Thursday, November 30, 2006

Invest Now!

This just cracked me up. It seems that I have an odd sense of humor:

Hint: don't forget to look at the banner ad. This is how people lose their hat in currency speculation... maybe FXCM should consider a new sales pitch?

Wednesday, November 22, 2006

Energy Mercantilism on the March

Just over a year ago I wrote about the New Energy Mercantilism, the set of geopolitical phenomena emerging as nations realize that, in the future, there will not be enough energy to go around to sustain projected demand. A market-economy solves this problem by increasing the price of energy until demand inelasticity is overcome and the energy is allocated to where the market says it is most valuable. Mercantilism, rather than trying to distribute shares of the pie more efficiently, aims to lock down as large a share of the pie as possible for your own needs.

A year later, it is clear that mercantilism is on the march.

Joseph Stroupe has written a fascinating article in Asia Times Online about the rise of energy mercantilism. Specifically, he outlines the mechanism by which nations like China, Russian, and India are embracing the mercantilist approach. All three nations are rapidly moving toward an energy market dominated by long-term, bi-lateral supply contracts. This might not sound like a major change, but consider that today energy is supplied to high-liquidity trading bourses where the person willing to pay the most gets the energy. This is significant for two reasons: 1) it ensures that everyone around the world pays roughly the same price for energy (after transport costs are accounted for), and 2) it reduces the ease for deploying the "oil weapon" through an embargo because such action has very dispersed effect--holding 4 million barrels of Iranian oil per day off the free markets increases the price for everyone, forcing your enemies and allies to bear the diminished effects. Long-term, bi-lateral supply contracts (where, for example, Angola commits to supply China with 200,000 barrels per day of crude oil at $60/barrel for the next 10 years) fundamentally alter this dynamic. First, by locking in future energy prices (at quantities far higher than can be achieved on the futures exchanges), everyone will not pay the same price for oil in the future. Second, by exiting the open market through such contracts, the precsion-targeting of future oil embargos increases dramatically. Increasingly, significant portions of China and India's energy supplies are being locked into such long-term, bi-lateral contracts, as are the majority of Russian gas shipments to Western Europe. As a result, much less of the world's energy needs are being met through freely-traded market instruments. It is especially significant when we consider who remains primarily dependent on the free market for their energy supplies: the US, Western Europe, and Japan. As traditional and swing producers (who's production is expected to decline rapidly over the coming years) begin to export less oil to the open exchanges, the price impact on the "West" will be diproportionate. Similarly, the "West's" vulnerability to oil embargos will increase dramatically. Participants in bi-lateral agreements will not be exposed to the same risks to their supplies--they can always resort to the market exchanges to make up for shortfalls (though at higher prices), but the reverse is not true--the "West" cannot quickly resort to bi-lateral agreements to guarantee supplies in times of crisis.

Long-term, bi-lateral agreements also remove energy supplies from dollar-denominated exchanges far more effectively than does opening a non-dollar-denominated exchange. Russian supply contracts to Europe are already non-dollar denominated, even though Russia's ruble-denominated exchange is not yet in full operation. China pays in yuan for oil from Africa--which doesn't harm the petrodollar system for now, as long as that currency remains pegged to the dollar. But the tipping point when domestic Chinese consumption becomes the prime driver of their economy is fast approaching, and at that point the benefits of maintaining the dollar peg will have evaporated.

Peak oil, when it hits world markets with full force in an unknown number of years, will only exacerbate this trend. I'm not so sure about freedom, but energy mercantilism is definitely on the march.


I heard a fascinating interview this morning on NPR with Robert Harris, author of "Imperium: A Novel of Ancient Rome." You can listen to it online here. Harris talks about his new book, Imperium, which is a work of historical fiction set amidst the developing Empire in Rome. Most fascinating was the historical research that Harris discussed. Did you know that one of the key events in the fall of the Republic was a pirate attack against the Roman port of Ostia? These stateless groups had the gaul (no pun intended!) to do what no organized state could and attack Rome right at its heart. The smoke rising from the flaming port of Ostia could be seen from the hills of Rome. Roman citizens, shocked that they could be attacked right at the heart of their realm, were easy pickings for opportunistic politicians. Records suggest that one speach actually included the phrase (in the context of convincint other nations to assist in combating the threat from pirates) "either you are with us or you are our enemy." General Pompey exploited this environment of fear to ram through the Senate new laws essentially stripping the populace of many of their substantive rights and paving the way to Empire. By the time Julius Caesar gained power (asserting dictatorial powers to save the Republic for the people, despite the common assumption to the contrary), momentum was too great to reverse the slide to Empire.

