Oil is doomed by another fake energy acronym: EROCI

Guest Aeuhhh???? by David Middleton

Economics
Oil Needs to Fall Below $20 to Compete With Green Alternatives

By Mathew Carr
August 5, 2019, 4:40 AM CDT Updated on August 5, 2019, 9:18 AM CDT

Wind and solar power can produce seven times more useful energy for cars, dollar for dollar, than gasoline with oil prices near current levels, according to BNP Paribas SA.

Oil will have fall to $9-$10 a barrel in the long-term in order for gasoline cars to remain competitive with clean-powered electric vehicles, and to $17-$19 a barrel for diesel, Mark Lewis, global head of sustainability research at BNP’s asset management unit, said in a research report. U.S. benchmark crude was trading at about $55 in New York on Monday.
 
“Our analysis leads to a very stark conclusion for the oil industry: for the same capital outlay today, wind and solar energy will already produce much more useful energy for EVs than will oil purchased on the spot market,” Lewis said. “These are stunning numbers, and they suggest that the economics of renewables in tandem with EVs are set to become irresistible over the next decade.”

Lewis coined the term “energy return on capital invested” to explain the economics of road transport. It’s a measure of the money spent on oil and renewables and the differential in their net energy produced when used to provide mobility, he said.

[…]

Bloomberg

Oil Needs to Fall Below $20 to Compete With Green Alternatives…

Aeuhhh????

Renewables must be so feeble, they now need two fake energy acronyms to make them viable.

First we had Energy Returned on Energy Invested (EROEI) and now we have Energy Returned on Capital Invested (EROCI)…

Stark raving mad numbers

The EROCI chart is comparing the capital costs of building offshore wind and solar PV power plants to the sales price of crude oil. It doesn’t get much more apples and oranges than this. Based on this bass-ackwards math, $9/bbl oil is worth more than $60/bbl oil. I only minored in math and spent most of the last 40 years involved in economic geology… But that is just fracking mental.

“Our analysis leads to a very stark conclusion for the oil industry: for the same capital outlay today, wind and solar energy will already produce much more useful energy for EVs than will oil purchased on the spot market.”

Mark Lewis, BNP Paribas, global head of sustainability research, BA in Spanish & German, MPhil in Latin American Studies, MA in German – LinkedIn

No business makes an investment decision based on “energy return.” Returns are denominated in $$$ or some other form of currency.

If his point is that oil would have to drop to $9/bbl for gasoline prices to be low enough to make ICE vehicles less expensive to drive than EV’s… We already have a metric for this concept: Miles per gallon equivalent (MPGe). EV’s are less expensive to drive, at least on paper… Yet the Ford F-Series pickup truck outsells all makes and models of EV’s combined in these occasionally United States… by a wide margin.

Sales data from Inside EV’s and Car Sales Base

To be fair, the article does go on to acknowledge that oil has a YUGE scale factor advantage over unicorn dust… But the unicorn dust is actually a lot more expensive than indicated in Señor (or is it Herr?) Lewis’ EROCI graph.

EIA “Cost and performance characteristics of new central station electricity generating technologies

Why is there such an incessant need for these people to make up fake metrics, fake numbers and declare an end to reality? I think this explains the problem: BNP Paribas, “The bank for a changing world.”

In the meantime, reality marches on…

It’s a fossil-fueled world!

Hat tip to “Carl” for the WUWT tip submission.

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188 thoughts on “Oil is doomed by another fake energy acronym: EROCI

    • Yes, that really puzzles me. Wind operates economically about 20% of the time, so the easiest costing method is to multiply the cost per unit of wind generated electricity by a factor of 5.

      • It’s probably a little worse than that, as the spinning backup has to remain spinning even when the wind is in the Goldilocks zone for the wind turbines. It would be idling, but would still need to be at a point where it could immediately be switched over.

        There would also be the energy required to spin the wind turbine blades during no wind situations. Otherwise, the bearings can develop hard spots and you get premature bearing failure. Takes a reasonable amount of energy to spin a turbine that could be several hundred feet in diameter.

    • $9 to $10/bbl for oil?

      As much as I would dearly love to see the prices at the pump drop to what they were in the 1960s ($0.19 to $.025/gallon), the lack of reality in that demand by the Greenbeaners is stunning.

      • Actually, gasoline prices have not changed since the 1960s. Something that cost $0.25 in 1960 now costs $2.15 (2018, last yearly data – so a bit more).

        Now, gasoline costs more than $2.15 a gallon in a lot of places today – every bit of the excess, and more, is accounted for by increased excise taxes (Federal and State both).

        When one looks closely at the 1973 oil embargo, the reason was almost purely economic, not political. Prices for crude had not kept up with inflation, leaving OPEC producers with a diminishing real income per barrel. In 1973, they had sufficient control of the supply (through nationalization of Western oil company assets in their countries, and a lack of significant new supplies coming on line in those countries) that they could force a massive price spike.

        The supposed political reason, the 1973 Arab-Israeli War, and the West’s response to aid Israel, was a perfect pretext for internal consumption, and useful idiots abroad. Many of the Arab “men on the street” were seriously impacted by the embargo – but could be convinced to bear up under the pain by making the issue “evil Jews,” instead of “protecting the cash flow of the Princes.”

          • True! A few years ago, I took advantage of one of the periodic price spikes and sold what silver coins I had at the time. Around $10 “face value” – it bought two weeks of groceries for a family of five (two teenagers at the time). I don’t remember whether I used some of the proceeds for gas or not, but probably I did.

  1. A recent analysis of wind turbine costs indicated that he lifespan of large turbines is barely half that promised. Since the build/erection costs dominate the cost of a turbine’s power output. this means the real costs are essentially twice as expensive as promised (and reported) costs. There is also the cost of backup power required. In terms of gas powered fuel costs versus electric fuel costs, at 15 cents per kWhr, a 4000 pound electric car can travel realistically 2 1/2 miles per kWhr or 6 cents per mile. But electric rate can also be as high as 35 cents per kWhr (San Diego, Hawaii, etc) or 14 cents per mile. But that doesn’t include road taxes, which at present most EV drivers do not pay, while gas powered cars do pay. At $2 per gallon and 20 MPG, a gas powered car pays less that 7 cents per mile for the fuel only.

    • Just drove 2500 miles in a 1 year old 1 ton crew cab standard bed diesel PU and averaged 19.7 mpg going 5 to 7 mph over the posted speed limit. (Averaged around 75 mph) Mostly highway driving with 200 miles or so around town. I would have gotten better mileage but I filled up when near empty at the lowest priced station on I 84 in Oregon. (Gasbuddy) Didn’t notice until I got 25 gallons in that it was type 5 bio-diesel. After returning to the interstate my instantaneous mpg dropped from around 21 mpg to just over 16 mpg, and stayed that low until I refilled the tank with diesel at Costco in Washington from a pump that stated “may contain 5% bio-diesel”. After that refill my mileage went up, but I could not judge how much since I was driving in town. Once back on Interstate my instantaneous mileage was still lower than earlier in the trip before the bio-diesel.

      Once I refilled at a Walmart in Idaho with normal #2, again with not much left in the tank, my mileage approved about a mile per gallon for the remainder of the trip. I probably would have beat 20 mpg without that bio-diesel partial fill up. 36 gallon tank and refilled the tank 4 times including the partial 25 gallons after starting with 150 miles off of the first tank, and still drove 200 miles more after completing the round trip before refilling again. Over 600 miles per fill up, 10 minutes to refill, than on the road again, try that with an electric vehicle.

      The bio-diesel was about 20 cents cheaper than other stations nearby, but the 15% reduction in mpg was obviously not worth the difference. I had never seen #5 diesel before, I will watch for it in the future in crazy enviro states. I was always aware of the difference in mileage in my old gas truck when I filled up in Vegas with “oxygenated” gas (10% ethanol) and regular gas in Utah. Always less mileage and power with the 10% ethanol gas.

      BTW as to comments on another thread on WUWT re improved economic efficiency and longevity, my old 2002 gas truck had 220,000 miles when I gave it away after 17 years of ownership, no engine work, about the same mpg and power as 20,000 miles in but I did need to replace the auto transmission. Lost 3rd gear, a known problem with that year that was corrected in later transmissions according to the shop who did the change out. It was replaced with a factory crate transmission after 180,000 miles. I gave it away a year ago and it is still running great. Does not burn oil, runs smoothly, starts right up even in COLD weather.

