My view has long been that if the world economy does not have enough energy resources, it will have to contract. The situation is analogous to a baker without enough ingredients to bake the size of cake he wants to make, or a chemist not being able to set up a full-scale model of a reaction. Perhaps, if a plan is made to make a smaller, differently arranged economy, it could still work.

The types of energy with inadequate supplies are both oil (particularly diesel and jet fuel) and coal. Diesel and jet fuel are especially used in long-distance transportation and in food production. Coal is particularly used in industrial activities. Without enough of these fuels, the world economy is forced to make fewer goods and services, and to make them closer to the end user. Somehow the economy needs to change.

My analysis indicates that our expectation of what goes wrong with inadequate energy supplies is wrong. Strangely enough, it is the finances of governments that start to fail, early on. They add too much debt to support investments that do not pay back well. They add too many programs that they cannot be supported for the long term. They become more willing to quarrel with other countries. Of course, no one will tell us what is really happening, partly because politicians themselves don’t understand.

In this post, I will try to explain some of the changes taking place as the economy begins to reorganize and deal with this inadequate energy supply situation.

[1] One energy limit we are hitting is with respect to “middle distillates.” This is the fraction of the oil supply that provides diesel and jet fuel.

Figure 1. Three different oil-related supply estimates, relative to world population. The top line shows oil production from the 2024 Statistical Review of World Energy, published by the Energy Institute. The second line shows international crude oil production, as reported by the US EIA, with data through October 2024. The bottom line shows middle distillates (diesel and jet fuel) relative to world population, using data from the 2024 Statistical Review of World Energy, published by the Energy Institute.

Each type of energy supply seems to be most suitable for particular uses. Middle distillates are the ones the economy uses for long distance transport of both humans and goods. Diesel is also heavily used in farming. If the world is short of middle distillates, we will have to figure out a way to make goods in a way that is closer to the end user. We may also need to use less modern farm equipment.

The top line on Figure 1 indicates that the world economy has gradually been learning how to use less total oil supply, relative to population. Before oil prices began to soar in 1973, oil with little refining was burned to produce electricity. This oil use could be eliminated by building nuclear power plants, or by building coal or natural gas electricity generation. Home heating was often accomplished by deliveries of diesel to individual households. Factories sometimes used diesel as fuel for processes done by machines. Many of these tasks could easily be transitioned to electricity.

After the spike in oil prices in oil prices in 1973, manufacturers started making cars smaller and more fuel efficient. In more recent years, young people have begun deferring buying an automobile because their cost is unaffordable. Another factor holding down oil usage is the trend toward working from home. Electric vehicles may also be having an impact.

On Figure 1, data for crude oil (second line) is available through October 2024. This data suggests that crude oil production has been encountering production problems recently. Note the oval labeled “Crude oil problem,” relating to recent production for this second line. The other two lines on Figure 1 are only through 2023.

The problem causing the cutback in oil production (relative to population) is the opposite of what most people have expected: Prices are not high enough for producers to ramp up production. OPEC, and its affiliates, have decided to hold production down because prices are not high enough. The underlying problem is that oil prices are disproportionately affected by what users can afford.

Food prices around the world are critically dependent upon oil prices. The vast majority of buyers of food, worldwide, are poor people. If budgets are stretched, poor people will tend to eat less meat. Producing meat is inefficient; it requires that animals eat a disproportionate number of calories, relative to the food energy they produce. This is especially the case for beef. A trend toward less meat eating, or even eating less beef, will tend to hold down the demand for oil.

Another approach to holding down food costs is to buy less imported food. If consumers choose to eat less high-priced imported food, this will tend to use less oil, especially diesel and jet fuel. Another thing customers can do to hold down food costs is to visit restaurants less. This also tends to reduce oil consumption.

On Figure 1, the third line is the one I am especially concerned about. This is the one that shows middle distillate (diesel and jet fuel) consumption. This is the one that was greatly squeezed down in 2020 by the restrictions related to Covid. Diesel is the fuel of heavy industry (construction and road building), as well as long distance transport and agriculture. Electricity is rarely a good substitute for diesel; it cannot give the bursts of power that diesel provides.

Close examination of the third line on Figure 1 shows that between about 1993 or 1994 and 2007, the consumption of middle distillates was rising relative to world population. This makes sense because international trade being ramped up, starting about this time. There was a dip in this line in 2009 because of the Great Recession, after which middle distillates per capita consumption noticeably leveled off. This flattening could be an early pointer to inadequacy in the middle distillate oil supply.

In 2019, middle distillate consumption per capita first started to stumble, falling 1.4% from its previous level. The restrictions in 2020 brought middle distillate consumption per capita down by 18% from the 2019 level. This was a far greater decrease than for total oil (top line on Figure 1) or crude oil (middle line). By 2023 (the latest point), per capita consumption had only partially recovered; the level was still below the low point in 2009 after the Great Recession.

Middle distillates can be found in almost any kind of oil, but the best supply is in very heavy oil. Examples of providers of such heavy oil are Russia (Urals), Canada (oil sands), and Venezuela (oil sands in Orinoco belt). The price for such heavy oil tends to lag behind the price for lighter crude oil because of the high cost of transporting and processing such oil.

Strangely enough, countries that are not getting enough funds for their exported fossil fuels tend to start wars. My analysis suggests that at the time World War I started, the UK was not getting a high enough price for the coal they were trying to extract. The coal was getting more expensive to extract because of depletion. Germany had a similar problem at the time World War II started. The financial stresses of exporters who feel they are getting an inadequate price for their exported fossil fuels seems to push them toward wars.

We can speculate that the financial pressures of low oil prices have been somewhat behind Russia’s decision to be at war with Ukraine. The recent problems of Venezuela and Canada may also be related to the low prices of the heavy oil they are trying to extract and export.

Extracting a greater quantity of heavy oil would likely require higher prices for food around the world because of the use of diesel in growing and transporting food. Publications showing oil reserves indicate that there is a huge amount of heavy oil in the ground around the world; the problem is that it is impossible to get the price up high enough to extract this oil.

The existence of these heavy oil “reserves” is one of the things that makes many modelers think that our biggest problem in the future might be climate change. The catch is that we need to get the oil out at a price that consumers of food and other goods can afford.

[2] Another energy limit we are hitting is coal.

Coal energy is the foundation of the world’s industry. It is especially used in producing steel and concrete. Coal started the world industrial revolution. The primary advantage it has historically had, is that it has been inexpensive to extract. It is also fairly easy to store and transport. Coal can be utilized without a huge amount of specialized or complex infrastructure.

China produces and consumes more than half of the world’s coal. In recent years, it has been far above other countries in industrialization.

Figure 2. Chart by the International Energy Agency showing total fuel consumed by industry, for the top five fuel consuming nations of the world. TFC = Total Fuel Consumed. Chart from 2019.

World coal consumption per capita has been falling since about 2011. Arguably, world coal consumption was on a bumpy plateau until 2013, with world coal consumption per capita truly falling only during 2014 and thereafter.

Figure 3. World coal consumption per capita, based on data of the 2024 Statistical Review of World Energy, published by the Energy Institute, showing data through 2023.

This pattern of coal usage means that world industrialization has been constricted, especially since 2014. In fact, the restriction started as early as 2012. It became impossible for China to build as many new condominium apartment buildings as inexpensively as promised; this eventually led to defaults by builders. World steel output started to become restricted. The model of world economic growth, led by China and other emerging markets, began to disappear.

The problem coal seems to have is the same as the problem diesel has. There is a huge quantity of coal resources available, but the price never seems to rise high enough for long enough for producers to truly ramp up production, especially relative to the ever-growing world population. Coal is especially needed now, with intermittent wind and solar leaving large gaps in electricity generation that need to be filled by burning some fossil fuel. Coal is much easier to ship and store than natural gas. Oil is convenient for electricity balancing, but it tends to be high-priced.

[3] Political leaders created new narratives that hid the problems of inadequate middle-distillate and coal supplies.

The last thing we can expect a politician to tell his constituents is, “We have a shortage problem here. There are more resources available, but they are too expensive to extract and ship to provide affordable food, electricity, and housing.”

Instead, political leaders everywhere created new narratives and started to encourage investments following those new narratives. To encourage investment, they lowered interest rates (Figure 4), made debt very available, and offered subsidies. Governments even added to their own debt to support their would-be solutions to energy problems.

Figure 4. Returns on 3-month and 10-year US Treasury investments. Chart by Federal Reserve of St. Louis. Data through February 21, 2025.

Political leaders developed very believable narratives. These narratives were similar to Aesop’s Fable’s “Sour Grapes” story, claiming that the grapes were really sour, so the wolf didn’t really want the grapes he initially sought.

The popular narrative has been, “We don’t really want coal or heavy types of oil anyhow. They are terribly polluting. Besides, burning fossil fuels will lead to climate change. There are new cleaner forms of energy. We can also stimulate the economy by adding more programs, including more subsidies to help poor people.”

This narrative was supported by politicians in most energy-deficient countries. The increase in debt following this narrative seemed to keep the world economy away from another major recession after 2008. People began to believe that it was debt-based programs, especially those enabled by more US government spending, that pulled the economy forward.

They did not understand adding debt adds more “demand” for goods and services in general, and the energy products needed to make them. However, it doesn’t achieve the desired result if inexpensively available energy resources are not available to meet this demand. Instead, the pull of this demand will partly lead to inflation. This is the issue the economy has been up against.

[4] What could possibly go wrong?

There are a lot of things that have started to go wrong.

(a) US governmental debt is skyrocketing to an unheard-of level. Relative to GDP, the US Congressional Budget Office (CBO) projects that US debt will soon be higher than it was at the time of World War II.

Figure 5. Chart by the CBO showing US Federal Debt, as ratio to GDP, from 1900 to 2035. Source.

Notice that the latest surge in US government debt started in 2008, when the Federal Reserve decided to bail out the economy with ultra-low interest rates (Figure 4). A second surge took place in 2020, when the US government began more give-away programs to support the economy as Covid restrictions took place. The CBO forecasts that this surge in debt will continue in the future.

(b) Interest on US government debt has become a huge burden. We seem to need to increase government debt, simply to pay the ever-higher interest payments. This is part of what is driving the increased debt projected in the 2025 to 2035 period.

Figure 6 shows a breakdown of actual Fiscal Year 2024 US Federal Government spending by major categories.

Figure 6. Figure by Gail Tverberg, based on CBO breakdown of US government spending for FY 2024 given at this link.

Note that US government spending on interest payments ($881 billion) is now larger than defense payments ($855 billion). Part of the problem is that the ultra-low interest rates of the 2008 to 2022 period have turned out to be unsustainable. (See Figure 4.) As older debt at lower interest rates is gradually replaced by more recent debt at higher rates, it seems likely that these interest payments will continue to grow in the future.

