because if say, only the US had a technical out, then it could expect both less fossil fuel from the rest of the world (so would require more nuclear/alternatives) and also more trouble from the rest of the world (which is hardly conducive to BAU).
  
  It would also be good if you could stick to case 2 analyses rather than case 3 because you have given no reasons for preferring the high side projections other than your cognitive bias.
  
  And this means not the alternative scenarios too, which build in unrealistic coal dynamism. (Case 3 builds in unrealistic shale oil).
  
  But anyway, on your preferred case and a presumption of 30 reactors to produce 1Ejy, the global equation would seem to be 15 replacements + 90 fossil fuel gap pluggers + 190 BAU enablers = ~300 reactors being built a year between 2010 and 2050.
  
  Time to buy shares in Ariva and Toshiba!
  
  But of course, how realistic is it that we could replicate the world's current total installed capacity every year for the next 40?
  
  (The scale up factor required for the other half of the post-peak BAU equation - biofuels and renewables - is of course way more horrendous).

 

[Jack21222]

Meanwhile, introducing nationalistic 'what about the rest of the world' lines derails the discussion.

Isn't "introducing the rest of the word" the exact opposite of "nationalistic?" Are we using two different versions of the English language?

 

[mheslep]

But anyway, on your preferred case and a presumption of 30 reactors to produce 1Ejy, the global equation would seem to be 15 replacements + 90 fossil fuel gap pluggers + 190 BAU enablers = ~300 reactors being built a year between 2010 and 2050.

I don't believe that follows. Could you clarify how you arrived at the replacements and the new energy demand numbers?

First, the current world wide http://www.iaea.org/cgi-bin/db.page.pl/pris.reaopag.htm" ; replacing all operating reactors over the next 40 years is 11 per year. Also, I suggest renovating an old nuclear plant (versus simply shuttering it) with an existing license to operate on an approved site is a far less expensive and difficult task than building a brand new plant from scratch. Thus adding counts of replacements together with new plants and using the sum as figure of metric to gauge feasibility is at least partially flawed approach.

Second, regarding new demand, Mohr says he already incorporates some kind of new demand model in his estimates for fossil fuel production. So it appears that 1) declines from some future peak fossil production point that is a function of demand, and 2) new future demand have at least some overlap in composition, and thus counting them separately would be double counting at least in part.

Third, the One EJ/year equivalents list I suggested above are simple energy balance metrics, i.e. so many solar panels produces and EJ/yr. I included no prescription saying one type must be used to the exclusion of the others. The world is free to pick and choose any combination non-fossil sources, as of course it will.

 

[apeiron]

First, the current world wide http://www.iaea.org/cgi-bin/db.page.pl/pris.reaopag.htm" ; replacing all operating reactors over the next 40 years is 11 per year. Also, I suggest renovating an old nuclear plant (versus simply shuttering it) with an existing license to operate on an approved site is a far less expensive and difficult task than building a brand new plant from scratch. Thus adding counts of replacements together with new plants and using the sum as figure of metric to gauge feasibility is at least partially flawed approach.

OK, call it 10 a year.

Second, regarding new demand, Mohr says he already incorporates some kind of new demand model in his estimates for fossil fuel production. So it appears that 1) declines from some future peak fossil production point that is a function of demand, and 2) new future demand have at least some overlap in composition, and thus counting them separately would be double counting at least in part.

The point of the study is how little the peak changes with various demand and supply considerations. And the 90 a year was based on your suggested figure.

But let's be reasonable and halve it - biofuels and other renewables can take up any of the slack.

Third, the One EJ/year equivalents list I suggested above are simple energy balance metrics, i.e. so many solar panels produces and EJ/yr. I included no prescription saying one type must be used to the exclusion of the others. The world is free to pick and choose any combination non-fossil sources, as of course it will.

I've already halved the nuclear contribution in the 190 figure I quoted - accepting scenarios like the Shell study where biofuels and other renewables take up the slack.
(p17 - http://www-static.shell.com/static/public/downloads/brochures/corporate_pkg/scenarios/shell_energy_scenarios_2050.pdf)

Current world energy consumption is ~470 Ejy (http://en.wikipedia.org/wiki/World_energy_resources_and_consumption#Nuclear_power_2).

Consumption would be double this by 2050 given BAU and good efficiencies.
(http://www.worldenergy.org/documents/scenarios_study_online.pdf )

OK, allow peak fossil fuels to be 2020 and the peak to be 520 Ejy, that will mean that on top of new energy to plug the post-peak decline, there will also have to be 420 Ejy extra capacity in 2050.