  2. Solar – maximally gives about 27% of a 24 hour day worth of equivalent full-rate generation. Period.
    It lasts for from 20 to 25 years. Period.

    If one uses … 20 years, 5% interest, 2700 power-hours per year, $1.50 per installed watt, then it works out to 5.4¢/kWh for the electric power. By direct comparison, California gasoline at $3.25 a gallon, 10 kWh of motive power per gallon, comes in at 32.5¢/kWh. Some 5.8× more expensive.

    BUT… again, “apples for apples”, in California without subsidies, power costs between 24¢/kWh and well over 28¢/kWh. Well … that makes gasoline only 1.3× more expensive than wall-plug power. The apples-to-apples bit is because both kinds of power are “fully distributed”, from “raw materials” to in-car use.

    No, petrol isn’t particularly inefficient.

    Now, coal, power stations, all that? Much depends on regulatory overhead. Much depends on pölïtical will. Its a different ballgame, for sure.

    Just saying,
    GoatGuy ✓

    • I pay 12¢/kWh for electricity and gasoline in Texas is around $2.40/gal. One gallon of regular gasoline is equivalent to about 33 kWh. That works out to $3.96 per gallon-equivalent of electricity.

      • Exactly. Gasoline is a cheaper source of energy than even cheap electricity. But, the motor is more efficient than the engine (little wasted heat).
        It costs me 5 cents a mile to drive my PHEV on electrons, and 8 cents per mile as a hybrid, and 11 cents as a pure ICE, based on EPA numbers.
        That is with 13 cents per KwH and 2.60 per gallon gas.
        Now, since in every case introduction of solar/wind drives up electricity costs, my cost per mile is going to go up when I drive pure electrons.
        My hybrid cost about 10,000 dollars more than a similar ICE (Thanks to the govt, I broke even on that). It will take a lot of driving at a cost savings of 3 cents per mile to equal 10,000 dollars (333,000 or so).

          • Well you can at the moment. There are people who want to change that. Here in Australia we have the very ridiculous situation where the country has only 28 days of oil supply for all liquid fuels. For such a “smart and lucky” country it’s hard to believe we’re in this situation, but there are people who want exactly that and worse.

          • Exactly. You have to include the time costs of EVs in any calculation. Spending three to six hours waiting to complete your journey versus five minutes is a huge additional cost, and will come with huge additional in infrastructure costs.

        • You have to remember that close to half the cost of gasoline are the road use taxes. As soon as EVs get above a trivial level of market penetration, it will be worth government’s while to figure out a way to make EVs help pay for the roads they are using for free now.

      • Germany: electricity 0.33€/kWh (0.17€/kWh without taxes), diesel 1.22€/l – 0.114€/kWh (0.07€/kWh without taxes).

      • I once worked out that the cost of electricity for a vehicle would be a lot less than the cost of gasoline. Let’s suppose for a minute that’s actually true.

        The average cost of an electric vehicle in 2018 was $38,775, according to Kelley Blue Book. For a gas-powered compact car, the price was just over $20,000. link

        So, you have to save $19,000 in fuel before the electric vehicle pays for itself. Where I am right now, that’s about 15,000 liters of gas. That would take you better than 200,000 km. That, of course, is ignoring the cost of electricity. Also, you can’t ignore the cost of financing.

        If you don’t drive a whole bunch, gas cars are still a better deal. On the other hand, my friend the delivery driver has a used Prius and it saves her a bundle. In my case, there’s no way an electric or hybrid makes sense.

      • David,
        I agree with your numbers. Here in the UK an imperial gallon is basically 40 kWh of energy, this very neatly translates into i kWh/mile travelled in my 1.8 ltr diesel car, i.e. it does 40 MPG.
        With that in mind I am intrigued to read the electric vehicles are lower cost than ICE because I pay £0.16/kWh for electricity. that equates to £6.40 for a gallon equivalent of energy and is more than the £5.90, I pay for a gallon of diesel. It is also worth noting 80% of the diesel fuel cost is Tax!!

        • Your diesel car performance is particularly crap. I get a long term average of 62 miles per imperial gallon which rises to 70 miles per gallon on long journeys say Frimley,Surrey to Great Yarmouth, Norfolk from my Ford Focus Euro 5 diesel.

      • Be happy for Texas prices, David.
        I just paid $3.95/gal for 87 octane at a Chevron. That’s far NE California in Alturas so about 30 cents more than more central areas.
        But an electric motorcycle won’t make the next 150 miles to Burns, Oregon, so what else would I do?
        Near where i live, the gas price at the First Nations service station is usually about 60 cents cheaper, representing a goodly chuck of California’s tax highway robbery.

      • There is a pea under shell game going on in the article above.

        “wind and solar energy will already produce much more useful energy for EVs than will oil purchased on the spot market.”

        “Wind and solar already produce much more useful energy for EVs”; a statement that is correct when one considers Wind and solar generate DC electricity.

        I suspect Lewis’s figures are based upon energy generation at their sources without the energy losses caused by converting to AC and then back to DC.
        In addition to Lewis purposely using apples to pineapples comparison while ignoring subsidies to renewables that add costs to fossil fuels.

        • I suspect he is also using name-plate capacity to figure the capital cost per kwh. We all know that wind and solar actually produce much less than that, on average, in the real world.

  3. “Wind and solar power can produce seven times more useful energy for cars, dollar for dollar, than gasoline …”

    I am not even sure what this sentence means. How do they define “useful”? Are they considering the costs (and loses) of transforming and moving the electricity from a wind turbine all the way into a car battery? Being able to drive more than 200 miles without recharging is pretty darn USEFUL to me.

    “Oil will have fall to $9-$10 a barrel…in order for gasoline cars to remain competitive…and to $17-$19 a barrel for diesel…”

    Last I checked, both gasoline and diesel vehicles were more competitive than electric cars. So…they are predicting electric cars will advance so quickly as to make gas powered cars obsolete? Not until someone solves the energy storage problem – or they regulate it into a distorted market.

    “These are stunning numbers, and they suggest that the economics of renewables in tandem with EVs are set to become irresistible over the next decade.”

    These numbers are completely made up…When the economics makes electric vehicles less expensive and more practical, then people will buy them. Meanwhile, people are going to drive and purchase that which makes economic sense to them. It’s amazing how economics works…they should go take a course in it sometime.

    Besides, we are all going to die of global warming in 11 years and 6 months, so why does this matter?

    • Worse both solar and wind are ONLY available in the first place thanks to the use of ‘evil fossil fuels ‘ in both construction and transportation.

      • AND thanks to fossil fuels for back-up when the wind doesn’t blow at the right speed, the sun isn’t shining, the panels or blades are covered in snow/ice, etc.

    • P’raps the really stunning falsehood in this paper is the EPA definition of MPGe. They compare the kWh of the chemical energy in a gallon of fuel to a kWh hour of electricity. NO mention of how that electricity is produced. Over 85% of the electric supply is fossil fuels, so the conversion should be about .15*33=5kwh from renewables and CO2free nuclear – about 33*.85*.4 overall electric energy conversion=11.22/33=.34 equivalent gallons of fuel.

      The true MPGe is about 1/3 of the claimed 33kWh. The 80-105MPGe values are actually 24-34 MPGe- very similar and in many cases less than the newer compact and midsize cars. The hybrids are all at better than that, and some like the Prius approach diesel efficiencies at 54mpg.

  4. If oil really was that uncompetitive, and renewables really were that cheap, there would be no need for governments to promote or subsidize them, the private sector would be stampeding to get in on the action and oil stocks would be nosediving.

    What color is the sky on the planet where these deluded thinkers live?

    • Exactly, Art.
      The only sure way for products to achieve their best value is for market forces to drive their evolution. If ICE powered vehicles are deigned to the junkyard, it will be a natural progression of the market, gov’t need not intervene. There is a reason that by far most people buy ICE vehicles – they are cheap(er), now dependable to at least 200,000 miles, can be dependably driven any distance, and they don’t significantly pollute.

