#85. Perfect Storm gets nearer

SURPLUS ENERGY ECONOMICS – AN UPDATE

If you have read Life After Growth (2013 and 2016), or before it Perfect Storm (2011), you will be familiar with the thinking on which the theory of surplus energy economics is based. Though the next article here was to have been a rescue plan for the British economy, it seems more important to update you on surplus energy economics.

My perception is that things are starting to stir, and that the climate is becoming much more receptive to ideas which challenge the traditional interpretation of economics.

What’s happening now?

Though less than six years have elapsed since Perfect Storm, a great deal has changed. Back in 2011, many found it disconcerting that the head of research at a major City institution would put his name to a report stating that a tightening of the energy equation might be bringing 200 years of economic growth shuddering to a halt. Though there were exceptions, much of the mainstream response varied between the dismissive and the derisive. Many, I felt, did not want to accept an analysis which would challenge their fundamental assumptions, as well as predicting an end to a relatively satisfactory state of affairs.

Now, though, this is changing – in two main ways. First, if the Perfect Storm thesis had been wrong, we should know by now, because the economy should be growing strongly, indebtedness should be decreasing as we implement the lessons learned so painfully in 2008 and, above all, there should have been a return to normality.

Instead, we have “secular stagnation”, where such growth as does occur reflects nothing more than the spending of borrowed money. Debt continues to escalate, and the extreme abnormality of ZIRP and other forms of monetary manipulation is doing a great deal of harm. (Even if rates creep up a little, by the way, we will remain a very long way from normality).

Second, economists are now starting to question their prior certainties, with some members of the profession prepared to admit that they may have got it wrong. The credibility of economics itself is in the spotlight.

In short, the economy is moving on in ways that refuse to conform to conventional theory, but bear a closer resemblance to the surplus energy interpretation. The thesis that the real economy would stumble, and that we would go on driving an ever-wider and more dangerous wedge between the “real” and “financial” economies, does seem to be happening.

What is Surplus Energy Economics?

Very briefly, SEE says that the economy is an energy system, not a monetary one. Prosperity is determined by surplus energy – that is, the energy available after the deduction of the energy which is always used up whenever we access energy.

Our entire history can be seen in this way. As hunter-gatherers, all the energy that people obtained from food was consumed obtaining that food, so there was no surplus, no economy and no society.

Agriculture was the “first great breakthrough” because it created the first energy surplus. Put simply, the greater efficiency of farming compared with hunter-gathering, plus the use of animal labour, enabled twenty people to be fed by the labour of nineteen, freeing the twentieth to do other things. This first energy surplus was small, and most people continued to undertake subsistence activities. But there was now an economy of sorts, and a society developed in parallel with it. People could now, for the first time, invest, sacrificing current consumption to create capital assets (such as barns, bridges, agricultural implements and rudimentary workshops) which would improve their lot in the future.

A vastly bigger energy surplus was created when we learned to tap fossil fuels, such as coal, oil and natural gas. This triggered two centuries of exponential growth, not just in economic output, but in population numbers and energy consumption as well. So sophisticated have economies become that, most notably in the West, very few people are engaged in producing food.

The end of growth?

For decades, people have speculated about the relationship between exponential growth and a finite planet. This debate rages on, but the balance is tilting, in two very obvious ways.

First, we are discovering the limitations of the earth as an ecosystem and, second, the surplus energy which has driven growth in economic output and population numbers is coming under mounting pressure.

Where fossil fuels – still well over 80% of our energy consumption – are concerned, two factors are in play. Depletion is robbing us of the gigantic, ultra-low-cost sources of energy which hitherto powered economic growth. Technology is endeavouring to offset this, both increasing the efficiency with which we access conventional fuels, and enabling us to tap energy from renewable sources.

Technology will doubtless continue to progress, but we are in danger of complacency over technological solutions. Renewables still account for barely 3% of global energy consumption, and no-one has yet worked out how to power a 747-size jet using renewables, or how to extract 1 tonne of ore from 500 tonnes of rock without using fossil fuels.

We should be optimistic about renewables, but also realistic. Renewables can supply energy more cost-effectively than fossil fuel sources discovered and brought on stream today. But my interpretation of the thermodynamic balance is that renewables are not going to take us back to an age of vast, low-cost, high-surplus energy from giant fields.

Measuring the state-of-play

If the economy is fundamentally an energy system, we need to assess our situation using measures which are energy-based, not financial. One such measure is EROEI (Energy Returns On Energy Invested). Another is ECoE (the Energy Cost of Energy).

I have long postulated an ECoE curve which is trending upwards relentlessly. I want to be quite clear about the lack of available data, which reflects a lack of financial support for research. The trend ECoE curve used here has been developed and refined over several years, and is subdivided by fuel and location. The system I use is called SEEDS (the Surplus Energy Economics Data System). It can only be a “best estimate”, but I derive encouragement from its seemingly good fit with what is happening to the economy.

This overall curve suggests that ECoE has been on a rising trend since the 1960s. Initially, increases were pretty modest, with ECoE increasing from 1.2% in 1970, via 1.9% in 1980 and 2.8% in 1990, to 4.2% in 2000. But, because this is an exponential progression, the rate of increase is rising markedly. My estimate for trend ECoE in 2010 is 6.4%, and this is projected to rise to 9.6% by 2020.

In short, we have now moved into territory where ECoE, once a number so small that we could afford to ignore it, starts to destroy the capacity for growth.

The concept of ECoE is best understood as “economic rent”, a charge levied on the economy by the limitations of the earth’s resource set. It is not the same as financial cost, because cost is a closed-system – money spent by, say, a company developing an oil field or a solar project, is a cost to that company, but an income to others, such as contractors, suppliers and employees.

Rather, ECoE is an economic rent, levied by resource limitations but not accounted for when we measure the economy. It can be thought of as a restriction of choice, forcing us to spend more on energy and, therefore, less on other things. It is in some ways analogous to taxation – tax does not reduce gross income, but it forces the recipient to use some of it in a way that might not be his or her preference, reducing how much can be spent in ways that the person might like.

In case this seems remote and theoretical, ECoE is already, and noticeably, eating into our discretionary incomes. As a direct corollary of rising ECoEs, the cost of household essentials has long been rising much more rapidly than general inflation, undermining how much of our incomes we can spend as we choose. I have explained before how prosperity is not a function of how much money someone has, but of how much choice (“discretion”) that person has after paying for essentials.

Finally, ECoE is only tangentially related to the current price of energy to the end-user. As prices soared between 2000 and 2007, and remained high until 2014, massive investment was poured into energy supply. This created a glut which, as well as driving prices down sharply, resulted in a slump in investment. In due course – and depending, of course, on demand – this dearth of investment could drive energy prices sharply higher. But pricing, ultimately, is a cyclical process acting as “noise” around the trend determined by the interplay of depletion and technology.

What next?

If the surplus energy interpretation of the economy is correct, growth should continue to prove elusive. But our system is so predicated on growth – a topic for another article – that we cannot accept even stagnation, let alone adjust to decline.

So we have been faking growth by borrowing. By 2008, the debt mountain had become so big that we could no longer afford to pay a normal rate of interest on it, so the authorities adopted ZIRP (zero interest rate policy) in order to prevent the economy being engulfed. But ZIRP, and other forms of monetary manipulation, cannot resolve the situation, and have their own costs. At zero- or near-zero rates, the economy cannot function normally, and it certainly cannot provide for the future, which is why huge deficits are now imperilling pension provision.

In theory, we might go on faking growth for many more years yet, and I’m pretty sure the authorities will be mightily tempted to try. But this would result in a further escalation of debt, which would also mean that raising interest rates significantly – let alone restoring them to something resembling normality – would become out of the question (which may already be the case). Comparing 2020 with 2015, and taking inflation out of the equation, the world seems likely to grow its GDP by close to $10tn, but to add at least $50tn to its $151tn non-financial debt mountain.

If (or, rather, when) debt escalation reaches crisis point, some kind of write-off might be tried, unless the authorities decide to unleash high inflation in an attempt to destroy the real value of debt. Inflation, which has been described as the “hard drug” of our economic system, can very rapidly get out of control.

So here we have some pointers to the future – debt escalation, and/or hyper-inflation, both of which would be insane choices, but neither of which are beyond the short-termism of the political class.

Ultimately, and whichever folly is chosen, faith in fiat currencies is likely to collapse, to which I will only add that there are already at least two major currencies that I, for one, would not want to hold. In the normal course of events, inflation strips money of its value, but this tends to be gradual – we have little widespread (though plenty of local) experience of what happens when a fiat currency falls apart.

People cannot be expected to accept any of the post-growth consequences described here with a resigned shrug. They are not doing so now – instead, and naturally, they are beginning to blame, and repudiate, established political leaderships, and this was the most significant trend to emerge in 2016.

If the economy – and, in the first instance, the financial system – does start to implode, governments are highly likely to resort to coercion, spouting precious claptrap about “the national interest” as they try to maintain their hold on power.

Though the financial and real economies are different concepts, it is impossible for finance to collapse without inflicting grave damage on the real economy.  Our economy is essentially fragile, depending on attenuated systems, most obviously for payment and clearing. If you try to envisage running an economy without payment systems, banks, insurance or even trusted money, in a climate in which no one knows who owns or owes what, you will appreciate that the real economy is a hostage to finance.

Meanwhile, I’m continuing to refine the SEEDS system, with a new version now almost ready for roll-out. Clearly, it would help if this system, like the broader interpretation of the economy as an energy equation, reached a mainstream audience. My belief is this will happen – as the scale of our predicament, and the shortcomings of conventional interpretations, become ever more obvious, there will emerge a pressing need for a new understanding.

Governments are unlikely to adopt this, though trans-government organisations might. It seems likeliest that a major financial corporation, seeking commercial advantage from “getting there before the competition”, might be the first big player to act.

How things may unfold, and when, remains conjectural – but I do feel that I now have more than enough material for a sequel to Life After Growth.

180 thoughts on “#85. Perfect Storm gets nearer

    • OK. I mean JPY and GBP.

      In Japan, the BoJ is hoovering up JGBs (govt bonds), is well on the way to owning half of all JGBs, the historically-high savings ratio is slumping as the population ages so people need to draw on savings, not add to them. To me, Japan is monetising its debt – very bad news. Someone described Japan as ” a bug in search of a windshield” – and I agree.

      The UK economy seems to be falling apart. The current account deficit is horrendous. Britain simply doesn’t earn enough forex to pay for its imports, so has been a continuous and big net seller of assets to pay its way. Investors who bought GBP assets during 2015 are now sitting on forex losses averaging close to 20% – so will they put in more money? Debt of £4.9tn – 268% of GDP – doesn’t include pension deficits (close to £1tn), unfunded public sector pensions (at least £1tn), or financial sector debt (£3.3tn). I’m concerned, also, about: real wages – energy supply – healthcare affordability – care for the elderly – disadvantaged young people – and the bias towards speculation rather than innovation & investment.

      ’nuff said?

      P.S. Next article will be about the UK economy.

    • Kyle Bass was the ‘Bug” man. His main trade a few years back was shorting JGBs he has since closed that one. He now has the Chinese in his crosshairs. As days go by it must be evident that China will be the one implode first. Any views?

    • China has significant problems, too much to go into here. Briefly, they are piling on debt (all debt, not just govt) dangerously rapidly – debt appears to have gone from $7tn in 2007 to well over $30tn now. Their “folly of choice” has been building surplus capacity, which has driven margins down to levels below cost of capital. Much of the problem is with entities owned by regional govts. One solution, converting debt to equity, has failed. There has been a massive reversal of decades of capital inflow.

      China’s broader problem is being motivated by volume rather than profit – their priority is maintaining or growing employment.

      So China does worry me. But I still wouldn’t hold yen…..

  1. BoJ and SNB, among others, are buying stocks and etf’s, even outside their own domestic markets.

    This makes them more interconnected with other economies so that, in the event of a crisis, other central banks and for example the IMF will have to come to the rescue. Imho, no mayor currency will blow up on its own.

    • Agreed, contagion would probably be unstoppable.

      The sheer scale of what is going on seems to rule out an IMF rescue. If memory serves, the inflation-adjusted value today of the IMF rescue of the UK in 1976 is about $60bn, obviously a drop in the bucket by 2017 standards.

      I really wish I could think of any way out of this.

    • Do you have a critique of the IMF bailing the world out with the SDR? This is an idea put forward by the American pundit Jim Rickards.

    • I’m familiar with Jim R but not with this theory – I need to look into it. But off hand I can’t see how it could work, without lethally undermining confidence in currencies.

    • A worldwide announcement of a steady state economy. All debt, savings, bonds, pensions to be called null and void. Every citizen a certain amount of currency in his/her bank account backed by SDR (which has to be partially backed by gold). Start with downgrading all industries that do not produce necessities.

      If we don’t implement harsh methods, it will overrun us.

    • Houtskool:

      How are savers likely to feel if you destroy their savings, but let others escape from their debts? That seems like gigantic “moral hazard” to me?

    • Dr., there’s no way out other than destroying the paper mess all at once. Before it destroys us. Savers will lose everything, but hey, their homes are debt free.

  2. Tim, I still pull up a copy of “Life after Growth” and also “A Perfect Storm”, just to keep me in touch with everyday reality. These works are still very pertinent and although none of us have Crystal Balls, they are standing up to the test of time.
    As a physicist by education, I can see the logic and rational in SEE and EROEI and I fully buy into these concepts. My only “problem” with these, is that they are macro-economic in nature, covering the global economy, and world events. It is difficult to filter this down to a local economic level, and even further down to assess the impact on the wallet in my back pocket !
    I was also going to ask the question which you have just answered, and I was relieved that I am not exposed to YEN, but am heavily exposed to GBP as it is the currency that I get paid in. ( The rest of my very modest pile of dosh is in EUR and a few Kruger, although I can also survive a year or two on what I invested in RUB, even if I need to live in Russia to spend it. )
    If Bitcoin keeps up its head of steam, I might be able to afford a new car next year.
    The UK economy is very worrisome for me, I do not see any positive aspect to it, so I will wait with baited breath for your next article.
    Many thanks for sharing your insights.

    • Johan

      You and I are in the same place – we can follow and understand the macroeconomics of this, but not translate this into what to do on the ground. I’ve considered many things, but drawn a blank.

      If anyone reading this has practical suggestions, I would be more than grateful…..

    • I live in the countryside so I am quite used to the electricity/water being regularly cut off, due to the elements, during the winter. I would recommend you redeploy your £s into something of practical value. Like a wood burner (and supply of logs) to keep warm, camping stove and gas to cook, case of bottled water etc. In other words start to think as to what practical measures you can take so that you are not inconvenienced when the “grid” ceases to function and there is a gap until “normal service is resumed”.

    • Jim:

      Thanks (and welcome to SEE).