Let half of that be nuclear reactors - 210 Ejy.

So if 30 reactors = 1 Ejy (as you said) then that is an extra 6300 reactors by 2050.

That comes to a build rate of 158 a year. (A lesser figure as I've been even more generous with the assumptions).

So 10 + 45 + 158 = 213 new reactors world wide every year to give us BAU (presuming nuclear carries only half the load and the contribution can be matched by other non-fossil fuel sources).

That is four new reactors every week. And about $6 billion in capital cost (or probably a lot more as fossil fuel peaks and energy costs soar).

Sounds like a tall order to me. Can you supply any evidence to suggest the world can build this many reactors and also manage the waste? Peak uranium would also be a consideration at this level of building of course.

 

[mheslep]

...And the 90 a year was based on your suggested figure.

Yes I know the 90 reactors are for gap plugging in fossil fuel decline based on my estimate of 30 reactors per 1 EJ/yr replacement. My second question was about your figure of 190 (6.3 EJ/yr) Buisiness-As-Usual new demand reactors. What is the basis of that figure? Edit: appears you address that below, thanks.

I've already halved the nuclear contribution in the 190 figure I quoted - accepting scenarios like the Shell study where biofuels and other renewables take up the slack.
(p17 - http://www-static.shell.com/static/public/downloads/brochures/corporate_pkg/scenarios/shell_energy_scenarios_2050.pdf)

Before I plough through that 52 pgr, what exactly are saying that the Shell scenario provides as relevant to your point? Could you quote a relevant passage?

Current world energy consumption is ~470 Ejy (http://en.wikipedia.org/wiki/World_energy_resources_and_consumption#Nuclear_power_2).

Agreed (you meant this top link I believe)

Consumption would be double this by 2050 given BAU and good efficiencies.
(http://www.worldenergy.org/documents/scenarios_study_online.pdf )

Ok, I don't know about the 'BAU' and efficiency qualifiers but I agree a world wide doubling of energy demand by 2050 is in line at least with some of US EIA's Outlook predictions, most of that increase coming from the developing world.

OK, allow peak fossil fuels to be 2020 and the peak to be 520 Ejy, that will mean that on top of new energy to plug the post-peak decline, there will also have to be 420 Ejy extra capacity in 2050.

That's my point above - you are double counting there by at least 50 EJ/yr (110 EJ/yr in case 3) as the fossil peak already counts increased demand.

Let half of that be nuclear reactors - 210 Ejy.

So if 30 reactors = 1 Ejy (as you said) then that is an extra 6300 reactors by 2050.

That comes to a build rate of 158 a year. (A lesser figure as I've been even more generous with the assumptions).

So 10 + 45 + 158 = 213 new reactors world wide every year to give us BAU (presuming nuclear carries only half the load and the contribution can be matched by other non-fossil fuel sources).

To avoid double counting let's simplify: In 2050 EIA predicted demand is ~940 EJ/yr.* Then, Mohr's 2050 fossil production is ~480 EJ/yr (case 3), so the 2050 demand deficit from fossil decline is 460 EJ/yr. If nuclear is tasked to cover half of that as you propose, then we have 230 EJ/yr * (30 reactors/EJ/yr) over 40 yrs is 173 reactors per year world wide, plus 10 replacements per year.

[...]Can you supply any evidence to suggest the world can build this many reactors and also manage the waste?

http://www.world-nuclear.org/info/inf17.html

It is noteworthy that in the 1980s, 218 power reactors started up, an average of one every 17 days.

http://www.world-nuclear.org/info/inf17.html
Regarding cost for nuclear, this varies considerably by country, another reason why addressing the problem world wide is complicated. In the US yes nuclear capital costs appear to be $5-7 / W(e). However China is throwing up PWBs for $1.6/W(e), or $1.6B for a one GW(e) reactor (as pointed out by https://www.physicsforums.com/showpost.php?p=2115378&postcount=115"r)

The two generators at Tianwan are expected to produce 2.12 MW each year for east China, which boasts the fastest economic growth in the country.

The construction of Tianwan Nuclear Power Station began in 1999 and has cost 26.5 billion yuan (3.3 billion US dollars). Both generators feature Russian pressurized-water technology.

http://news.xinhuanet.com/english/2006-05/13/content_4542917.htm

Peak uranium would also be a consideration at this level of building of course.

Eh, peak production of Uranium isotope 235 maybe, otherwise no there's no peak production of fissionable fuels anywhere near 2100.