Harris also talks about the historical importance of the study of the Fall of the Roman Republic from the perspective of the leadership of the British Empire at its zenith. Which brings me to something of a tangent: James Bond. Ian Flemming's famous spy was, essentially, a literary reaction to the decline of the British Empire (Query: what was the cultural/literary/spiritual reaction to the fall of the Roman Empire, or the transition from Republic to Empire?? Christianity?). James Bond was someone who's very existence countered the gathering impotence of Britania. And after the Suez Crisis, when it was blatantly clear to all that the British Empire was not merely teetering on the brink, but that it was actively spiraling downward, Flemming's plots became more and more unbelievably fantastical. Bond was no longer merely assisting Britain and confirming her equal status amidst Russia and the US (as the early plots suggested), but rather Bond was singlehandedly saving the world from megalomaniacal villains intent on world domination.

As long as I'm committed in this post to a rambling style, let's back up and I'll explain why Bond has special meaning in my life. It has nothing to do with my background in Intelligence, because Bond was, in reality, so much more than that--Bond was a walking, Wagerian leitmotif, but more on that later. Bond is important to me because most of my Summers as a child were spent with my Grandparents in Berlin. Afternoon thunderstorms, a frequent event, would leave my Grandfather smoking and playing chess in the glassed-in veranda overlooking the garden, and my brother and me laying on the floor in their living room watching old James Bond movies dubbed into German (which neither of us spoke well enough to follow the dialogue). Bond movies can effectively communicate so much about these deeper themes when you strip away the dialogue. Take, for example, the comparative role of Bond and the respective SuperVillain. Robert Anton Wilson takes the side of the supervillain, arguing that this much maligned Bond character is really trying to advance society and bring about progressive change, while Bond is only interested in maintaining an essentially Victorian world order. Take the villain from Thunderball, for example, with his private estate "Palmyra" in the Bahamas. It's worth noting that Palmyra was an ancient trading city in Syria that collapsed amid the breadown of Pax Romana, and is also the picture at the top of this blog. I think that Flemming (and perhaps more important, the Director Albert "Cubby" Broccoli in the production of the movie series) unwittingly set up Bond Villains as collapse theorists--though generally Roddenberry-esque technotopians.

There is something very Jungian at work here. Who is the real hero? How does this dynamic change now that the Bond-archetype no longer exists to address the failings of one empire with regards to other empires, but rather to address the failings of empire with regards to rhizome (Bond has always addressed non-state or quasi-state actors, but in the past this has been within a conflict of empires context, and now it is within a hierarchy vs. rhizome context of the "war on terror). Specifically, take the current Bond movie "Casino Royale." I thought it was outstanding, and I think that Daniel Craig was excellent. Bond is a Jungian Jihad seeking the resurection of the Victorian-era "Caliphate" of the British Empire. In this context, Bond is the leitmotif introducing the theme of structural struggle, and it is interesting to watch how its developmet mirrors our cultural consciousness in general.

Terrorism, Pirates, Ancient Rome, the British Empire, James Bond, Supervillains. It doesn't get much better than this. Talk amongst yourselves...

Monday, November 20, 2006

Citizen Soldiers?

Representitive Charles Rangel wants to bring back the draft. I say good idea.

The "All-Volunteer Force" is a mercenary force...let's not mince words here. Some people certainly enlist in the military because they feel that it is there civic duty, but most do it in large part for the money (or future career/money prospects). If we did away with very hefty enlistment and re-enlistment bonuses, we would have no military. And even with bonuses that can exceed $100,000 tax-free in the first five years (enlistment bonus, re-enlistment bonus and specialty pay bonuses), we still need to contract out a huge proportion of logistical and support functions (and many combat functions) to "real" mercenaries.