    • Come on, you don’t believe that oil investors would rather put money into a sure bet that would yield better returns than they would take a risk on an investment with less returns? I guess you need to major in Latin Studies to understand such complexities.

    • Back when I was in college, somebody came out with a study that allegedly proved that when you cut work hours back to 35 hr/week, workers became so much more productive that they actually created more output than they did at 40 hr/week.

      Since this had been “proven”, “scientifically”, more than a few leftists started demanding that since companies were too stupid to see for themselves how much more money they would be making if they cut back work hours, therefor government needed to step in and mandate a shorter work week. For their own good, of course.

  5. Here is another new coined term ERTI, which stands for Energy Return on Tax Investment. Trying to subsidize energy on a massive scale is comparable to using public funds to support air and water consumption. And as a side reminder, you can’t tax the rich for vote-buying programs when you have already rewarded them with a king’s ransom in tax credits. But you can put on the appearance of trying with enough donations and paid media fawning.

  6. See, and there was me thinking they actually meant it when they said it would cost >$100 trillion to get to where we’re at NOW with hydrocarbons. Turns out it’ll really be just like money growing on trees, or unicorns farting Energy Rainbows!

    • He shoots himself in the foot in the introduction…

      If all of this sounds far-fetched, then the speed with which the competitive landscape of the European utility industry has been reshaped over the last decade by the rollout of wind and solar power – and the billions of euros of fossil-fuel generation assets that this has stranded – should be a flashing red light on the oil industry’s dashboard.

    • More like a Tough Road Ahead without oil…
      Fossil fuels are required to make Rubber and Road Pavement
      Without it we will be driving on Steel Wheels around wooden rims on streets paved with stones or with dirt that turns to mud in the winter and has ruts all year round. A truely Tough Road

    • BNP Paribus is a bank (or, more correctly, a “banque” since they originated in France [or, more correctly, Remulak]). They’re supposed to be financially savvy, since they make investments on behalf of their clients. I wouldn’t trust my money to these Bozos.

      But then, I don’t like French banques anyway. From a 2011 trip I took to Paris, the following Facebook post:

      “I went to the banque to cash a cheque. But the clerque was a jerque. So I said: “You’re a dique!” and I walqued right out…”

      • I wonder where this dickbrain invests his own money? Anyone think it might be other than ‘green’ stuff?

        There is the old chestnut of when a financial advisor boasts of his success and points to his Ferrari – potential client says ‘great, now show me your clients’ Ferraris’

        • When my wife talks to financial advisers seeking her business, the first question she asks is “What’s your net worth?” If it isn’t way more than hers (and she’s a millionaire), she just walks away.

  7. “Why is there such an incessant need for these people to make up fake metrics, fake numbers and declare an end to reality?”

    Because the actual science not only fails to support their position, it unconditionally falsifies it.

    Because the environmental impact and the economics of green are so harmful, the only way to make it look good is to lie.

    Because the political left embraced the wrong side of purposefully deceptive science, while many on the left are so emotionally committed to ideology they can’t perceive how they’re being deceived, much less admit error.

    • But, if I ask you this question, “How certain are you that global warming is not responsible for the new weather patterns we’re seeing”, will that make you see the light?

      Do I need a /sarc?

      • Do I need a /sarc?

        You shouldn’t when referring to something that’s not happening as the cause of something else that’s not happening, but then again, too many people consider that your question is relevant.

  8. If renewable energy provides a better return than fossil fuels why are our energy prices soaring and renewables subsidized? People aren’t stupid enough to believe this crap.

      • I agree. It appears the majority are that stupid.

        Using the word “renewable” to describe intermittent ambient sourced energy demonstrates automatic acceptance of the crap.

        The only current energy technology known to man that could be rightly classified as renewable is combustion of wood from managed forests. Wind and solar based generators cannot produce enough energy over their probable life to support their replication in the modern economy. Intermittent generation is thoroughly hobbled by the need and high cost of storage for dispatchable output.

  9. Based on this bass-ackwards math, $9/bbl oil is worth more than $60/bbl oil.

    That’s not what is displayed in the graph. How did you arrive at it?

      • It doesn’t mean the end price (worth), but investment. The smaller investment, the cheaper, better energy. However, this stuff is so convoluted I don’t comment.

        • You don’t make an investment to get a return in TWh.

          If you invest $100 billion in developing oil fields, you’re not going to get a better return with oil at $9/bbl than you would at $60/bbl.

      • What the graph says is that $100 B produces more electricity if oil $9/barrel instead of $60/barrel. Is that a surprise? How is that “mental”? As in:

        Based on this bass-ackwards math, $9/bbl oil is worth more than $60/bbl oil. I only minored in math and spent most of the last 40 years involved in economic geology… But that is just fracking mental.

        Are you generally surprised when cheaper raw materials produce more product per money invested?

        Like everyone else, I am dubious about the cost per TWH of solar and offshore wind; but truer numbers will become available as the current installations are maintained and then replaced.

        • It’s mental because:

          1. EROCI is portrayed as if it’s a valuation.
          2. It compares the sales price of crude oil to the capital costs of offshore wind and solar PV.
          3. This bass-ackwards math makes $9/bbl oil appear more valuable than $60/bbl oil because it uses TWh as a valuation metric.
          4. It understates the capital costs of solar and offshore wind by wide margins.
          5. If you invest $100 billion in developing oil fields, you’re not going to get a better return with oil at $9/bbl than you would at $60/bbl.

          Are you generally surprised when cheaper raw materials produce more product per money invested?

          I covered that in a subsequent paragraph.

          • 1. It is definitely worth considering.

            2. That is the correct comparison if you are thinking about $100B to invest now.

            3. TWH is the product. You seem not to be interested in this.

            4. I expect that is probably true. I expect better estimates in updates.

            5. This is not about investing in developing oil fields, it is about investing in electricity generation. Presumably the capital costs of developing oil fields like the capital costs of developing the manufacturing infrastructure for windmills and solar farms will be adequately covered in the sale prices of these goods (needs to be checked, naturally.)

          • Matthew,
            The idea that the value of oil can be measured by a single simple metric like the amount of electricity that can be produced by it is beyond stupid. There are many other things that factor in, like the ability to store and transport it, the fact that it is a feed stock for many industrial processes, etc. This is exactly why the market value ($$) is used because it reflects all these thing and more. Basic macro economics.

          • The value of oil can easily be measured by s single metric:

            Sales price ($/bbl) – Finding & development cost ($/bbl) = Value ($/bbl)

            Of course, you would have to perform a discounted cash flow analysis to determine what it’s truly worth…

            PV10 is the present value of estimated future oil and gas revenues net of estimated direct expenses and discounted at an annual discount rate of 10%. Used primarily in the energy industry, PV10 is helpful in estimating the present value of a corporation’s proven oil and gas reserves.

            To calculate PV10, reservoir engineers create a reserve report for existing wells and proven undeveloped well locations, taking into account every well’s present production rate, individual production costs, expenses for reserve development, and the forecast decline rate.

            https://www.investopedia.com/terms/p/pv10.asp

        • And that’s complete rubbish. The amount of energy (oil) capable of being produced by any investment is totally independent of the price of oil. That’s a simple fact.

          Price is set by supply and demand, not by investment or the cost of production.

          You can look at the equivalent cost in energy terms of oil versus renewables and see what price oil might fall to, but you don’t need this nonsense to do that.

      • This is silly.
        The graph “Stark Numbers” compares a purported unit price per nameplate capacity in GW of so-called “non-hydro renewables” with a unit price per barrel of some form of oil (which is a unit of energy).
        Apples and oranges.
        Dustbin. Start over.

        • Kurt in Switzerland: The graph “Stark Numbers” compares a purported unit price per nameplate capacity in GW

          The vertical scale in energy out, terrawatt-hours.

          Start over.

          I agree. I look forward to frequent updates.

      • Makes no sense to me. The energy return (in terms of the amount of energy) is surely independent of price?

        For any given investment I get the same amount of oil, regardless of what price I can sell it for. And the price I can sell it for is independent of the investment. So this is just nonsense. And once I have invested, that investment is sunk cost, so to continue producing I just need to cover operating costs. That’s the error the Saudis made about US shale oil.