(c) Continued deficit spending appears likely to be needed in the future.

Figure 7. Chart by CBO showing annual deficit in two pieces–(a) the amount simply from spending more than available income, and (b) interest on outstanding debt. Source.

The CBO estimates in Figure 5 seem likely to be optimistic. In January 2025, the CBO expected that inflation would immediately decrease to 2% and stay at that level. The CBO also expects the primary deficit to fall.

(d) The shortfall in tax dollars cannot easily be fixed.

Today, tax dollars mostly come from American taxpayers, either as income taxes or as payroll taxes.

Figure 8. Past and Expected Sources of US Federal Government Funding, according to the CBO.

A person can deduce that to stop adding to the deficit, additional taxes of at least 5% or 6% of GDP (which is equivalent to 12% to 14% of wages) would be needed. Doubling payroll taxes might provide enough, but that cannot happen.

Corporate income taxes collected in recent years have been very low. US companies are either not very profitable, or they are using international tax laws to provide low tax payments.

(e) The incredibly low interest rates have encouraged all kinds of investment in projects that may make people happy, but that do not actually result in more goods and services, or more taxable income.

Figure 8 shows that US corporate income taxes have been falling over time. The reason is not entirely clear, but it may be that companies set their sights lower when the return that is required to pay back debt with interest is low. All the subsidies for wind, solar, electric vehicles, and semiconductor chips have focused the interest of businesses on devices that may or may not be generating a huge amount of taxable income in the future.

I have written articles and given talks such as, Green Energy Must Generate Adequate Taxable Income to Be Sustainable. Green energy can look like it would work if a person uses a model with an interest rate near zero, and policies that give renewable electricity artificially high prices when it is available. The problem is that, one way or another, the system as a whole still needs to generate adequate taxable income to keep the government operating.

Of course, many of the investments with the additional debt have been in non-energy projects. There have been do-good projects around the world. Young people have been encouraged to go to college using debt repayable to the government. Government funding has supported healthcare and pensions for the elderly. But do these many programs truly lead to higher tax dollars to support the US government? If the economy truly were very rich (lots of inexpensive surplus energy), it could afford all these programs. Unfortunately, it is becoming clear that the US has more programs than it can afford.

(f) The ultra-low interest rates have encouraged asset price bubbles and wealth disparities.

With ultra-low interest rates and readily available debt, property prices tend to rise. Investors decide to buy homes and “flip” them. Or they buy them, and plan to rent them out, hopefully making money on price appreciation.

Stock market prices are also buoyed by the readily available debt and low interest rate. The US S&P 500 stock market has provided an annualized return of 10.7% per year since 2008, while International Markets (as measured by the MSCI EAFE index) have shown a 3.3% annual return for the same period, according to Morningstar. The huge increase in US government debt no doubt contributed to the favorable S&P 500 return during this period.

Wealth disparities tend to rise in an ultra-low interest period because the rich disproportionately tend to be asset owners. They are the ones who use “leverage” to get even more wealth from rising asset prices.

(g) Tensions have risen around the world, both between countries and among individual citizens.

The underlying problem is that the system as a whole is under great strain. Some parts of the system must get “shorted” if there is not enough coal and certain types of oil to go around. Politicians sense that China and the US cannot both succeed at industrialization. There is too little coal, for one thing. China is struggling; quite often it seems to be trying to try to “dump” goods on the world market using subsidized prices. This makes it even more difficult for the US to compete.

Individual US citizens are often unhappy. With the bubble in home prices and today’s interest rates, citizens who are not now homeowners feel like they are locked out of home ownership. Inflation in the cost of rent, automobiles, and insurance has become a huge problem. People who work at unskilled hourly jobs find that their standard of living is often not much (or any) higher than people who choose to live on government benefits rather than work. Fairly radical leaders are voted into power.

[5] The major underlying problem is that it really takes a growing supply of low-priced energy products to propel the economy forward.

When plenty of cheap-to-extract oil and coal are available, growing government debt can help to encourage their development by adding to “demand” and raising the prices consumers can afford to pay. High prices of oil and coal become less of a problem for consumers.

Figure 9. Average annual Brent equivalent oil prices, based on data of the 2024 Statistical Review of World Energy, published by the Energy Institute.

But when energy supply of the required types is constrained, the additional buying power made available by added debt tends to lead to inflation rather than more finished goods and services. This inflationary tendency is the problem the US has been contending with recently.

Strangely enough, I think that growing inexpensive coal supply supported the world economy, as oil prices rose to a peak in 2011. As China industrialized its economy using coal, its demand for oil rose higher. The higher world demand coming from this industrialization helped to raise oil prices. But as coal supply (relative to world population) began to fall, oil prices also began to fall. By 2014, the decline in industrial production caused by the lower coal supply (Figure 3) likely contributed to the fall in oil prices shown on Figure 9.

It is the fact that oil prices have not been able to rise higher and higher, even with added government debt, which is inhibiting oil production. World coal production is inhibited by a similar difficulty.

[6] The world economy seems to be headed for a major reorganization.

The world economy seems to be headed in the direction that many, many economies have encountered in the past: Collapse. Collapse seems to take place over a period of years. The existing economy is likely to lose complexity over time. For example, with inadequate middle distillates, long-distance shipping and travel will need to be scaled way back. Trading patterns will need to change.

Governments are among the most vulnerable parts of economies because they operate on available energy surpluses. The collapse of the Central Government of the Soviet Union took place in 1991, leaving in place more local governments. Something like this could happen again, elsewhere.

I expect that complex energy products will gradually fail. Gathering biomass to burn is, in some sense, the least complex form of supplemental energy. Oil and coal, at least historically, have not been too far behind, in terms of low complexity. Other forms of today’s human-produced energy supply, including electricity transmitted over transmission lines, are more complex. I would not be surprised if the more complex forms of energy start to fail, at least in some parts of the world, fairly soon.

Donald Trump and the Department of Government Efficiency seem to be part of the (unfortunately) necessary downshift in the size of the economy. As awful as may be, something of this sort seems to be necessary, if the US government (and governments elsewhere) have greatly overpromised on what goods and services they can provide in the future.

The self-organizing economy seems to make changes on its own based on resource availability and other factors. The situation is very similar to the evolution of plants and animals and the survival of the best adapted. I believe that there is a God behind whatever changes take place, but I know that many others will disagree with me. In any event, these changes cannot take place simply because of the ideas of a particular leader, or group of leaders. There is a physics problem underlying the changes we are experiencing.

There is a great deal more that can be written on this subject, but I will leave these thoughts for another post.

The great unspoken fact of the 1930s was that the world was drifting to war, a trend that nobody knew how to stop.

The great unspoken fact of the 2020s is that the global economy is in the process of inflecting from growth into contraction, and, again, this is a process that no-one can halt, still less put into reverse.

Logically, countries, groups and individuals must strive to work out how to fare best in an economy that has become a less-than-zero-sum game. Their relative success or failure in this endeavour will be a function of how much they know about it, and how early they are in gaining that knowledge.

What do they know?

This leads to a question that often arises here, which is that of how far ‘the powers that be’ are aware of this.

It seems logical to assume that somebody, somewhere, must have figured this out. Getting to the facts of the situation isn’t exactly rocket-science. All that’s really required is the kind of cool objectivity that rejects consensus wishful-thinking, and repudiates, as unrealistic, the orthodox notion that we can be assured of ‘infinite economic growth on a finite planet’.

With global economic inflexion understood, the issue becomes one of competitive advantage.

Seen strategically, America is in the midst of a gigantic economic gambit, the bet being that extreme fiscal stimulus can re-shore and expand important industries to a point of critical mass before the burden of soaring public debt either cripples the dollar or, more probably, calls time on super-gigantic stimulus.

Nobody can imagine that the current trajectory of US government borrowing is sustainable. But an important strategic advantage can be seized if lenders – and overseas lenders in particular – are willing to fund what is, essentially, a competitive, national-advantage economic agenda

There is, by the way, nothing wrong with pursuing national economic advantage – it’s what governments do.

The counter-gambit is that the BRICS+ countries are trying to build a competing economic bloc strong enough to defend its member countries from the aggressive economic strategy of the United States.

These are examples of move and counter-move in the wholly new context of involuntary economic de-growth.

To a significant extent, countries outside these completing blocs have to decide where their own best interests lie.

The energy key

It should be beyond obvious that energy is critical to these issues. Our reliance on fossil fuels has created two juxtaposed vulnerabilities.

The first is that we may inflict irreparable climatic and ecological damage to the Earth’s environment, and this will have economic as well as human consequences.

The second is that the diminishing economic value of oil, natural gas and coal is putting economic growth into reverse.

Anyone clever enough to figure out the realities of economic inflexion must also be smart enough to realise that renewable energy sources can’t provide a complete, like-for-like replacement for the energy value hitherto sourced from oil, natural gas and coal. Renewables expansion is simply too materials-intensive for this to happen, and the requisite raw materials can only be obtained through the agency of legacy fossil fuel energy.

To anyone who has reached this conclusion, the deceleration of energy transition – and the corresponding slowing of the move from ICE to battery-powered vehicles – will have come as no surprise at all.

This isn’t to say that renewables (and their transport ancillaries) don’t have important roles to play in the economic future. The manufacture of wind turbines, solar panels, grids, power-storage systems and EVs are important industries, certainly in terms of employment, though improbably in terms of profit. If we’re going to build these things anyway, it’s better that the building of them takes place at home rather than overseas.

But it’s one thing to try to corner as much energy-transition activity as you can, and quite another to believe that renewables are capable of taking over from fossil fuels in an economy that carries on growing.

Crisis management, or the art of pretend-and-extend

To a significant extent, politics is a matter of crisis management, something in which participants are successful if the eventuation of crisis can be pushed out far enough into the future that it doesn’t happen on their watch.

This explains much of the apparent madness now visible in global economic and financial affairs.

Various instances illustrate these processes.

In the United Kingdom, a large and rising proportion of home-buyers are now taking out mortgages whose terms extend beyond the borrowers’ dates of retirement. This may seem both irrational and dangerous, but it’s part of a financial mechanism dictated by political choice. There’s no divine diktat which says that a country must push the prices of homes out of the reach of most of its own citizens, but policies which would deflate the property price bubble haven’t attracted sufficient political support to become feasible.