There are problems with employing a mercenary military. The foremost, in my mind, is the divide that builds between people who make decisions to employ the military and people who serve in the military. The military, as Clauswitz said, is politics by other means. And it is dirty work. It is always a tempting option to have someone else do your dirty work, but when the question boils down to "do you, personally, want to engage in this dirty work," then the military tends to be much more judiciously utilized. There are lots of people out there in America who "support the war," or at the very least "support the troops" (I still haven't figured out what that amounts to). But there are not many people who support it or them enough to go take part themselves. There are plenty of excuses--but let me disabuse you of at least one: if you are less than 60 years old, male or female, the Arkansas national guard will let you enlist and will ship you off to Iraq within months to help guard convoys. I actually know one person (Rowe Stayton of Lakewood, Colorado) who was 55 when he decided that ne needed to "do his part" and enlist. But you have a job, or a family, you say? Mr. Stayton had both--actually, he was an attorney with his own successful firm, but he enlisted and spent 12 months in Iraq as a military policeman. Stayton joined as a Sergeant in the Army because that was where the need was greatest, even though he had previously served 11 years as a Major and F-15 pilot in the US Air Force. While I question his stance and decision, I do not question his entitlement to legitimately claim that he supports the war and the troops. But a mercenary military allows a large segment of the American population to declare that they support the war, or that they support the troops, all while comfortable in the knowledge that someone else will to the actual dirty work.

States that employ a mercenary military make far less judicious decisions about when and how to employ that military. History bears this out. There is a long history of discourse in the Western Tradition (I can't comment on this same tradition elsewhere out of ignorance) about the importance of the citizen soldier. The Romans (at least during portions of the Republic) undestood the importance of a citizen soldier to the fabric of society. Greeks before them undesrtood the same. Citizen-Militias were the founding backbone of America. Heinlein's "Starship Troopers" (The classic book, not the movie) dealt effectively with the importance of the citizen soldier in the fabric of society. A draft--when done properly, without loopholes for the wealthy, priviledged, or connected--creates a strong society with citizen soldiers.

This is not merely an issue for states. Tribes and tribal conflict is perhaps the epitome of the citizen soldier. The citizen soldier is a critical structural institution. It's easy to say that "this war is worth while," or to cite causus belli. But is it worth you putting your life on the line, or the life of your sons or granddaughters? A draft helps ensure that military action passes the latter test. Here is the critical structural distinction: when the military action in question is legitimately an action in self-defense (even if proactive self-defense), then the answer is almost invariably YES. If the action is offensive, aggressive, exploitative, or a product of hierarchy, then the answer is almost invariably NO. The calculus is entirely different when you are considering employing a mercenary military.

So, while I understand that most readers don't support the war in Iraq, and don't have any interest in joining the military (and I wholeheartedly agree), I do think that a well-constructed draft is a good idea. This is not merely an issue for America, or for large overgrown hierarchies in general. It is a general maxim of societal constrution, a maxim of decentralization, rhizome, sustainability. Citizen Soldiers are more likely to engage in defensive, not offensive wars. They are not a foolproof end to war, but when combined with other elements of decentralization and localization they bring us to the broader concept of a rhizome military that is structurally incapable of engaging in offensive warfare. The ultimate, structural goal is to ensure that the decision makers are personally willing to engage in the dirty work. Put Jenna Bush behind an M-60 on top of a Hummer transiting Route Tampa from Kuwait to Baghdad and see how long we "stay the course."

Light Rail

On an optimistic note, Denver's new Southeast Light Rail line opened last week. I commuted via light rail today, and it was quite pleasant--about 10 minutes longer trip than driving (35min including necessary walking vs. 25 minutes door-to-door driving), but a relaxing opportunity to read, and cheaper than parking alone, not to mention car ownership and gas. My current schedule allows me to commute outside of rush-hour, so the light rail trip is about 10 minutes faster if I had to fight the traffic.