      These are very good ideas, particularly given the fragility of our systems. Dmitry Orlov’s book on the stages of collapse would interest you.

    • @Jim Jordan – have a read of Chris Martenson’s book Prosper; it’s does a good job of describing different types of wealth along the lines you suggest – invest in tools, land, education, health, etc so that when (not if) things do go south, you’ll have a fighting chance.

    • Chris Martenson is a scum bag trying to sell ‘hope’ Don’t waste your money.

      ‘ gap until “normal service is resumed”.’

      You don’t seem to grasp the scale of what is headed our way. There will be no reset — there will be no energy going forward.

      This is – and no hyperbole intended – the end of days

    • 5th horseman.

      I think most of us here do grasp how bad things are. My aims, which I think others share, are:

      1. To understand what is happening, research it and listen to the input of others

      2. To contribute to building a calm, rational and well-argued case that – who knows? – may influence how our economy is managed.

      Lastly, I really want us to be courteous here – and I disagree 100% about Chris Martenson. If you think he’s mistaken, please say that instead.

    • Bitcoin crashed today . It’s not accepted widely enough to survive. The currency only depends on whose behind it. The US government is why the $US is accepted by everyone.

    • With regard to Bitcoin, you need to look at the broader picture. As I see it, BTC did not crash, all that happened was that you, and the public in general were made aware of a drop. This information was provided by the Mainstream Media. This same Mainstream Media did not however report on the rapid rise of Bitcoin over the past couple of months before.
      Yes, the price was hammered down as was reported, but the prices also went up during November / December. So today we are trading at US$750 or so, which is much in line with what we were trading at 3 months ago.
      So if you look at the “Big Picture”, where is the “Big Crash” ?

      As I see it, this is just one further step towards the BTC = US$10,000 mark.
      When fiat currency is shown up to be the charade that it really is, then more and more people will bail into Crypto currency. The fact that neither the CIA or the FBI with all their resources have not yet brought it down, shows its resilience.

  3. Tim,

    I’m in a funded final salary pension scheme. As far as I can see, while the deficit isn’t very clever, the fund income from dividends and the members is roughly equal to whats being paid out. The return on the investments is (Currently) greater than the return on Government stock so as far as I can see, the deficit isn’t as bad as it looks on paper……………

    Of course as you rightly say it can all go very wrong

    • John

      Not all schemes are in the same condition, and I’m glad to hear yours seems OK. Where these are employment-related schemes, a lot depends on the past generosity (or otherwise) of the sponsoring employer.

      Speaking generally (and I did a piece about this not long ago), pension funds can make capital gains when bonds and equities rise. But capital gains aren’t the same as reliable income from dividends, and of course capital gains can reverse, whereas incomes are stable.

      Pension funding isn’t about Mr A putting £1,000 in today and getting £1,000 back later. If you worked out the sum you needed in retirement, and tried to save that sum out of income through your working years, the saving requirement would be daunting. Growth in invested value is the key.

      For the maths to work, the sum invested has to grow, which, historically, has been the case. Funds often have guidance on what the investor can expect to receive in retirement, but far too many funds seem predicated on assumed investment growth rates, say 7.5% annually, which have been rendered wildly improbable by low interest rates. Apparently, some US funds have tried – and failed – to get approval to reduce current payouts, warning that they might otherwise exhaust their resources in as little as 10 years.

  4. Thank you again, Tim, for your insight.
    Scaring to know that agriculture as an energy system that carried mankind for thousands of years now is an energy sink totally dependent on fossil fuels – and even worse: you cannot go back!

    • Indeed. All land capable of cultivation was in use by 1960, and we are now losing fertile land because of climate change and the prior stripping of nutrients by monoculture.

      The increase in food production since 1945 is entirely a function of energy inputs. Even mineral inputs would not be available without the energy used in extraction and delivery.

    • Re “we are now losing fertile land because of climate change and the prior stripping of nutrients by monoculture.”

      A minor quibble with this point. Monoculture is not actually the culprit when it comes to the stripping of nutrients. The most fundamental culprit is removing food crops (and other crops such as cotton) and the nutrients they contain from the land while not returning the waste to it. Second only to this is the practice of tillage, which repeatedly destroys soil ecosystems, brings organic matter to the surface where it is oxidized and lost to the atmosphere as CO2, and leaves the soil bare so it can readily dry out and thus further destroying the soil ecosystem. If we’re talking about no-till practices, then the repeated application of herbicides is every bit as effective in destroying the soil ecosystem as is tillage, and the ground is similarly left largely bare, so it leaves us in more or less the same place.

      Monoculture itself also makes the list. If we look at living communities that thrive in the natural world, we notice that plants tend to live in communities. This is because plants have different requirements and give back different nutrient complexes to the soil that are mutually beneficial. Or perhaps they aid each other in other ways such as by repelling insect pests in return for a favorable soil ecosystem. Most people learned in school about symbiosis in lichens, but unfortunately most teachers did not extend this principle to living communities in general. But it is in fact ubiquitous in the natural world. Gardeners recognize it when they adopt “companion planting” practices. Monoculture, of course, repudiates this paradigm, to the detriment of soil fertility.

      It’s a minor quibble. But I thought it might be useful to bring up the distinction, because, while the first step in addressing a problem is recognizing that we have one, the second step is understanding what it actually is.

    • Hi Dolphin,
      you said “The most fundamental culprit is removing food crops (and other crops such as cotton) and the nutrients they contain from the land while not returning the waste to it. ” and I absolutely agree! It’s that one way trip down the toilet and out to sea. Which is what this guy solves, and why I am so excited about this new Vertical Sea Farming practice. Here is 15 minutes that could change your world.

    • Eclipse Now — a very cool video. It put me in mind of starting these kinds of farms in the upper Chesapeake Bay. A lot of nutrients come down the Susquehanna River and do a lot of damage to the bay’s ecosystems. Perhaps also in the lower Potomac, James, and York rivers as well.

      I can hear the watermen screaming already. They think it should be a free-for-all forever. Which, of course, means there’s practically nothing left. It would be interesting to see what kinds of legal issues are involved in getting something like this started.

    • Perhaps you can’t go back, but that doesn’t mean that going forward won’t involve elements of agriculture as formerly practiced. The good news is that we will be taking recent scientific findings about soil structure and function along with us, as well as aspects of technology that provide serious bang for the buc… err… barrel. Materials for greenhouses, for example, are now vastly more durable, manageable, and affordable in energy terms than in earlier eras, meaning that extended growing seasons in temperate zones will become commonplace.

      In some respects, we will indeed revert to former practices that have fallen into disuse. Fallow land and use of manures in lieu of commercial fertilizers will, in my view, once again become common practices. And, most importantly, human and animal muscle will once again become significant sources of energy in agricultural production.

      This might take a very long time to play out. But already I see the groundwork being laid in my own community. Questionable food production practices such as Roundup being sprayed on ripening crops to make them dry out evenly, coupled with awareness of the unsustainability of a system that consumes many calories of energy resources per calorie of food on the table has caused many people in my community to conclude that we need to look after our own food requirements to the extent possible. Should an energy crunch cause a spike in the cost of food at the local grocery store, I’m guessing that this trend get underway in earnest.

    • Thank you for your comments – you have thought this through, and make some very astute observations.

      My question, though, is – can we feed 7 billion this way?

    • I’m not sure we can feed 7 billion (or 9 or 11) this way. I’m thinking there is an energy equation that could be used to characterize “sustainable” agriculture. Factors would include caloric requirements of 7 billion people, solar energy reaching arable land, efficiency with which the incident energy is converted into food calories, additional energy needed in the planting, caring for, harvesting, processing, and distributing foodstuffs, and how it can be sustainably provided, etc. I might try my hand at analyzing such an energy system as time permits.

      In addition to this, the primary concerns are for the factors needed for plant and animal growth and health. This comes down to water, carbon dioxide, oxygen, and soil nutrients, together with the soil biota that makes the nutrients available to food plants. Oxygen and carbon dioxide don’t present much of a problem. With the exception of nitrogen, though, soil nutrients are another matter. In developed countries, huge quantities of essential nutrients are flushed away, in many cases finding their way into the oceans where they are difficult to retrieve. We have been replacing these lost nutrients by mining mineral deposits from which the nutrients can be extracted, then processed, delivered, and applied to the land, all at enormous energy costs. Should energy ever become harder to come by, this system may no longer be feasible. At that point we will be forced to recycle our organic wastes, or watch the fertility of our soils decline to the point where we indeed cannot support 7 billion people.

      I think that the present population of the US may well be sustainable. We are fortunate that the population pressure per acre of productive land is still quite reasonable here. In other places, I’m not so sure. It might be time to start thinking about that energy equation…

  5. Tim,

    I don’t want to pollute your post with my comments, but I really need an explanation of:

    “We should be optimistic about renewables, but also realistic. Renewables can supply energy more cost-effectively than fossil fuel sources discovered and brought on stream today”

    More cost-effectively?

    • Niels:

      Naturally, we have exploited the cheapest-to-produce oil fields first. With big, simple, onshore fields mostly developed, we have turned to complex, smaller and offshore fields instead. These have much higher ECoEs (i.e. lower EROEIs) than the earlier fields.

      So, the fields that we are developing now are costly – and that includes shales, not so much on opex grounds but because of super-rapid depletion rates. The best renewables can match these costs, albeit often aided by subsidies.

      But my point here is that matching the (high) costs of today’s expensive developments is one thing – matching the (low) costs of the giant fields of the past is quite a different matter.

    • Hi Tim,
      Great article – very much looking forward to your take on the UK economy.

      Re. energy costs, I would add that the cost of oil is not the c. $55 quoted, but far higher, once the wars and destruction and military funding to secure it is factored in (I believe 1/10th of the US national debt is due to the Gulf Wars).

      I believe I’ve said it before, but I really think you need to get your work in front of Mark Carney or Janet Yellen or similar.

      Best regards,

      Dan

  6. Another great post Tim. Perhaps you make a comment about population growth – surely this is directly correlated to energy growth? Has this relationship been broken by the central banks? Another major worry is a tsunami of (entirely preventable) early deaths in the west due to obesity – thereby reducing our capacity to create wealth still further (pay back debt)?

    Regarding food production – isn’t there a forecast giving only 60 more harvests?

    • Just reading through the excellent if frightening “Life after Growth” and the thought struck me that population growth is a bit like debt growth in that it is a “claim on future money therefore… a claim on future energy”. In fact if anything it seems rather more worrying in a post growth world whether at world or national level as new energy has to be found or the supply to those already living necessarily diminishes.
      At least with debt you can have theories about hyperinflation, debt forgiveness etc but it is rather harder with people especially in a “take in your neighbor’s washing economy”

      So much to read in this blog.

    • Mick

      Yes, though I’d not looked at in that way. Each person added to our population is, theoretically, a demand unit (needing to be fed, etc), and a labour unit (capable of contributing).

      In an agrarian society, these debits and credits would match. But the vast – and I mean vast – majority of the energy used by the economy isn’t human labour, and agriculture (and so much else) is geared to energy inputs. So each additional person adds a debit that far exceeds his/her labour credit contribution.

      I take the point, too, about it being easier (relatively) to postulate a fix for the financial economy than for the real one.

      I think this is your first comment here – if so, welcome, and more please.

    • Jonathan

      In my book there is a chart showing how population, energy use and economic output match up – very closely indeed. Logically, if the “master exponential” (energy) collapses, the others go with it. One leading scientist has postulated a future global carrying capacity population of 1bn.

      It’s easy to see how the outlook, as surplus energy economics projects it, leads to catastrophe. Our economic (and social) systems aren’t designed to stand still, let alone go into reverse. Much of our infrastructure is sub-viable at utilisation rates below perhaps 95%. Linkages are too complex to be resilient. The economy can NOT function if the financial system collapses – and the financial system is predicated on continuous expansion. How can we feed 6bn people? What are the dangers of conflict, and mass migration, in a deteriorating economy?

      And so on.

      But my focus is on promoting awareness. Politicians are highly unlikely to grasp this. Inertia is the default position of government institutions. Business leaders might be more open to new ideas.

  7. Hi Tim

    I think the reason surplus energy economics is so threatening to economists, politicians etc is that it makes everything very simple – its the surplus energy. No need for complication, no schools of economics (the Chicago school etc) no politician’s long term plans. As long as you have abundant surplus energy you’re fine – when you don’t then you’re in trouble no matter what your theories are. A bit like a rising stock market makes everybody an investment wizard.

    Following up your mention of 747s the excellent Wolf Richter has an article today on troubles at Boeing – he ends up saying
    “Airlines have peeked into the future, and they’re not particularly enthusiastic about what they see in the global economy. They react by slashing or even canceling their aircraft orders.”

    In our recent by-election I found the best way of terminating the doorstep conversations with the various parties was to suggest that Heathrow was likely to need fewer runways rather than more by 2025. There were 3.7 billion passengers (equivalent to half the worlds population) on scheduled flights last year (although only six percent of the worlds population flew) and this was an increase of 6%. Apparently they have not figured out the exponential progression in relation to passenger numbers let alone the surplus energy requirements.

    Gail Tverberg appears to have gone apocalyptic in her latest post seeking divine intervention- I suppose it’s one approach. There was an interesting link in the comments section which I’ve only had a quick look at http://www.energyandstuff.org.

    I suspect surplus energy economics time in the sun is fast approaching. Once you start thinking in surplus energy terms you see it everywhere because it is.

    Thanks
    Mick

    • Thank you Mick. I haven’t read Gail’s latest, though I shall. But I shall not suggest appealing to the Deity, or going apocalyptic.

      I’m sure you’re right about air travel – it’s interesting how the powers that be enlist exponential progression when it favours extra runways, but not when it warns them about exponential debt!

      I, too, have seen everything in surplus energy terms since I reached my initial conclusions on it. I certainly see it in nature. The birds in my garden have the first priority of keeping stocked up on energy, and seem to have an in-built awareness of the energy/activity balance. Lizards fatten themselves up, then hibernate – sleeping out an adverse period for the energy/activity balance? A fascinating thought.

  8. Hi. I spent the first half of my life growing up in a third-world dictatorship/police state, in a country that today is still always in one of the top 10 poorest of the planet at any given time. The conditions for the vast majority of the population were & are akin to feudal, so women had a child a year like the livestock on the subsistence smallholdings that amounted to the economy …..by any meaningful definition.

    Given 1 in 10 childbirths resulted in death for the mother at least, families tended to have about 10 kids, ~2 of which survived pre-colonialism – but post, about 8 now survived, even with just the most basic medicine and foreign aid making up the shortfall in food that ever subdivided and degraded peasant farms could eke out. As people culturally had to marry young, a generation was literally biblical, ~20 years being a fair description …..after independence then, the elephant herd in the room, the population timebomb was ticking, with the total quadrupling every 20 years while the carrying capacity of the land was actually falling due to rapacious over-exploitation through desperation or greed. Even before factoring in the neo-colonial economic destructive ravages of robber-baron capitalism, (vs regulated) the place never had a chance, it could only have resulted in a race to a failed state, a moonscape of desertification – where even western-valued natural resources couldn’t have saved the situation as the poor who occupy the desired land are just removed by whatever means because they can be.