It seems safe to conclude that somebody in the corridors of power must know that Britain has become a post-growth, credit-dependent economy. Over the past twenty years, and with everything stated at constant 2023 values, the government has borrowed £2.1tn, roughly half of which has been backstopped by the net-of-QT money-creation of the central bank. Private borrowers have been more cautious, but have nevertheless increased their debts by close to £800bn. All of this is reinforced by rapid credit expansion in the NBFI or “shadow banking” sector.

The result of all this credit-bingeing and money-creation is an economy that’s only £625bn, or 30%, bigger now than it was in 2003, and most of that “growth” is itself the cosmetic effect of spending borrowed money.

The immediate need is to walk a tight-rope between interest rates that are high enough to prop up the currency, but low enough not to burst the real estate bubble. Assurances of ‘growth’ are pure PR-exercises in an economy that can’t, nowadays, house its population, bring down colossal health-care waiting lists, or stop polluting its rivers and seas with untreated sewage.

In short, the British authorities are playing extend-and-pretend.

But they shouldn’t be taken too hardly to task for that, for two main reasons. First, many other countries, arguably most of them, are doing exactly the same thing.

Second, there are no good alternatives to ‘extend-and-pretend’.

Likewise, the United States reported real-terms growth of $675bn last year, but the government had to run a $2.4tn fiscal deficit to enable this to happen, and is now adding public debt at the rate of $1tn every hundred days. Nobody in his or her right mind could contend that this is sustainable, but America has the advantage of a currency that’s the least-dirty shirt in the global laundry-basket.

China, meanwhile, is trying to manage the implosion of a gigantic real-estate Ponzi scheme, but nobody could imagine that this event came unexpectedly, out-of-the-blue. Like Britain, China’s total borrowing over the past twenty years has far exceeded reported growth, in this instance in the ratio of 4.4:1, with the difference that private entities, rather than the state itself, have undertaken most (almost four-fifths) of this borrowing.

Japan is persisting with monetary policies which have halved the dollar value of the yen since the inception of “Abenomics” back in 2012.

In short, much of what looks like madness – British mortgages, US Federal debt, Chinese real-estate, and the monetary policies of the Bank of Japan – turns out to be exercises in ‘extend and pretend’.

Getting to the real

Those of us who want to work out how things are really unfolding are perfectly capable of doing so. Stripping out credit-effect distortion from reported GDP brings us to a calculation of underlying or ‘clean’ economic output (C-GDP) which correlates remarkably closely to the quantities of primary energy used in the economy.

The further deduction of surging ECoEs – the Energy Costs of Energy – provides a calculation of prosperity which is a pretty good fit with what’s been experienced in recent times.

On the latter calculation, the World was 28% more prosperous in 2023 than it was in 2003, but population numbers increased by 26% between those same years.

We can, if we so wish, make corresponding calculations about the future. As ECoEs carry on rising, and as renewables prove incapable of providing a complete replacement for the energy value hitherto sourced from fossil fuels, aggregate material prosperity will fall, gradually in the balance of the 2020s but much more rapidly in the 2030s.

In comparison with 2023, the world’s average person is likely to be only about 7% poorer by 2030, but fully 25% worse off by 2040.

At the same time, the real costs of energy-intensive necessities will carry on rising, applying leveraged compression to the affordability of discretionary (non-essential) products and services.

Where the financial corollaries of these material economic trends are concerned, we can assume that ‘extend-and-pretend’ will remain the only game in town, meaning that debt and quasi-debt will carry on rising – and the spending of this credit will carry on being presented as “growth” – until the credibility of money has been destroyed.

The strategic aim isn’t to side-step this process, but to ensure that your currency doesn’t win this ‘race to the bottom’.

The rate at which credit will rise will force the authorities back onto the path of QE, ZIRP and NIRP, because there’s no other way of maintaining the fiction that the economy is capable of servicing these soaring debts.

We can, on these same lines, work out which sectors will face the most severe compression, and figure out which countries and which currencies are leading the race to the bottom.

We can do all of these things and, if we so wish, we can share our findings.

But we can’t expect any of this to make us popular.

Until quite recently, the idea that the global economy might reverse – my preferred term is inflect – from growth into contraction lived in the realm of radical and unwelcome theory.

But this has been the year in which theory has been borne out by experience.

Much as astronomers deduce the existence of invisible objects through their gravitational effects on other bodies, we can see the effects of economic inflexion in everything from social discontent and the “cost of living crisis” to deteriorating international relations and worsening financial fragility.

The causes of the ending and reversal of growth can be summed up in the single word depletion.

Fossil fuel energy has been depleted to a point where its material costs, measured here as the Energy Costs of Energy (ECoEs), are becoming unaffordable.

Non-energy natural resources, too, such as minerals, agricultural land and accessible water, have been depleted, as has the finite ability of the environment to absorb the effects of human economic activity.

1

It has turned out to be perfectly possible to measure, interpret and anticipate these economic processes, and that’s been the aim of the Surplus Energy Economics project from the outset.

But two centuries of industrial expansion have been quite enough to render economic reversal very nearly incomprehensible to most people, and almost entirely unacceptable.

Our first collective responses have involved simple denial, based on the ‘infinite growth’ promises of an economics orthodoxy firmly rooted in pre-industrial conditions, when none of today’s resource challenges were even conceivable.

Our second resort has been to hubris, manifested in the idea that human ingenuity, implemented as technology, can resolve all of our energetic, material and environmental problems. This can, supposedly, offer a seamless, with-growth transition to alternative energy sources, and perhaps even “de-couple” the economy from the use of energy.

The snag here is that the potential scope of technology is bounded by limits set by the laws of physics. The looming failure of technology is going to come as a gigantic shock to the system.

We’ll look at this impending failure shortly.

Reality, meanwhile, is breaking through, as it always does. Few voters now believe that their economic conditions have been improving in recent times, that the current extent of inequality is justifiable, or that soaring living costs are either fully reported or are traceable to one-off bits of simple bad luck. They’re increasingly attracted to scapegoating foreigners, who might be immigrants, or dishonest trading partners.

The authorities, meanwhile, have been drawn towards the ‘extend and pretend’ of reckless credit expansion, to ‘getting their retaliation in first’ against rising popular discontent, and to trying to skew the patterns of international trade to their own national advantage.

Before we judge them too harshly, though, we should remember – in this season of goodwill – that the process of inflexion itself is entirely outside their control, and that, one by one, all of the supposed “levers” of economic management have broken in their hands.

2

The formal commencement of the industrial economy can be dated to 1776, when James Watt completed the first truly efficient device for converting heat into work.

But this was to be no sudden revolution. Even in Britain, where this process began, battleships were still made of wood, and powered by wind, into and beyond the 1850s. Industrialization began quite slowly in Europe and North America before extending, again gradually, into all corners of the world.

This said, and with a tiny scattering of exceptions, even the last countries in which industrialization took hold have been living with assumed economic growth for well over a century.

The ending and reversal of growth is, therefore, a profound culture-shock, up-ending generations of almost unchallenged expectation.

It’s a revolution far more sweeping in its implications even than the removal of absolute monarchy, or the arrival and subsequent failure of communism in the USSR and its satellites.

This means that we need to start looking for the practices, systems and institutions that will be swept aside by this revolution – and, conversely, at what might replace them.

3

It helps us to know that two assumptions, above all, will be overturned by the ending and reversal of growth.

One of these is that each generation will be more materially prosperous than the one before.

The second is the notion that economic expansion is coterminous with progress. If somebody opposes the bulldozing of farmland or the destruction of historic artefacts for the building of a retail mall, motorway or factory, he or she is portrayed as an obstacle to progress. The word Luddite entered the English language as a term describing futile, unreasoning opposition to the unstoppable march of modernity.

The ever-perceptive Charles Hugh Smith has explained that a lot of what we continue to think of as ‘progress’ has in fact become Anti-Progress, a concept which he has connected to the collapse of quality. Your new domestic appliance, for example, might be wi-fi connected (”progress”), but won’t work as well, or last as long, as the old one (“anti-progress”).

4

We can look at this, quite reasonably, as the product of misaligned incentives, where it’s more profitable to sell the customer a new and inferior product every five years than a higher-quality, more repairable one every twenty-five.

But there are structural factors involved as well.

In pre-industrial times, raw materials were costly, in the sense that their supply required large amounts of human labour. In these conditions, it made far more sense to use hard-won, costly timber to make furniture or buildings that would last for generations than to construct shoddier alternatives that would require replacement in a small number of years.

The advent of cheap and abundant energy changed all that, making possible a profit-incentivized shift to an accelerated cycle of creation, disposal and replacement. This is how the energy-dissipative economic model of the past became the dissipative-landfill commercial system of today.

This system will unravel, not as a matter of commercial practice or social preference, but because of changes in the productive-replacement equation itself.

5

Contrary to the quaint notions of orthodox economics, the central processes of the economy are material, not monetary.

The defining purpose of the economy is to supply physical products and services to society.

Services are no less material than goods – we can’t run an e-commerce business without vehicles and warehouses, or supply on-line services without cables and computers.

Since a society without a history is as disconnected as a person without a memory, we can safely assume that history will continue to be taught and studied, long after economics has been subsumed into the sciences of thermodynamics and the characteristics of materials.

These historians of the future will be amused, as well as baffled, by contemporary notions that we could build an immaterial economy based on services, or somehow “de-couple” the energy economy from the use of energy. They’re likely to laugh out loud at the notion of ‘infinite, exponential economic expansion on a finite planet’.

The material economy works by using energy to convert non-energy resources into products. These then wear out, and are abandoned and replaced. Critically, the speed at which this cyclical process operates is determined by the relative costs of the necessary inputs.

These inputs are human labour, energy and raw materials.

When each of these inputs was costly, the lifespans of products were extended as far as possible. Cheap and abundant energy made each of these inputs less expensive – production required less human labour, the cost-efficiency of resource extraction rose sharply, and the cost of energy itself was low.

In consequence, life-spans of products became ever less important, and the relinquishment-replacement cycle was accelerated. The creation of the dissipative-landfill system has been a product, not of fashion, or even of incentive, but of evolving material circumstances.

Because this process has been material in its characteristics, nobody has been able to call a halt to it, any more than the advocates of a more human-scale approach could halt the takeover of England by “dark satanic mills”.

6

The lesson to be learned from this is that prevalent commercial practice, far from being driven by the latest vogue in business-speak or the most recent pronouncements of management text-books, is determined by material conditions.

And these, as we know, are now changing rapidly. Raw materials, like energy itself, are fast ceasing to be cheap. The balance of cost and scarcity between human labour and exogenous energy is tilting rapidly from the latter to the former.

The ultimate exponents of the rapid-replacement model aren’t manufacturers, or suppliers of services broadly understood, but the behemoths of the “tech” sector. Their business models are tied, to a quite remarkable degree, to the already-failing presumption of ‘infinite economic growth on a finite planet’.