Mass transit alone isn't the solution to our problems, or even a very effective stop-gap. It's quite nice to have, though. And it can certainly buy us time when combined with multi-use zoning, transit-oriented development, higher density residential/commercial, etc. Watching the city breeze from the seat of a train by makes me feel like I'm in Europe, so maybe that's fueling my optimism. But America has a lot of structural problems that don't plague Europe, and that light rail won't solve. But hey, it's nice for me for the time being...

Friday, November 10, 2006

Investment in Photovoltaic Complexity

As my last two posts illustrate, I'm in a bit of a rut on the potential for photovoltaics to solve all of our problems. It would be overly simplistic to boil this argument down to "Roddenberrys" vs. "Doomers," because those terms (the former of which I just coined, so bear with me) seem to only address irrational behavior by individuals at either extreme end of the techno-optimism spectrum. There is a very genuine debate underway in what I consider the more moderate middle of this spectrum. Two people whom I enjoy reading, and who's writing I respect, are on either side of my personal view of this, but both within the "reasonable" zone: Big Gav from Peak Energy (leaning towards Roddenberry), and Ted Heistman from Freerange Organic Human (leaning towards Doomer).

At the end of the day, the information available suggests to me that the Energy Return on Energy Invested (EROEI) for photovoltaics is less than or about equal to 1:1. If I'm wrong, and it is more like 10:1 and will steadily rise indefinitely with futher research, then a strong case for "Star Trek" optimism (and hence "Roddenberrys") can be made. There is no doubt in my mind that improvements in photovoltaics will be made--the real question is whether the return on these investments in technology (in complexity) will provide linear returns, or whether they will be subject to diminishing marginal returns. Here is a recent project from the Solar 2006 convention in San Jose last month:

SunPower is approaching a 23% efficient PV. This helps it take business from typical 17% efficient PV. Dr. Richard Swanson, CEO, SunPower gave the conference good reason to expect continued high growth. He pointed out that in 1975 solar modules cost $100/watt. By 2002, the cost had fallen to $3 per watt. The industry learning curve of 30 years has been consistent – each time that production doubles, cost drops 81%. Dr. Swanson expects $1.40 per watt by 2013 and 65 cents per watt by 2023.

This Dr. Swanson of SunPower is making the case for a kind of "Moores Law" for improving solar panel efficiency. Is this really a linear decrease in cost? Right now there is about 5300 MegaWatts of installed PV capacity worldwide. The US alone currently generates on average over 1,000,000 MegaWatts of electricity (just electricity...this won't power a hydrogen fuel scheme). So existing PV would need to double eight times in order to just match the current US electrical generation. If, per Dr. Swanson's linear decrease in cost projection is true, after eight doublings in capacity PV cells would cost 0.005 cents per watt. You could build enough PV to power the entire United States for $5,095. Something tells me that the reality is not linear! No, the reality is most likely best expressed by some form of logistics curve, such as the diminishing marginal return curve suggested by Joseph Tainter:

The rapid increase in efficiency of photovoltaics coupled by the decrease in cost per watt from the '70s to the present is represented by the return on investmen tin complexity, which rises rapidly from 0,0 to C1,B1. The salient question is: what point on the curve represents the return on current marginal investment in PV complexity? Probably somewhere between C1,B1 and C2,B2. Projections, like Dr. Swanson's that assume linearity in cost decrease per watt are basing this assumption on the roughly linear increase represented by the curve between 0,0 and C1,B1. But the reality is that the benefit from each marginal investment in photovoltaics at this point will return less and less. This technology cannot save us from the ultimate ramifications of diminishing marginal returns.

There is, in fact, some evidence that PV technology is already at the peak of the diminishing marginal return curve (C2,B2). Sunpower, the same company where Dr. Swanson extolls the historical decreasing cost of photovoltaics, recently made this press release:

...Overall, these changes result in a 43 percent increase in power, said Julie Blunden, vice president of external affairs at SunPower. Each panel can generate 315 watts of electricity and will have roughly the same cost per watt as the existing line, she said.
When you improve "efficiency," but the cost of doing so keeps the cost per watt stagnant, then you have peaked on the diminishing marginal returns curve. Future increases in efficiency are most likely possible, but they will become so costly as to actually increase the cost per watt. Investment in complexity is inelegant, and will always run into exactly this problem...