        What he’s trying to do is to work out renewable prices (based on total costs) and then see what the equivalent oil price needs to be to be competitive. That’s fine but you don’t need thus dumb metric for that.

        • Assuming $55/bbl oil and $2.50 mcf natural gas… If I spend $20 million to drill and produce a 1 million barrel oil well, I’ll produce just as much energy as a 5.8 BCF natural gas well. If the reservoir was gas-filled instead of oil-filled, it would cost the same to drill, $20 million.

          The oil well would make a profit of almost $26 million. The gas well would be a loss of almost $8 million.

  10. What I find so distasteful is that progressive wordsmiths are constantly re-defining words (as in “making more acidic”) and engaging in cherry picking facts to try to make it appear that 2 + 2 = 5, without any sense of shame. They behave as though they believe that any means justifies the end. But, they can’t even make a compelling case that their desired end is necessary, let alone achievable.

  11. Wow. Someone give these tools their own state and have at it. Maybe Oregon.

    When all their fantasies have the bugs worked out, check back with the rest of us and please do a progress report while you’re at it.

    Good luck and Godspeed.

      • What a pity most of it is too small to see with the naked eye, and comes from Asia where – shock! – environmentalism doesn’t seem to cut much ice.

        • ..And now, I’ve heard those on the Left tell us recently, that the Pacific Plastic Patch (the size of Texas, you know), while Yes, most of said material originates as outflow/direct open ocean dump centered on an Asian origin…is really ‘All Our Fault’ – ‘Our’ being the West, by doing the Environmentally Sound Thing by recycling our trash. What I now hear is this dumping is actually our Sin, because the Connex boxes we send over brimming with our Environmentally-conscious Recyclables are rejected and ocean or river-dumped by the aforementioned Asians..because We left un-rinsed foodstuffs inside to fester and rot during the transoceanic journey!!

          Can’t win for the losing, I guess…

          Regards again,

          MCR

  12. I know some leftists, they are SUPER IDEALISTIC and do not like parts of reality, and they think if they just chant long enough it will change the universe.

    • There are a few leftists who are AGW sceptics. I’m one and I think Piers Corbyn is another. What makes us different from other leftists is that we are both scientists.

  13. A vehicle buying decision has a number of pricing components.

    Mileage is one, but anyone who has purchased a vehicle knows the actual price and financing costs are the largest cost components components, not the quantity and cost of energy used.

    A vehicle running $20 to $30,000 more than an equivalent gasoline vehicle, such as current electric products without government subsidies, fuel cost is the not the primary factor driving a purchase decision.

    When electric vehicles provided similar space, power, operating distance and speed of refueling to current gasoline and diesel vehicles, then buyers will have a clear financial choice by which to make a decision.

    GM believes it has found the secret sauce as it appears to be moving to an all electric fleet. This will be an interesting exercise if the company stays this course.

    • “GM believes it has found the secret sauce as it appears to be moving to an all electric fleet. ”

      All electric meaning only EVs, or meaning EV + hybrid (some ICE component)? I seriously doubt the former.

      • Neither like Volvo the intent is make EV of all types and NOT to stop producing ICE. There is a big difference between increasing the types of EV and not selling ICE.

    • For new vehicles, depreciation in resale value is probably the most significant non-current cost factor.

      While new vehicle buyers might be splitting the atom with Excel exercises about comparative fuel costs, they seem oblivious to the fact that they’re about to kiss off $10 – $20k the moment they hit the public streets with in their shiny new ride.

    • GM? Why not?
      When you go bankrupt and get the taxpayers to bail you out once, hey! we got your back. Go for it.
      When you reward gross mismanagement, you get more mismanagement.
      Oh, and rename your finance unit from GMAC to Ally. All better now.

  14. There is nothing wrong with the comparison of the energy output of two sources. Turning the energy into dollar equivalents adds nothing to the analysis. However, the energy metric has to be the same for both. Eg, mechanical energy from an internal combusion engine isn’t directly comparable to electricity from a solar panel.

    The most serious — and common – error in this is comparing capital costs to operating costs. That’s an “F” level MBA 101 error. Total costs, taking into account operating lifespan of each engine, is the only meaningful number. In this example, ignoring the operating costs of wind turbines is nuts.

    Needless to say, there are a host of assumptions in this process. Caveat emptor.

    • The only things that matter are:

      1) How much does it cost to produce and/or generate?
      2) How much can you sell it for?

      The answers to both of those questions are not denominated in Btu, kWh, joules or any other energy metric. The answers are denominated in $$$ and other currencies.

      • Indeed, because there are also real world factors that determine the retail costs and benefits for the buyer. For instance, it would be cheaper to sleep on a pile of straw than it would on a modern mattress, but that doesn’t make the pile of straw the desirable choice or the better bargain.

        • Yes. I am retired. Drive 5000 miles per year. The economy would grind to a zero before the cost of fuel would be much of a consideration.
          OTOH, because of local traffic – and I only drive locally – metrics on my car say I am averaging 16 miles per hour when I drive. A comfortable seat, AC, and a good sound system (with Sirius-XM) are far more important to me. Since those are the qualities my ICE car has, short of government dictat, there is absolutely no reason to buy an EV.

        • But free markets allow one to sleep on a pile of straw if one so desires, for whatever reasons. There was (is?) a market for hair shirts. One size fits nobody.

          Governments can only distort markets and allocate shortages. Would any of you want Bernie Sanders to make life choices for you?

  15. Hmmm…..
    I thought EROEI was at least a partially useful metric. I liked the idea that you could, for instance, compare the energy cost of building a windmill and directly compare to the total energy output of that windmill over it’s expected lifespan. When the numbers do not add up, it is obvious that the whirlygig is a losing proposition. I thought it was a better argument than “Cost”, because subsidies and tax breaks obscure the real cost. Then you get “Cut subsidies for fossil fuels”, then those same people studiously ignore huge surcharges on ratepayer bills. So the whole “Cost” discussion gets quickly derailed. (Some AE advocates are so agile at derailing a “Cost” discussion that you might suspect they had been practicing.)

    In any event, the EROEI metric cuts through all that clutter.
    I always considered the E (energy) part to be a good proxy for “stuff”, because everything requires energy to make and deliver. (Note: I said “proxy”, it is an estimate, not a measurement) Sometimes a proxy allows you to get an estimate for a thing you cannot measure directly. So perhaps useful.
    And of course, Energy is an excellent proxy for that universal commodity, Money. To be sure, there are any number of markets where Energy and Money can be converted and exchanged. So it stands to reason that one can be used as a proxy for the other.

    This whole EROCI metric does seem to be an Academic’s dream, and nothing more.

    • Costs and revenue are all denominated in $$$.

      With oil at $58/bbl and natural gas at $2.10/mcf, oil is worth $10.00/mmBtu and natural gas is worth $2.10/mmBtu.

      • D. Middleton, NG 1/5 the cost of “oil” so why are we not using CNG (3000 psi) for our transportation vehicles? The 1980 NG “shortage” is history. Fracking has produced a 2020 NG “glut”. CNG avoids the cost of building and operating a CCNG plants. The plant is twice as efficient as the ICE but so what, it’s not about energy it’s about money. Burning NG to produce electricity that has to be squeezed into wires and a bunch of transformers to charge a battery to power an electric car that won’t start in the winter is poor economics.

        • Pretty much the same reason Ford F-Series pickup trucks outsell all makes & models of EV’s combined.

          The Marcellus will eventually peak… Cheap natural gas isn’t permanent.

      • Indeed, David, money continues to be the primary measure of many life factors because it has proved to be such a successful concept. If it had not evolved, we would have invented it to fill a need. Geoff S

    • There are no proxies for free, individual human beings. A good analogy is that people vote with their feet; remember the walls needed to keep in East Germans? Things are so good in the U.S. that we need walls to keep the world’s poor out.

      When a government has to force people to do something, that government has failed in its duty to “stay the hell out of my business.” Even the UN IPCC politicians/bureaucrats acknowledge there is no climate emergency.