The International Atomic Energy Agency estimates the remaining uranium resources to be equal to 2500 ZJ.

(i.e. 2500 years of 1000 EJ/yr production)

*I'm highly sceptical that real demand will reach that high coming from the developing world, that instead efficiencies such a solar water heating, high efficiency lighting, and more efficient aviation (e.g. 787) will leap frog the more wasteful technologies just as the cell phone leap frogged land telco lines in the developing world. But for now I'll accept the doubling prediction of 940 EJ/yr in 2050.

 

[apeiron]

To avoid double counting let's simplify: In 2050 EIA predicted demand is ~940 EJ/yr.* Then, Mohr's 2050 fossil production is ~480 EJ/yr (case 3), so the 2050 demand deficit from fossil decline is 460 EJ/yr. If nuclear is tasked to cover half of that as you propose, then we have 230 EJ/yr * (30 reactors/EJ/yr) over 40 yrs is 173 reactors per year world wide, plus 10 replacements per year.

OK, BAU = business as usual. ie: continued GDP growth and energy demands basically unchanged apart from significant efficiency moves (by 2050, consumption merely doubles rather than quadrupples).

And it seems you will settle for 183 new reactors a year to cover half the peak fossil fuel gap (which is still a low side case 3 estimate based on Mohr's study).

So that is 183 reactors a year building programme compared to the 21 a year achieved during the 1980s. Almost an order of magnitude increase in building maintained over four decades (if it started this year).

This would be a reactor every two days.

The rosiest projections of the industry lobbiest is "a realistic estimate of what is possible might be the equivalent of one 1000 MWe unit worldwide every 5 days."

http://www.world-nuclear.org/info/inf104.html

 

[aquitaine]

Easy to say. But I guess many decades of close exposure to the gap between the hype and the reality makes me less confident. AI, fusion, nano-technology, SDI, space travel, neutropics. So many sci fi claims with rather pedestrian outcomes.

A fossil fuel replacement strategy has to match the EROEI and also the projected consumption curve of the world for it to be business as usual.

If the EROEI is markedly worse (and you have to factor in things like conversion costs of everyone going electric cars or whatever), or the consumption curve (GDP burn) is flatter or declining, then you will have to have a strategy for "socio-political" redesign as well.

Ah yes, the grand old EROEI misconception. Fortunately, we have things like electric cars (which are coming out this year and next year) which will allow us to still go to work while avoiding taking the bus. And to make that electricity, we have the most efficient and abundant source of energy ever discovered: nuclear fission. Doomed? Hardly.


I find it interesting you can come onto a science and technology forum and say technology won't find a way around things. Peak oil is very much a problem of technology, and so therefore it has technological solutions.

 

[apeiron]

I find it interesting you can come onto a science and technology forum and say technology won't find a way around things. Peak oil is very much a problem of technology, and so therefore it has technological solutions.

Thanks for the link to the blog "debunking EROEI". It really is very funny. A top source.

Screw the earth. It's like the egg we hatched out of. We suck its resources dry, and then we step out of the nest and fly into the wild black yonder

We will never run out of hydrocarbons or energy, because they are the basic building blocks of the universe, and the universe is infinite.

Who says a world production peak means US consumption has to go down? That's not necessarily true. Maybe world production starts declining, and US consumption doesn't, or even goes up. After all, the US is rich, and the schoolyard bully.
Obviously this situation can't go on forever, but it's certainly a good stopgap, and I don't see anything to really prevent it from happening.

The guy is clearly an economic genius .

Even when using oil to recover oil, money can still be made with an EROEI of 1 if inflation is high enough. Oil projects take a long time. You make all the oil investments when oil is at, say, $40, and sell the product when oil is at $80. The net energy gain is 0. The net monetary gain is %100, minus the rate of inflation. Depending on the economic climate, this could even work with an EROEI<1.

how would you even *know* if you had crossed into an EROEI<1 ? No one is doing the energy acccounting, and due to the entrenched resistance of traditional economists, no one will be. So why would production stop due to a variable that no one is calculating?

Now suppose you have a reserve of oil, and using it, you can produce another reservoir of the same size, would you do it? Hubbert would say no, it's irrational. You might as well just consume the oil, or hold and sell it later because it amounts to the same thing. But that is incorrect because there are beneficial side effects to producing, even though the EROEI=1. If you produce, lots of people can remain employed in the production effort, and get paid and eat, while you use up the first reservoir. And when it's exhausted, you have a whole new reservoir to use or consume, so you haven't lost anything.