These business models are, to a greater or lesser extent, based on the assumptions of ever-cheaper raw materials, ever more abundant energy, and ever-expanding consumer discretionary affordability.

Yet these assumptions are already becoming twentieth-century notions, preserved in aspic.

The context, looking ahead, is set out in the following charts. In America, as elsewhere, top-line economic output – adjusted to exclude credit distortions, and known here as underlying or “clean” output (C-GDP) – has long been decelerating towards contraction. Meanwhile, the first call made on output by ECoE has been widening the gap between output and material prosperity (Fig. 1A).

Fig. 1

At the same time, the real costs of energy-intensive necessities have been rising, such that the affordability of discretionary (non-essential) products and services, shown in blue in Fig. 1B, is subject to relentless compression.

The United States has been chosen to illustrate these trends because of the differences between Figs. 1C and 1D.

Over a very long period, as the rate of discretionary expansion has fallen below the rate of increase in the population, the average American has experienced a continuing, but gradual, reduction in the affordability of discretionaries (Fig. 1C).

But aggregate discretionary affordability has carried on creeping upwards even as its per capita equivalent has drifted downwards.

This seems to have left many businesses wholly unprepared for the impending rapid decline of discretionary affordability.

The acid-test of vulnerability to these effects is the extent of exposure to discretionary compression. On-line retailing can continue pretty solidly, though it will tilt away from discretionaries and towards staples. EVs have a future, but only as niche products, since the replacement of all (or even most) of the World’s 2bn cars and commercial vehicles is a material impossibility.

On the other hand, anything dependent on advertising or subscription revenues, or on the mass sale of non-essential gadgets to the public, is heading over the Niagara of contracting discretionary purchasing.

7

The way in which energy-hungry behemoths turn into dinosaurs will have a critical bearing on how society and the financial system adapt to the ending and reversal of material economic growth.

Embodying a law of diminishing returns, each new iteration of “tech” is more energy-intensive, and seems to add less material value, than the one before, and the sector is already starting to feel the headwinds of a decelerating replacement cycle.

This is typified by smart-phones, where annual units sold peaked back in 2015. The first cell-phone was a major breakthrough, as were the first smart-phones, but subsequent developments have added ever less valuable capabilities at ever increasing costs.

AI, the latest passing vogue in “tech” circles, exemplifies the pursuit of energy-intensive innovation for the sake of innovation itself, and for some very short-lived financial gains. Everybody seems to accept that AI will make enormous demands on energy, but nobody seems to be really clear about how it will add value.

The general (though rather vague) notion seems to be that AI will make profits by replacing human labour. In fact, though, human labour will be increasingly abundant as the economy contracts, whilst ever-higher thresholds will be set for the prioritization of energy use.

Some suppliers of energy-intensive tech services are already giving thought to investing in their own energy sources, typically small modular reactors, which might enable them to cool as well as power their sprawling data-centres.

What this idea overlooks, however, is the impossibility of re-energizing the economy in which their customers reside.

With no such capability possible, a combination of decreasing prosperity and ever-costlier necessities has already started to exert an ever-tightening stranglehold on the affordability of discretionary (non-essential) products and services.

8

What, though, will be the wider implications of technological disillusionment for the broader human endeavour?

The word “technology” has two distinct meanings in contemporary parlance. To scientists and engineers, it means the implementation of human ingenuity in the material world. To investors and business bosses, it means a hugely successful sector that rose, phoenix-like, from the ashes of the dot-com bust.

To the general public, it probably denotes a combination of the two, a phenomenon which is both enabling and threatening, and something whose unstoppable advance only a card-carrying Luddite would seek to halt.

Humanity, and perhaps every sentient creature, seeks to alter its environment to conditions most favourable to itself. The human project has coined the word “technology” to describe our efforts in this regard.

Hitherto, we’ve been able to look back at the history of technology as an ascending march of progress. Noteworthy names in this progression include Watt, George and Robert Stephenson, Michael Faraday, Thomas Edison, the Wright Brothers, Karl Benz, John Logie Baird, Frank Whittle and Robert Watson-Watt.

We’ve learned, too, from our failures, as when Capt. Cowper Coles’ inherently unstable turret-ship HMS Captain capsized off Finisterre, and when John Blenkinsop invested in spiked wheels on the grounds that railway locomotives with smooth wheels wouldn’t be able to move.

9

The critical point about technology, though, is that it has to work within the envelope of material and energetic possibility. Orville and Wilbur Wright, for instance, didn’t invent the aeroplane and then sit around waiting for somebody to discover petroleum. Rather, they found a novel and worthwhile application for a source of energy that was already available.

Modern technology has delivered marvels, and we seem, in any case, to have an instinctive attraction to the new and shiny. Technology has been elevated to the status of a secular deity, capable of resolving our each and every problem.

And this is why our disillusionment with technology, as it arrives, will be such a shock. Because of their inferior material characteristics, renewables can’t restore growth to the economy, or even keep it at its current size. Engineering can’t resolve our environmental problems in ways that allow excess consumption, and super-rapid resource depletion, to continue.

If, at this festive time, you’ll allow me a single cliché, ‘as one door closes, another opens’. There are alternatives to our current arrangements, and perhaps we’ll discuss these in the future.

Beginning in 1949, the German Jewish philosopher Leo Strauss taught at the University of Chicago. He soon formed a small group of Jewish disciples from among his students. He taught them orally, which was quite different from his writings. According to him, the democracies had shown their inability to protect the Jews from the Nazi final solution. To prevent this tragedy from happening again and the hammer from falling on them, his disciples had to be on the other side of the handle.

He advised them to build their own dictatorship.

Organizing his followers, Leo Strauss called them his "hoplites" (soldiers of Sparta). He trained them to disrupt the classes of some of his fellow teachers.

Several of the members of this sect have held very high positions in the United States and Israel. The operation and ideology of this grouping were the subject of controversy after the attacks of September 11, 2001. An abundant literature has opposed the supporters and opponents of the philosopher. However, the facts are indisputable [1].

Anti-Semitic authors have wrongly lumped together Straussians, Jewish communities in the Diaspora and the State of Israel. However, the ideology of Leo Strauss was never discussed in the Jewish world before 9/11. From a sociological point of view, it is a sectarian phenomenon, not at all representative of Jewish culture. However, in 2003, Benjamin Netanyahu’s "revisionist Zionists" made a pact with the US Straussians, in the presence of other Israeli leaders [2]. This alliance was never made public.

One of the characteristics of this group is that they are ready for anything. For example, they wanted to return Iraq to the stone age. This is indeed what they did. For them, all sacrifices are possible, including for themselves, as long as they remain the first; not the best, the first [3]!

Paul Wolfowitz

In 1992, an advisor to the Secretary of Defense, the Straussian Paul Wolfowitz, wrote the Defense Planning Guidance. It was the first official US document reflecting the thinking of Leo Strauss [[4](#nb4 "The 1976 report of the "B Team" accusing the USSR of wanting to dominate (...)")]. Wolfowitz was introduced to Strauss’ thought by the American philosopher Allan Bloom (a friend of the Frenchman Raymond Aron), but he himself only briefly knew the master at the end of his teaching in Chicago. However, the US ambassador to the UN, Jeane Kirkpatrick, recognized him as "one of the great Straussian figures" [5].

In the context of the dissolution of the Soviet Union, Wolfowitz developed a strategy to maintain US hegemony over the entire rest of the world.

The Defense Planning Guidance should have remained confidential, but the New York Times revealed its main lines and published extracts [6]. Three days later, the Washington Post revealed further details [7]. In the end, the original text was never made public, but a version edited by the Secretary of Defense (and future Vice President), Dick Cheney, was circulated.

It is known that the original document was based on a series of meetings in which two other people, all three Straussian, participated: Andrew Marshall, the Pentagon’s "thinker" (who was replaced three years after his death by Arthur Cebrowski), Albert Wohlstetter, the thinker of the atomic deterrence strategy, and his son-in-law Richard Perle, the future director of the Defense Policy Board. The Defense Planning Guidance was written by a student of Wohlstetter, Zalmay Khalilzad (future ambassador to the UN).

The document speaks of a new "world order [...] ultimately supported by the United States", in which the sole superpower would only have temporary alliances, depending on the conflict. The UN and even NATO would be increasingly sidelined. More broadly, the Wolfowitz Doctrine theorizes the need for the United States to block the emergence of any potential competitor to U.S. hegemony, especially "advanced industrial nations" such as Germany and Japan. Particularly targeted is the European Union: "While the United States supports the European integration project, we must be careful to prevent the emergence of a purely European security system that would undermine NATO, and particularly its integrated military command structure. The Europeans will thus be asked to include in the Maastricht Treaty a clause subordinating their defense policy to that of NATO, while the Pentagon report recommends the integration of the new Central and Eastern European states into the European Union, while giving them the benefit of a military agreement with the United States that would protect them against a possible Russian attack [8].

For thirty years, this document has been patiently implemented.
– The Maastricht Treaty includes a paragraph 4 in Title V, Article J4, which stipulates: "The policy of the Union within the meaning of this Article shall not prejudice the specific character of the security and defence policy of certain Member States and shall respect the obligations of certain Member States under the North Atlantic Treaty and be compatible with the common security and defence policy established within that framework. These provisions have been included in the various texts up to Article 42 of the Treaty on European Union.
– The former Warsaw Pact member states have almost all joined the European Union. This decision was a choice imposed by Washington and announced by Secretary of State James Baker just before the European Council meeting that endorsed it.

In 2000, Paul Wolfowitz was, together with Zbignew Brzezinki, the main speaker at a large Ukrainian-US symposium in Washington, organized by Ukrainian "integral nationalists" who had taken refuge in the USA. There he pledged to support independent Ukraine, to provoke Russia to go to war with it, and ultimately to finance the destruction of the resurgent rival of the USA [9].

These commitments were implemented with the passage of the Ukraine Democracy Defense Lend-Lease Act of 2022 on April 28, 2022 [10]. Ukraine is now exempt from all arms control procedures, including end-use certificates. Very expensive weapons are leased by the USA to the EU to defend Ukraine. When the war is over, the Europeans will have to pay for what they have consumed. And the bill will be heavy.

Victoria Nuland and Anthony Blinken in John Kerry’s office

Although the European elites have benefited from their alliance with the United States so far, they should not be surprised that the United States is now trying to destroy them under the Defense Planning Guidance. They have already seen what Washington was capable of after the 9/11 attacks: Paul Wolfowitz forbade countries that had expressed reservations about the war, such as Germany and France, to conclude contracts for the reconstruction of Iraq [11].