    • I agree. No need for anymore discussion. Investors can back whichever horse they want, and the free maket can decide who wins. Oh, and clearly no subsidies or tax differentials should be used to determine the winner. Nor should governments ban one to allow the other a win by default.

      I, like all other consumers, stand ready to buy the most cost effective solution that fits my needs.

      • 21st century governments and administrators stand ready to pursue whatever course strengthens their grip on power. That motive trumps everything that occurs at an individual level. The cost effective solution is whatever those in power decide will increase their power and control.

        Anyone owning a roof in Australia is economically disadvantaged if they do not have solar panels on it. Until the climate change/CO2 myth is busted, governments and those in charge will continue to ride that fabulously enriching gravy train; legislating to drive individual behaviour to further enrich themselves.

        USA momentarily dodged a bullet by electing Trump – and not by much. But State governments and administrators are deeply mired in the swamp and will not give up their grip on power without a fight.

  16. QUESTION: Does anybody know how much is the cost of fuel in my electricity bill?
    I pay 13 cents per KwH, and 6.6 cents is the price of the electricity. BUT, what is the actual cost of the fuel, when using coal, oil, nuclear, gas, etc. A big part of that 6.6 cents must be for the cost of the power plant and compensation of the power plant workers, insurance, etc.
    I do not know where to find this information.

    • You can get an idea from EIA’s LCOE reports.

      https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf

      It all depends on the generating source and fuel type.

      The LCOE for natural gas advanced combined cycle is about 4.12¢/kWh, about 3.15¢/kWh is the cost of the fuel.
      The LCOE’s for onshore wind and solar PV are 5.59¢/kWh and 6.0¢/kWh respectively, but the fuel is free and the taxpayers pick up about 30% of the cost.

      • Comparing LCOE of a dispatchable source of electricity with that of an intermittent source is meaningless. Making such comparisons is deceptive and misleading.

        The guaranteed output from any intermittent ambient generating source is precisely ZERO. Hence the LCOE for dispatchable energy from that source alone is INFINITE.

        With current cost of storage and typical capacity factor for fixed array solar at 35 degrees latitude, the minimum LCOE for dispatchable output is around 40c/kWh; tracking array a little less. In most circumstances wind is higher LCOE than solar at that latitude and at lower latitudes. At higher latitude, wind is likely lower LCOE for dispatchable output than solar but likely more than 40c/kWh unless winds are reliable year round at the particular location.

        The only circumstances where intermittent generation has economic merit, with existing technology, is a predominantly hydro supplied power system that is perched water constrained.

        • It’s meaningful because fossil fuels kick the living schist out of wind and solar, even with data skewed in favor of wind and solar.

  17. Ah you’re missing that he is only factoring in “useful” energy. Gasoline and diesel fuel obviously do not produce useful energy, it produces worthless energy – probably the true source of that mysterious dark energy that astronomers have been looking for.

  18. “Energy returned on capital invested”

    I think they forgot about the VALUE of that energy when produced.
    For the electricity markets, renewables increasingly produce a greater share of their kW precisely when the market price is at its lowest (sometimes nil, or even beneath nil).

    • Excellent point. Sometimes we talk about electricity as if it’s value is only in the watt hours provided. But consumers want electricity when they want it, with high quality performance and reliability. Lower quality energy supplies can result in significantly higher other costs for its users. It is interesting to hear how much cheaper insect protein is than many other sources, but it does not mean a great transition is at hand.

  19. Last winter I tried to determine the cost difference for fueling a vehicle with gasoline, electricity or compressed natural gas (3000 psi). I was surprised at how little information I could find. The well to wheel google search found these two sources. Neither source made a clear statement of the cost basis, but after a few calculations I determined the DOE used $012 kw-hr, electric, $12.00 mcf Natural gas and $144 bbl crude oil in determining that EV’s were the most economical transportation mode (typical government work). If anyone has better links please reference.
    https://www.researchgate.net/publication/264981402_Well-to-wheel_analysis_of_direct_and_indirect_use_of_natural_gas_in_passenger_vehicles
    https://www.ornl.gov/content/well-wheel-analysis-direct-and-indirect-use-natural-gas-passenger-vehicles

  20. I wonder what kind of car the EROCI guy drives.

    And what happens to the price of electricity if we all convert to solar and wind. With no taxes from fossil fuels taxes on electricity will go up. I doubt Mr EROCI made any allowance for that.

  21. LSD, or wot?

    BNP Paribas must still be butt-hurt about a non-Frenchman winning le Tour de France again.
    There’s no other logical explanation, Captain.

  22. One little mistake, we all occasionally make mathematical errors. How many math tests did any of us get 100% correct? (for myself maybe 1 out of 100). The author must have meant, “oil must fall below $200/bbl to compete with wind/solar”. That works out about right.

  23. The ‘savings ‘ in running costs for EV come from the fact that there power source currently does not get hit for a massive tax take like ICA ones do. That will have to end once EV hit significant numbers because this tax take is used in many areas to found them .
    Its an irony that EV’s ‘success ‘ would spell an end to the very thing that makes them cheaper to run , not to buy where they cost more.

  24. Wind and solar have ZERO ability to recharge electric cars on demand when needed. There utility is only a maybe. If you happen to need it at the right time.
    Renewables only as a source effecively makes electric cars useless.
    Dispatchable backup is essential.

  25. Oh and I would love for them to elaborate more on how crude would need to drop to $19/bbl for diesel to be more useful than the alternative…you know…that Tesla Semi that no independent source has been allowed to test yet.

  26. And in other news…
    “Tesla reports larger-than-expected losses of $408 million in second quarter. Tesla reported Wednesday a wider-than-expected loss of $408 million, or $2.31 per share, and generated $6.3 billion in revenue in the second quarter despite record deliveries of its electric vehicles.”

    • A loss of 0.4 billion on a revenue of 6.3 Billion does not seem disastrous to me. It is the sort of discrepancy that could be closed by better management methods, improvement in productivity, reduction in stock inventory, a more aggressive buying policy as examples of the actions that I have seen turn failing companies around in fairly short time scale. But the keys are: a product that is in demand , and, crucially, good managers.

  27. Most gasoline engines are about 35% efficient, meaning that 35% of the heat of combustion of gasoline is converted to work to move the car. The heat of combustion of gasoline works out to about 35 kWh per gallon, so that a gallon of gasoline delivers about 12.3 kWh of power to the car. At about $2.80 per gallon of gasoline, the cost per kWh of power is about 23 cents.

    Electric motors are normally about 80% efficient, so that supplying 12.3 kWh to drive an electric car requires about 15.3 kWh of charging power. Of course, due to the higher weight of storage batteries compared to a gasoline engine, an electric car might require more power to move the same distance at the same speed as a gasoline-powered car. Whether this results in any savings over gasoline engines depends on how the electricity is obtained.

    A combined-cycle natural gas generation plant (where natural gas is burned in turbines, and the hot low-pressure gases are heat-exchanged to generate high-pressure steam and provide further power) can have an overall efficiency of about 60%, so that charging an electric vehicle with 15.3 kWh costs 25.5 kWh in heat of combustion of natural gas, which is less than the energy stored in a gallon of gasoline.

    Coal-fired plants are only about 35% efficient, so that charging an electric vehicle would cost 43.7 kWh of heat of combustion of coal, or more than the energy stored in a gallon of gasoline.

    Using an electric vehicle which is charged by a fossil-fuel power plant essentially transfers the location of the emission of pollutants from the car to the power plant, without eliminating them. Natural gas burns cleaner than gasoline, but coal is much dirtier (in terms of real pollutants such as CO, NOx, and SO2).

    Nuclear power plants do not produce pollutant emissions (other than spent radioactive fuel) but their capital cost is much higher than that of gas-fired or coal-fired power plants.

    The problem with “renewable”-fuel charging stations is that most people with electric cars want to drive them during daytime or early evening, and recharge them overnight. Solar power is obviously not available at night, and average wind speeds are much lower at night than during daylight hours.

    • You also need to factor in about 80% efficiency in the charging process, so 80% of 80% knocks it down to about 64% efficiency from the point the electricity is at the charger. Factoring in energy delivery efficiency gets far more complicated for both electricity and petrol.