    Whether technology has the potential to save the planet’s population is a moot point since the intellectual capacity of the majority/voters is not presently capable of electing the leaders needed to resist being bought or just tinkering with the symptoms as opposed to the actual causes of the fundamental problems. (even in nominally highly-educated countries, people are rendered stupid via mindless consumerism, not realising that cheap plastic tat costs you your job) The planet can actually handle this human population, but our nature can’t, the elite will not let go the grip on the throats of the rest until they are convinced they have to, which is too late. To be fair, they are acting quite logically, history has proved that for the most part they will ride out the storm whatever happens. As you allude, brexit is but a microcosm of the situation globally, they can deflect the anger & pain of the masses onto the vulnerable who always suffer the backlash …..immigrants & the poor/weakest of society in general. C’est plus la change. Carpe ominus.

    • Fascinating comments, for which many thanks

      I’m ever more drawn to the issue of how we think about issues – and the debasement of thought and of ethics is, for me, the biggest single indictment of “neoliberal” economics.

    • Absolutely, I’m always surprised at how easy it is to manipulate even intelligent people via their hard-wired cognitive biases. It’s like the persuasion masters know which spot to push in a brain to get people to dance to their tune like puppets – an abstract equivalent of acupuncture. As Trump & other recent events have proven, this is what wins elections & can destroy our entire lives – in the same way as the candidate getting the job most of the time only being the best at interviews vs the actual skills for the work.

      Looking back through history to see real evidence of what actually works, the consistent pattern, the only common denominator in successful states that ran beautifully at least for a while, (as judged by a number of variables) like the Roman empire or the genesis of the industrial revolution catapulting Britain to truly global power status …….is very good governance. Most find this hard to accept because it seems too easy – so we reason it can’t be …..otherwise surely everyone would be doing it? But the main reason it doesn’t happen most of the time is human greed alone.

      It can be really, really basic & unsophisticated, but work very well – because the catalyst for wealth creation is simply, just stability – that peace leads to prosperity & the freedom (lack of gate-keeping in all its insidious forms) leads to innovation since the creators are reassured that they will benefit from their own efforts. This leads to a positive spiral as wealth spreads out, growing the pie and multiplier effects cascade until the baser instincts of people bring the whole edifice crashing down. This is usually through complacency, hubris & greed, expressed as wars, rentierism & other ways of exhibiting a lack of the unity that created the initial wealth & associated power/independence. Sadly, the elite always come out ahead in the end because they have the means & the will to pay a few of the poor to subjugate the rest by whatever means necessary – the dogs in Orwell’s ‘Animal farm’.

      For the time that this state lasts, even countries with few natural resources or other obvious competitive advantages can through their enlightenment shine by punching way above their weight. Post-war 20th century Japan, the Roman golden era, renaissance Italy are extreme examples …..remarkable when you remember that both are on aggressive techtonic plate faultlines & have no significant energy reserves of their own.

      Once the elites within the European colonial powers that dominated the 20th century could no longer exploit those in their vassal states, they turned to eating their own (the vulnerable in their own countries) to keep up their rate of enrichment/standards of living. This is another reason for the stagnation & decline of Europe, a sad irony being it doesn’t have to be this way. If it were a union in the true spirit of co-operation, prosperity would have endured, but it was corrupted by corporate capture of the leadership, passively enabled by the apathy of the majority. This the Neoliberal revolution. Democracy has been sidelined, people quietly disenfranchised …….& they are still sleepwalking through the final stages of a total loss of personal privacy, which will result in full autocracy. The rise of Trump & his ilk shows the confidence of the elite in that they can now desist with the illusion of pseudo-democracy, to blatantly show their true colours. We are living Orwell’s 1984.

  9. Dear Dr Tim

    There are ways to enhance soil without petroleum derived inputs (e. g., permaculture practices) however these methods take some time and the ability to scale them up is an unknown. Nevertheless now would be the time to try to scale them particularly in countries that need to import both oil and food. Also, countries that are not currently self sufficient in food should not be accepting immigrants and instead should discourage population growth.

    • The problem with this is scaling. In principle I’m 100% behind organic and sustainable farming – but would it feed anywhere near our current population? That seems unlikely.

      Less ambitiously, we need people to start buying local – which means eating what is in season.

  10. There’s always been the rural/urban bargain. We feed you in return for…. [as a thought experiment insert the economy here]…..

    Wow, the future really is Malthusian!

    Great article as ever Tim, thanks.

  11. Correct me if I’m wrong, but this article seems predicated upon a ‘peak energy’ belief system? Peak energy is a myth. Breeder reactors can provide all the abundant, reliable, clean electricity we could need, and that can revolutionise the transport system as well.

    Breeder reactors burn the actinides in nuclear waste. For laypeople like myself, that sounds like gobbledegook. But when it’s broken down into English, it’s a startling fact that I wish I had known decades ago. Put simply, the longer lived radioactive stuff in nuclear waste can be burned to supply abundant clean electricity, and the final waste only has to be stored for about 300 to 500 years. Easy!

    Before you scoff, China will mass produce breeders cheaper than coal in just 8 years!
    http://nextbigfuture.com/2014/06/china-seriously-looking-at.html

    But there’s already a history of them.

    There are 2 main types of breeder reactor.
    1. Fast Neutron reactors.
    https://en.wikipedia.org/wiki/Fast-neutron_reactor
    A famous prototype Fast reactor was the American EBR2, an Integral Fast Reactor prototype that reprocesses all its waste on site.
    “Costing more than US$32 million, it achieved first criticality in 1965 and ran for 30 years. It was designed to produce about 62.5 megawatts of heat and 20 megawatts of electricity, which was achieved in September 1969 and continued for most of its lifetime. Over its lifetime it has generated over two billion kilowatt-hours of electricity, providing a majority of the electricity and also heat to the facilities of the Argonne National Laboratory-West.”
    http://en.wikipedia.org/wiki/Experimental_Breeder_Reactor_II#Integral_Fast_Reactor

    Russia had the old BN-350, and then built the Bn-600. Note: the Japanese paid Russia a billion for the technical specs on their old BN-600, and “The operation of the reactor is an international study in progress; Russia, France, Japan, and the United Kingdom currently participate.”
    http://en.wikipedia.org/wiki/BN-600_reactor

    They have now build the BN-800, and have exported the plans to China who will be building their own soon.
    http://en.wikipedia.org/wiki/BN-800_reactor

    Russia are building the BN-1200 soon.
    https://en.wikipedia.org/wiki/BN-1200_reactor
    The French had the massive 1200MW Superphenix until ignorant activists shot RPG’s onto the site and Fear, Uncertainty and Doubt closed it down again. What a waste! The French could be breeding up all their own nuclear ‘waste’ into fuel again.
    http://en.wikipedia.org/wiki/Superph%C3%A9nix#Closure

    2. Thermal (slow neutron) reactors run hotter
    My favourite thermal reactor is the Liquid Fluoride Thorium Reactor which CANNOT ‘melt down’, as it is already a liquid. China has an enormous LFTR project.
    http://www.technologyreview.com/news/542526/china-details-next-gen-nuclear-reactor-program/
    Thorium is currently a massive and expensive waste problem from mining all those rare earths that wind and solar rely on. But if we can burn thorium, wind and solar and nuclear can all be friends. We can have the best of both worlds. Various future breed

    • No, it is not predicated on “peak oil” (etc). The peakniks’ theories have been answered by the cornucopians, who have supplied the right answer……….to the wrong question.

      Starting with fossil fuels, they will not “run out”. But what they are alreay doing is becoming more expensive, not necessarily in USD, GDP etc but in the ratio between gross energy accessed versus net energy after deduction of energy consumed in the access process. Renewables are improving on this ratio just as fossil fuels are worsening, so these are converging – but not at levels equivalent to the abundant, low-cost resources of the past.

      Just as I don’t predicate my thinking on peakism, I don’t buy into much of the technical solution answer either. Taking fusion, we have been trying this since the 1920s. ITER is proving hugely expensive, and seems a very long way from achieving even technical demonstration – correct me if I’m wrong, but isn’t the ratio of energy in/out still around 70%? I’m familiar with a lot of the scientific claims about nuclear, but also with the views of those equally qualified who say it can’t be done. Fusion, for instance, could “put the sun in a box” – but we still don’t really know how to build such a box.

      I’m not qualified to assess these new technologies – they might work, and be scaleable. But both scale and time are against us. The overall fossil/renewable output-to-cost ratio is rising exponentially. This has undermined economic growth, to the point where we’re “faking it” using debt. If these new technologies are going to work, they need huge investment from what I term “the legacy economy” – and it’s hard to see where that investment comes from in a global financial system that is already in very deep trouble.

      Above all, I’m open-minded – but sceptical.

    • Forget fusion for now. EROE (Energy Returned over Energy Invested) of nuclear fission is just fine. Splitting the atom gives us 2 MILLION times more energy than splitting the chemical bonds of fossil fuels. So the EROEI of nuclear power — even with the enormous energy costs of mining and refining uranium, building an enormous concrete containment dome over the reactor core, etc etc etc — is still very high because 2 MILLION times more energy is actually significant! 😉 So nuclear is around 75 times the energy it took to build it. But here’s the deal. That’s calculated on a once-through fuel cycle. Once you start talking about breeder reactors, everything changes. Breeders get 60 to 90 times the energy out of the same amount of uranium! Do the math. 75 by 60 is HUGE for an EROI!

      And time? France built out their 75% nuclear grid in about 15 years. Dr James Hansen is *the* climatologist that diagnosed our climate problem. Unfortunately, no one wants to listen to him about the solution.

      He says:
      1. Believing in 100% RENEWABLES is like believing in the Easter Bunny or Tooth Fairy. He’s aware of all the ‘studies’ that say we can do 100% renewables, but still thinks storage is ridiculously expensive and cannot do the job.
      http://goo.gl/8qidgV

      2. The world should build 115 reactors a year*
      http://goo.gl/Xx61xU
      On a reactors-to-GDP ratio the French *already* beat this build rate back in the 70’s under the Mesmer plan. 115 reactors a year should be easy for the world economy. France did it *faster* with older technology, and today’s nukes can be mass produced on an assembly line. Also, GenIV breeders are coming that can eat nuclear waste and covert a 100,000 year storage problem into 1000 years of clean energy for America and 500 years for the UK with today’s levels of nuclear waste. Read the free book that Dr James Hansen recommends, Prescription for the Planet, at the link below.
      http://www.thesciencecouncil.com/pdfs/P4TP4U.pdf

    • I think nuclear is a viable energy source. However, most of the EROEIs I have seen for Nuclear Power generation come in around 5. Admittedly, it’s not an easy number to hang one’s hat on, since it’s not always clear where to draw the lines (in accordance with the Buddhist principle that everything’s connected). I’ve seen numbers anywhere from 70 down to less than 1. The fact that nuclear power plant projects almost always require massive public subsidies makes me think that the real number is closer to 5 than 70.

      I also agree that breeder reactors are, in theory, the way to go as far a nuclear power generation is concerned. But… the concept has been around for a long time, and the plants that have been built have been notoriously tricky to keep running properly. Perhaps the issues will be resolved and we’ll have yet another golden age of cheap, plentiful power. But it will be brief. Fuel sources for this mode of power generation will be subjected to exactly the same issues confronted by coal and oil. The first sources to be tapped are the highest grade sources that are easy to get at. Eventually, diminishing returns will set in on this fuel source also, and we will be back to where we are now. Only with potentially more billions of people to figure out how to feed. And with some very heavily contaminated decommissioned power plants to deal with.

    • Dolphin

      You raise some good points here. EROEIs for current nuclear are a tricky area, but most of what I’ve seen is in the range between 10 and 20.

      With new technologies, this could change. But, beyond the technical uncertainties, there are two other issues. First, cost – the ITER demonstrator seems to keep getting ever more expensive.

      Second, time. New technology may be decades away – but the EROEI/ECoE of the existing energy slate is worsening pretty rapidly, suggesting that we need solutions that are up-and-running in a decade. ITER, for instance, isn’t going to meet that timescale.

      To put this another way, we are already in “secular stagnation”, massive dependency on debt, and monetary abnormality. We don’t have 20 years to find solutions – I doubt if we have even 10.

    • Tim, an EROEI that low would still do the job but you’re going to have to justify only looking at nuclear EROEI’s that low! There are many, many studies showing higher nuclear EROEI’s. I don’t know why some are so attracted to only accepting super-pessimistic, super-low EROEI’s, especially when splitting the atomic bond delivers 2 MILLION times more energy than the chemical bonds in fossil fuels. But there you have it.

      Weissbach says the EROEI of centrifugal enrichment is 75
      http://festkoerper-kernphysik.de/Weissbach_EROI_preprint.pdf

      But breeder reactors get EROEI’s near 2000!
      http://festkoerper-kernphysik.de/dfr_eco

    • All this was tested in Limits to Growth even abundant free clean energy doesn’t change the paradigm. The issue is about equilibrium. We’re all ready over heating the planet breeder reactors would exacerbate the problem. If our vision of energy utopia is Saudi Arabia well OK but to my knowledge you can’t eat sand. So no matter how you calculate it the system has to stop growing, but it can’t without collapse. Pumping more energy in won’t change the equation we need to resign ourselves to the reality. This was a one time event made possible by an unusual set of extraordinary circumstances. It won’t be repeated because it can’t. It’s interesting to compare the public response to these realities with the stages of grieving. Direct correlation.

    • That’s way too simplistic John! Think about all the things you can do with really abundant clean energy! I mean, if we ended up with super-cheap fusion reactors we could farm indoors in hydroponic arcologies. One arcology youtube portrays towers of 5000 people, all growing their own food and living in luxury apartments, being placed every mile along the coast of North America. Because all agriculture was occurring in the towers, the land around is returned to nature. No grazing, no farmlands, no corn. Just wilderness. How many people could be housed in one arcology every mile along the coast of North America — even along the coasts of Alaska, enjoying Arctic views outside their windows because they have all the food and warmth they could want indoors?

      Only 50 BILLION people, with the entire North American continent between the coasts being returned to nature in this scenario.

      But that’s fusion, and we may never get there. But we could have Molten Salt Reactors that *cannot* melt down because they’re already a liquid. We could develop the Integral Fast Reactors that Dr James Hansen recommends. These have already existed, energy positive, in the real world. There are hundreds of versions of the breeder reactor being developed. Hundreds. If we clean up our energy we get rid of the greatest environmental threat we have, climate change. Then we can work on fisheries and forests and conservation and all those other concerns.