Monday, November 06, 2006

Elegant Technology

Every now and then I get the sense that some people see me as a “doomer.” That I’m perceived as a bit of a pessimist about the future. I don’t know why. In the face of issues like peak oil, global warming, catabolic collapse, I don’t see any need for our quality of life to decrease. I do see a need for our quantity and mode of consumption to decrease—and I think some people are confusing the two. Many people are labeled “doomer” simply because they reject the general idea that technology will be able to save us from all our problems and guarantee the maintenance (even perpetual increase) of our consumer-driven society. I think that this demonstrates a failure to grasp two critical concepts—that extreme consumption does not equate to quality of life, and that technological complexification is not, in itself, of any value.

Technology is only of value to the degree that it provides for quality of life without creating negative power-relationships that outweigh that benefit. And such technology does not have to be complex or “advanced” at all. Technology is nothing more than “knowledge of technics” or knowledge of a technique—knowledge is power. A thin photovoltaic array or a genetically engineered bacterium that converts woody biomass to ethanol both represent technology. The question that we must ask is “does the quality of life provided by this technology outweigh the decrease of our quality of life from the power-relationships that we must enter in to in order to employ this technology?” As a general rule, when the answer is yes, the result is something that may be accurately described as “elegant simplicity.” When the answer is no, as I think it is with both the example of photovoltaics and biotech-ethanol, then the result is not “elegant simplicity.” In fact, because I am using “elegant” not in the vernacular, but as a term of art, the phrase “elegant simplicity” is actually redundant: “elegant” alone will suffice, because I use that term to imply a measure of simplicity—that the benefit from an “elegant” technology outweighs burden of the incurred hierarchy, when measured from the perspective of the median (not mean) individual.

Most people who categorize me as a “doomer” do so, in my opinion, because they fail to understand this concept. I think that the “solutions” presented by most people fail the criteria for elegant simplicity. These solutions—cellulosic ethanol, thin-film photovoltaics, genetically engineered pest-resistant crops, nuclear fusion—will not solve our problems because, at their core, they ARE our problems. The root problem facing human society at present is the composite of the power-relationships that we have submitted to in order to “benefit” from such “non-elegant” technology—what I have elsewhere labeled as “hierarchy.”

While the test laid out above for “elegance” is subjective, there are hallmarks of technologies that fall into the “elegant” and “non-elegant” categories. Elegant technology is probably vernacular, general, and contained. These may not be the best three characteristics to capture the entirety of “elegant,” but they are the three that I will use for now.

Vernacular, for our purposes, means used by and accessible to commoners (the “median individual” from above). It doesn’t require a specialist to understand or implement, but rather is generally accessible.

General, for our purposes, means broadly applicable. An elegant technology is one that can be applied to a broad set of circumstances, not something that is only applicable to a single and unique set of circumstances.

Contained means giving rise, on balance, to negative feedback loops. A contained technology solves one problem without creating two different and greater problems.

These three characteristics of elegant technologies—vernacular, general, and contained—are broad and subjective, but provide a framework for evaluating technologies. To put it as plainly as possible, such evaluation is critical because technologies that are elegant are part of the solution to the problems facing human society. Technologies that are not elegant are part of the problem. Let’s take a look at a specific area of technology: Solar Energy.

Non-Elegant Solar: We’ll start with a negative example—a non-elegant technology for the use of solar energy: photovoltaics. Photovoltaics are not vernacular. Do you know how to make one? Probably not, but even if you do, I’m quite sure that you don’t know how to make all of the machines and tools necessary to create photovoltaics. This is important because when a technology is outside the realm of the vernacular, use (specifically ‘reliance on’) that technology creates a dependency relationship between the user and the provider. Are photovoltaics a general technology? Probably—while they only serve to produce electricity, that is a pretty generally useful thing in our modern world. Are photovoltaics contained? No, for exactly the reasons cited above: such specialized and complex technology relies on a specialized and industrial society. Even if we deem specialization and industrialization to be positive benefits, the mere scope of these non-contained impacts makes this technology non-elegant. Ultimately, photovoltaics require a hierarchal society for implementation, and the problems incumbent in such hierarchy make the technology itself non-elegant.