      • You’ve also forgotten about TRANSMISSION LOSSES. Windmills are seldom located where the demand for power is, and transmission (and conversion) losses all have an impact as well. Intermittency also guarantees that much of the ACTUAL recharging power WILL necessarily be from fossil fuel powered generating plants and NOT from windmills and solar panels.

        Plus you probably LOSE some storage capacity in EV batteries as they go through charge-discharge cycles, while ICE vehicles continue to get the same energy out of the fuel they burn.

        Oh, and we’re still ignoring the fact that may people don’t have off-street parking or garages, and therefore have no access to “overnight” charging for the EVs AT ALL.

  28. http://www.caiso.com/Pages/default.aspx

    That is the California Independent Systems Operator. As of today at 12:30 it shows renewables supplying 44% of current demand. In June, renewables provided 35% of electrity demand.

    Electricity is expensive: my cost at 12:30 is $0.46/kwh (rate depends on time of day). My less thrifty neighbors are “above baseline”, so they pay more, unless they have put up solar panels, which indeed some have.

    I voted against the Renewable Portfolio Standard, but I was in the minority. I mention these figures as examples of more and more fairly reliable statistics about costs and availabilities that I see being publicly available as time goes by.

      • David Middleton: That’s why nothing here is denominated in Btu, kWh or joules…

        That’s a non sequitur. No one metric is completely adequate by itself, but EROEI and EROCI are reasonable metrics to add to the list.

    • Leo Smith, maybe you should have added /sarc. Not everyone understands the EROEI gives the same value to a kw.hr of electricity on a sunny windy cool day as it does after a week of cloudy calm scorching hot days. Doesn’t work that way with all the grid poison renewable junk power on the grid. Nobody cares about the energy in energy out the only metric that matters is that the k.wh price is 10 fold more during the hot spell.

    • dmacleo: let me know when solar/wind materials built w/o using oil based materials.

      I am looking forward to that as well.

    • AND without using fossil fuel constructed and powered machines to mine materials, transport materials, assemble, transport assemblies, erect assemblies, demolish them at end-of-life, and transport/dispose of the “dead” solar panels and windmills.

  29. funny I never see an electric truck out plowing snow in extreme cold weather here.
    would like to see one running all night lifting a plow (electric, BOSS 9.2) and running front and rear window defrosters full blast all night.

    that “wasted” heat from ICE not really wasted up here 6 months a year.

    • dmacleo
      Yes, and you don’t see the calculations for the efficiency or cost of battery systems calculated for Winter when the batteries have reduced capacity and some of the energy has to be used to keep the driver/passengers warm.

      • Clyde Spencer; Yes, and you don’t see the calculations for the efficiency or cost of battery systems calculated for Winter when the batteries have reduced capacity and some of the energy has to be used to keep the driver/passengers warm.

        An associate of mine, who wishes to remain anonymous, lives in Denver and drives his Tesla year-round. In winter when there is enough snow, he drives it with his whole family in it to ski up in the mountains.

        In my VW Jetta I can drive from here (San Diego suburb) to his house in 17 hr, including stops. With charging stations as they are now, his Tesla could make the trip in 19 hr. However, I seldom make the drive non-stop, but overnight somewhere in between. With an overnight charge, the shorter range of the Tesla only adds 1 hr to total lapsed time.

        At about the time that I bought a new VWJetta he bought his Tesla. We are keeping track to see who has the lowest lifetime cost. He has roof-mounted solar panels for electricity, which he essentially leases fro a flat monthly rate. He saves a lot on electricity. He does not pay anything for recharging his Tesla at night.

        Teslas are definitely niche cars, as he freely admits. His other car is an above-average-sized SUV.

    • dmacleo: funny I never see an electric truck out plowing snow in extreme cold weather here.

      99% of the vehicles on the road can’t do that job.

      Contrariwise, you don’t see people driving snowplows to shop for groceries, drive on their vacations, or deliver mail.

        • David Middleton: That’s because an ICE-powered snow plow already moved the snow out of the way.

          Not here, not most places in the US, and not most of the year anywhere. Even Upstate New York (e.g. Rochester which averages 100 in of snow per year) does not use its snowplows every day in winter, and does not use them to carry the mail or FedEx and UPS packages.

          Let me know when snow plows are delivering the mail in CA and TX.

          • This sentence was written in English…

            That’s because an ICE-powered snow plow already moved the snow out of the way.

            Snow plows and other snow removal vehicles only clear the snow when it’s blocking the streets. It doesn’t snow most of the year. When there’s no snow, they generally take the plows off of the trucks and use them as trucks.

          • when we had local fedex contract in 2017 we could carry packages for them after plowing lots. we chose not to as we had too many other commitments but a driver was allowed to take packages and deliver if desired and get paid extra.
            so yeah, snow plows can deliver fedex.

      • I get groceries often when out plowing. safer than having wife drive 30 miles into town to do it.
        my postal carrier has plow mount on his truck.
        my bosses plow truck also tows a camper so the vacation meme covered too.
        rural area.
        lot of trucks. most economical (thats not just fuel economy) tool for the job.

  30. EV’s are less expensive to drive, at least on paper… Yet the Ford F-Series pickup truck outsells all makes and models of EV’s combined in these occasionally United States… by a wide margin.

    For some reason, Ford is developing an EV-150. We’ll see how well they do.

    • “But with plug-in electric vehicles currently making up only 1 percent of the U.S. market, it remains to be seen if demand will keep up with investment.”

      Matthew, it appears you believe in marketing hype over markets. What is your educational background and work experience? You seem big on the future, but what is your past?

      • Dave Fair: PhD in statistics. Research in health, mostly brain and behavioral health.

        At one time, air travel made up only 1% of trans-Atlantic travel. At one time, turbine engines powered only 1% of commercial flight. At one time, powered vehicles did only 1% of American plowing.

        My colleague in Denver owned a Leaf before owning his Tesla, and I owned a Corolla before owning my VW Jetta. His detailed 5-year cost comparison, Leaf vs Corolla, actually favored the Leaf — but the comparison was unfair because, among other details, he paid no tax toward maintaining the roads. But major factors included oil, brakes, and transmission; he did include depreciation of the battery. That was a couple years ago. I expect to read many more comparisons.

        Even though I am getting old, the future is where I expect to do my living. A lot of the pros and cons of electric vehicles and wind and solar power depends on how fast the costs of production can be reduced. And back to the main theme, the future is where the investors expect to reap their returns.

  31. “Based on this bass-ackwards math, $9/bbl oil is worth more than $60/bbl oil. I only minored in math and spent most of the last 40 years involved in economic geology… But that is just fracking mental.”

    Renewables are worthless because they’re more expensive. Cheap energy is worth more. $9/bbl was worth more. We built our country with oil like that. If it was worth more because we had to pay $100/bbl, we’d be like North Korea. That poor.

    Price is related to worth. It’s not always the same thing. Build a country. What has more worth to you? $9/bbl oil or $100/bbl oil? $100/bbl oil is worthless to you.

    • $100/bbl oil is worth more than 10× $9/bbl oil to someone deciding whether or not to invest in oil production.

      • And if I get a windturbine subsidy of $.05 per kilowatt generated, a wind turbine to worth more me but not to society. The wind turbine is worth less to society because I just farm the government for money.

        • I don’t know of anyone who is in business for “society”… Except maybe social justice warriors… But that’s not a real job.

          • Capitalism is good for society. It’s an argument to win with. We say, Look at Venezuela. They aren’t capitalists. I appreciate your articles. I use this site to keep up with the climate news.

          • I agree capitalism is good for society… Unfortunately most people who claim to be doing things on behalf of society aren’t fond of capitalism.

  32. No business makes an investment decision based on “energy return.” Returns are denominated in $$$ or some other form of currency.

    Are you saying that the price of TWHs will not be determined by the purchasing power and preferences of the customers? Absent even more onerous govt intervention than we have now, wherever there is demand for TWHs, the cheaper suppliers will have the advantage.

    As you wrote, the performance of the wind and solar farms is not likely estimated accurately. But some day they will be. If it should turn out that they produce TWHs more cheaply than fossil fuels at the equivalent of $20/barrel of oil, then the solar and wind farms will be competitive in the market or force down the price of fossil fuel.