    • Eclipse
      I love the dream and I’d love to be there with you. For years I’ve researched the possibility you suggest but when you actually put pen to paper and start accounting for all the heat that will be generated in your scenario the earth would be cooked. The first law of thermodynamics is conservation. All the consumption of energy eventually is expended as heat. The heat must be radiated from the planet. The rate of heat radiation is based on surface area and temperature differential or delta T. For this present world to be raised to the American standard of energy consumption we would already pass the habitable limit. We may have already passed it now. So I’m sorry I’m so simple but I do think the problem is a simple one. The most efficient and prosperous systems we have are what we were endowed with in the beginning plants and animals. Think about that for awhile. We’ve learned a powerful lesson.

    • Dr Tim et al,

      ITER is a fusion reactor project. I leave it to others’ crystal balls to forsee whether this technology is going to work out or not. I’m not holding my breath. I’ve been attending fusion energy conferences since the mid-’70s and I’m not convinced that a concept for a working reactor has even appeared on the horizon yet.

      As far as fission reactors are concerned, conventional or otherwise, it’s not the ERoEI of the fuel ore even the reactor that’s the issue. The issue is, what’s the ERoEI of a Nuclear Power Plant when all energy costs are factored in — construction, operation, mining and refining of fuel, spent fuel containment, decommissioning the plant at the end of its service life, energy equivalent set-aside for risk, etc. I can assure you that it’s nowhere near 70. If it was, Nuclear Power Plants would be so lucrative we’d be absolutely swimming in them. Instead, what we see is an industry that has struggled since its inception and has characteristically chewed up vast public subsidies just to be “economically viable.” I noticed just last month that a pair of nuclear power plants in Illinois will require an annual infusion of $235 million to stay in operation. I don’t know about you, but “public subsides” and “economically viable” don’t really seem comfortable in the same sentence to me unless the word “not” appears in it somewhere.

      Don’t get me wrong. Even at ERoEI 10 – 20, nuclear power may still have its place. You know, like at night, or on cloudy days. And maybe breeder reactors will push this number higher, although I suspect what they will really do is stretch the fuel out longer. Which is admittedly a very good thing in itself. But even so, has our situation really changed? Obviously, we may be able to party on for perhaps another few decades, and the discussion has moved on from “peak oil” to “peak uranium” or “peak thorium.” But it will still be the same discussion that we’re having now.

    • “As far as fission reactors are concerned, conventional or otherwise, it’s not the ERoEI of the fuel ore even the reactor that’s the issue. The issue is, what’s the ERoEI of a Nuclear Power Plant when all energy costs are factored in — construction, operation, mining and refining of fuel, spent fuel containment, decommissioning the plant at the end of its service life, energy equivalent set-aside for risk, etc. I can assure you that it’s nowhere near 70.”
      Can you? Are you an expert in EROEI studies? I’ve seen good engineers conclude 70.

      Do you admit that the mining and refining of uranium costs a lot of energy? Great! I’m sure it’s quite the operation, given the thousands of tons of ore that are processed to get a little uranium. But here’s the deal. What do you make of the fact that atomic bonds give us 2 MILLION times the energy of the chemical bonds of fossil fuels? Would that help raise the credibility of the higher EROEI’s? And what about the fact that future breeder reactors will not mine uranium at all! I’ll say that again. If America built out Integral Fast Reactors and Molten Salt Reactors, they would not have to mine uranium for 1000 years! Do you know why? Because these things eat nuclear waste! There’s a little energy cost in reprocessing today’s long-lived nuclear ‘waste’ to get at the actinides, but that’s nothing compared to mining and refining uranium ore to start up a reactor from scratch. Breeders get 60 to 90 times the energy out of the ore. That means that eventually, when we run out of land-based uranium and thorium reserves in about 50,000 years, we can just put dongle’s in the ocean that soak up uranium particles and get a lifetime’s fuel supply for one human on one dongle: about a kilogram’s worth. And into the breeder it goes!

      “If it was, Nuclear Power Plants would be so lucrative we’d be absolutely swimming in them. Instead, what we see is an industry that has struggled since its inception and has characteristically chewed up vast public subsidies just to be “economically viable.””
      Expensive nuclear power is a particularly American problem, due to their unique regulatory framework that cripples American nuclear. There are countries building nuclear far cheaper than America. Check South Korea! “We find that trends in costs have varied significantly in magnitude and in structure by era, country, and experience. In contrast to the rapid cost escalation that characterized nuclear construction in the United States, we find evidence of much milder cost escalation in many countries, including absolute cost declines in some countries and specific eras. Our new findings suggest that there is no inherent cost escalation trend associated with nuclear technology.”

      http://goo.gl/YGnZnu

      “I noticed just last month that a pair of nuclear power plants in Illinois will require an annual infusion of $235 million to stay in operation. I don’t know about you, but “public subsides” and “economically viable” don’t really seem comfortable in the same sentence to me unless the word “not” appears in it somewhere.”
      Well, it’s probably performed better than most wind and solar farms, but there are as many new nuclear designs and approaches coming out now as there are for wind and solar.

      “Don’t get me wrong. Even at ERoEI 10 – 20, nuclear power may still have its place.”
      When you get your head around breeder reactors, you might come to realise why some studies report them having EROEI’s approaching a THOUSAND!
      Here is a 2011 summary of my favourite reactor, the Molten Salt Reactor, aka LFTR. Kirk Sorenson presents it in 2 hours. Watch it in half hour chunks, as you may need a break! I know I did! The first 5 minutes are a frantic summary of the next 2 hours, then it slows down and goes into details.
      Enjoy!

    • “Are you an expert in EROEI studies? I’ve seen good engineers conclude 70.”
      — I’m a trained, practicing electrical engineer, and so I read technical material with a critical eye. As the saying goes, when something sounds too good to be true, it probably is.

      “But here’s the deal. What do you make of the fact that atomic bonds give us 2 MILLION times the energy of the chemical bonds of fossil fuels? Would that help raise the credibility of the higher EROEI’s?”
      — No. During a fission reaction, only a minute fraction of the mass of the reactants are converted into energy. So while the energy output per nuclear bond vs chemical bond is very much greater, the number of bonds involved is vastly smaller.

      “And what about the fact that future breeder reactors will not mine uranium at all! I’ll say that again. If America built out Integral Fast Reactors and Molten Salt Reactors, they would not have to mine uranium for 1000 years! Do you know why? Because these things eat nuclear waste!”
      — A good thing.

      “There’s a little energy cost in reprocessing today’s long-lived nuclear ‘waste’ to get at the actinides, but that’s nothing compared to mining and refining uranium ore to start up a reactor from scratch. Breeders get 60 to 90 times the energy out of the ore.”
      — This was certainly not the experience of the French Superphenix reactor you mentioned above. The breeding efficiency of this reactor was only about 1.13. Still a net positive, but nowhere near the 60 to 90 times you mention. Perhaps future reactor designs will achieve a higher ratio,

      That means that eventually, when we run out of land-based uranium and thorium reserves in about 50,000 years, we can just put dongle’s in the ocean that soak up uranium particles and get a lifetime’s fuel supply for one human on one dongle: about a kilogram’s worth. And into the breeder it goes!
      — I’m not sure where your figures are coming from, but we’ve already cherry-picked the high-grade uranium deposits and are moveing down through the grades in a process very reminiscent of coal. And it’s my understanding the Thorium is about four times as abundant as Uranium, so I’m thinking 50,000 years is a highly optimistic estimate.

      Expensive nuclear power is a particularly American problem, due to their unique regulatory framework that cripples American nuclear. There are countries building nuclear far cheaper than America. Check South Korea! “We find that trends in costs have varied significantly in magnitude and in structure by era, country, and experience. In contrast to the rapid cost escalation that characterized nuclear construction in the United States, we find evidence of much milder cost escalation in many countries, including absolute cost declines in some countries and specific eras. Our new findings suggest that there is no inherent cost escalation trend associated with nuclear technology.”
      — Sounds great. So how do you recommend we combat the high cost of nuclear power plant construction here?

      Well, it’s probably performed better than most wind and solar farms, but there are as many new nuclear designs and approaches coming out now as there are for wind and solar.
      — Which is why I think Nuclear Power probably has a similar ERoEI as do wind and solar when all costs are included.

      When you get your head around breeder reactors, you might come to realise why some studies report them having EROEI’s approaching a THOUSAND!
      — I’ve had my head around breeder reactors for well over 40 years. The concept is definitely an improvement over conventional reactors, but in practice, breeder reactors have proven difficult to operate and do not yield anything close to the breeding efficiencies predicted. Perhaps this will change with improved technology, but once again, this remains to be proven out.

      I think we’ve both expressed our views on this topic. Feel free to have the last word.

    • Hi again Dolphin, some good points!
      “— I’m a trained, practicing electrical engineer, and so I read technical material with a critical eye. As the saying goes, when something sounds too good to be true, it probably is.”
      Excellent, you’re way ahead of me then and as an electrical engineer, can more clearly visualise how this stuff actually works. I have a humanities background and everything I know about this comes from reading ‘over the shoulder’ of giants.
      “— No. During a fission reaction, only a minute fraction of the mass of the reactants are converted into energy. So while the energy output per nuclear bond vs chemical bond is very much greater, the number of bonds involved is vastly smaller.”
      Great point!
      “— A good thing.”
      Your open-minded attitude to nuclear power eating nuclear waste is great!
      “— This was certainly not the experience of the French Superphenix reactor you mentioned above. The breeding efficiency of this reactor was only about 1.13. Still a net positive, but nowhere near the 60 to 90 times you mention. Perhaps future reactor designs will achieve a higher ratio”
      Ah, I see what’s happening. YES, you’re absolutely correct: most breeding only achieves a minor increase in fuel supply each year. The physicists tell me that’s just the laws of physics at work there. The fertile stuff has to catch enough neutrons to make it fissile. Just like wet fire logs placed around the edge of a campfire to dry out, the breeder blanket of extra fuel rods sits around the reactor core to catch radioactive ‘heat’ in the form of excess neutrons and ‘dry out’: move from fertile, possible nuclear fuel into actual fissile material. This happens slowly. It takes a year to get an extra 10%. While there’s a lot of potential there, it takes time. It’s actually a supply constraint – if we clicked our fingers and magically converted all the coal fired power plants to breeder reactors, it would take decades to give them all fuel! They reprocess the fuel rods at the end of the year, and move the extra fuel into the actual reactor and reposition all the fertile stuff around the edges. They do it again, and again, and again! It takes decades to get that extra energy out, and that’s from the best breeder reactors.
      “— I’m not sure where your figures are coming from, but we’ve already cherry-picked the high-grade uranium deposits and are moveing down through the grades in a process very reminiscent of coal. And it’s my understanding the Thorium is about four times as abundant as Uranium, so I’m thinking 50,000 years is a highly optimistic estimate.”
      Professor Barry Brook, operating with breeders that get 60 to 90 times the energy. Also, thorium breeders have such a high EROEI you can mine the dirt in your backyard to get thorium out.
      “— Sounds great. So how do you recommend we combat the high cost of nuclear power plant construction here?”
      A government program that rolls them out? It’s anti-nuclear activists, crippling regulatory frameworks, etc that make it so expensive in America. Breeders will have standardised safety features and roll of the production line. They’ll also be cheaper without the giant steel reactor core, kind of like a giant pressure cooker because water reactors have to run at over 150 atmospheres! Breeders generally don’t use water, and so will have easier to mass produce reactor cores.
      Why don’t we see more breeders today? Politics. Nixon closed down the MSR program and diverted funds to the fast reactor for jobs and politics. The resulting IFR is a good reactor, but I’m sad about losing the potential MSR. And then even the EBR2 program was closed down. It’s all just ignorant politicians and paranoid politics. Proliferation! Bombs! Death! Bombs will be everywhere! But pyroprocessing cannot lift off bomb-grade plutonium isotopes. There’s no problem with the technology itself, just politicians poor understanding of it.
      Kirk Sorenson does a great talk to explain it all here.
      http://atomicinsights.com/kirk-sorensen-why-didnt-molten-salt-thorium-reactors-succeed-the-first-time/

      The consequences of this silly proliferation paranoia is spelt out below.
      “So in April 1977, US President Jimmy Carter banned commercial reprocessing. President Ronald Reagan lifted that ban a few years later, but the costs of the facilities were so high that only two commercial reprocessing plants have been opened for reactor fuel since then, both in France. Research on breeder reactors largely ceased, because they seemed to make little sense without reprocessing. And engineers found themselves left with a complicated disposal problem: they would now have to isolate tens of thousands of tonnes of spent fuel for hundreds of centuries, thanks to the 24,100-year half-life of plutonium-239. No one has yet worked out how to guarantee isolation on that timescale (see Nature 473, 266–267; 2011).”
      http://www.nature.com/news/nuclear-energy-radical-reactors-1.11957

    • Without wishing to go into the detail of various nuclear possibilities, I’d like to put an economic focus on this.

      My work suggests that we have very little time in hand, for at least three reasons:

      1. The ECoE of the existing energy slate is rising relentlessly.

      2. We are now faking GDP “growth” using huge anounts of debt.

      3. This in turn has led us into ZIRP and other manipulative expedients to enable the economy to co-exist with a debt mountain (and associated asset price bubbles) of unprecedented magnitude.

      In short, we are using a financial pytamid scheme to maintain an illusion of “business as usual”. There are limits to how long this can run.

      So, any tew technology would require time plus investment. We do not have much of either.

    • Are you suggesting there are no financial shenanigans the state can employ in an emergency to ensure that their special projects have to get done? Dr Hansen says the world should build 115 reactors a year. http://goo.gl/Xx61xU

      ECONOMICS: on a reactors-to-GDP ratio the French *already* beat this build rate back in the 70’s under the Mesmer plan. There was an oil crisis, and the French people relied on oil for electricity! The government just said BUILD THE NUKES, and it was done.

      TODAY: 115 reactors a year should be easy for the world economy. One a reactor to GDP basis, France did it *faster* with older technology. During an oil crisis!
      Now let’s say they don’t crack 1GW reactors for $1bn, as per various MSR and IFR claims.
      Let’s say it’s $5bn per 1GW factory build reactor.
      115 GW = $575bn per year, and the world economy is $70,000bn GDP per year.
      That’s 0.8%, not even 1% of the world economy.

      Even in the Great Depression they built the Hoover Dam, and it created jobs and water in the desert!