Elegant Solar: So if photovoltaics are not elegant, does that make any use of solar energy non-elegant? No. Let’s take a particularly clear case. Solar orientation: the understanding that the sun transits a broadly east-west path, and that, north of the tropics, the sun shines primarily on the south side of anything. Is this even a technology? It may not fit the way we commonly think of that term, but it is clearly knowledge of a technique—that specific orientation has a specific effect in terms of solar gain. Is it vernacular? Yes, both potentially (everyone can understand it), and in reality as it is widely used in vernacular architecture. Is it general? Yes—it is quite broadly applicable in terms of architecture, agriculture, energy production, etc. Is it contained? Yes—this technology can be used without creating any outside impact. I can be as simple as planting a frost-sensitive tree on the south side of a rock wall instead of the north side, but it certainly doesn’t require specialization or industrialization. So, solar orientation is an excellent example of an elegant technology.

What is the broader relevance of this definition of “elegance”? Elegance is a solution to the problems of hierarchy. Because elegance is, by this definition, contained, it will foster localized, self-sufficient, and independent societies. Elegance is the feedstock of rhizome. And elegance is a concept that, if we set it as our goal, can steer the vast potential of human innovation to a positive, sustainable end that is compatible with human ontogeny. So I don’t think of myself as a “doomer.” I just think that dreams of a “Star Trek” future where “high” (read non-elegant) technology solves all of our problems is pure fantasy. And I don’t think that this is a bad thing.

Friday, November 03, 2006

Energy Payback from Photovoltaics: Problems in Calculation

Does solar energy—specifically photovoltaic (PV) panels—ever produce as much energy as the energy that was initially invested in their manufacture? Industry, academia, and government all seem to be in agreement that the answer is “yes.” (1)(2)(3) The consensus seems to be that PV produces as much energy as was used in its creation in a time period of 1-5 years, allowing PV to produce between 6 and 30 times more energy over its life than was used in its creation. These two answers—that PV produces more energy than is used in manufacture, and that PV provides an Energy Return on Energy Invested (EROEI) of between 6:1 (2) and 30:1 (2)—suggest that photovoltaics can be and should be a cornerstone of our efforts to replace our reliance on non-renewable fossil fuels.

There are serious problems, however, with the methodology used at present to calculate the EROEI of solar panels. Some authors claim that life-span EROEI for photovoltaics is as high as 50, but provide no information for how that figure is calculated. (4) Others, such as Clarion University’s calculations, take a very limited view of energy invested in PV production, accounting only for energy use of the manufacturing plant itself. Under these assumptions, they understandably arrive at a very optimistic EROEI of 6:1 to 31:1. (1) So what energy inputs are not being accounted for in such a calculation? Let’s work backwards:

* Installation: PV does not good sitting in the factory. It must be installed, and this takes labor. There are various ways of accounting for the energy represented by such labor, but it certainly takes energy.

* Transportation: PV has to get to the installation site. Efficient manufacture is only possible if it is centralized, but this means that it must be shipped—usually by truck, which requires both the fuel directly consumed by shipping, plus the energy consumed in the entire chain of operation necessary to construct the truck, as well as the labor cost of the driver, which also represents an energy input.

* Manufacturing plant: EROEI calculations usually account for the energy consumption of the manufacturing plant, but not for the construction of the manufacturing plant itself, as well as the construction of all the machines used on the PV assembly line (PV advocates often point out that silicon is the most abundant element on earth and therefore requires very little energy to acquire—but this is NOT true for the highly advanced manufacturing machinery necessary to create PV cells, usually made from metals that require great energy input for extraction). If we take the total energy required to create one PV manufacturing plant as well as its expected lifetime production, we can then calculate how much of that energy should be attributed to a given quantity of PV panel.