    Say for the sake of argument that you want to sell electricity in the Imperial Value where most of it will be used in the daytime for pumping irrigation water. It’s only one niche, but there are lots of small niches in the US where electricity from the renewable energy sources can start competing with electricity from fossil fuels. It’s all a matter of continuously reducing the costs of manufacturing the devices.

    • Do you not know how to read? This sentence was also written in English…

      No business makes an investment decision based on “energy return.” Returns are denominated in $$$ or some other form of currency.

      • David Middleton: Do you not know how to read? This sentence was also written in English…

        Do not be simple minded. Even with batteries the more watt-hours you can make per $billion the better will be your financial return.

        Perhaps we could rescale the graph to $$$/kwh, to get over your perplexity about cutting the costs of production.

        Keep your mind on the future. Turbine engines didn’t drive reciprocating engines out of airline travel the first day they were flying.

        Perhaps we should review why Anthony Watt installed PV panels instead of a gas-powered generator. In my neighborhood the roof-mounted PV systems outnumber gas-powered generators for powering the A/C. Granted, that’s in CA where regulations have driven up the cost of electricity off the grid.

        • Try to follow along.

          The EROCI Bozo is comparing the capital costs of building power plants to the sales price of crude oil and claiming that crude oil has to be less than $20/bbl to compete with offshore wind, solar PV and electric vehicles. The EROCI graph treats TWh as a value.

          My first comment in this tedious exchange:

          No business makes an investment decision based on “energy return.” Returns are denominated in $$$ or some other form of currency.

          The part of your reply that I read…

          Are you saying that the price of TWHs will not be determined…

          I wasn’t saying anything other than what I wrote, hence my reply…

          Do you not know how to read? This sentence was also written in English…

          No business makes an investment decision based on “energy return.” Returns are denominated in $$$ or some other form of currency.

          No one invests capital in oil & gas development to get TWh in return.

          The graph is mind-numbingly idiotic.

          $100 billion invested in crude oil development at $9/bbl is worth a lot less than crude at $60/bbl or $100/bbl. By EROCI Bozo math, natural gas would be worth more than all other energy sources because it has the lowest levelized cost of electricity.

          Let’s say you have a prospect to drill. It has a great direct hydrocarbon indicator, but it’s in a play where it could be either oil or gas. The cost to drill and develop the prospect is that same whether it’s oil or gas… let’s say $20 million. If the reservoir is filled with oil, the volumetrics indicate it’s 1 million barrels (bbl), if gas, the volumetrics indicated 6 billion cubic feet (Bcf) of natural gas. The lease has a 1/6 royalty. Oil is at $55/bbl and gas is at $2.50/mcf.

          • 1 million bbl of crude oil = 5.8 trillion Btu
          • 6 Bcf of natural gas = 6.0 trillion Btu

          An oil discovery would return a net profit of $25.8 million.
          A gas discovery would return a net loss of $7.5 million.

          • Well, the product is what the customers buy. There are advantages to producing it cheaper, and investment advantages in knowing who can produce it cheaper. Henry Ford got rich by reducing the cost to produce autos; investors responded favorably. Michael Dell got rich by reducing the cost to manufacture PCs. There are lots more examples.

            We agree that the pricing of the renewable production is suspect. But the idea of backing the producer with the lowest cost of production has a lot of support — that’s whom the customers will buy from.

          • Whoever produces oil & gas cheaper makes more money than those with higher F&D costs.

            However, all producers make more money at $60/bbl than they would have made at $9/bbl, irrespective of their F&D costs.

          • David Middleton: However, all producers make more money at $60/bbl than they would have made at $9/bbl, irrespective of their F&D costs.

            You seem to be assuming that the producers can always command the price that they want.

            In what other realms of production do you think the producers with the higher raw materials costs have the larger market share of comparable products?

          • Nearly 40 years in this business tells me that we cannot even predict the price of oil, much less control it… That’s why we hedge the living schist ot of our production.

          • David Middleton: No one invests capital in oil & gas development to get TWh in return.

            The return easily translates into $$$ once you know the market price of the TWh. Meanwhile, somebody is investing in TWh; here in San Diego Co, SDG&E and the producers it buys the electricity from are investor-owned. There are a lot more investor-owned utilities, and investor-owned manufacturers of PV panesl and windmills. If the reality ever approaches the analysis closely enough, some of the investment money will flow out of oil and into the alternatives.

            I think we have beaten this topic to death for now. That essay you critique is surely not the last word, so we’ll keep following this story in the future, as we have in the recent past.

    • “… but there are lots of small niches in the US where electricity from the renewable energy sources can start competing with electricity from fossil fuels. It’s all a matter of continuously reducing the costs of manufacturing the devices.”

      Matthew, your apparent ignorance of basic electric utility facts is breathtaking. Again, what are your educational qualifications and work background?

      • Dave Fair: Matthew, your apparent ignorance of basic electric utility facts is breathtaking.

        Of what basic electric utility facts am I ignorant? One of my consulting jobs entailed working with a bunch of electrical engineers who were designing (and patenting) better temperature control systems for hotels, and modeling/estimating how much savings could be obtained given the somewhat bizarre and nonlinear electricity rates that SDG&E (that is, nonlinear in kwh consumed) charges its industry customers.

        • Now we’re getting closer to the nut, Matthew. Some sort of consulting work in conjunction with electrical (electronic?) engineers designing temperature control systems for hotels. Of what did your consulting work consist?

          How does this consulting work relate to planning, financing, designing, constructing, and operating and maintaining electric power systems? How does it relate to analyzing, developing and establishing wholesale power sales contracts? How does it relate to analyzing, developing and establishing industrial, commercial and residential electric service rates and conditions of service?

          I’ve done all the above and more. Additionally, I actually ran an electric power company. Tell me more of your expertise in these areas.

          • Dave Fair: . Tell me more of your expertise in these areas.

            So you are an expert in the past. Tell me how my hypotheses about the future are wrong. Did you make a killing investing in battery-powered power tools, battery powered electric razors, batteries, battery-powered golf carts? PV cells for rooftop power supplies (like my colleague in Denver, an engineer fwiw, has)? Battery-powered model airplanes and drones? How about battery-powered delivery trucks?

            This isn’t about how power companies have been run heretofore, it is about the possibility of market penetration by a new technology that so far has required government assistance, like passenger aircraft, turbine engines for them, and the rest of the airline transportation system.

            Did you read the part about how our system was patented? That was possible because none of the experts had heard about it yet.

          • Dave Fair: Tell me more of your expertise in these areas.

            This may be repetitious — it looks like one of my posts got deleted.

            Did you read the part about our patent? We got the patent for the system because nobody yet knows about how to do what we were doing; the measuring devices and their communication network are battery powered.

            The topic is the possible penetration into the market of devices that now need govt assistance, like aircraft and turbine engines of yore. Battery powered devices following, possibly, the trajectory of battery powered tools (including drills and chain saws), model aircraft and drones, golf carts and delivery vans, picnic coolers, computers, telephones, speakers, earphones, cameras, video recorders, and televisions.

          • Dave Fair: I’ve done all the above and more. Additionally, I actually ran an electric power company. Tell me more of your expertise in these areas.

            I think we have covered our disagreements and partial agreements on the facts and conjectures. I have one more question: I allowed as how the costs of the electricity from wind and solar might be underestimated by a factor of 3 (that is, actual costs might be 3 times the estimates.) How bad do you think the estimates might be? Do you agree that the actual costs matter?

      • Dave Fair: Matthew, your apparent ignorance of basic electric utility facts is breathtaking.

        At the risk of repeating myself, of what facts about basic electric utilities am I ignorant?

  33. If their thesis is true, then what are they worried about? All they need to do is wait and “renewable” energy sources will put fossil fuels out of business.

    Pro-tip: Don’t hold your breath.

    • Sailorcurt: All they need to do is wait and “renewable” energy sources will put fossil fuels out of business.

      More likely they’ll reduce the (growth rate of demand for) fossil fuels.

  34. Señor (or is it Herr?) Lewis’ EROCI graph…”

    There’s a political motivation at work likely, so I think it is “Comrade”.

