Energy-Return-On-Investment (EROI): The accessibility of ......Energy-Return-On-Investment (EROI):...

Energy-Return-On-Investment (EROI):

The accessibility of energy and its link with economic growth

Victor Court

BEIS Workshop on EROI, 30 June 2017

• Postdoctoral researcher at EconomiX, the research center in economics of the Université Paris Nanterre.

• Forthcoming position as a postdoctoral researcher of the Chair Energy & Prosperity.

• Personal website (research articles, Ph.D thesis, and data): www.victor-court.com.

• E-mail adress: [email protected].

30/06/2017 BEIS Workshop on EROI, Victor Court 2

http://www.victor-court.com/

mailto:[email protected]

• Societies are based on the transformation of natural resources into final

goods that provide useful services (food supply, protection,

entertainment, etc.).

• Energy is needed to perform such changes from raw material to useful

infrastructures and goods.

• Humans cannot produce energy, they can only collect it from the

environment.

• It takes energy to extract primary energy from the environment (coal,

oil, gas, uranium, solar flows) and refined it into final forms (liquid

fuels, heat, electricity).


Energy and the economy

• The EROI is the ratio of the quantity of energy delivered by a given processto the quantity of energy consumed in that same process.

• The EROI is a measure of the accessibility of an energy resource.

• The higher the EROI, the greater the amount of net energy delivered tosociety in order to support activities other than energy extraction.


Definition of the EROI

𝐸𝑅𝑂𝐼 =𝐸𝑛𝑒𝑟𝑔𝑦 𝑜𝑢𝑡𝑝𝑢𝑡

𝐸𝑛𝑒𝑟𝑔𝑦 𝑖𝑛𝑝𝑢𝑡. (1)

𝑁𝑒𝑡 𝑒𝑛𝑒𝑟𝑔𝑦 = 𝐸𝑛𝑒𝑟𝑔𝑦 𝑜𝑢𝑡𝑝𝑢𝑡 − 𝐸𝑛𝑒𝑟𝑔𝑦 𝐼𝑛𝑝𝑢𝑡. (2)

𝑁𝑒𝑡 𝑒𝑛𝑒𝑟𝑔𝑦 = 𝐸𝑛𝑒𝑟𝑔𝑦 𝑜𝑢𝑡𝑝𝑢𝑡 ∗𝐸𝑅𝑂𝐼 − 1

𝐸𝑅𝑂𝐼. (3)

EROI boundaries: « mm », « pou », and « ext »

530/06/2017 BEIS Workshop on EROI, Victor Court

𝐸𝑅𝑂𝐼𝑚𝑚 =𝑃𝑟𝑖𝑚𝑎𝑟𝑦 𝑒𝑛𝑒𝑟𝑔𝑦 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 𝑎𝑡 𝑡ℎ𝑒 𝑚𝑖𝑛𝑒 −𝑚𝑜𝑢𝑡ℎ

𝐸𝑛𝑒𝑟𝑔𝑦 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑡𝑜 𝑓𝑖𝑛𝑑 𝑎𝑛𝑑 𝑝𝑟𝑜𝑑𝑢𝑐𝑒 𝑡ℎ𝑎𝑡 𝑒𝑛𝑒𝑟𝑔𝑦. (4)

𝐸𝑅𝑂𝐼𝑝𝑜𝑢 =𝐹𝑖𝑛𝑎𝑙 𝑒𝑛𝑒𝑟𝑔𝑦 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑒𝑑 𝑎𝑡 𝑡ℎ𝑒 𝑝𝑜𝑖𝑛𝑡 𝑜𝑓 𝑢𝑠𝑒

𝐸𝑛𝑒𝑟𝑔𝑦 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑡𝑜 𝑔𝑒𝑡 𝑎𝑛𝑑 𝑑𝑒𝑙𝑖𝑣𝑒𝑟 𝑡ℎ𝑎𝑡 𝑒𝑛𝑒𝑟𝑔𝑦. (5)

𝐸𝑅𝑂𝐼𝑒𝑥𝑡 =𝑈𝑠𝑒𝑓𝑢𝑙 𝑒𝑛𝑒𝑟𝑔𝑦 𝑒𝑛𝑗𝑜𝑦𝑒𝑑 𝑎𝑠 𝑎 𝑠𝑒𝑟𝑣𝑖𝑐𝑒

𝐸𝑛𝑒𝑟𝑔𝑦 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑡𝑜 𝑔𝑒𝑡, 𝑑𝑒𝑙𝑖𝑣𝑒𝑟, 𝑎𝑛𝑑 𝑢𝑠𝑒 𝑡ℎ𝑎𝑡 𝑒𝑛𝑒𝑟𝑔𝑦. (6)

