Receding Horizons for Alternative Energy Supplies
5 Sep, 2008 11:52 am
When energy optimists tout the huge supply of oil that is still available to us in the form of tar sands and oil shale, they forget to mention that costs are rising so quickly for producing that oil that these alternative sources may prove to be of limited value. The same cost problems are occurring in the renewable energy field as well. What is behind this phenomenon sometimes referred to as the problem of receding horizons?
First, it is helpful to understand how complex energy systems actually work. For this task we turn to the humble tree which gathers energy in ways that are very much like those of human societies. The leaves on the top of the tree quite obviously gather more sunshine than those below. So, why do trees bother with all those leaves which only get partial sunlight? The answer is that trees are not merely trying to obtain maximum energy gain per leaf, but maximum energy gain for their whole structure. The best way to do this is for the leaves at the top to support the leaves below with an energy subsidy. The result is a total energy gain larger than that which the leaves at the top could ever achieve on their own.
This pattern is seen throughout natural systems. Those systems try to maximize their energy gain in order to increase their survivability and reproduction. So, how do human societies maximize energy gain? They diversify by providing an energy subsidy to incremental energy sources. That subsidy comes primarily from our most widely available and versatile energy source, oil.
Oil provides cheap liquid fuels used to explore for coal, natural gas and uranium. In the cases of coal and uranium, liquid petroleum fuels are essential to run the mining machinery which extracts them. These fuels are also essential for the transport of coal and uranium ore to processing facilities and finally to their places of use.
To build a power plant to burn the coal or natural gas or to use the uranium requires substantial liquid fuels for the construction machinery and for the many processes which go into making and transporting the components. There is, of course, the mining of the raw materials for the components, and this naturally requires yet more liquid fuels. (Roughly the same set of energy uses go into the construction of hydroelectric dams.)
Do renewable energy sources escape this problem? Of course, they do not. Because our society is so thoroughly dependent on liquid fuels and petrochemical feedstocks from oil, practically everything we make depends on them. And so, for now wind generators and solar panels require some inputs of oil. Even that supposedly "clean" fuel, corn ethanol, requires copious amounts of fossil fuels for making fertilizers, pesticides and herbicides; for process energy (primarily natural gas and coal); and finally for transport by tanker truck since ethanol cannot currently be moved through pipelines. (For more on why these sources will have a difficult time filling the energy gap, see my previous column, "How Many Windmills Does It Take to Power The World?")
The oil optimists like to point to the success of the tar sands in Canada. They are correct that production has been ramped up quite extensively. But costs have risen very quickly as well. Not too long ago tar sands developers lamented that they would be profitable if only oil would reach $30 a barrel and stay there. Now underlying costs are estimated at $85 a barrel, up from just $65 one year ago.
Causes cited include the increased cost of capital, rising labor costs, and taxation. But all of these costs can be traced back in part to rising energy costs. Since energy projects compete for capital like other projects, all things being equal, increasing demand for energy leads to more demand for capital from the energy industry which raises the cost of capital. And, the demand for new energy projects is very much linked to the high price of oil. In the case of the tar sands, it is directly linked.
Rising labor costs have in part to do with the small size of the oil industry labor pool which shrank during a 20-year bear market that ended at the beginning of this decade. But, it is now more costly to provide basic needs for workers because of rising energy prices.
Taxation looks like it would be out of the realm of energy costs. But one reason that governments are seeking more revenues is that their energy costs are spiking.
Then, there are the direct energy inputs from oil in the form of diesel for mining machinery as well as from natural gas and electricity used to process the tar sands into something useable. Natural gas has quadrupled in price in this decade, and because fuel costs are rising for electric utilities, electricity prices are levitating as well.
Certainly, not all of the escalating costs for tar sands production are attributable to increasing energy prices. But the prices of oil and natural gas are so thoroughly intertwined with the tar sands production cycle that they are now central components of the cost structure.