      Keep in mind that from a climate point of view, we should also be weaning off oil, so we’ll also need to start scaling up EV’s and synthetic diesel, which will eventually require their own power plants.
      But as the cost of the new nuclear power plants is *already* included in the price of the synthetic diesel that draws CO2 out of seawater and mixes it with hydrogen, then the new nukes just scale up as the synthetic diesel economy also does.
      https://bravenewclimate.com/2013/01/16/zero-emission-synfuel-from-seawater/

      (NREL says 84% of light vehicles and trucks can charge on the existing power grid and existing power stations, but admittedly all running at maximum. Nevertheless, we’d only have to build extra power for the last 16% of the cars and trucks that mostly run on petroleum. It’s the diesel that requires new nukes from the start.)

    • Dr Tim
      Your on point the time is up. These Hail Mary dreams of unlimited energy are simply pie in the sky. It’s denial of the problem and an emotional response to reason. The reality will remain too hard for the majority to accept.

    • A government contract standardised build out of nuclear power is the *fastest* way to switch off fossil fuels! Let’s look at the historical facts (that *cannot* be argued with). Denmark started building wind power at about the same time as France started building nukes.
      France deployed safe nukes under government contract, building about 15 per year. Unlike wind or solar, nukes are reliable on the darkest, quietest winter day. For every massive wind farm that goes up, you can be sure that there’s something backing it up 2/3rd’s of the day. Wind farms are OFF more than they are ON. That is a huge problem, and most countries with lots of wind energy rely on fossil fuels for backup, or import electricity from other countries. That’s why France, the clean nuclear nation, exports more electricity than any other nation on earth!
      https://en.wikipedia.org/wiki/Electricity_sector_in_France#Export

      So who won the clean energy race? Let’s look at the facts:-
      Denmark emits 478 grams CO2 per kilowatt hour.
      France emits only 80 grams CO2 per kilowatt hour.
      http://bravenewclimate.com/2013/02/18/two-decades-and-counting/
      It’s simple really. It’s nuclear power or climate change.

    • John

      That’s my view, certainly. Obviously, no one can say with certainty.

      So, my preference is for a pragmatic approach which leaves no avenue unexplored. The phrase “hope for the best, but prepare for the worst” sums up what I’d do.

      I would certainly research anything promising in the nuclear field. I would hope for success from this quarter – but I wouldn’t bet everything on it.

      At the same time, then, I’d be preparing on the assumption that nuclear doesn’t ride to the rescue in the time we have. We would therefore evaluate options including conservation, greater efficiency and reduced materialism.

      One point to bear in mind is lack of resilience. On my estimates for a group of 19 economies, GDP of $56.4tn last year was massively inflated by the spending of borrowed money – absent this debt-fuelled consumption, underlying GDP for these 19 countries comes out as just $45.5tn on my calculations.

      Therefore, any kind of mega “debt event” could thus crash the economy, not least because our economy is designed to run at high utilisation rates – numerous businesses, including utilities, plus government systems, would fail at load rates below 90%.

      So, for things to go horribly wrong wouldn’t take default. It wouldn’t even need us to stop spending borrowed money altogether. If we just reduced the spending of borrowed money by half, GDP would drop by about 10% – triggering non-viability across a wide range of private and government activities.

      What’s really worrying is that, even if the nuclear guys are right, the over-extension of the financial system, and its dependency on ever greater borrowing, could, of itself, crash the economy.

    • Tim

      I agree there is the possibility of some kind of debt jubilee as Steve Keen has postulated. But I think we’re up against the thermodynamic limits already in fossil fuels. So no matter how hard we try we can’t implement anything quickly enough to break the velocity of collapse. I’m also very skeptical of these claims of no environmental impact by increasing energy supply and consumption by the factors being implied. It is simply irrational to believe technology will solve the problems created by technology. The self discipline required has never been demonstrated historically. Quite the opposite if we’re honest with ourselves. I’ve always admired your Perfect Storm essay but wondered how you could present it in a capitalist environment? Without perpetual growth the gigs up. Who wants to hear that as they plan their retirement and college fund? It takes courage to tell the truth. Much more then the intellectual set is prepared to display.

  12. Hi Tim

    Many thanks for yet another perceptive article.

    To me it’s becoming ever more apparent that the economic models we use ( and which I was taught at university) are probably redundant and this is now even admitted by TPTB.

    What is interesting to me about your system is that it implicitly indicates a more “fundamentalist” approach to the economy rather than one that, as now, is driven by what are in effect short term indicators of dubious value. By this I mean that what seems to matter is the direction of a secular trend rather than the “noise” of the cycle.

    Looking at things this way what it does seem to require is a more strategic management of our economy which in turn reflects back on political structures which are only concerned with the short term electoral cycle.

    Also, and if this is true, does it qualify the position of the market in all of this and elevate the role of the state? The role of the state is always underplayed by free market adherents but it seems to me that the current structures we have are unable or unwilling to meet the challenges posed in a SEEDS system. I am of the opinion that such things as robotics may well drive us down the road to what is in effect socialism because of the implications for unemployment; it is either that or the dystopia of a type of brutal feudalism. If this is true then the challenges posed by you are even more inclined to send us in this direction.

    • Thanks Bob.

      I’m biased, maybe, but I do think the SEE approach gives us a more fundamental view. Money-based measures are limited because our monetary system is a human construct, whereas energy, and thermodynamics, are fundamental, cannot be tinkered with for short-term reasons, and relate the economy to the planet. Also, I think SEE is providing answers which conventional economics seems to keep finding ever more elusive.

      The neoliberals who have claimed the free-market label are anti-state. But Adam Smith recognised an important regulatory role – which only the state can perform – ensuring that competitive markets are defended from monopoly, manipulation and outright dishonesty. Personally, I’m a Smith-style believer in free markets that are regulated to prevent abuse – a free market has to have rules if it is not to degenerate into “law of the jungle”.

      Moreover, a pragmatic view is that there are some things done better by the state – defence, police and law are examples. In other words, the “mixed economy” has a lot to commend it. I’m wary of extremes, from “the state does nothing” to “the state does everything”.

      Robotics raise a series of questions. Without workers, what happens to demand? A story is told about a manager showing the first car-making robot to a union official – “try to get that to join your union!”, he chortles. “Try to persuade it to buy a car”, replies the union man….

  13. Tim, It’s difficult for me to read your blog as the main body of the text is gray and not dark enough for easy legibility. Can you adjust the typeface to fix that please? It’s quite a strain on the eyes.
    Thanks
    John

    • John

      Concerned at what you say, but haven’t noticed this myself, and doubt there’s anything I can do about it. Can you adjust your settings?

    • The headlines are very black, Tim. I think the body of the text is about 9 or 10 point type. You should be able to increase it to 12 as default. My 76 year old eyes don’t compare with a youth’s eyesight. Too many texts are predicated on perfect eyesight yet everyone over 40 gets impaired sight. I’ve had cataracts removed so my sight is quite OK under normal situations. I don’t think I can make it blacker from here. Anyway don’t worry about it unduly. John

  14. ECoE is an economic rent, levied by resource limitations but not accounted for when we measure the economy. It can be thought of as a restriction of choice, forcing us to spend more on energy and, therefore, less on other things.

    Really. The U.S. equivalent ECoE (energy expenditures as a share of GDP) has declined from 13.3% in 1981 to ~6% in 2016, with an interim high of 9.6% in 2008. The debt-to-GDP ratio hasn’t increased due to higher energy costs over the last 40+ years.

    http://www.eia.gov/totalenergy/data/monthly/pdf/sec1_17.pdf

    • This involves comparing end-user product prices with GDP. EROEI (and ECoE) tell a different story. GDP is by no means a reliable number, as John Williams (and many others) have surely demonstrated. In recent years, too, GDP has been inflated by the spending of borrowed money. Also, neither 1981 (oil crisis) or 2016 (cyclical price crash) are normal years.

      We might not agree on this, but I hope that the SEEDS interpretation of the economy – stagnation, “growth” manufactured by borrowing, escalating debt, destruction of saver and pension fund value, and the sheer abnormality of ZIRP – might convince you that we’re on to something? The conventional economics profession is enduring much heart-searching (and criticism) because events have not panned out as they had forecast – surplus energy-based forecasts, on the other hand, are proving a lot closer to what we see happening.

      The issues you raise are things I should address here – so I shall.

  15. Shadowstats Williams is a quack.

    Also, neither 1981 (oil crisis) or 2016 (cyclical price crash) are normal years.

    Correct. Now average 50 years of data. You will notice that in 1970, prior to the 1973-1985 OPEC muscle, U.S. energy expenditures were 7.7% of GDP.

    Does the U.K. have equivalent accessible data for energy expenditures and intensity relative to national income? If so, a link would be nice.

  16. It sure takes a lot of borrowing and spending by Canadian households, businesses, and governments (all levels) to keep the Canadian economy growing.

    Canadian annual gdp at the present time is approximately $2 trillion.

    http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/indi02a-eng.htm

    In the 1 year period from the end of September, 2015 to the end of September, 2016 the Canadian economy grew by approximately 1.5%. (ie: the size of the economy grew by approximately $30 billion.)

    http://business.financialpost.com/news/economy/canadas-economy-grows-3-5-per-cent-in-third-quarter-beating-expectations

    In this same 1 year time frame the total debt outstanding in Canada grew by $355 billion. For each $1.00 the economy grew in this 1 year period the total debt outstanding increased by $11.83.

    Looking at just the total debt outstanding of domestic non-financial sectors in Canada. In the 1 year period from the end of September, 2015 to the end of September, 2016 the total debt outstanding of domestic non-financial sectors increased by $250 billion. For each $1.00 the economy grew in this 1 year period the total debt outstanding of domestic non-financial sectors increased by $8.33.

    http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3780122

    (Nov. 6, 2008)
    The Queen spoke for the nation yesterday when she asked how the credit crunch could have taken so many economics experts by surprise.

    She described the financial crisis as ‘awful’ and inquired that, since the meltdown was so massive, ‘Why did nobody notice it?’

    http://www.dailymail.co.uk/money/news/article-1646332/The-Queen-Why-didnt-we-see-awful-crunch-coming.html

    • You are right, of course. My calculations extend over a longer period, and here are my ten-year numbers for you (all in Canadian dollars):

      GDP:

      2005: 1,417bn = 1,687bn at 2015 values
      2015: 1,986bn
      Real growth: 1,986bn – 1,687bn = 299bn

      Debt:

      2005: 2,921bn = 3,477bn at 2015 values
      2015: 5,510bn
      Real borrowing: 5,510bn – 3,477bn = 2,033bn

      Ratio:

      2,033 / 299 = 6.80 per unit of growth.

      Sources: Debt: BIS
      GDP and deflator: WEO

      There are all sorts of reasons why economists don’t notice – just one is that the neoliberal ascendancy doesn’t seem to think that debt matters all that much……

    • Thank you Tim – even I understand your calculations! Can you make the global numbers for growth to debt ratio, too? It however raises so many questions that it could easily fill another post, I think.

    • Thank you Niels

      The new version (SEEDS 17) will be complete soon, supplying the global numbers

      You are right about the questions, of which there are many. Here is the one that interests me the most:

      what would growth have been if we had not spent huge amounts of borrowed money?

      I think I’ve found a way of answering that – and the question of “ex-borrowing growth” may indeed be worth an article to itself.

    • As someone on the ground……..
      I can tell you that the 6.8 to 1 ratio does not surprise me a bit.
      The Canadian Economy is a Zombie economy and one can say this with a 90% confidence……it all started around 2005.
      The country has a Housing bubble and by extension a Banking bubble.
      One of the reason the Government is constantly rising the Immigration quote ……is that many leave because there is no jobs or business to be had.
      Even many locally born Canadians leave to seek opportunities outside of Canada.
      But again…..you will not read this in the press.
      One can not think of a more mismanaged economy within G7 than Canada.
      To sum it up: A failing colonial outpost with a failing housing bubble and soon……failing colonial banks.

      Yours,
      Peter.

    • Peter

      I’m a little surprised at your summary of Canada’s position – though you are in a much better position to know than I am.

      SEEDS shows Canadian GDP overstated – for 2015, the reported number of C$1.99tn compares with underlying (ex-borrowing) GDP of C$1.68tn. Looking ahead, underlying GDP growth is 0.2%. Reported GDP is growing more quickly, of course – 1.8-2.0% seems the consensus view – but this requires rising debt.

      Canada’s energy outlook is pretty solid, essentially validating the low-but-positive underlying growth trajectory.

      Housing and banking bubbles are pretty commonplace throughout the Western economies. It is intriguing that people leave Canada to seek opportunities elsewhere, as I often hear Canada mentioned as a place to move to. If it’s any comfort – it probably isn’t – the UK outlook is very much worse than Canada’s.

      One thing I’d like to know is – to what extent has Canada followed the neoliberal idiocies of the US and Britain?

    • Hi Tim and All:
      Tim- Yes, Canada has followed the liberal economic policies of the UK and US.
      To give you a better impression of what is going on here on the ground just reflect on this:
      2 of the very close families in my circle have left the country in the last 12 months.
      2 other close friends of mine who have their own businesses (1 in healthcare the other in energy) are basically working of existing assets and not to stay home, in other words no capital gains to be had.
      In broader terms:
      a.) The RE bubble is way more pronounced than in any other G7 country.
      b.) The big 5 colonial banks are trying to expand outside of Canada as fast as they can……cause they know what they have done in Canada and where it is going.
      c.) Not much Industrial companies left…….the one still here are strongly connected to the self defeating and undercapitalised extraction industries……..so yes they are still operational but no gains to be had………..
      d.) One can observe in the last 24 months how all businesses are trying to pass trough price increases to compensate for the lower physical volumes, but the increases do not stick…….they have to discount heavily shortly there after.
      A simple example:
      Say 4.4 or a 5 litre jug of a brand name synthetic motor oil lists for $40-55 CAD. But everyone has to run constant sales and move it at $25-34 CAD range. Which if one cares to study is the price of the same oil in the US in USD………..
      So, not only are the rice increases not sticking, but they actually have to sell for less than in the US……which is probably the cheapest motor oil market in the world.
      And this repeats itself in everything……….say a 2016 Buick Lacrosse lists for $36,500 CAD, but a 2017 and a brand new design at that….list for $35,500…….and this is before you negotiate any discounts………by the time the deal is done……you will pay less than the US list price in CAD……..which means you bought the car foe way less than in the US……….
      These two……tell you all you need to know about the state of the colonial Candian Economy, its consumers…..banks…….etc.

      Cheers,
      Peter.

  17. Tim

    “what would growth have been if we had not spent huge amounts of borrowed money?

    I think I’ve found a way of answering that – and the question of “ex-borrowing growth” may indeed be worth an article to itself.”

    Definitely – what illusory growth have our political masters bought us when the only thing we should be buying is as much time as possible for the boffins to try and work something out.

    Renewables as they presently stand and the fag ends of fossil fuel are going to provide very thin
    gruel.