EROI boundaries: an example


5 MJ2 MJ 2 MJ 1 MJ

9 MJ

FOSSIL FUEL

REFINING & TRANSPORTExtracted

crude oil

100 MJ

Refined

products

95 MJCrude oil deposit

100 MJ

GOODS & SERVICES

PRODUCTION

FOSSIL FUEL

EXTRACTION

Embodied

energy in capital

goods

Upstream energy sector Downstream energy sector

Energy system

Energy-economy system

𝑬𝑹𝑶𝑰𝒆𝒙𝒕 = 𝟓. 𝟎

𝑬𝑹𝑶𝑰𝒎𝒎 = 𝟐𝟓

𝑬𝑹𝑶𝑰𝒑𝒐𝒖 = 𝟗. 𝟓

Methodology summary: a two-dimensional boundary


Boundary for energy Inputs

Boundary for energy Outputs

1. Extraction

(mm)

2. Processing

(pou)

3. End-use

(ext)

1 Internal energy 𝐸𝑅𝑂𝐼1,𝑖𝑛𝑡𝐸𝑅𝑂𝐼2,𝑖𝑛𝑡 𝐸𝑅𝑂𝐼3,𝑖𝑛𝑡

2 Direct external energy 𝐸𝑅𝑂𝐼1,𝑑𝑖𝑟 𝐸𝑅𝑂𝐼2,𝑑𝑖𝑟 𝐸𝑅𝑂𝐼3,𝑑𝑖𝑟

3Indirect energy embodied in material inputs

𝐸𝑅𝑂𝐼1,𝑖𝑛𝑑 𝐸𝑅𝑂𝐼2,𝑖𝑛𝑑 𝐸𝑅𝑂𝐼3,𝑖𝑛𝑑

4 Indirect energy embodied in labor 𝐸𝑅𝑂𝐼1,𝑙𝑎𝑏 𝐸𝑅𝑂𝐼2,𝑙𝑎𝑏 𝐸𝑅𝑂𝐼3,𝑙𝑎𝑏

5Auxiliary services and environmental

externalities𝐸𝑅𝑂𝐼1,𝑎𝑢𝑥 𝐸𝑅𝑂𝐼2,𝑎𝑢𝑥 𝐸𝑅𝑂𝐼3,𝑎𝑢𝑥

• 𝐸𝑅𝑂𝐼1,𝑖𝑛𝑑 is also called 𝐸𝑅𝑂𝐼𝑠𝑡𝑛𝑑 for « standard ».

Source: Murphy et al. (2011).

EROI values for fossil fuels at the mine-mouth (« mm »)

830/06/2017

0

20

40

60

80

100

120

ER

OI at

the m

ine-m

ou

th(w

ell-h

ead

)

BEIS Workshop on EROI, Victor Court

Source: author compilation from literature, see Court (2016).

EROI values for electricity at the point of use (« pou »)

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0

10

20

30

40

50

60

70

80

90

100

ER

OI p

ou

for

ele

ctr

icit

yp

rod

ucti

on


Source: author compilation from literature, see Court (2016).

Order of magnitudes

10

• Pre-industrial energy systems based on solar energy had EROIs around10-20.

• Conventional fossil energies have higher EROIs around 40-80.

Switch from biomass (low energy density) with low EROI, tofossil energies (high energy density) with high EROIs, seems tobe a key factor to enable a regime of sustained high economicgrowth.

• EROIs of conventional fossil fuels seem to be decreasing in recentdecades.

• Non conventionnal fossil fuels and modern renewable energies have,for now, lower EROIs around 5-20.

Crucial to take into account a third dimension: time.


EROI as a function of the exploited resource ratio


• For a given energy resource, the EROI represents the struggle betweentechnological progress and physical depletion.

• Exploited resource ratio, 𝜌 ∈ 0,1 :

Non renewable: cumulated production divided by Ultimately Recoverable Resources(URR).

Renewable: annual production divided by par Technical Potential (TP).

𝜌𝑛𝑜𝑛 𝑟𝑒𝑛𝑒𝑤𝑎𝑏𝑙𝑒,𝑡 =𝐶𝑢𝑚𝑢𝑙𝑎𝑡𝑒𝑑 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛𝑡

𝑈𝑅𝑅. (7)

𝜌𝑟𝑒𝑛𝑒𝑤𝑎𝑏𝑙𝑒,𝑡 =𝐴𝑛𝑛𝑢𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛𝑡

𝑇𝑃. (8)

Theoretical model of the EROI

• The exploited resource ratio 𝜌 ∈ 0,1 is a proxy measure of both:

experience, i.e. technological learning,

physical depletion of the resource.

• So we can define:

12

𝝆

Technological component 𝑮 Physical component 𝑯 Complete function 𝑭

EROI

𝝆

EROI of virgin resource

Strictly positive asymptotic value𝚽

EROI

𝝆

Technological limit

Initial EROI with immature technology

1

𝚿

EROI

𝝆

Maximum potential EROI

Break even limit (EROI = 1)

𝛆

1

1 11

1

𝐻 𝜌 = 𝑒𝑥𝑝 −𝜑𝜌

and

𝜑 = 𝑙𝑛(𝜀)

𝐺 𝜌 = 𝛹 +1 − 𝛹

1 + 𝑒𝑥𝑝(−𝜓(𝜌 − 𝜌))


𝐸𝑅𝑂𝐼 𝜌 = 𝜀 𝐹 𝜌 = 𝜀𝐺 𝜌 𝐻 𝜌 . (9)

Implication 1: Maximum EROI of global oil already reached

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0

10

20

30

40

50

60

70

80

1860 1880 1900 1920 1940 1960 1980 2000 2020

EROI (dmnl)

Time (year)

Global EROI of oil (1860-2011)

0

5

10

15

20

25

30

35

40

2000 2025 2050 2075 2100 2125 2150

EROI (dmnl)

Time (year)

Global EROI of oil (2000-2150)

Historical estimation with price-based method

Historical estimation with new model

Prospective estimation with new model

Deviation range


Source: Court & Fizaine (2017).