At present, the rise in the price of energy sources and their increasing scarcity threaten not only the heating and transportation of individuals, but above all the survival of all their industries. If this phenomenon continues, it is the economy of the European Union as a whole that will suddenly collapse, taking its population back at least a century.

This phenomenon is difficult to analyze because the prices and availability of energy sources vary according to many factors.

First, prices depend on supply and demand. As a result, they have risen with the overall economic recovery from the end of the Covid-19 epidemic.

Second, energy sources are the main targets of speculators. Even more so than currencies. The world price of oil can be multiplied by 2.5 just by the effect of speculation.

So far, everything is usual and known. But the Western sanctions against Russia, following its application of the Minsk II Agreement, for which it was the guarantor before the Security Council, have broken the world market. From now on, there is no longer a global price, but different prices according to the countries of the sellers and the customers. There are still prices quoted on the stock exchange in Wall Street and the City, but they bear no relation to those in Beijing and New Delhi.

Above all, oil and gas, which were abundant in the European Union, are starting to run out, while globally they are still in overabundance.

All our reference points have been turned upside down. Our statistical tools, designed for the global market, are not at all adapted to the current period. We can therefore only make assumptions, without any means of verifying them. This situation allows many people to talk nonsense with an air of authority; in fact, we are all evolving at a guessing pace.

One of the current factors is the reflux of dollars which were used for trade and speculation and which are no longer usable for these transactions in certain countries. This mostly virtual currency is leaving Russia and its allies to go to or return to the countries where it is still used. This is a gigantic phenomenon that the Federal Reserve and the US military have always wanted to avoid, but which the Straussians in the Biden administration (Secretary of State Antony Blinken and his deputy Victoria Nuland) have deliberately provoked.

Wrongly convinced that Russia has invaded Ukraine and is trying to annex it, the Europeans forbid themselves to trade with Moscow. In practice, they still consume Russian gas, but they are convinced that Gazprom will cut off their gas supply. For example, their press announced that the Russian company was closing the Nord Stream pipeline, although it had announced a three-day technical interruption. Normally, gas pipeline deliveries are interrupted for maintenance for two days every two months. Here, Gazprom was hampered in its maintenance by the Western blockade, which prevented the return of the turbines it had sent for repair to Canada. However, the population understood that the evil Russians had cut off their gas on the eve of winter.

The European propaganda aims to prepare public opinion for a definitive closure of the gas pipeline and to put the responsibility on Russia.

In this case, the leaders of the Union are simply implementing the directives of the Straussians. In doing so, they are scuttling European industry to the detriment of their citizens. Already some energy-intensive factories have reduced their production or even closed.

The process of decrepitude of the European Union will continue as long as no one dares to oppose it. To everyone’s surprise, a first pro-Russian demonstration was held on September 3 in Prague. The police admitted to 70,000 people (for a country of 10 million), but there were probably many more. Political commentators despise them and consider them "Putin’s useful idiots". But these insults do not mask the unease of European elites.

Energy experts consider power cuts throughout the Union inevitable. Only Hungary, which has previously obtained exemptions, could escape the rules of the single energy market. Those who can produce electricity will have to share it with those who cannot. It doesn’t matter whether this inability is the result of bad luck or short-sightedness.

Brussels should start with voltage reductions, then cut off at night, and finally during the day. Individuals will have difficulties to maintain elevators, to heat their homes in winter, to cook if they use electric plates and, those who use trains, buses or electric cars, should have difficulties to move. Energy-intensive businesses, such as blast furnaces, are expected to close. Infrastructures are expected to become impassable, such as long tunnels that can no longer be ventilated. Above all, electronic installations designed for continuous operation will not be able to withstand repeated interruptions. This will be the case, for example, for antennas that are essential for cell phone networks, which will be thrown away after three months of this treatment.

In third world countries where electricity is scarce, battery powered leds are used for lighting and UPS to power low consumption machines, such as computers or televisions. But these materials are currently not available in the EU.

The EU’s GDP has already fallen by almost 1%. Will this recession continue as the Straussians plan, or will the citizens of the Union interrupt it, as part of the Czech people are trying to do?

The Straussians will go all the way. They have taken advantage of the decadence of the United States to take over the real power. Since a junkie, never elected, can use official planes galore to do business all over the world [12], they have quietly moved into the shadow of President Biden and are governing in his place. European leaders, on the other hand, are either blind or too committed to stop, acknowledge their thirty years of mistakes and turn back.

What to remember:

• The Straussians are a fanatical sect ready to do anything to maintain the supremacy of the United States over the world. They imagined the wars that have plagued the world for the past thirty years and the one in Ukraine today.
• They persuaded the European Union that Moscow wanted to annex first Ukraine and then all of Central Europe. With that, they convinced Brussels to stop all trade with Russia.
• The energy crisis that is beginning is leading the European Union towards electricity and power cuts that will wreak havoc on the way of life of its citizens and on its economy.

Preface. Heavy-duty diesel-engine trucks (agricultural, mining, logging, construction, garbage, cement, 18-wheelers, and more) are the essential for our fossil-fueled civilization. Without them, no goods would be delivered, nothing could be manufacturied, no food planted or harvested, no garbage picked up, no minerals mined, no concrete made, no metals smelted, and roads are constructed with specialized diesel trucks and petroleum asphalt. If trucks stopped running, gas stations, grocery stores, factories, pharmacies, and manufacturers would shut down within a week and civilization would end.

Since oil, coal, and natural gas are finite, biomass doesn’t scale up, and hydrogen is an energy sink, clearly someday trucks will need to run on wind, solar, hydro, and geothermal generated electricity with batteries or overhead catenary wires (though that won’t work either, see chapter 8 of Life After Fossil Fuels: A Reality Check on Alternative Energy and this post). Yet even batteries for autos aren’t cheap, long-lasting, light-weight, or powerful enough for most Americans to replace their current gas-guzzlers with. And given the distribution of wealth, few Americans may ever be able to afford an electric car, since two-thirds of Americans would have trouble finding even $1,000 for an emergency.

Trucks that matter — that haul 30 tons of goods, pour cement, haul mining ore — can weigh 40 times more than an average car. So scaling batteries up for heavy-duty trucks (NRC 2014) is impossible now given the state of battery technology. For example, a truck capable of going 621 miles hauling 59,525 pounds, the maximum allowable cargo weight, would need a battery weighing 55,116 pounds, and so could only carry about 4,400 pounds of cargo (den Boer et al. 2013). And because a heavy-duty truck battery is so heavy and large, charging takes too long — typically 12 hours or more.

Or as Ryan Carlyle, oil company engineer puts it: “As far as heavy trucking is concerned, there is no replacement for hydrocarbon fuels. The physics of power/weight ratios, and existence of legal road weight limits, means you simply can’t build an “electric semi” and expect it to haul anything comparable to what diesel trucks haul today. This is not an area where Tesla can build a 30% better battery pack and suddenly it’s feasible. The necessary energy density numbers are more like 50 times less than they need to be. The truck will use over half its payload capacity just carrying its own batteries. There are chemical limits to what batteries can do. Electrochemical galvanic cells physically cannot store enough energy — ever — to approach today’s large diesel engines (Carlyle 2014).

Microsoft founder Bill Gates agrees: ” The problem is that batteries are big and heavy. The more weight you’re trying to move, the more batteries you need to power the vehicle. But the more batteries you use, the more weight you add—and the more power you need. Even with big breakthroughs in battery technology, electric vehicles will probably never be a practical solution for things like 18-wheelers, cargo ships, and passenger jets. Electricity works when you need to cover short distances, but we need a different solution for heavy, long-haul vehicles (Gates 2020).”

And car battery development is hitting the brick-walls of the laws of physics and thermodynamics, yet truck batteries need to be even more powerful, durable, and long-lasting.

_Alice Friedemann www.energyskeptic.com Women in ecology author of 2021 Life After Fossil Fuels: A Reality Check on Alternative Energy best price here; 2015 When Trucks Stop Running: Energy and the Future of Transportation”, Barriers to Making Algal Biofuels, & “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Crazy Town, Collapse Chronicles, Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity_

***

There are not any commercially available heavy-duty Battery Electric Vehicles (BEVs) outside the transit bus segment at this time. It is not expected that BEVs can penetrate into the long-haul trucking vocation in the next several decades, where significant high speed steady-state operations dominate the vehicles duty cycle, without significant advances in battery energy density and BEV recharging technologies. (ARB 2015).

There are however, demonstration projects with class 8 electric trucks. The first, NFI, has two trucks running between Chino and the Ports of Los Angeles/San Pedro 135 miles round-trip using two of the five heavy-duty charging stations in Southern California. Only one round-trip can be made, there isn’t enough juice left in the battery to go again. The second, Penske is averaging 150 miles per shift on dedicated routes to a California quick-service restaurant chain with two battery-powered trucks in a relay system to make the most of the available electric charge. And other demonstration projects are planned (Adler 2019).

Nikola claimed to have a working Nikola One truck and portrayed it as fully functional with a video called “Nikola One Electric Semi Truck in Motion. But investment firm Hindenburg Research published a bombshell report claiming that the Nikola One wasn’t close to being fully functional. Even more incredible, Hindenburg reported that the truck in the “Nikola One in motion” video wasn’t moving under its own power. Rather, Nikola had towed the truck to the top of a shallow hill and let it roll down. The company allegedly tilted the camera to make it look like the truck was traveling under its own power on a level roadway, and has admitted that it didn’t have a working hydrogen fuel cell or motors to drive the wheels, the two key components (Lee 2020).

And the latest Nikola scandle from August 1, 2021: Nikola electric-truck prototypes were powered by hidden wall sockets, towed into position and rolled down hills. The prototypes didn’t function and were Frankenstein monsters cobbled together from parts from other vehicles. Nikola also overstated the number of pre-orders the company had received. Federal prosecutors have charged the founder of the Nikola Corp. (NKLA) with lying to investors about the supposed technological breakthroughs the company had achieved in order to drive up its stock price. Prosecutors said in the initial period following Nikola starting to trade publicly, the value of Milton’s shares shot up by $7 billion. After it emerged the company was under investigation, shares tanked causing many retail investors to lose tens and even hundreds of thousands of dollars, prosecutors said. In some cases, some investors lost substantial portions of their retirement savings, they said. Nikola founder Milton was taken into custody and later released on a $100 million bond.

Electric trucks do exist, mostly medium-duty hybrid that stop and start a lot to recharge the battery. This limits their application to delivery and garbage trucks and buses. These trucks are heavily subsidized at state and federal levels since on average they cost three times as much as a diesel truck equivalent (Table 1).