    Bring it on Tim-lets see the the real position

    Mick

    • I can give you a preview of some numbers. All are in local currencies, billions, and refer to 2015. The format is: reported GDP/underlying GDP:

      US: 17,947 / 14,239

      Canada: 1,986 / 1,679

      France: 2,182 / 1,877

      Germany: 3,026 / 2,816

      UK: 1,864 / 1,476

      Hope this helps!

      (P.S., these are borrowing-adjusted – they are not further adjusted for ECoE)

    • Hi Tim

      I went away to sleep on those figures-unfortunately they are still here in the morning. Grim and I worry what happens when and if they are accepted in the mainstream. Nice to see us and our transatlantic cousins leading the pack although China’s figures would be interesting. Use debt to create the illusion of GDP growth to justify more debt to increase and so on to infinity and beyond. I note your P.S.

      I’m sure the Government know all of this and have a very very cunning plan to get us out of this mess with minimum discomfort to us boomers. I feel better already.

      Back to the more important subject of surplus energy and on the basis that misery loves company I came upon this blog (apologies if the link was from you’re blog- i have forgotten where it was from originally) run by a retired geologist who worked for Shell. https://jillesonenergy.wordpress.com/over/. Very good article on the Groningen gas field which has supplied Holland with positively heroic amounts of gas and tax revenues for the last 40 years. This is now declining but has left a nasty legacy of actual and potential future earthquakes of quite a large magnitude. Very good article-highly recommended if you have not come across it before.

      As always thanks for all the work you put into this blog

      Mick

    • China GDP, 2015:

      Official: 68.4 tn RMB
      Borrowing adjusted: 47.45

      The interesting thing here is growth. On the official numbers, GDP increased by 148% between 2005 and 2015. My number for borrowing-adjusted is 92%. Going forward, the consensus growth expectation seems to be about 6.5% annually. Mine is 3.4%.

  18. It’s great to finally find a blog in the UK focussed on these issues. (and thanks for the Perfect Storm BTW).
    I can maybe add a couple of insights. Historically, our progress can be measured by improvements we make in our use of energy, and that seems to be a figure of one percent a year over the last, say 100 years, for practical purposes. We are now in a footrace against depletion effects, and these might be modelled as an exponential decline in efficiency – most obviously in oil extraction, but also in other fossil fuels, and other extractive industries. My gut feeling is that we have until 2025 to come up with a good answer, but given the likely lead time for construction, we may already have lost that race.
    My second point may be more difficult to convey. You mentioned the lack of interest from the financial sector. The financial sector has a conflict of “interest” here. They wish to promote life on a “permanently high plateau”, because that will encourage investors to believe their risks are low and thus accept lower rates of return This is just one facet or petal from a banquet of consequences currently in preparation. At some point corruption and criminality becomes endemic, something “Moral Hazard” doesn’t quite cover.

    • Thank you, Richard, and welcome to surplus energy economics. Perfect Storm, by the way, became the book Life After Growth.

      Both of your points are good ones. It is sometimes hard to convey how critical energy is, and how the cost of energy is rising in ways unrelated to the price of oil (etc) at any particular moment. Way back, I did a study, published by OPEC, showing the long cyclicality of supply, demand and prices, and this is overlaid by short-term cyclicalities. What really matters is the underlying trend, best observed in EROEI and my measure, ECoE.

      Finance, your second point, is a tricky issue, even to someone like me who has worked in it. The economy has become increasingly “financialised”, with banks etc controlling far more of total economic activity than in the past. The financial economy is geared to perpetual expansion – unfortunately, our planet is not. I too am very concerned about corruption and criminality, mainly because of the underlying deterioration of morality that they reflect. More broadly, we have become subjected to the deceit of using debt to create the illusion of growth.

    • Thanks, Dr Tim, for the reply. I’ve written privately on some features of electricity supply and consumption in the UK. This source of energy has the feature of almost zero short term storage, so from particular points of view the flow figures are impossible to manipulate. The most recent three or four years have shown some anomalies. I have no explanation for thus far for these.
      Regarding finance, and politics and corruption, once you believe in getting something for nothing, especially in a party political manifesto, you place yourself on a slippery slope. Unfortunately, that is exactly where our present finances place us today.

  19. Hi to All:
    I have just discovered your blog Tim!!!
    Totally shocked as these have been my thoughts since 2001.
    Also, enjoy your readers comments and your replies……the whole blog space seems to be very productive.
    I do hope it can stay this way going forward.
    Reminder to all the Socialist Economic System of East Europe collapsed after Debt to GDP became roughly 4:1.
    Anyone who gets simple arithmetic would understand that anything above 3:1 is counter productive and as Tim has said a simple PONZI.
    In my view our reality/predicament is pretty straight forward:
    Our current Energy Capacity can not meet the needs of 7 Billion humans and is becoming too expensive for the close to 1.6 billion who operate in the “developed”/Debt/Ponzi economy.

    Hence only a technology breakthrough which starts bringing the marginal cost of electricity closer to 0 might get us out of our current trajectory.
    So instead of calling on divine powers as Gail did in her latest blog…….the powers that be……need to move fast……unless the plan is……to make 5 billion of us vanish…………..hope everyone is catching my drift here…………..

    Peter.

    • Thank you, Peter, and welcome. I am glad that you find this site worthwhile. The comments by readers are terrific – reasoned, original and respecting the opinions of others even if disagreeing. Given the global predicament (which you summarise very well), we need intelligent, constructive, reasoned and courteous comment more than ever.

      I didn’t really follow Gail’s appeal to the Deity. Even if you believe in a divine entity (which, as it happens, I do) it is clear that we made this mess, and we alone can sort it out.

    • trouble is Peter, we arent short of electricity … we are short of “cheap” liquid fuel

    • Dear Unravel………….
      The reality is that the majority of the energy we use is used as electricity (regardless of the feedstock- coal, hydro, uranium, NG, Oil……etc).
      As such as a first step we need to solve the electricity issue…….to a point where the marginal cost of production trends towards 0.
      Once this becomes the case the way you can develop the economy and extraction of other resources changes dramatically.
      This is the only viable way for about 5.5 billion of us to remain on the spinning ball………otherwise we are looking at more chaos and destruction outside G7+ Russia.
      It is my impression that Dr. Tim has pointed out in his earlier post of the relative importance of Energy (understand electricity) as a share of GDP……and how while being around 4%………most of the rest will not be there if not for those 4%.
      Hence the largest part of the 4% pie needs to start trending towards the MC of 0 if we are to resolve the other 96% in a constructive and non-destructive way.
      Looking for everyone’s thoughts on this……….
      As it underpins all else.

      Cheers,

  20. Hello Dr Tim. May I disagree with you when you say ‘Renewables can supply energy more cost-effectively than fossil fuel sources discovered and brought on stream today’?

    Take a look at the UK grid on this coldish early winter evening.

    http://www.gridwatch.templar.co.uk/

    UK demand is 50GW. The 10GW of installed solar is generating nothing. The 14 GW of wind capacity is generating 0.74GW. We, the country, are paying for the investment of 24GW of electrical generating capacity that produces a trivial amount of electricity exactly when we need it most.

    Nuclear is down to 6.8GW from a steady 7.5 to 8GW over the last month or so (perhaps refuelling). Our coal and gas stations are generating flat out. The inter-connector to France is operating at 50% capacity and the supply from Holland is down due to the anti-cyclone over Europe and the lack of wind generation there.

    And the plan is to eliminate the remaining 10GW of coal powered generating capacity within the next few years. Madness.

    • I would like to add: Oil is taxed at well and tank, renewables only live on artificial respiration, i.e. subventions.

    • Here we are 3 days later. UK demand this evening has touched 51GW. The contribution from wind has increased to all of 0.79GW. Of course the output from the installed 11.43GW of solar is still zero.

      Interestingly, we appear to be sending 0.62GW to France, whereas their grid status site claims that they are sending 0.60GW to the UK.

    • if you check solar at evening is obliouvsly that is 0.

      but the point is not that renevable is better than fossil fuel. the point is that “Renewables can supply energy more cost-effectively than fossil fuel sources discovered and brought on stream TODAY.” today=https://www.woodmac.com/analysis/preFID-oil-projects

      “But my interpretation of the thermodynamic balance is that renewables are not going to take us back to an age of vast, low-cost, high-surplus energy from giant fields.” ie not game changer, game estender at best.

      “And the plan is to eliminate the remaining 10GW of coal powered generating capacity within the next few years. Madness.”

      coal (and natural gas) have the same trouble of oil: close to peak in the world and well after the peak in UK “Until the late 1960s, coal was the main source of energy produced in the UK, peaking at 228 million tonnes in 1952 (post war peak, historical peak is 1913 with 292 million). In 2015 UK coal production fell to an all-time low of 9 million tonnes. ”

      .https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/559572/Coal_in_2015.pdf

    • Hi Paolo,
      I wish coal were close to peaking worldwide, but it just ain’t so! According to Bill McKibben’s “Do the math” there is 5 times more coal and oil and gas than we can burn. Given underground coal gasification schemes, I don’t think we’re close to peak coal at all.

      But 10GW is easy. 10 AP1000’s. Done.

    • Another day, another update. Demand has been over 50GW this evening and the contribution from wind is 1.8GW. And solar PV is zero.

      Having checked on the installed wind capacity today I see, as of 2016Q3, it is over 15GW. And the best figure I have for solar PV is 11.43GW.
      https://www.gov.uk/government/statistics/energy-trends-section-6-renewables

      So 26.5GW of installed wind and solar capacity is producing 1.8GW. It must be clear to everyone that we cannot rely on wind and solar to meet our winter peak demand for electricity. That means the country has to fund both renewable and conventional electricity generation because renewables are so intermittent and unreliable.

      To my mind this is economically illiterate.

    • Whilst I don’t wish to undermine your point I’d like to point out that we use considerably more power than we need. It is ludicrously cheap.

    • The bottom line Nigel? Nukes have the highest EROEI, most reliable record, are the safest (yes, safest) power source, and France deployed them to run three-quarters of their grid in just 15 years. At the same time we can switch all city driving to EV’s (now that even buses and council garbage trucks can run on EV). Heavier long-haul vehicles have 3 options:-
      1. Recyclable powdered boron (see Dr James Hansen below).
      https://eclipsenow.wordpress.com/recharge/
      2. Synthetic diesel from seawater, with the nuclear power to run the factory costed into the price.
      3. Longer term may even see governments building fast rail over the most regular trucking routes in trucks-to-trains programs.

      We can do this. We just need a public education program and some strong action.

    • It’s the weekend and demand is still 47.5GW. The 15GW of installed wind farms is providing about about 1.2GW. Over the last week wind generation has varied between 0.7GW and 1.8GW at the time of peak demand (early evening).

      Let’s look at the economics of replacing 10GW of coal fired power stations (which, let us not forget, have already been built and paid for) with wind energy. Based on the performance of the wind farms this last week or so we would have to install about 120GW of wind farms to get something like 10GW of output, and even that is not guaranteed.

      The CAPEX for offshore large scale wind farms is quoted as around £3 million per MW. So 120GW of offshore wind farms would cost the UK £360 billion. And the OPEX for the wind farms would amount to about £20 billion per year.

      If we assume there are 30 million or so homes and other establishments in the UK then the average charge for just the OPEX would be £600 per year.

      Peter Lilley calculates that cost of decarbonising electricity to meet the Climate Change Act will be £584 per year per household by the year 2020. The CCA policies will place a cumulative £10,800 burden on each household, between
      2014 and 2030. Country-wide, this cost amounts to an extraordinary £319 billion,
      http://bit.ly/2gWIpq5
      I do believe that Miliband and his 2008 Climate Change Act will bankrupt this country.

    • Hi old scouser,
      I *completely* agree with your analysis of the sad performance of wind, and the ridiculous overbuild the low capacity factor requires.10GW in next generation breeder reactors may come in at $2bn each, or even cheaper as they come off the production line. I’ve seen estimates at $1bn / GW! But even today’s more expensive AP1000’s could come in at $5bn / GW, or $50bn for your 10GW. And they work in the heart of a cold still winter’s night.

    • While we’re waiting for Dr Tim to put some flesh on the bones of his claim that renewables are cost effective, let’s look at electrical energy consumption instead of peak demand. Perhaps renewables will look better in this light?

      http://www.gridwatch.templar.co.uk/
      An anticyclone has persisted over the UK for more than a week. But let’s focus on one week as a time interval. Average demand has been about 40GW, so over 7 days that equates to 7,000 GWhr. Wind output is up and down but let’s say an average of 1.5GW, or for 7 days 252 GWhr. Likewise solar PV is variable, but let’s say 2GW output for 4 hrs a day; so that is 56 GWhr for the week. Giving a total wind and solar energy output of 308 GWhr for the week, Or about 4.4% of total consumption.

      If we were to replace just 10GW of coal fired stations that produced 1,680 GWhr over a week then we would need to install more than 5 times as much wind and solar as is currently installed (26.5GW), i.e. 144GW. Current wind capacity is 15GW. So to install 75GW of new offshore wind farms at a CAPEX of £3 million per MW would cost £225 billion. Plus 55MW of solar PV.

      Some people say storage is the answer.

      I have read that there is a pumped storage project planned for Glyn Rhonwy. This is a 500 MWhr facility with a forecast CAPEX of £120 million. To store 1,680 GWhr of energy we would need 3,360 similar projects, with a total CAPEX of £400 billion. Whether or not there are 3,360 suitable sites available is moot. The well known Dinorwig power station has a capacity of 8,640 MWhr. It was constructed between 1974 and 1984 for £425 million. That suggest CAPEX(2016) would be between £1 and £3 billion. So 200 Dinorwigs would cost £200 – 600 billion.

    • Let me just explain about the cost issue. Oil fields developed about 30 years ago had EROEIs of around 30. Renewables cannot match that. But fields developed today have EROEIs barely into double figures, which the best renewables probably can match, or soon will.

      There are a lot of other issues – for instance, renewables generate electricity which is quite different from the compact, high-density energy source provided by gasoline or diesel (hence my point that you can’t run a 747, or extract 0.2% ore from rock, using renewables).

    • High EROEI nuclear power could be built out quickly, and governments could legislate the phase out of oil based transport in favour of the alternatives. What alternatives? Energy carriers borrowing from the high EROEI nuclear, like Dr James Hansen’s friend’s idea of recyclable boron powder or even synthetic diesel from the oceans. From the summary paragraph of my “Recharge” page.

      Summary: Electric batteries are now so good they can replace oil for cars and light trucks, including local government service vehicles like buses and garbage trucks. Today’s grid can already charge most of this fleet of cars and light trucks if the power plants are run at full capacity. Robot taxi-cabs may reduce individual car ownership with 1 one robot cab displacing 10 vehicles, so that we do not even need to replace or charge the entire car fleet in the first place. Diesel in heavy trucking can be replaced by a number of solutions including fast trains, synthetic diesel, and even boron powder. The future could be leaner, cleaner, and more convenient. There are even options for reducing oil dependence in a very sudden oil crisis!
      https://eclipsenow.wordpress.com/recharge/

    • Hello Dr Tim. Do you think that cost is a measure of, or a surrogate for, EROEI?