Implication 2: Maximum EROI of global gas already reached

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0

25

50

75

100

125

150

175

200

1890 1910 1930 1950 1970 1990 2010

EROI (dmnl)

Time (year)

Global EROI of gas (1890-2012)

0

10

20

30

40

50

60

2000 2025 2050 2075 2100 2125 2150

EROI (dmnl)

Time (year)

Global EROI of gas (2000-2150)



Implication 3: Maximum EROI of global coal not yet reached

1530/06/2017

0

15

30

45

60

75

90

105

1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020

EROI (dmnl)

Time (year)

Global EROI of coal (1800-2012)

Historical estimation with price-based method

Historical estimation with new model

0

20

40

60

80

100

120

2000 2020 2040 2060 2080 2100 2120 2140

EROI (dmnl)

Time (Years)

Global EROI of coal (2000-2150)

URR = 105 000 EJ

URR = 29 500 EJ



Implication 4: EROI of modern renewables are probably increasing


• No way to confirm that in our article.

• Recent studies on PV are consistent with this idea:

Meta-analysis from Bhandari et al. (2015): « The mean harmonizedEROI varied from 8.7 to 34.2 ».

Leccisi et al. (2016): « quality-adjusted energy return on investment(EROIPE-eq) values ranging from over 60 to ~10 ».

• Negative side: storage at grid-level is not included in such studies.

• Positive side:

Last barrel of oil will have an EROI equal or below 1.

Last installed wind turbine will have an EROI of 1 but the globalwind farm will have an EROI above one.

What is the minimum EROI that a society must have?


• Depends on:

society’s complexity,

society’s energy intensity.

• Hall et al. (2009) postulate that a minimum EROI of 12-14 isprobably needed to have growth in moder economies.

• With an indirect approach based on energy expenditures, Fizaine& Court (2016) show that the US economy requires a primaryenergy system with an EROI above 11 in order to enjoy apositive rate of growth.

Decreasing EROIs for oil and gas have already impacted the economy ?


• Average rate of growth of GWP of 2.7%/year between 1950-75, compared to1.8%/year between 1975-2010.

Energetic determinism not only through EROI but also the efficiency ofprimary-to-useful exergy conversion (see forthcoming article).

• Moreover, be carefull with the non-linearity between EROI and netenergy:

Consequences of a 50% EROIdecrease from 15 to 7.5 are notproportional to a 50% decreasefrom 30 to 15.

EROImin

Source of graphic: Lambert et al. (2013).

Conclusion


• EROI represents the evolving struggle between technologicalprogress and physical depletion to get energy from the environment.

• EROI of oil and gas will most likely continue to decrease in thefuture.

• EROI of coal should be maximum in a few decades and decreaseafter that.

• Currently, modern renewables have lower EROI than fossil fuels butprogress is expected.

• Uncertainty remains on the compatibility between a full renewablemix including high storage capacities and the minimum EROI of 11required to have growth in a modern economy.

Thank you for your attention.


References


• Cited in this presentation:

Court, V., 2016. Energy, EROI, and Economic Growth in a Long-Term Perspective. Ph.D thesis, UniversitéParis Nanterre.

Court, V., & Fizaine, F., 2017. Long-term estimates of the energy-return-on-investment (EROI) of coal, oil,and gas global productions. Ecological Economics, 138, pp. 145–159.

Fizaine, F., & Court, V., 2016. Energy expenditures, economic growth, and the minimum EROI of society.Energy Policy, 95, pp. 172–186.

Hall, C.A.S., Balogh, S. & Murphy, D.J.R., 2009. What is the Minimum EROI that a Sustainable Society MustHave? Energies, 2(1), pp.25–47.

Lambert, J., Hall, C. & Balogh, S., 2013. EROI of Global Energy Resources. Status, Trends and SocialImplications. State University of New York College of Environmental Science and Forestry (SUNY-ESF),Syracuse, USA/Next Generation Energy Initiative (NGEI), Marcellus, USA, xxii + 136 pp.

Murphy, D.J. et al., 2011. Order from Chaos: A Preliminary Protocol for Determining the EROI of Fuels.Sustainability, 3(10), pp.1888–1907.

• Other articles of the author:

Court, V., Jouvet, P.-A., & Lantz, F., 2018. Long-term endogenous economic growth and energy transitions.Energy Journal, 39(1), pp. 29–57.

Fizaine, F., & Court, V., 2015. Renewable electricity producing technologies and metal depletion: a sensitivityanalysis using the EROI. Ecological Economics, 110, pp. 106–118.

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