Your "source" just gets better and better...

Production with an EROEI of 1 or less can also be rationalized through accounting chicanery. Subsidies and tax breaks are good examples. You socialize the input energy costs, and privatize the output energy profits. Here's a more extreme example: You live in a last-dregs world where oil is virtually non-existent, and worth an astronomical sum. So you capture some people, and work them to death pumping out a barrel of oil from an old well. You don't feed or care for them in any way, so you have minimal costs, and in the end you get a priceless barrel of oil. In short, it's rational to produce oil even with an EROEI of 0.001 if you can force or trick someone else into paying the costs.

Gosh Aquitaine, I just hope you were in on the joke...

 

[aquitaine]

Unlike you, he knows what he's talking about.

 

[apeiron]

Unlike you, he knows what he's talking about.

No, no. If you want to question my conception of EROEI issues, then you need to link to some credible research and not this satirical nonsense.

 

[brainstorm]

I have been trying to compare the cost of expanding solar to rising fossil-fuel costs. Assuming oil and coal prices keep rising, the cost of solar should decline relative to non-renewables. However, solar users who feed-in to their grid are wanting to receive the retail rate in exchange for fed-in energy. This means that there is no allowance for the utility company itself. The question is will utility companies charge more for oil/coal-based power in order to buy-in excess solar for the grid, or will the high costs and declining demand for non-solar drive the utility companies to bankruptcy?

 

[apeiron]

I have been trying to compare the cost of expanding solar to rising fossil-fuel costs. Assuming oil and coal prices keep rising, the cost of solar should decline relative to non-renewables. However, solar users who feed-in to their grid are wanting to receive the retail rate in exchange for fed-in energy. This means that there is no allowance for the utility company itself. The question is will utility companies charge more for oil/coal-based power in order to buy-in excess solar for the grid, or will the high costs and declining demand for non-solar drive the utility companies to bankruptcy?

I think the point at the heart of your question is about the big possible efficiency gain that would be possible with relocalised energy production. Power has been about big companies/big government building the infrastructure. Now we need a scalefree model of production which would maximise efficiency. It would be good for homescale production to be able to use the national grid as its battery, as actual batteries are a bad idea.

In countries like Germany, farmers have been paid a premium for electricity generated by wind turbines on their land. Hence wind is flourishing in Germany. A subsidised start quickly overcame the NIMBY factor.

In my own country (New Zealand), you can feed power into the national grid. But you get less for it when you later buy it back. So effectively you are penalised.

So I would say there is a natural future in national power grids becoming the storage battery for homescale energy production. But you have two key problems with this happening.

The first is that the existing monopolies have to be made to open up (which is possible where the state is in charge, much harder in privatised systems).

The second is the issue of fossil fuel pricing. Unless there is some imposed pricing mechanism that pushes up the cost of fossil fuel to what it should be (pricing in its scarcity, its carbon footprint, etc) then it will continue to be under-priced and so undercut renewable alternatives.

This is the problem for people who say "technology solutions will save us". The technology may exist, but getting it in place requires some rather serious socio-political-economic engineering. Those of us following progress are alarmed at how little progress there is on behaviour change.

We know that denial is the first stage of grief. Denial is what we mostly still hear from people.

 

[brainstorm]

Solar energy is wonderful, but the point I was trying to raise is that for people to sell their excess power onto the grid at the same price they pay for it requires that someone else pay them at that rate PLUS the costs of maintaining the grid, as well as administration costs, etc.

So, ultimately I think it's going to come down to a question of competing labor costs. 1) How much do solar producers expect per kwh and 2) how much are fossil fuel producers willing to take per kwh generated? Solar may end up costing more than fossil fuel only because the people supplying it are indexing their price against what they pay for electricity, whereas the fossil fuel prices are based on supply and demand.

Eventually, if enough people invest in solar panels to make feed-in competitive, there will be supply-side competition and the cost paid to solar-cell owners will go down. However, the question is whether this low price will be sufficient to motivate private individuals to buy and maintain solar systems. It may turn out that big companies undercut private individuals eliminating home-based solar collectors.

At that point, my question would be what was gained economically by switching to solar, if it just becomes another profit industry the same as fossil fuels. Granted the ecological benefits are great, but it's not like people are going to be any more free economically than they are now, even though sunlight is 100% free. See the problem?