      Your recent essay number 80 makes the point that if the cost of energy and other essentials increase as a proportion of GDP then we are likely to experience a decline in our standard of living. The report by Peter Lilley shows that even the current programme of renewables will cost each household £875 per year in subsidies by the year 2030. The term ‘fuel poverty’ has entered the lexicon and doubtless we shall hear it more often in the future.

    • Oldscouser:

      To a certain extent, your question anticipates #86.

      ECoE, as a calculation, is the inverse of EROEI. ECoE is used here as an “economic rent”.

      To explain:- Money spent developing an energy source (by an oil company, for example) is money received by someone else (such as a contractor), so it doesn’t leave the system. But, if the cost of energy rises from, say, 5% of economic output to 10%, that 5% increment is money that cannot be spent on something else. The sum total is the same – say $100bn – but the allocation has changed. Before, we spent $5bn on energy and $95bn on other things. Now, we must spend $10bn on energy, and only $90bn on other things. The fall from $95bn to $90bn makes us poorer. This is an “economic rent” – a compulsion on how we spend our money.

      The household budget works similarly. If your income is $10,000, and essentials take 20% ($2,000), you are left with $8,000 to spend as you wish. But if essentials rise to 40% ($4,000), the money left for you to spend as you like falls from $8,000 to $6,000 – so you are poorer, in terms of your ability to buy cinema tickets, a car, a TV, a holiday, etc..

      This is happening now. In Britain, for example, average wages rose by 25% from 2005 to 2015. Inflation was 27%, so real wages were essentially flat. But the cost of power and light rose by 90% over those years, water charges went up by 47%, travel costs rose by 70% and food went up by 39%. So the money left after essentials declined – making the person poorer.

      Globally, we’ve been countering this by spending borrowed money. World GDP grew by 1.8% annually between 2000 and 2015. Take out the spending of borrowed money, however, and “real” (non-borrowed) growth was only 0.6%. More recently it’s down to 0.3% – so allowing for population growth, total GDP per person is shrinking – and then the cost of essentials applies an extra squeeze….

    • I hear what you are saying Nigel, and I’m a fan of passive solar architecture, New Urbanism, and all that. But it takes time to replace all our housing infrastructure.

    • Hello Nigel.
      Over the last decade UK peak electrical demand has already been reduced by about 10GW, from 60+GW to 50+GW. This may have something to do with the de-industrialisation of the country – the closure of UK’s energy intensive industries. Cement manufacturing, aluminium smelters, steel smelters, paper and chemical industry, etc. Of course we still use all those sorts of products, it’s just that they are manufactured abroad now and are imported. So we as a country have not significantly reduced the embodied energy of our lifestyle, but we are now running an unsustainable deficit in our balance of trade, which Dr Tim et al have written about.

  21. Dear Tim and All,
    Thought you might be interested in this article:
    https://www.theautomaticearth.com/2017/01/what-is-this-crisis-of-modernity/

    Interesting to see some of the key points overlapping with Dr. Tim’s views.
    Have to say that I can also see where Saudi is a done dollar.
    The Arabian peninsular will be re-done in the next 24 months………….
    With the US taking the most and the EU 2nd most.
    There is no run around it……….Trump will finish what H.W could not………
    The US will be taking over Gulf oil supplies proper.

    The current Chinese rhetoric out of the White House is no accident………and so wasn’t the BBC leak of the Queen’s remark on the Xi’s delegation to London…………..

    The Credit bubble of the Euro, Yen and Yuan has been milked……….there is nothing more to steal…….and so the gnomes of THE CITY and Basel are moving to their next step………physical acquisition of the left over energy assets…….otherwise known as WAR…………….

    Cheers to all,
    Peter.

    • I won’t be including these – I think I’ve explained before why the value of assets is quite different to debt.

      Just imagine, say, the UK slumps. Incomes drop. Security of employment weakens. Maybe interest rates rise as well. Supply of mortgages craters. Seeing this happening, house owners decide to sell. Demand slumps, supply increases. House prices crash. Asset value of housing stock collapses. So does asset value of UK, as houses are a big majority of total asset value.

      Debt remains the same.

    • Assets = stock
      Debt = flow

      Assets = stock
      Energy = flow

      Currently we screw up the stock to flow ratio by adding debt to compensate for the other stock to flow ratio: assets vs energy. In particular financial assets.

      But first we tried to manage the stock to stock ratio; real assets vs financial assets. That worked for several decades, didn’t it?

      Now it’s time to manage the declining real flow (energy) vs fake flow (debt, financial assets) to real assets ratio.

      Exponentially.

      BTW, Eclipse Now, why didn’t they build the 5000 nuke plants already? Too expensive maybe?

      Have a nice day!

    • Hi Houtskool,
      why didn’t they build it? 4 words.
      The politics of prejudice.
      The public are ignorant and don’t like nukes, so politicians get influenced by the dozens of ‘studies’ (written by fanbois) that say renewables can and will and must provide 100% baseload power.

      Expensive nukes? “In contrast to the rapid cost escalation that characterized nuclear construction in the United States, we find evidence of much milder cost escalation in many countries, including absolute cost declines in some countries and specific eras. Our new findings suggest that there is no inherent cost escalation trend associated with nuclear technology.”
      http://goo.gl/YGnZnu

      Have a nice day!

    • 2008: world bank forecast for advanced economy +2.2. it was +0.4. 2009: world bank forecast +0.1. it was -3.4%. Since the World Bank – and indeed most of the other agencies – do not reveal the details of their forecasting models or the assumptions they make, it is hard to critique them other than in terms of their results.

    • As some of its practioners now concede, conventional interpretations of economics are proving faulty – this is reflected, too, in forecasts.

    • Eclipse now, to build and maintain the grid, including your cheap nukes, to provide commodities and transport, fossils are needed.

      We’ve seen Tscherno and Fuku.

      Cheap energy leads to greed and expansion. We cannot afford anymore of that. Your wish to overexpand will not be fullfilled.

    • Hi Houtskool,
      of course fossil fuels are required to build out the non-fossil fuel era. The sooner we build that non-fossil fuel era, the better.

      Chernobyl: no one in the west has EVER build a Chernobyl reactor, and going on about it is like trying to ban modern aviation because of the Hindenburg.

      Fukushima: not that bad. I’d live there. People live with far higher radiation in India.
      https://eclipsenow.wordpress.com/radiation/

      “Cheap energy leads to greed and expansion. We cannot afford anymore of that. Your wish to overexpand will not be fullfilled.”
      That’s a value statement. It’s interesting that rich westerners with an internet connection are the ones quickest to condemn the poorer developing nations for wanting a taste of our lifestyle. Greed and expansion? The reality is that the human population will only stabilise when we supply everyone with everything they need. We have the technology to supply everyone on earth with a comfortable first-world life, minus the crap (like traffic jams) by designing cities smarter.
      https://eclipsenow.wordpress.com/reduce/

    • Me, for one.

      Seriously, though, I think we’ve got two debates going on. Can nuclear fix our ECoE/EROEI problem? And are we faking growth using debt?

      I have my views, but very much welcome differing points of view.

      If you take the position (as I do) that we’re faking growth using debt, it also puts energy as % of GDP into a new context, by questioning the validity of a GDP figure inflated artificially using debt.

      In short, are we fooling ourselves?

    • Hi Tim

      I agree with your point about asset values vs debt but I’m not so sure that “the debt remains the same”.

      An awful lot of the current debt can’t be repaid and I wonder if we’re not headed for a crisis during which we’ll have a debt jubilee, in which case the debt won’t remain the same. I’ve a sneaking suspicion that that’s where the situation is being managed to and that a crisis will then require us all to sacrifice some wealth….

      Of course it’s likely to be pitchforks and barricades at that point but the lesser of two evils,,,?

    • We are faking growth using debt. Debt was invented to fake growth in the first place….

      A transition to another energy world takes 20 to 30 years, from what i’ve read. And it takes a lot of political efforts and fossil fuels to accomplish. Over 15% of renewables in our current grid system is not sustainable, over 20% causes blackouts all over the place, on a daily bases.

      Addicted to growth as we are, forced upon us by a system you and i created, together with a financial system that needs to grow exponentially, is a state of cannibalism that cannot be seen by the indoctrinated.

      Thanks for all that you do, for providing a great blog, leaving comments, teaching and learning.

      Regards.

  22. Boil it back to basics, what you said Tim, about agriculture, still holds true today except more so. The oil age allows 1 to feed 1000’s no other power source can replace it. The future of farming will be much more self sufficient i.e. the productivity will reduce hence, my prediction for a Malthusian future.

    • My fun version of Windows 10 has a scrolling error! ergo – my restriction of a paragraph at a time. Anyway! It seems to me that modern measures of wealth are no longer attached to the reality of tangible assets. We can attach a modern value to these but it would be arbitrary, more of a social construct. That’s a problem, who’s to say a Ferrari is worth more than an acre of land? Or that someone is a Trillionaire if that much exceeds all available tangible assets?

    • “The oil age allows 1 to feed 1000’s no other power source can replace it. ”
      High EROEI nukes have enough energy left over to ‘recharge’ all the energy carriers we could need to replace oil, like synthetic diesel from seawater or even metallic boron powder. Even Dr James Hansen thinks boron powder could be a contender. Seriously, a metal as an energy carrier. Who would have thought it? But it can be recycled and ‘recharged’.
      https://eclipsenow.wordpress.com/recharge/

    • Diesel usage per acre? Not really my area, or the subject in question. Yes, agriculture and farms use a lot of diesel. But my concern is meeting average world demand for clean liquid fuels and other forms of energy carrier in peak oil, climate threatened world. Analysing the specifics of oil usage per acre for various farming techniques is *way* too specific for my concerns.
      https://bravenewclimate.com/2013/01/16/zero-emission-synfuel-from-seawater/

    • The ratio of energy in to energy out in farming leaves very small surplus margins, especially when we allow for distribution, and “sunk energy” – by which I mean the energy used to create the roads, machinery, infrastructure etc, and constructing the plant used to make those things. Our ability to feed a huge population depends on cheap (comparatively) energy. Moreover, monoculture has made the challenge tougher, by stripping the land of nutrients.

      Where farming is concerned, we have no choice – everyone needs food. But, and with very rare exceptions, biofuels are nonsense on EROEI/ECoE grounds – as I put it in LAG, we could find ourselves “driving around looking for a meal”.

  23. Just imagine, say, the UK slumps…, etc.

    You already have a model. It is the US. The value of household real estate cratered 30% between 2006 and 2010. I am comforted that the fixed asset to GDP ratio has remained tightly bound between 3 and 3.5 for 70 years.

    https://fred.stlouisfed.org/graph/fredgraph.png?g=cuIC

    Ya, the perfect storm is always tomorrow, until tomorrow becomes today. in which case the perfect storm is always tomorrow.

  24. “Our entire history can be seen in this way. As hunter-gatherers, all the energy that people obtained from food was consumed obtaining that food, so there was no surplus, no economy and no society.
    Agriculture was the “first great breakthrough” because it created the first energy surplus. Put simply, the greater efficiency of farming compared with hunter-gathering, plus the use of animal labour, enabled twenty people to be fed by the labour of nineteen, freeing the twentieth to do other things. This first energy surplus was small, and most people continued to undertake subsistence activities. But there was now an economy of sorts, and a society developed in parallel with it. People could now, for the first time, invest, sacrificing current consumption to create capital assets (such as barns, bridges, agricultural implements and rudimentary workshops) which would improve their lot in the future.”

    • Obviously. Your point in relationship to our energy discussion? Society has obviously moved on, now with less than 5% of people involved in agriculture, freeing up the other 19 in 20 people to do other things. And so it will continue, with nuclear power + synthetic diesel or boron.

    • I’m not anti-nuclear – in fact, I’ve stood on top of a nuclear reactor, which I doubt if many have done – but this comes down to a judgment call on whether nukes can deliver the energy that we need, safely, affordably and in time. My view, which no amount of scientific data will change, is that they can’t. We have always experienced a very big discount between the theoretical promise of nuclear and what it has delivered, at what cost, and when. ITER seems to be conforming to this discount.

      If I can revert to economics here, we may have a lot less time (and less investment capacity) than we think. I’m doing a study on how the spending of borrowed money has distorted GDP. My findings suggest that reported world GDP overstates the reality by about 20%.

      If that is so, then – amongst other things – our debt ratios to GDP are worse than they look, and energy is a higher percentage of GDP than we might otherwise think. Bottom line is that time is running out.

      I’m not planning to go into detail about the underlying (vs the reported) level of GDP, but global growth of $15tn has been accompanied by $67tn of net new borrowing over ten years. It is impossible to believe that this borrowing has not fed through into consumption, and hence into reported levels of economic activity.

    • France oil consumpion per capita is around the same of Italy (no nuclaer energy production) Spain (again no nuk) Germany (17% of eletrical production from nuk). France produce 75% of electirity from nuk: if a substitute of oil why the pro capita oil consumption is not lower than others european western country? maybe a mix of energy sources AND acceptance that we have a more serius trouble than a + or – 0.1% of GDP con be a short time brigde, but at the state of art nuclear industry (assuming that we found the money to build the new infrastructures, and litium for car battery) alone (or combined with fracking revolution or so on, check Trump energy plan) it’ s only a way for elite to refuse reality. my two cents.

    • Hi Paolo,
      nukes clean up electricity, eliminating coal. Oil is a trickier proposition for various reasons, which also involve the question of ideal city infrastructure and public transport design to minimise congestion and time lost in traffic jams. I’m a fan of New Urbanism and walkable town design.
      So transport can be solved with more trains, trams, trolley buses, EV’s, synthetic diesel and boron. These are all ‘recharged’ (or regenerated or recycled) using nuclear power. Out of interest, apart from this thread have you *ever* heard of burning recyclable metal boron pellets to replace oil in long-distance trucking? Sounds crazy I know, but the world’s most famous climatologist thinks it has a chance.
      https://eclipsenow.wordpress.com/boron/

    • but global growth of $15tn has been accompanied by $67tn of net new borrowing over ten years

      Setting aside your “real” global growth flow and “nominal” net new borrowing stock error, what is the accompanied growth of fixed assets plus land values?

      In the US, the increase in borrowing to the increase in fixed assets is is a 1:1 ratio.

      energy is a higher percentage of GDP than we might otherwise think.

      This is a settled matter. In the U.S. energy spending was 8% of GDP in 2005 and 6% in 2015.

      It is very difficult to make argument when the SEEDS is a proprietary secret sauce.