* Labor: One of the key components in the production of PV panels is human input, and yet this energy cost is not accounted for in standard EROEI calculations. I’m not referring to the actual calories expended operating an assembly line, or answer the phones in the front office, but rather the energy consumed in the course of these people’s daily lives—energy that must be accounted for because it is part of the support structure necessary to create a PV panel. No employees, no PV.

These embodied energy costs in the creation of a PV panel (called “emergy”) are difficult to calculate. We can regress infinitely, eventually going so far as to account for the portion of energy consumed by a rice farmer in China in order to fill the belly of a Merchant Marine captain shipping machine parts across the Pacific, ad infinitum. How do we actually get a composite sense of the total embodied energy in PV production? One way—and certainly not a perfect way—is to use the market’s ability to set prices as an equivalent for embodied energy. This is what I am calling “Price-Estimated EROEI Theory.” It basically suggests that the most accurate representation of the total energy embodied in ANY product is the price of that product. In our example above, the energy required to install PV can be accounted for by the cost of that service. The energy required to transport, to build a manufacturing plant, to employ workers, etc.—all component energy contributions in the production of PV increase the market price of the resulting product.

So what is the Price-estimated EROEI of PV? If we accept that the price of an installed PV system is representative of the energy used, then we can compare that price with the quantity of energy produced over the lifetime of that system (which also has a market price) and reach an EROEI ratio. There are variables involved here, but when we use market-price to account for the full spectrum of energy “invested” in PV, we reach an EROEI of approximately 1:1 (*see full calculations below). This is dramatically different than the 6:1, 30:1, or 40:1 suggested by most sources. Which figure should we rely upon? While I recognize that price-estimated EROEI is not a perfect calculation, at least it attempts to account for the full spectrum of energy inputs, and the precautionary principle suggests that we should err on the side of this number (1:1) as opposed to the quite optimistic figures coming from the PV industry or the government.

Ultimately there is only one way to definitively answer this questions: The bootstrap challenge. I have previously stated that when I see an ethanol plant that distills their ethanol USING ethanol (not natural gas or coal), then I will seriously reconsider the merits of that alternative energy source. Likewise, when I see a PV production plant that is powered entirely by PV, containing machines manufactured at plants powered entirely by PV, machines composed of materials mined, refined, and shipped entirely under PV power, etc., then I will believe that PV has an EROEI greater than 1:1. With an EROEI like 30:1, this should be no problem . . . so the fact that this is not the case is yet another argument, at least in my mind, that reality stands closer to the 1:1 figure.

EROEI is not just a nifty academic exercise. The outcome of the debate on EROEI—whether for PV panels, ethanol production, nuclear fission—is critically important for the future of our economy and society. Regardless of the exact timeline, it is not seriously disputed that non-renewable energy sources such as oil, gas, and coal—all with high EROEI—are running out. There is a commonplace assumption that we will create alternatives to replace them, but at present these alternatives—from PV to ethanol—are all being produced with the very fossil fuels that are disappearing. When they are effectively gone, only energy sources with an EROEI of greater than 1:1 will be viable—and even then, our economy, with its demand for constant growth, cannot survive on energy with an EROEI of 2:1 or 5:1. For that reason, it is critical that we more carefully address this EROEI debate today. If alternative, truly renewable sources of energy cannot match—and eventually improve upon—the EROEI of today’s energy sources, then we must conduct a serious reappraisal of the fundamental structure of our society. My analysis suggests that we must do exactly that.

* CALCULATION: 2 KW complete PV system installed in Phoenix quoted at $16,000 (before any tax rebates or incentives, grid-intertie only,NOT including battery storage)(5). In Phoenix (optimal location), this generates 4,000 KW-hours of electricity per year (5). At prevailing Phoenix rate of electricity ($.10/KW-hour) this is $400/electricity per year. This produces a pay-back time of 40 years if we do not account for the time-value of money. For the purposes of this calculation I will be very conservative and find that actual inflation will equal TVM over this 40-year period. The quoted PV panels have a life-expectancy of 40-years (again, this is conservative as this “complete” system ignores battery storage, which would dramatically decrease the aggregate life expectancy). The resulting price-estimated EROEI of PV solar is 1:1.