But even these stop-and-start a lot to recharge the battery trucks may not be economically feasible. Nikola Motor Company’s plans to mass produce 5,000 garbage trucks for Republic Services, one of the nation’s largest waste management service providers, were canceled, the latest in a string of bad news for the electric truck and hydrogen cell maker (Alcorn 2020).

The most vital truck is a farm tractor to plant and harvest food. A battery-driven tractor would have to be very small or the weight would compact the soil and reduce crop productivity for many decades. The first one I saw appear in the search engine was the 7030 series John Deere battery pack tractor in December 2016, and it was pretty small. But they never did make it, and it isn’t even mentioned anywhere on their website.

The latest tractor, not in production but promised in 2021, is the $50,000 Monarch Electric Tractor with peak power of 70 HP for a few seconds, otherwise 40 HP (Smith 2020). The farmers comments were interesting:

• Most farmers I know frequently have to drive their tractors long distances, sometimes miles, just to get to the field of the day. And there’s no power out there…. Talk about range anxiety!
• 40hp class tractors do not usually till fields. Where I am now, for these applications we see a 75hp class tractor at the very least, usually 90hp and up on larger farms
• Take it from someone who is actually a farmer. This will never take over the heavy tractor work as there are constant interactions due to irregularities in the ground which require the operator to adjust the tractor or the attached implement to the terrain, ie. rocks, roots, animal burrows. drainage etc. Farming is extremely brutal on equipment and it must be durable enough and simple enough to fix so that we don’t miss very small time windows on each step of the process. Farming has ridiculously small margins so the economic proposition of service life vs. amortized and operating costs over that life must make sense no one wants to pay $4 for one onion.
• I bought my MF 133 for $1200 USD and it works just fine for being 50 years old. Would I like 4WD? Yeah. Would I like an electric? Sure! Do I see this thing running very long in -10º with a snow-blower hanging off of the PTO? Color me skeptical.
• As far as the “goal of 20-plus years of continuous service life” — uh huh. Considering my issues and my friend’s issues with getting EVs repaired, I’ll believe it when I see it.
• I know a few farmers (corn, beans and hogs or cattle) and they dont really have a use for a 40-70hp tractor. This is likely to end up at grape vineyards or hobby farmers who use a tractor intensely for a few days or weeks of the year.
• The grid is thin in the country, if battery tractors existed, could they all charge up at once in the narrow planting and harvesting seasons?

Tractors do a lot of heavy work over rough ground, and today only internal combustion engines can provide efficient mobile and portable heavy-duty power (DTF 2003).

The Port of Los Angeles thought about using heavy-duty all-electric drayage trucks to improve air quality. Drayage trucks drive at least 200 miles a day back and forth between the port and inland warehouses. But it remained a thought experiment because electric drayage trucks cost too much, $307,890. The 350 kWh battery alone is $110,880 dollars. That’s three times as much as an equivalent diesel truck $104,360, and 100 times more than a used $3,000 drayage truck. And cost wasn’t the only problem (Calstart 2013a):

• The range is too short because of the battery weight and size. Drayage trucks need to go at least 200 miles a day, but at best an electric truck could go 100 miles before having to be recharged, which would take too long, and require expensive infrastructure to charge each truck several times a day.
• The batteries/battery pack cost too much.
• Overcoming the long time to recharge by using fast-charging may shorten battery life which would result in the unacceptable expense of a new battery pack before the lifetime of the truck ended
• Although electricity is available almost everywhere, the quantities required for a fleet of Battery Electric Vehicle (BEV) drayage trucks are very high and could require significant infrastructure. Multiple costly high-power and/or fast-charging stations would be required
• Roadway power infrastructure is complicated and expensive, and may be appropriate only in certain areas or applications. The impact on the grid and whether enough power could be supplied is unknown for the roughly 10,000 drayage trucks in the I-710 region
• Large battery pack life-cycle and maintenance costs are unknown
• Swapping stations are impractical and would require “industry standardization and ‘ruggedization’ of battery packs, as well as standardized software and communication protocols for batteries and system integration, plus many locations, and the storage space and operating space for multiple large trucks and hundreds of large battery packs.

Table 1. Electric trucks coust 3 times more than diesel equivalents (ICEV) on average. Source: 2016 New York State Electric Vehicle – Voucher Incentive Fund Vehicle Eligibility List. https://truck-vip.ny.gov/NYSEV-VIF-vehicle-list.php

Other costs

• Battery cost is a major component in the overall cost, ranging from $500 to $700 per kilowatt-hour (kWh) range. This is substantially more than the cost for a conventional diesel powerplant. In their 2013 I-710 commercialization study, CALSTART estimated the cost of a 350 kWh battery system at over $200,000 in 2012.
• A BEV 240 kW fast charger can cost can cost $1,500,000 (with $300,000 in additional costs). It can charge 5 heavy duty trucks (ICF 2016) per charger: $350,000 EVSE 450kW+ $150,000 to $200,000 installation costs per EVSE (Calstart 2015), or $350,000 for a specialized Proterra fast charger able to accommodate up to eight Proterra transit buses (ARB 2015)
• Additional costs to upgrade the distribution system if the rated capacity of the installed electric equipment is exceeded. A fleet with 20 E-Trucks in Southern California had to upgrade a transformer on the customer side of the meter. The transformer cost $470,000. 100 medium-duty E-Trucks charging at the same time would demand 1.5 MW of power on the grid and 50 E-Buses would demand 3.0 MW. This is in the same order of magnitude as the peak power demand of the Transamerica Pyramid building, the tallest skyscraper in San Francisco, CA (Calstart 2015)
• Unlike electric cars, which can charge at night when rates are lowest (11 pm to 8 am for $0.05), e-trucks and buses need to run during the day at the highest peak hours (12 noon to 6 p.m. $0.20) and mid-peak charges (8 a.m. to noon and 6 pm to 11 pm ($0.10), doubling to quadrupling the price paid for electricity (Calstart 2015).
• Earning money from V2G is not likely to be adopted by commercial fleets because they have rigid operating schedules while the grid varies constantly and unpredictably. If the grid tapped into e-truck batteries, it might reduce their range or delay availability (Calstart 2015)

Electric trucks are also not commercial yet because they have too many performance issues, such as poor performance in cold weather, swift acceleration, driving up steep hills, too short a range and battery life, they take too long to recharge, declining miles per day as the battery degrades, all of which make planning routes difficult and inefficient.

It is also much harder to develop batteries for trucks than cars because trucks are expected to last 15 years (versus 10 for cars) or go for 1 million miles. Trucks also have to endure more extreme conditions of temperature, vibrations, and corrosive agents than autos (NRC 2015), and it is hard to make battery packs durable enough for this rougher ride, longer miles, and longevity.

Calstart interviewed many businesses about their reluctance to buy hybrid or all electric trucks, and found their greatest concerns were the purchase cost, lack of confidence in the technology, lack of industry and truck manufacturer support, lack of infrastructure, and the heavy weight (Calstart 2012).

Elon Musk recently tweeted that Tesla will build a semi-truck with absolutely no details, promising to tweet again half a year from now with more information. Why should I believe an Elon Musk tweet any more than a Trump tweet? Especially since nearly all of the electric truck companies I studied for “When Trucks Stop Running” are out of business now, despite huge federal and state subsidies. Given that Tesla is nearly $5 billion in debt, he’s clearly angling to get drayage truck subsidies from the Ports of Los Angeles and San Pedro and more money from investors. None of the electric trucks I studied or that are on the market now were long-haul or off-road tractors, harvesters, construction, logging, or other class 8 heavy-duty trucks (except garbage trucks). They were all much smaller class 4-6 delivery trucks or buses, because they stop and start enough to use hybrid batteries, a far more commercially likely possibility than long-haul trucks, that can go for hundreds of miles before stopping, and be up to 80,000 pounds (and even more weight off-road). This wired.com article points out other issues as well with electric trucks as well.

But if the devil is in the details, then read more below in my summary and excerpts of a paper about electric trucks. Catenary trucks, which use overhead wires, will be covered in another post. Both electric and catenary trucks are covered at greater length in “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer

Abbreviations:

• BEV Battery Electric Vehicle
• PEV Plug-in Battery Electric Vehicle
• HEV Hybrid Electric Vehicle
• ICEV Internal Combustion Engine Vehicle (usually diesel, also gasoline engines)

What follows is a summary and then deytails of the following paper:

**Pelletier, S., et al. September 2014. Battery Electric Vehicles for Goods Distribution: A Survey of Vehicle Technology, Market Penetration, Incentives and Practices. CIRRELT. 51 pages.

**

SUMMARY

Financial

While commercial BEVs’ energy costs can be nearly four times cheaper than ICEV equivalents, the downside is that their purchase costs are around three times higher.

A study of drayage trucks on the I-710 corridor found that $3,000 old used trucks were used to take containers from Los Angeles ports to inland facilities that paid $100 per container delivered. “Costs for a full BEV truck are not expected to go below $250,000 even past the 2025 time frame of this report. … The same is true for fuel cells” (Calstart 2013b).

Furthermore, the cost of the equipment necessary for charging the battery can be several thousand dollars. The high cost of level 3 Electric Vehicle Supply Equipment (EVSE) is still a significant barrier to a wider adoption of fast charging. Level 2 charging equipment costs approximately $1,000 per station and installation costs approximately $2,500 to $6,000 for one unit or $18,520 for 10 units. Level 3 fast charging is not used much yet because more research needs to be done on whether this shortens battery life.

PEV and HEV vehicles typically have significant autonomy and payload limitations and involve much larger initial investments in comparison to internal combustion engine vehicles (ICEV). The battery pack is the most expensive component in PEVs and significantly augments their purchase cost compared to similar ICEV trucks.

Competing with compressed natural gas (CNG) and existing diesel (ICEV) trucks will be hard — significant improvements in ICEV efficiencies are likely in the future from the 21st Century truck partnership and other efforts to improve diesel engines. BEVs will also have to compete with other fuel alternatives such as CNG, in which case their business case can be even harder to make.

Battery Issues

Can’t carry enough cargo: Battery size and weight reduce maximum payloads for electric vans and trucks compared to equivalent diesel trucks. Even HEVs suffer from the extra weight of two power-trains reducing payload capacity.

Short range. Technical disadvantages include a relatively low achievable range. Typical ranges for freight BEVs vary from 100 to 150 kilometers (62-93 miles) on a single charge.