  35. Assuming that a cost effective backup power generation system is not going to be discovered, I can see only one way that the numbers in this article can be effectively applied to real word usage. That is, if smart metering is implemented on an outlet basis and it includes an individually addressable EV charging mode the power system operators could enable EV charging when any excess energy is available to them from wind and/or solar. This would require that, since there can be multi-day periods where excess wind and/or solar are not available, EV customers would have to have an alternate mean of transportation to use in case their EVs were insufficiently charge. But, for someone that only commutes a few tens of miles a day, and has an office job where his/her EV would be available for charging during daytime hours (available solar +/ wind) and late night sleep time hours (available wind), and could take a bus or some other means of transportation when the vehicle hadn’t received a charge lately, this might be cost effective. :<)

  36. One reason electric vehicles are so cheap to operate is they are not taxed to pay for the roads the. way gasoline and diesel are. They are exempted.

    When the cost electricity is padded with the same amount gasoline is, the operating cost will be much higher. There no way around it. Governments are devoted to tax income. If all the vehicles are electric the same road building and maintenance will be needed. A fuel tax will become an energy tax. That’s all.

    In Ontario the tax on fuel is about 50% of the price. Let’s round it to $0.072 per km. Half is taxes so 3.6 cents per km for road use. Electricity is about 1.2 cents per km. Adding the necessary taxes quadruples the consumable cost to 4.8 /km.

    That is less than 7.2 but we didn’t factor in the battery replacement. If it costs $8000 after a working life in 150,000 km it is another 5.3 cents per km. Plus the merchant’s time. So apples-to-apples, it will cost 12.5 cents per km to operate. That is 74% more, with a saving on engine maintenance still to be considered.

    Not so cheap, really

  37. ‘Oil will have fall to $9-$10 a barrel in the long-term in order for gasoline cars to remain competitive with clean-powered electric vehicles’

    A new LEAF is $32,000.

    A new Civic is $20,000.

    Operating cost with electric power is cheaper than with gasoline. But even at a hundred bucks a barrel, the high cost of ownership grossly overrides any savings. Get a LEAF down to $20,000 and then we can talk.

    When my son had a Civic, he spent a thousand dollars a year for gasoline. It is obvious on its face that the LEAF can’t compete. But there is more: depreciation on a LEAF is catastrophic! I haven’t checked it in a year or two, but the LEAF lost 71% of its value in TWO YEARS.

    Financially, EVs are a Titanic disaster.

    ‘in order for gasoline cars to remain competitive with clean-powered electric vehicles’

    An assertion not in evidence.

    • Gamecock: A new LEAF is $32,000.

      A new Civic is $20,000.

      Compare for a while a Tesla and an equally-priced Mercedes-Benz, around $65,000 (no tax credit or other subsidy.) The Tesla probably has a lower lifetime cost, though this remains to be seen. The Tesla has an awesome acceleration, which some people find attractive (I do.) At that price, some buyers prefer the Tesla, and some the M-B. True, there are not many in either camp — I got a VWJetta for a little less than $16,000 in a closeout sale — taxes, title and registration included, but it’s also a 5-speed manual, which puts me and my wife in a very tiny and non-representative niche. It’s a special consideration obviously, but if VW can manufacture their all-electric car of the same size as a Jetta for around $20,000, it might do well in the market.

      Future costs of mass production are, in my opinion, the most important known unknowns in this discussion.

  38. Last few thoughts:

    1. If the costs of renewables are too low by a factor of 3, then the “breakeven” price of oil is $30/bbl.

    2. If there really are no customers to buy the electricity, then this analysis is empty. I think there will be customers, and that the cheapest electricity will increase its market share. Hence provide a return on investment.

    3. If demand for oil for other purposes than transportation fuel keeps the price of oil high, then there are opportunities for investing in oil and investing in renewables.

    4. Right now renewables and EV cars are supported by subsidies and tax credits. Those confound the calculations. I do expect that the large majority of ICE drivers will demand taxes from EV drivers to contribute to road maintenance. I do hope that subsidies are also ended due to voter demand.

    5. EV-powered snow plows will not be cost-competitive in my lifetime, but that represents a small fraction of the energy used for transportation.

    • 1. If the costs of renewables are too low by a factor of 3, then the “breakeven” price of oil is $30/bbl.

      The “breakeven” price of oil has no relationship to renewables. It entirely based on the cost of finding and developing the oil. It varies by play, basin and operator.



      2. If there really are no customers to buy the electricity, then this analysis is empty. I think there will be customers, and that the cheapest electricity will increase its market share. Hence provide a return on investment.

      The analysis is empty because it’s empty.

      3. If demand for oil for other purposes than transportation fuel keeps the price of oil high, then there are opportunities for investing in oil and investing in renewables

      The demand for oil for transportation and other purposes will not shrink any time soon…

      Future oil prices are highly uncertain and are subject to international market conditions influenced by factors outside of the National Energy Modeling System. The High and Low Oil Price cases represent international conditions that could collectively drive prices to extreme, sustained deviations from the Reference case price path. Compared with the Reference case, in the High Oil Price case, non-U.S. demand is higher and non-U.S. supply is lower; in the Low Oil Price case, the opposite is true.

      https://www.eia.gov/outlooks/aeo/pdf/aeo2019.pdf

      The IEA’s recent reduction in its growth rate forecast is not a forecast of shrinking demand.

      4. Right now renewables and EV cars are supported by subsidies and tax credits. Those confound the calculations. I do expect that the large majority of ICE drivers will demand taxes from EV drivers to contribute to road maintenance. I do hope that subsidies are also ended due to voter demand.

      At the Federal level the subsidies are ending. The PTC and ITC for wind and solar are scheduled to phase out over the next couple of years. And the Federal tax credit for EV’s phases out after an automaker sells 200,000 EV’s

      5. EV-powered snow plows will not be cost-competitive in my lifetime, but that represents a small fraction of the energy used for transportation.

      EV-powered snow plows won’t exist anywhere outside of Elon Musk’s imagination.

  39. David Middleton: The “breakeven” price of oil has no relationship to renewables. It entirely based on the cost of finding and developing the oil.

    that was meant to be the breakeven price of oil as a raw material in the production of electricity. Sorry if that was not the topic of this thread. If alternatives are cheap enough, they will reduce the demand for oil for electricity.

    It’s odd you would think that the market price of a commodity is independent of the market price of its competitors in the market.

    • that was meant to be the breakeven price of oil as a raw material in the production of electricity.

      Oil is rarely used “as a raw material in the production of electricity.”

      It’s odd you would think that the market price of a commodity is independent of the market price of its competitors in the market.

      Wind and solar aren’t competitors with oil. Natural gas isn’t even a competitor with oil.

      • David Middleton: Oil is rarely used “as a raw material in the production of electricity.”

        Yeh. I was thinking of the cost of energy-equivalent amounts of natural gas. Sorry.

          • Like you, I have had these discussions with lots of other people. Some are what you might call true believers in the future of electric vehicles, others more like the majority of writers here who believe, more or less, if EVs were a good idea they’d already command at least 5% of the market. I am closer to you than to the EV boosters like my friend in Denver, but I was surprised to learn that you can already drive long distances most places in the US and still find places to recharge pretty conveniently, as I wrote about driving from San Diego to Denver (indeed, most people driving from San Diego/Los Angeles to Las Vegas wouldn’t be inconvenienced much at all. I was surprised by the fact that people use EVs to drive to the skiing lodges in the Rockies. So I am thinking that maybe EVs have a brighter future than I thought a year ago.

            Maybe. The future technologies are always unpredictable, and the technological ecology, so to speak, is created by different people than those who have created and managed the recent past. Experts in the present are not as reliable as we would like in predicting the future.

            You might be right. OTOH, if the EV boosters are right, the energy supply for transportation, whether measured in TWh, joules, or gallons of fuel, will gradually shift from gasoline filling stations to charge points. Investors who have choices of where to invest their $$$ for returns measured in $$$ will be paying attention to studies such as the one that you critique here.

          • Electric vehicles will make gradual inroads.

            Electric tractor trailers, probably not.

            Electric airliners… not a chance.

            Electric LNG tankers… No.

            Electric container ships… No.

            Electric ore carrier ships… No.

            Regarding predictions…

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