    • “My view, which no amount of scientific data will change, is that they can’t.”
      I thought scientific and economic data was *the* way to decide this? How else are we going to decide this?

      “We have always experienced a very big discount between the theoretical promise of nuclear and what it has delivered”
      It sounds like you’re referring to the old 1950’s promise of nuclear electricity “Too cheap to meter”. That’s such an old meme that it is irrelevant to the discussion of modern nuclear technology. It is a perfect example of “Poisoning the Well”.
      “Poisoning the well (or attempting to poison the well) is a fallacy where irrelevant adverse information about a target is preemptively presented to an audience, with the intention of discrediting or ridiculing everything that the target person is about to say.”
      https://en.wikipedia.org/wiki/Poisoning_the_well

      Back at the dawn of the nuclear era they were making such astonishing discoveries and advances so amazing and so fast that an exponential curve appeared to be opening where the end was hard to imagine. The first bombs quickly led to the first military reactors which led to the first commercial reactors, basically submarine reactors parked on the land. The energy potential was vast, with uranium about the size of a milk crate running a reactor for 3 months. (And that’s before we get into reprocessing!) Splitting the atom has a million times the energy density of chemical fuels. The potential seemed limitless. The military was in awe. The world was in awe. Aircraft carrier Task Force One tore around the world breaking all records for force-projection speeds at sea, without refuelling! Just look at the sailors standing on parade, formed up in the famous “E = mc2”

      Back then, projecting that we would one day have power ‘too cheap to meter’ must have seemed possible. I bet the early nuclear engineers winced when the meme got out. They have always had a more realistic appreciation of the sheer capital in a reactor! We cannot *rationally* condemn all reactor technologies because an old marketing campaign got carried away with itself!

      So how expensive is nuclear power? Is it, as American writer Amory Lovins says, dying of an ‘acute attack of the marketplace’? No. Amory is over-simplifying. That is a particularly American problem, due to their unique regulatory framework that cripples their nuclear. There are countries building nuclear *far* cheaper than America. “In contrast to the rapid cost escalation that characterized nuclear construction in the United States, we find evidence of much milder cost escalation in many countries, including absolute cost declines in some countries and specific eras. Our new findings suggest that there is no inherent cost escalation trend associated with nuclear technology.”
      http://goo.gl/YGnZnu

      And you mentioned ITER? Sorry, but I’m not even discussion tomorrow’s sci-fi technologies like FUSION! I’m talking about good old fashioned fission that we can already do, and discussing breeder reactors in the context of the world’s nuclear engineers ACTUALLY HAVING 400 REACTOR YEARS with real, not hypothetical, breeder reactors that can fission nuclear waste.
      * GenIV breeder reactors will have standardised safety and parts, come off a production line, and burn nuclear waste. China are planning an assembly line GenIV nuke cheaper than coal in just 6 years!
      http://goo.gl/fePqHf
      * Many GenIV breeders will not use water as a coolant. This is a big deal for cost, as it lets them build a room pressure core, not the extremely huge single-cast steel reactor core of today that has to survive over 150 atmospheres of pressure!
      * The assembly line will build the modular components in climate controlled factories, avoiding delays due to bad weather. Then the final pieces will be trucked to site for fast assembly. The whole process will crash prices, giving the world abundant and *reliable* clean power that can close coal ASAP.
      * It will not be ‘too cheap to meter’, but may indeed get as low as $1 billion per GW, cheaper than coal! Indeed, some say some nukes are already there.
      http://www.world-nuclear.org/information-library/economic-aspects/economics-of-nuclear-power.aspx

      If you account for the externalised public health costs of coal and the absolutely unfathomable ‘costs’ of climate change (although ‘costing’ the potential end of civilisation is a pretty meaningless exercise!), nuclear power may already be cheaper than coal. “Too cheap to meter” was a terrible campaign. But affordable, safe, abundant, reliable, climate-friendly nuclear power that leaves clear skies and fresh air? Now that’s a marketing campaign I could get behind!

    • Marmico

      I think I need to clarify this for you. First, both growth and borrowing are adjusted for inflation in my numbers. This is not sleight of hand. I want to be clear about that.

      Second, SEEDS is not a “secret sauce”, or even “source”. What I said was that I was not proposing to describe that part of SEEDS which identifies borrowing-funded “growth”. In fairness, therefore, I’m not going to make much use of, or ask readers to accept, that part of the system which divides underlying from debt-fuelled growth.

      As for why, economists are up a gum tree at the moment. Their forecasts are way off beam. They, and those who employ them, need to know why. What I’m talking about here is just a part of the answer – but, if you think I’m going to make a gift of it to government, investment banks, etc, please think again.

      I really think I’ve already explained why asset values are notional whereas debt numbers are fixed. It’s why bubbles explode. Asset values soar (think tulip bulbs here). Debt (fixed amounts thereof) are taken on in order to participate. Then, asset values collapse. Debt remains the same. Those who’ve borrowed to get involved are wiped out.

      Finally, energy to GDP. If – as I argue – GDP has been inflated artificially using borrowed money, the reality of GDP is lower – and the percentage therefore higher.

    • Dear Tim….spot on:
      “global growth of $15tn has been accompanied by $67tn of net new borrowing over ten years.”
      This is where it kind of all begins…….and ENDS.
      Cheers!!!

    • Even if this is the case…

      >“global growth of $15tn has been accompanied by $67tn of net new borrowing over ten years.”
      This is where it kind of all begins…….and ENDS…
      … what fraction is 115GW of reactors per year? At $5bn each for today’s AP1000, that’s only $575bn in an economy of $52,000bn (according to your argument).

    • A further note……
      The East bloc fell when the ratio reached 4:1…….in other words $4 of debt for $1 of GDP.
      We are now at 4,4:1………..so YES- time is running out……..and everyone who needs to knows it…….and hence the upcoming WAR in the Gulf.
      Cheers,

    • Why? Don’t despair. Take action! Promote clean, safe nuclear power and synthetic diesel or boron. Read my summary page including the links to the sub-pages and you’ll see how quickly we can do this. EG: Cities are starting to buy electric buses and garbage trucks because they’ll save *stacks* of money on diesel.
      https://eclipsenow.wordpress.com/recharge/

  25. @Eclipse, I do appreciate all the efforts you’ve put into this. I think you need to at least consider fuel use in agriculture, unless you’ve evolved more than me, you need to eat.

    Thanks to you, I have done a little reading on seawater diesel and it does require a huge amount of what is admittedly a huge resource. It is that quantity that stops it being viable because the time required to make a gallon could never equal the time it takes to use it. I seem to recall some 23,000 gallons of sea water to produce 1 gallon of diesel. That might last me a month but my immediate farmer neighbours would use that in a nano-second. Let’s call it a time default. That imbalance, that default would have the effect of moving farmers along a continuum of self sufficiency that leads to less and less spare production and the rural urban pact will break down.

    I blame Maslow, partially, his hierarchical needs model shows a very stable pyramid with food and water at the bottom as a broad stable base whereas, the pyramid should be inverted. That might show how everything else rests on one thing and just how vulnerable we all are.

    It’s worth noting also, how farming is now reliant on plastics. Here in soggy West Wales the effect of climate change means we can no longer rely on enough dry days together to make hay. We have adapted by making haylage instead. These bales require miles of plastic film to wrap in a season and weigh 1/2 a ton each.

    Also, recent legislation to control slurry will push farmers out of productive dairy farming and into less productive suckler herds. Further down the continuum towards self-sufficiency. The rural economy with its ‘alternative’ nature will survive but I do despair for the cities.

    • Hi Nigel,
      I don’t see any ‘time delay’ in the diesel from seawater papers I read. Not at all. I just see an industry at its infancy, ready to grow exponentially with an affordable product – with even the nuclear power to run the industry costed in. Do you have any evidence for the ‘time delay’?

    • PS: Nigel, we can make all the plastics we need out of household waste. Not only that, but superior grade lubricant oils, varnishes, paints, plastics, and basically everything else the petro-chemical industry requires. All from ordinary household waste like old joggers, soiled nappies (diapers), pizza boxes, etc.
      https://eclipsenow.wordpress.com/recycle/

    • What I was hoping you’d get from the haylage example is that fodder can no longer be made by hand and, by extension, agriculture has reached the point where food production cannot happen without diesel.

      As to the time deficit, I don’t doubt that it hasn’t been mentioned. If I read correctly, and you don’t dispute it, the practicalities of pumping 23,000 gallons of sea water are immense. Sea water has fish in it to begin with. I assume some sort of filter would be needed but the biggest hurdle remains the time required to pump that much. Food production cannot wait. If it takes longer to pump it than it does to consume it then that is the deficit. No way around it. Further, I assume that the process would render 23,000 gallons of sea water lifeless.

      I’m sorry but this is not the panacea you hope it is.

    • Nigel, the flow rates are costed in at about 1% of the costs.

      “Max Flow: 35 cm3s-1
      Max Pressure: 350 kPa
      So I write P = QR where R is the hydraulic resistance. If the max flow occurs at the max pressure, R = 350 kPa/35 cm3s-1 = 1010 Pa s m-3. The experimental flow rate was 2.5 cm3s-1. So I can write power = PQ = Q2 R = 0.0625 W for 2.5 cm3s-1, or 2.5 MW for 100 m3s-1.
      This is approximately 1% of total process power, so its a minor component, and I don’t include it in the cost.”
      https://eclipsenow.wordpress.com/synthetic-diesel/

      There are a variety of sea life protecting nets or filters that would protect sea life from the collection bays and pipes.

      Lastly, what is the alternative?
      * Just keep burning fossil fuels? I don’t think sea life will appreciate full-blown climate change!
      * Just ask people to powerdown and go live in a teepee? Not going to happen, as the developing world is working night and day to escape their poverty.
      * Just give up? Sorry, I have kids. I’ll promote these solutions as long as it takes.

      EV’s can run our city-wide trips, including council trucks and buses.
      Synthetic diesel OR powdered boron can run interstate long-haul trucking and agriculture. You seem to think you’ve disproved synthetic diesel with a bit of a water collection story, but don’t seem to appreciate how much energy and volumes of material are processed in tar sands pits or even existing crude oil wells. They’re still profitable, and sill produce an energy product.

      But you haven’t even started on boron yet, and Dr James Hansen thinks that one could also be a contender!
      https://eclipsenow.wordpress.com/boron/

      Then for a really sudden oil crisis we can always quickly convert diesel cargo ships into sailing ships to supply most of our coastal cities. Australia had plans to do this in WW2, and we’ve only got better at modern sailing since then. Sail produce to coastal cities, and EV’s can do the rest. In a real emergency, we might even see the rise of rickshaw relays to get stuff inland! (That would temporarily help solve some of the unemployment crisis as well!)
      https://eclipsenow.wordpress.com/sudden-oil-crisis/

    • Nigel, watch this 15 minute presentation on seaweed 3d vertical ocean farming, then tell me why it won’t work. Imagine it with sailboats for a while, if you have to, until they can harvest enough seaweed to replace boat diesel! We could feed the world, backup intermittent wind and solar with biogas, run everything else on biodiesel from seaweed and sequester CO2 with a massive biochar program.

  26. Eclipse
    You simply do not understand thermal dynamics. I’m sorry but your entire premise is hopetimum. We might as well believe in perpetual motion. I’ve looked at the information you post on your sight and it’s all technical speculation. Not one thing you present is a real viable produced product. Let’s take the idea of battery powered transport. The best lithium ion has a weight ratio of 50/1 compared to conventional motor fuel. Sure you can pack a 1200lbs battery in a toy car like Tesla and have a 200 mile operating range. But you’ll never run a truck or backhoe with it. And you’ll never fly a passenger plane with it. So let’s turn sea water into all our liquid fuels right? First of all according to your own paperwork it would take 290,000 Nimitz class reactors to do it. Do you have any clue of the amount of energy it would take to build them or the fuel it requires to fuel them? You obviously don’t. This unlimited dream of yours would last about a year and a half. We might as well believe in alchemy that turns lead into gold. Or better yet I bet if you did a little digging you could find a scientist who has proven he can turn power directly in to hamburgers through a replicator. Actually that would solve all our problems. That might be the best road for you to pursue.

    • John, It’s alchemy that turns fertile material into fissile material through OLD, UNDERSTOOD, real world physics. 400 reactor-years and all that. It’s not hopeium, it’s history!

      IF you read my Recharge page, you would understand that I’m not recommending we replace ALL oil with synthetic diesel, just the niche market that diesel has today. EV’s CAN provide 95% of our city trips, as most journeys are well within the range of modern EV’s, with even electric garbage trucks and buses stepping into action.

    • Gail Tverberg is an actuary, not an engineer or physicist. She just bans views she does not like, and censors peer-reviewed engineering papers she does not like.

      Energy skeptic did not seem to allow posts, and from the simplistic arguments I read there about the end of trucking, did not really seem worth my time engaging. I don’t have an engineering background, but I respect engineers. If even I can spot errors in just a few minutes of browsing, what good is the site?

  27. Dear Tim
    You’ve done great work on Surplus Economics. Please don’t let speculative techno narcissism spoil it. The purpose is cognitive dissonance. The reality is we have lived through an unusual set of circumstances that will never be repeated. For most they don’t know but for a few they are some where in the stages of grieving. The first is denial.

    • Thank you John. If the nuclear enthusiasts are right, we’ll just have wasted some time. If we become complacent about energy, and then it turns out they’re wrong, the cost will be far higher.

      What I focus on right now is an economy that already seems to be floundering. Conventional economics is baffled, as some of its practioners now recognise. The situation is already highly abnormal – ZIRP, piling on debt to sustain “growth”, deterioration in most people’s real living standards, understandable public anger. SEE is only one possible explanation, but it does seem to supply a lot of answers.

    • Yes because it is a Surplus Energy Economy and traditional economics can’t cope with that reality.

    • John

      Naturally, I think treating the economy as a monetary system rather than an energy one undermines conventional economics. Even within its own parameters, however, conventional economics is failing. I aim to tackle this on both fronts.

  28. And please, Tim, read Gail Tverberg’s (Our Finite World) latest post: The “Wind and Solar Will Save Us” delusion.
    Your next post? I barely cannot wait!

  29. There is new post by Feasta on the website “Resilience called – fairly self explanatory title – “End of the “Oilocene”: The Demise of the Global Oil Industry and of the Global Economic System as we know it”:

    http://www.resilience.org/stories/2017-01-31/end-of-the-oilocene-the-demise-of-the-global-oil-industry-and-of-the-global-economic-system-as-we-know-it/

    Agrees with your post and also includes research by Hills Group. Lengthy but seems extremely convincing to me. However, implies that very little time – if any – is left to avoid a Seneca Cliff.

    • Gavin
      Thanks for the link. The conclusions are spot on. Not much time left but the warning has been there for quite a long time. Maybe a little less football and a little more reading might help.

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