The miles a truck can travel declines over time. In Germany and the Netherlands, the limited operating range of electric trucks caused less flexibility in planning trips and restricted ad-hoc tour planning, resulting in less efficient operations. Also, the range declined over time through battery aging, when carrying heavy loads, and in winter from heating, lights and ventilation. Furthermore, the range listed by EV manufacturers is based on measurements according to the New European Drive Cycle which, compared to real life energy consumption in urban last mile delivery, do not give a reliable indication of the expected range. The reliability of the EVs was dependent on the model; certain prototypes and conversions were judged as reliable, while others were reported as insufficient (Taefi 2014).

Short battery life. At the moment, lithium ion batteries last for four years; however, practical experience has shown that the average period of use is only two years.

Range is also shortened by: extreme temperatures, high driving speeds, rapid acceleration, carrying heavy loads and driving up slopes. The efficiency and driving range varies substantially based on driving conditions and driving habits. Extreme outside temperatures tend to reduce range because more energy must be used to heat or cool the cabin. Cold batteries do not provide as much power as warm batteries do. The use of electrical equipment, such as windshield wipers and seat heaters, can reduce range. High driving speeds reduce range because more energy is required to overcome increased air resistance. Rapid acceleration reduces range compared with smooth acceleration. Hauling heavy loads or driving up significant inclines also reduces range (U.S. Department of Energy 2012b).

Long time to charge battery: It takes a long time to charge the batteries because of their low energy density. Recharging time may take up to 4 to 8 hours, and even with quick-charging equipment, recharging a battery to 80% takes up to 30 minutes.

Charging issues: The most common way of charging was to slow charge the vehicles over night at company premises. The in-house charging infrastructure had to be fixed several times when it was overloaded by the high capacity need of the e-trucks in Germany. Other charging related issues found were that the implementation of a smart grid and load management for large electrical fleets is not yet clarified; solutions to ensure charging in case of power outage are necessary; and charging plugs were too damageable, so only specially trained staff could handle the plug, which caused problems with replacement drivers and training issues. The limited number of charging spots outside the cities and lack of battery swapping for larger vehicles was also an issue (Taefi 2014).

Batteries have low energy density — too low. Batteries are a critical factor in the widespread adoption of electric vehicles but have a much lower energy density than gasoline, partly caused by the large amount of metals used in their production.

Battery life too short: Lithium-ion batteries in current freight BEVs typically provide 1,000 to 2,000 deep cycle life, which should last around six years.

Some manufacturers are working on a 4,000 to 5,000 deep cycle life within 5 years, but there are often tradeoffs to be made between different lithium based battery chemistries. For example, lithium-titanate batteries already reach 5,000 full discharge cycles, but have lower energy densities than other lithium-ion technologies. Calendar life, on the other hand, is a measure of natural degradation with time and was in the 7-10 years range as of 2010 with a projected range of 13-15 years by 2020. Typical battery warranty lengths for electric trucks have been reported as being in the three to five year range.

Battery degradation. Battery health can be influenced by the way they are charged and discharged. For example, frequent overcharging (i.e., charging the battery close to maximum capacity) can affect the battery’s lifespan, just as can keeping the battery at high states of charge for lengthy periods**. As expressed through deep cycle life, battery deterioration can also occur if it is frequently discharged to very deep levels . This generally implies that only 80% of the marketed battery capacity is actually usable. Using high power levels to quickly charge batteries could also have negative impacts on battery life, especially if used in the beginning and end of the charging cycle. The uncertainty regarding the effect of extreme operational temperatures on lithium batteries is another issue that should be further considered. All these potential deteriorating factors can speed up the reduction of maximum available battery capacity and shorten vehicle range and battery life**.

Lithium-ion batteries. At the moment, lithium ion batteries last for four years; however, practical experience has shown that the average period of use is only two years (AustriaTech 2014).

The Demands on the Electric Grid

Power Requirements to recharge batteries are high. A battery electric truck with a 120 kWh battery would require a charging power level of 15 kW to be able to charge in 8 hours, and the same vehicle with a battery pack of 200 kWh would require a power level of 400 kW to be able to be charged in 15-30 minutes.

The impact of the high power demand from the electricity grid. This could limit the amount of vehicles in a depot which could simultaneously be charged with high power levels, potentially requiring further investments for transformer upgrades.

The stations would also need to recharge a very large amount of batteries at the same time, which could impact the electric grid.

Out of Business

Better Place was considered a fron-trunner in the battery swapping industry but it recently filed for bankruptcy (Fiske (2013)).

Some models have recently been discontinued due to manufacturers’ financial difficulties or restructuring plans; these include Azure Dynamics’ Transit Connect Electric in 2012, Navistar’s eStar in 2013, and Modec’s Box Van in 2011.

Commercial Vehicles are dependent on government subsidies

To see the New York State All-Electric NYSEV-VIF incentives, click here.

To see the California Hybrid Truck and Bus Voucher Incentive Project (HVIP) incentives, click here.

Many U.S. companies which operate battery electric trucks also have received funding from the American Recovery and Reinvestment Act.

Plug-in electric trucks and vans (class 2 to 8 vehicles) have generally only penetrated niche applications, while remaining dependent on government incentives. They attribute this to key industry players going out of business, the conservative nature of fleet operators when it comes to new technologies, renewed interest in natural gas, and the important cost premium of these vehicles.

Sales of HEV & BEV trucks are very low

The global stock of class 2 to 8 HEVs, PHEVs and BEVs was around 20,000 at the end of 2013, versus 15 million diesel and gasoline (ICEV) trucks sold in 2013.

The vast majority of expected sales are not fully electric plug-ins, but are Hybrid Electric Vehicles (HEVs) which do not require plug-in recharging (but which are only suitable for applications that require a great deal of stopping and starting, i.e. garbage trucks, delivery vans).

One of project FREVUE’s reports identifies other factors explaining the limited use of electric freight vehicles in city logistics, namely doubts regarding technology readiness, high purchase costs, limited amount of models on the market, and rapid technology improvements themselves can be a market barrier since fleet operators fear that an electric freight vehicle purchased today could quickly lose all residual value. The uncertainties surrounding the vehicles’ residual value also limit leasing companies’ interest in electric freight vehicles.

The bottom line is that a wider adoption of Battery Electric Vehicles can only be achieved if these prove to be cost-effective.

———————————–

[ Here are more details. ]

The worst possible use of an e-truck is daily mileage less than 40 km, never needs to return to the base, has little chance of charging while on operations, needs to be charged in 20 minutes or less, carry a full load equal to a diesel truck, carries the full load all day, goes the same speed much of the day, travels on freeways, hilly terrain, and charges at peak load. The best possible use of EV is 60+ km/day, returns to the base to recharge 3 to 6 times a day for 30 minutes a day, carries half a load, has very high variations in speeds traveled in flat urban areas and only charges off-peak (AustriaTech 2014b).

Cost Competitiveness of Battery Electric Vans and Trucks

While commercial BEVs’ energy costs can be nearly four times cheaper than diesel equivalents, the downside is that their purchase costs are approximately three times higher (Feng and Figliozzi 2013).

Furthermore, the cost of the equipment necessary for charging the vehicle’s battery, which can reach several thousands of dollars, should be considered. Maintenance costs should also be significantly less than for ICEVs (Taefi et al. (2014)) and this advantage should increase as the vehicles get older (Electrification Coalition (2010)). Because of these different cost structures between ICEVs and BEVs, the only way to appropriately compare the cost competitiveness of battery electric vans and trucks for goods distribution is to study their whole life costs (McMorrin et al. 2012), according to which all costs incurred over the vehicle’s life are actualized to a net present value. Whole life costs are also referred to as the vehicle’s total cost of ownership (TCO). The following are brief descriptions of the cost structure and TCO of battery electric freight vehicles compared to their conventional counterparts.

Cost Structure: High Fixed Costs and Low Variable Costs Purchase costs for medium duty battery electric trucks offered by AMP Trucks, Inc., Boulder Electric Vehicles, Electric Vehicle International, and Smith Electric Vehicles range from $130,000 to $185,000 US, while equivalent ICE trucks go within the $55,000 to $70,000 range (New York State Energy Research and Development Authority (2014)). One way to decrease the cost premium of these larger BEVs is to be able to right-size the costly battery according to the application (Electrification Coalition 2013). However, while this measure could significantly improve the vehicles’ business case and allow for additional payload capacity, the smaller battery would require more frequent deep discharges, which could cause accelerated battery deterioration (Pitkanen and Van Amburg 2012). Another option for reducing upfront costs while also addressing fleet operators’ concerns about battery life is to lease the battery for a monthly fee based on energy consumed or distance traveled (McMorrin et al. 2012).

However, uncertainties regarding battery residual value limit many fleets’ interest in battery leasing (Pitkanen and Van Amburg (2012)), most likely because these uncertainties will be integrated into the leasing fee. Furthermore, battery leasing currently only seems available for a few battery electric vans but not for trucks, for whom it could significantly help the business case based on whole life costs (Valenta (2013)). Purchase costs for battery electric vans vary largely depending on GVWs and the availability of battery leasing. Large manufacturer products with battery leasing go for about $25,000 for GVWs close to 2,100 kg. Examples of these include Renault for its Kangoo Z.E. vans and Nissan for its e-NV200 van, with monthly battery leasing fees starting at approximately $100 per month and varying according to monthly mileage and contract lengths (Renault (2014c), Nissan (2014d)). Typical purchase costs with battery ownership range from approximately $25,000 for lighter battery electric vans (GVW starting at 1100 kg) with limited battery capacities, to about $100,000 for larger battery electric vans (GVW up to 3,500 kg) with higher battery capacities. Conventional cargo vans with GVWs close to 4,500 kg cost between $30,000 and $40,000, GVWs close to 3,500 kg are within the $25,000-$30,000 price range, and GVWs around 2,500 kg are closer to $20,000 (Nissan (2014a)).

