Humanity must produce an excess amount of energy in order for forward progress — but with increasing demand, how can we achieve this?

Much has been written about how intermittent renewables like wind and solar negatively affect grid stability and often need government subsidies to produce positive financial returns on investment (ROI). Less well understood, but even more important, is the fact these intermittent renewables reduce our global net energy surplus when compared to the coal, oil, natural gas and nuclear energy sources they replace. In other words, our current technologies generate a higher energy output on their energy inputs versus wind and solar.

The world’s current standard of living is a direct result of power-generation technologies producing a high energy surplus. Research suggests electricity from wind and solar is unable to achieve break-even levels relative to the existing energy surplus economic threshold, suggesting they will diminish our future standard of living.

Understanding why energy surplus matters is key to understanding human progress. It is also the key to understanding how the Bitcoin network’s energy-reliant proof-of-work consensus mechanism can be a tool that expands society’s energy surplus well into the 21st century.

What Is Energy Surplus?

Having an energy surplus is fundamental to survival.

Take a cheetah, for example. A cheetah consumes a tremendous amount of energy pursuing its prey. Many of these chases are unsuccessful. For the few that result in a kill, the energy provided by eating its prey must be greater than all the energy consumed in prior chases (and be enough for the next chase).

However, beyond the maintenance energy required just to live and hunt, the energy surplus must also be large enough to allow a mother cheetah to give birth, nurse her cubs and devote time and energy to raising them. For a cheetah to live normally, its energy surplus must be well above a break-even level.

The same can be said of a fish, an insect, a tree or any organism or system that requires energy, including humans and human economies. The larger the energy surplus within a system, the more diverse, robust and resilient the system is because it can easily meet its basic needs with surplus energy for reproduction, experimentation, innovation and growth.

Energy surplus, or net energy, is measured by energy returned on energy invested (EROEI). EROEI is the ratio of the energy gathered by a system — numerator or the caloric energy of the prey — to the energy expended in the process of gathering that energy — denominator or the energy expended on the hunt. To be accurate, the calculation should use energy units, preferably joules, the international standard for measuring the energy content of heat and work.

Like a financial ROI, an EROEI > 1 shows that a system gathers more energy than it expends to gather that energy, e.g., the cheetah eats more calories than it needs for basic functions. The result is surplus energy that allows a mother cheetah to give birth and raise her cubs. When EROEI = 1 the energy received equals the energy spent (breakeven) and the cheetah barely survives and cannot reproduce. An EROEI < 1 indicates that the system requires more energy than it is able to gather, e.g., the cheetah cannot survive.

In the human world, an EROEI < 1 is also a recipe for death and extinction. An EROEI = 1 is a tenuous balance between life and death with no surplus energy for societal growth and advancement. However, a large and increasing energy surplus produced from high EROEI technologies has allowed human civilization to expand and flourish creatively, technically and culturally.

Energy Is Real Wealth

Simply put, energy is our real wealth and our growth depends on how efficiently we convert primary energy into useful energy that enables us to do useful work. As humans evolved over millennia we developed better and better technology to find and convert increasingly dense sources of primary energy into useful energy.

For example,

Weißbach et al., EPJ Web of Conferences 189 (2018)

Raw data for chart:

2 “Energy and Civilization: A History,” Vaclav Smil (2017).

3 Some care is advisable when considering EROEI calculations:

First, methodology matters. Is the approach top-down (energy costs derived from fiat costs) or bottom up (energy costs derived from material quantities and manufacturing processes)? The former can easily confuse fiat with energy units giving useless results. The latter, while requiring more effort, is more accurate.

Second, while EROEI is a simple ratio to calculate, there is not yet a standard definition of system boundaries to use when determining the numerator and denominator. Some analysts consider only the fuel costs. Others include the costs of the plant. While still others include the costs of the plant and additional upstream costs incurred to be able to build the plant. Weißbach et al. applied a uniform boundary definition over a full life cycle assessment for each type of power plant. The total energy was also adjusted to utilized energy (exergy) invested and returned for each type of plant. This results in one of the cleanest analyses available.

Third, EROEI is location dependent. Windier locations have greater energy returned on the same energy invested. The same goes for sunnier locations for solar. Fossil fuel plants will also have varying EROEIs depending on their proximity to fuel supplies and the quality of fuel available.

Even the EROEIs of fossil fuels like coal and oil generally decline over time. While the embedded energy in the chemical composition of similar grades of coal and oil are the same between different stocks, the energy required to gather those stocks has historically increased. Newer discoveries are generally farther away from end consumption and require more energy to extract. Today’s deep-water drilling is far more costly in energy terms than drilling was in the East Texas Oil Field during the 1940s when the field was young.

Lastly, like a lot of data analysis, EROEI can be subject to manipulation in order to justify personal biases and political objectives. However, EROEI has value for relative energy surplus analysis. With consistent system boundaries and a defined calculation methodology it offers a standardized way to compare the net energy produced by various power plant technologies without regard to their often distorted fiat ROIs.

This is a guest post by John Thompson. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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