 

[apeiron]

At that point, my question would be what was gained economically by switching to solar, if it just becomes another profit industry the same as fossil fuels. Granted the ecological benefits are great, but it's not like people are going to be any more free economically than they are now, even though sunlight is 100% free. See the problem?

Afraid that I don't really understand the point you are trying to make.

What I was saying is that a key issue with alternatives is that if the power source is "everywhere" as it is with wind and sun, then it makes sense to create a system that can tap into it over all available scales. With electricity grids, this would not actually be that hard to do, although established interests might resist the change.

The "economic freedom" of people boils down to then getting the cheapest power for the longest time. Whether this is achieved by big monopolies or turbines and PV panels on every roof is not really a big deal is it?

 

[brainstorm]

The "economic freedom" of people boils down to then getting the cheapest power for the longest time. Whether this is achieved by big monopolies or turbines and PV panels on every roof is not really a big deal is it?

If economics was sane, I would say you're right. Unfortunately, though, I was trying to explain that people with solar cells are trying to feed-in power for a high kwh fee. This means those who buy from the grid will have to pay even more to fund the high solar costs PLUS the costs of infrastructure and administration.

Another way to put it is that people will have to pay the same amount of money to the utility companies to cover their infrastructure and administration costs AFTER investing in their solar system. PLUS, the price per kwh will go up as a result of how many less kwh are being bought by people living off their solar systems during the day.

So you're going to ultimately end up paying more for solar energy because the people working for the utility companies are going to want to keep making the same amount of money, along with the people who produce infrastructure, build buildings, etc. Either that or the economy has to be radically restructured to make life sustainable with significantly lower amounts of income.

 

[talk2glenn]

If economics was sane, I would say you're right. Unfortunately, though, I was trying to explain that people with solar cells are trying to feed-in power for a high kwh fee. This means those who buy from the grid will have to pay even more to fund the high solar costs PLUS the costs of infrastructure and administration.

This is a legitimate problem with net-metering generally, but is a policy, rather than market problem.

Power companies are required by federal law to buy back excess eletricity, at some rate. Exact policy varies state-by-state. At the market-end of the spectrum, states either allow the utility to contract with homeowners directly (setting a contract rate), or provide a legal wholesale rate (which is significantly lower than the market rate for the electricity, reflecting the fact that the utility maintains the grid).

Other states, however, require that homeowners be compensated at the utilities own market rate (the same rate the utility charges its customers for electricity draw). These policies make little economic sense; the homeowner does not have to pay for his share of the infrastructure, as you point out, and he does not have the overhead of grid maintenance. His only infrastructure costs are the initial PV installation, which was itself already heavily subsidized by the public utilities and the state. This means rates generally must go up to offset the added costs of paying the owners of solar setups at greater than market rates (if the power company and homeowner negotiated, the agreed upon price for the homeowners energy return would be significantly less than that charged by the power company itself), and effectively non-solar households are subsidizing solar households, a market distortion.

While unfortunate, it is not unique to electricity return. Even without these kinds of net metering policies, taxpayers generally are already subsidizing the installation of solar cells on homes, through federal and local programs.

 

[apeiron]

While unfortunate, it is not unique to electricity return. Even without these kinds of net metering policies, taxpayers generally are already subsidizing the installation of solar cells on homes, through federal and local programs.

Market mechanism are maximally efficient in theoru, but usually suffer from extreme short-sightedness in practice as only the immediate future is easy to see.

So it would be normal to subsidise behaviour that we want to encourage long-term. This is why public transport is subsidised.

Alternative energy needs subsidising for the same reason. Indeed, the situation is worse. Fossil fuels are priced too cheaply (in the longterm view). Yet the response to a price rise is economic contraction - which then reduces the demand and thus price. This is because production is based on longterm infrastructure investment. So the system is locked into an attractor that keeps fossil fuel prices artificially low and prevents a move to more expensive alternative energy infrastructure.

The relationship is well understood. And countries can make choices about how to break-out of the feedback loop.

 

[brainstorm]

Subsidizing solar systems, either though formal subsidies or buying excess energy they produce at retail rates, is a double-edged sword. Yes it promotes the installation of solar systems, but it also spoils the supply-market of solar-cell producers by making them accustomed to subsidized profit-levels. The question becomes whether the solar-cell industry will remain in business once subsidies are reduced or eliminated. Ironically, if solar growth is very successful, it will contribute to oil conservation, which will extend the life of oil as an available fuel. This in turn lowers demand and therefore the price of oil, which in turn makes it harder for solar to compete. Ultimately the question is whether solar cells will become so simplified and/or plentiful that they will be as easy to cultivate as, say, a lawn sprinkler system. Will people be able to go to a local hardware store and pick up the parts to set up or fix a solar system and, as such, will the industrial production of these parts become so massified as to render the parts as cheap as any other relatively meaningless mass-produced commodity, such as pvc and pvc fittings?