Even when the optimists accept these facts, they still advance one key argument which must be taken seriously. High prices for oil and other fossil fuels will stimulate technological innovation. Humans will over time figure out how to get oil out of the tar sands using less energy and fewer resources. They will also finally figure out how to extract oil from oil shale economically when the need arises.
In making this argument they have left out one important consideration that makes it less tenable. In the past we have made transitions from energy sources of lower density and quality to energy sources of higher density and quality. Humans moved from wood to coal, and then from coal to oil. Now we are faced with moving from oil to something that isn't really oil, tar sands and oil shale. (Oil shale is a misnomer. What is really being mined is marlstone impregnated with kerogen, an immature form of oil that requires extensive processing.) And, these sources are much more diffuse than the conventional crude which flows out of the ground as a liquid. That's why currently, so much energy is required to process tar sands and oil shale. Too much energy in the case of oil shale.
Oil from tar sands is proposed as a substitute for the most widely used, most versatile and most dense energy source we have now, conventional crude oil. But it simply cannot fulfill that role. Right now, tar sands cannot be produced at a rate that will make much difference in a world where demand is projected to reach 112 million barrels per day by 2030. Even if production reaches 5 million barrels per day, five times what it is today (wishful thinking in my view), tar sands still won't be the replacement we're looking for.
Beyond this the energy returns are marginal, as low as 1.5 units of energy produced for every unit used. I've heard estimates that new technology is moving that number up to perhaps 7 to 1. But that's still a far cry from the 20 to 1 return we are currently getting with conventional oil. In addition, we need to keep in mind that the easiest, richest, most accessible resources in the tar sands are being mined first. The hard stuff which will require more and more energy to extract will come later.
So what about oil shale? Right now, oil shale is not being produced commercially. The difficulties which lie ahead for the extraction of oil from shale are so great that the U. S. Energy Information Administration forecasts only 140,000 barrels a day of production by 2030 in the United States. This is merely a trickle.
Perhaps technology will improve. A lot could happen between now and 2030. Human beings are very clever and have enormous scientific resources available to them. But the most important thing to remember about technological progress is that it is not inevitable.
First, technology runs on energy. If human societies don't figure out how to replace their main energy source, fossil fuels, with something of comparable density, versatility, and volume, society's "enormous scientific resources" will ultimately shrink. That's because science, like everything else, currently runs on fossil fuels. This predicament is often referred to as the rate-of-conversion problem.
Second, technological achievements do not necessarily follow from energy or money expended. The classic case is the extensive research focused on fusion reactors. After 50 years of work, no commercial fusion reactors exist. Scientists working on the latest international fusion project speak in terms of another 50 years before a commercial reactor is operational. But when the work on fusion reactors began, scientists were confident that all the technological hurdles could be overcome within a couple of decades and that fusion plants would be up and running by the year 2000.
Maybe we'll overcome the hurdles we face with fusion power. Maybe we will do it in time. But it's not inevitable, no matter what scientists or economists say.
Of course, discussions like this one only deal with the supply side of energy issues. There is a way to buy some more time to allow new technologies to develop. We could stretch out current supplies by making major cuts in our energy use. This would be wise for another reason. The hoped-for technological breakthroughs may not arrive. And, that would mean that we need to adapt to a lower-energy world.
But let's assume for the moment that technological breakthroughs in the near future allow us to tap, for example, both tar sands and oil shale at such high rates of production and high energy returns that the problem of fossil fuel depletion is put off for several decades. The next breakthrough we would need--and, in a hurry--is a solution for all the greenhouse gasses produced by burning the oil from these sources.
The multiple interlinked major problems we face will require quick and near simultaneous breakthroughs in many fields if we want to go on living as we have. Maybe it can happen. But, no one can be certain what the future will bring. And so, just in case, perhaps we should take out some insurance in the form of adjusting the way we live to mitigate the hazards and adapt to the limits we know we face if technology doesn't evolve the way we want it to.