 

[talk2glenn]

Market mechanism are maximally efficient in theoru, but usually suffer from extreme short-sightedness in practice as only the immediate future is easy to see.

If this is true, why does it follow that the government would be more able to anticipate long term needs than the market? Is the future more easily foreseen by public than market forces? I would argue that the evidence strongly suggests the latter outdoes the former; the centrally planned Soviet Union could not anticipate long term needs for winter clothing in one of the most consistently cold regions on earth, while we take it for granted that there will always be enough milk on store shelves to go around, with little to no waste, despite dramatic fluctuations over both the short and long terms. Markets in fact have a harder time anticipating short-term demand than long-term, due to unforeseeable events (disasters, for example, but also apparently random fluctuations in short-term consumer preferences that are relatively stable over longer periods).

This is why public transport is subsidised.

Public transportation isn't subsidized because of an anticipated long-term growth in demand, but for precisely the opposite reason: the long-term demand trend has been negative.

As demand for public transport has gone down, it has become increasingly dependent on public subsidy to survive, because there is an excess in supply (which would tend to push prices down and eliminate weaker competitors, in a competitive marketplace, reducing supply and increasing demand until a new equilibrium is met).

So the system is locked into an attractor that keeps fossil fuel prices artificially low and prevents a move to more expensive alternative energy infrastructure.

Fuel prices are not kept artificially low; the market rate is a product of supply and demand. If it is the case that supply of cheap fuels is decreasing irrecoverably, while demand for energy is increasing, then these prices will rise until alternative sources become viable.

The question becomes whether the solar-cell industry will remain in business once subsidies are reduced or eliminated.

Clearly, if subsidies were not offered, demand for solar cells would decline, which would lead to short-term price falls. This would have the effect of eliminating the weakest competitors in the industry. The industry would survive, but it would be composed of a smaller number of companies.

This in turn lowers demand and therefore the price of oil, which in turn makes it harder for solar to compete.

This is only true for the short-term. In the long term, oil companies will respond by reducing supply, and price levels will rise again. The new equilibrium level in the long-term may or may not be lower than the initial price.

 

[aquitaine]

Subsidizing solar systems, either though formal subsidies or buying excess energy they produce at retail rates, is a double-edged sword. Yes it promotes the installation of solar systems, but it also spoils the supply-market of solar-cell producers by making them accustomed to subsidized profit-levels. The question becomes whether the solar-cell industry will remain in business once subsidies are reduced or eliminated. Ironically, if solar growth is very successful, it will contribute to oil conservation, which will extend the life of oil as an available fuel. This in turn lowers demand and therefore the price of oil, which in turn makes it harder for solar to compete. Ultimately the question is whether solar cells will become so simplified and/or plentiful that they will be as easy to cultivate as, say, a lawn sprinkler system. Will people be able to go to a local hardware store and pick up the parts to set up or fix a solar system and, as such, will the industrial production of these parts become so massified as to render the parts as cheap as any other relatively meaningless mass-produced commodity, such as pvc and pvc fittings?

Solar has other more fundamental problems that prevent it from becoming a primary source of baseline power. For example, it doesn't work at night.

 

[JaWiB]

Subsidizing solar systems, either though formal subsidies or buying excess energy they produce at retail rates, is a double-edged sword. Yes it promotes the installation of solar systems, but it also spoils the supply-market of solar-cell producers by making them accustomed to subsidized profit-levels. The question becomes whether the solar-cell industry will remain in business once subsidies are reduced or eliminated. Ironically, if solar growth is very successful, it will contribute to oil conservation, which will extend the life of oil as an available fuel. This in turn lowers demand and therefore the price of oil, which in turn makes it harder for solar to compete. Ultimately the question is whether solar cells will become so simplified and/or plentiful that they will be as easy to cultivate as, say, a lawn sprinkler system. Will people be able to go to a local hardware store and pick up the parts to set up or fix a solar system and, as such, will the industrial production of these parts become so massified as to render the parts as cheap as any other relatively meaningless mass-produced commodity, such as pvc and pvc fittings?

Why should the subsidies be reduced or eliminated? Subsidies for fossil fuels are still around.