Valuable sources for vehicle prices include Source London (2013) and New York State Energy Research and Development Authority (2014), referred to as SL (2013) and NYSEV-VIF (2014) in the tables. Some models’ prices are simply not available, most likely because, as Lee et al. (2013, p.8025) point out, “commercial vehicle prices can vary depending upon negotiation between fleet operators and truck manufacturers, and truck volumes to be purchased”. This could also imply that the prices listed here could vary depending on specific purchasing contexts. Ranges for these class 3 to 6 trucks are from 115 to 200 km (71-124 miles) depending on battery size, vehicle weight

• $133,000 AMP vehicles 100 kWh battery, 6350-8845 kg GVW
• $130-150,000 Boulder 500-series 72 kWh battery, 4765-5215 kg GVW, payload 1405 kg,
• $150,000 Navistar eStar 80 kWh battery 5490 kg GVW, payload 1860 kg
• $185,000 EVI walk-in van 99 kWh battery, 7255-10435 GVW
• $150,000 Smith Electric “Newton” 80 kWh, $181,000 with a 120 kWh battery

Den Boer et al. (2013) state that approximately 1,000 battery electric distribution trucks were operated around the world as of July 2013. CALSTART’s report on the demand assessment of electric truck fleets (Parish and Pitkanen 2012) claims that industry experts have estimated there were less than 500 battery electric trucks in use in North America as of 2012, with most sales made in US states like California and New York, which offered incentives for these vehicles. Also, approximately 4,500 hybrid electric trucks were sold in North America as of 2012. The large majority of hybrid and battery electric trucks sold were in medium duty and vocational applications rather than long-haul class 8 applications. Stocks of freight electric vehicles (vans and trucks) as of January 1st 2012 in Europe included 70 in Belgium, 106 in Denmark, 338 in Germany, 1,566 in France, 217 in the Netherlands, 103 in Norway, 38 in Austria, 13 in Portugal, 459 in Spain, and over 2000 in London (TU Delft et al. 2013). However, most of the electric vans in the UK are old low performance vans with lead-acid batteries, with only a few hundred modern electric vans with lithium-ion batteries sold in 2012 (Cluzel et al. 2013).

As previously noted, the advantage in the cost structure of BEVs comes from their lower variable costs (i.e., energy and maintenance costs) (McMorrin et al. 2012).

However, electricity rates incurred depend on geographical location, average consumption levels, and time of use (Hydro-Quebec (2014)). Charging during off-peak hours can allow for reduced electricity rates and seasonal price variations may also occur. It is therefore necessary to evaluate the potential of lower energy costs of commercial BEVs according to one’s specific context.

Gallo and Tomi´ c (2013) provide an overview of the performance of delivery BEVs (class 4-5) operated by a large parcel delivery fleet in Los Angeles. The findings showed that in comparison to similar diesel vehicles, the electric trucks were up to four times more energy efficient, offering up to 80% lower annual fuel costs. The report estimated maintenance savings ranging from $0.02 to $0.10 per mile, finding these savings “will vary widely depending on driving conditions, vehicle usage, driver behavior, vehicle model and regenerative braking usage”(p.53). Other findings included the need for drivers to be trained to adapt their techniques to electric trucks, that a minimum utilization of 50 miles per day is necessary to recuperate purchase costs in a reasonable time span, and that incentives are still necessary at this stage to make the vehicles a viable alternative. Additionally, some repairs needed to be provided by the vehicle manufacturers because of the limited experience of fleet mechanics with electric trucks. TU Delft et al. (2013) also reported several companies having experienced a lack of available resources for quickly solving technical issues with freight BEVs. This is important to consider because in order to profit from lower variable costs, companies must have access to reliable maintenance services and spare parts.

Figliozzi (2013) compared whole life costs of battery electric delivery trucks to a conventional diesel truck serving less-than-truckload delivery routes. The BEVs are the Navistar eStar (priced at $150,000) and Smith Newton (priced at $150,000), while the diesel reference is an Isuzu N-series (priced at $50,000). Different urban delivery scenarios were designed based on typical US cities values and different routing constraints. Thus, 243 different route instances were simulated by varying values for the number of customers, the service area, the depot-service area distance, the customer service time, and the customer demand weight. Different battery replacement and cost scenarios were also studied. The planning horizon was set to ten years, with the residual value of the vehicles set at 20% of their purchase price. In spite of the fact that the electric trucks had a higher TCO in 210 out of the 243 route instances, a combination of the following factors would allow them to be a viable alternative: high daily distances, low speeds and congestion, frequent customer stops during which an ICEV would idle, other factors amplifying the BEVs’ superior efficiency, financial incentives or technological breakthroughs to reduce purchase costs, and a planning horizon above ten years. With a battery replacement after 150,000 miles at a forecasted cost of $600/kWh, the diesel truck always had a lower TCO.

The need for a battery replacement significantly decreases thee business case for BEV Trucks

Battery electric freight vehicles currently fit much more into city distribution than long haul applications because of the battery’s energy density limitations (den Boer et al. 2013). Typical daily miles traveled by urban delivery trucks are often lower than the range already achieved by electric commercial vehicles (Feng and Figliozzi 2013). With limited payloads, this makes them more viable for last mile deliveries in urban areas involving frequent stop-and-go movements, limited route lengths, as well as low travel speeds (Nesterova et al. 2013), AustriaTech 2014b), Taefi et al. 2014)). With forecasted reductions in battery costs and evolution of diesel prices are compared to electricity prices, as time goes by, BEV distribution trucks should become more competitive with equivalent ICEVs based on their own economic proposition (den Boer et al. 2013). However, commercial BEVs will also have to compete with other fuel alternatives such as compressed natural gas, in which case their business case can be even harder to make (Valenta 2013). Furthermore, significant improvements in ICEV efficiencies are expected in upcoming years (Mosquet et al. (2011)). Nevertheless, for now, the appropriateness of using delivery BEVs ultimately depends on the context of their intended use, but the high purchase cost has been extensively pointed out as a huge cost effectiveness barrier, and the need for incentives at this stage of the market seems like a recurring requirement for a viable business case.

Financial Incentives

The goal of financial incentives is to reduce the upfront costs of electric vehicles and charging equipment (IEA and EVI (2013)). One form is purchase subsidies granted upon buying the vehicle (Mock and Yang (2014)). An example of this is the California Hybrid Truck and Bus Voucher Incentive Project (HVIP) which provides up to $35,000 towards hybrid truck purchases and up to $50,000 towards battery electric truck purchases to be used in California (Parish and Pitkanen (2012)). Eligible vehicles can be found in CEPAARB (2014). Another similar program is the New York Truck Voucher Incentive Program, which offers up to $60,000 for electric truck purchases to be used New York (New York State Energy Research and Development Authority (2014)).

Companies are also eligible to receive similar purchase subsidies for participating in demonstration or performance evaluation projects (US DOE (2013b)).

Overviews of tax exemptions related to electric vehicles can be found in IEA and EVI (2013), Mock and Yang (2014), ACEA (2014), and US DOE (2012a).

Companies Experimenting with BEVs In North America, large companies using battery electric delivery vehicles include FedEx, General Electric, Coca-Cola, UPS, Frito-Lay, Staples, Enterprise, Hertz and others (Electrification Coalition (2013b)). Frito-Lay alone has been operating 176 battery electric delivery trucks in North America since 2010 (US DOE (2014b)). Fedex also operates over 100 electric delivery trucks (Woody (2012)). Many U.S. companies which operate battery electric trucks have received funding from the American Recovery and Reinvestment Act to cover a portion of the vehicles’ purchase costs (US DOE (2013b)).

BEVs in city logistics have often been used for parcel delivery, deliveries to stores, waste collection and home supermarket deliveries. A few notable private initiatives identified in the report include Deret’s 50 electric vans for last mile deliveries to city centers in France, UPS’s 12 Modec vehicles for parcel and post delivery in the UK and Germany, Tesco’s 15 Modec vehicles for on-line shopping deliveries in London, Sainsbury’s use of 19 electric vans for supermarket

Drivers expressed concerns regarding the reduction in payloads.

Delivered products include parcel, courier, textiles, fast food, bakery, hygienic articles and household articles.

Negative factors experienced included the required investments (vehicles and EVSE), reduced payloads, limited range, the effect of cold temperatures on range, imprecise marketed vehicle ranges, the lack of resources to fix technical problems, incompatibility of vehicles’ connectors with public charging infrastructure, and the need to train drivers to better adapt to the vehicles. All in all, the case studies indicated that the vehicles were found to be most adequate for last mile and night deliveries.

Electric Tricycles carrying up to 440 pounds (200 kg)

Urban consolidation centers (UCC) are logistic facilities multiple organizations use, close to the area they serve. UCCs using BEVs for last mile deliveries also often use smaller vehicles ideal for tight urban areas, which can lead to increases in vehicle kilometers per ton delivered (Allen et al. (2012)). These smaller vehicles are typically electric tricycles, which have payloads of up to 200 kg (AustriaTech 2014b) and low driving speeds. These tricycles can find parking locations more easily than larger vehicles, can often use bicycle lanes for faster access to customers in congested and pedestrian areas, and from a cost point of view are more affected by driver costs than purchase costs and utilization rates (Tipagornwong and Figliozzi 2014). Allen et al. (2007) present an example of the use of electric tricycles by a UCC. La Petite Reine used a consolidation center in the center of Paris for last mile deliveries of food products, flowers, parcels, and equipment/parts with electric tricycles with a maximum payload of 100 kg (220 pounds). The initial trial in 2003 was deemed a success, with monthly trips growing from 796 to 14,631 and the number of tricycles from seven to 19 in the first 24 months. Operations are now permanent and La Petite Reine operates three locations in Paris with over 70 collaborators, 80 tricycles, 15 electric light duty vehicles and 1 million deliveries per year (La Petite Reine 2013).

Nesterova et al. (2013) present two other cases of two phased deliveries in Paris integrating to some extent electric bikes and tricycles. The first is Chronopost International, which offers express delivery of parcels and uses two underground areas in Paris for sorting last mile deliveries. The parcels are first transported from their facility at the border of Paris to their underground areas, where they are sorted per route and distributed to customers by electric bikes and vans in inner Paris. The second is Distripolis, a delivery concept tested by road transport operator GEODIS. A depot in Bercy receives shipments from three organizations and delivers the packages under 200 kg to multiple UCCs in the city center of Paris (heavier packages are directly delivered to the receiver). From here, electric trucks and tricycles are used for the last mile deliveries of the light packages. Distripolis operated 10 light duty electric vehicles (Electron Electric truck, GVW 3.5 tons) and one electric tricycle in 2012, and aims at having 56 tricycles and 75 electric vehicles by 2015.

BESTFACT (2013) provides another case of two-phased deliveries with electric vehicles. Gnewt Cargo operates a transhipment facility for the last mile deliveries of an office supplies company in London (Office Depot). They use an 18 tons vehicle to transport parcels from the office supplies company warehouse in the suburbs of London to the transhipment center in the city, where the parcels are transferred onto electric vans and tricycles for final delivery to customers. Initially a trial in 2009, the company has permanently implanted this system because it involved no increases in operational costs, and it plans to implement similar delivery systems in other cities (Browne et al. (2011)).

Other Interesting Distribution Concepts for BEVs

An interesting experiment regarding last mile deliveries with BEVs can be found in the context of project STRAIGHTSOL, during which TNT Express integrated a mobile depot into their operations in Brussels with electric vehicles during the summer of 2013 (Nathanail et al. 2013), Anderson and Eidhammer 2013), Verlinde et al. 2014). A large trailer equipped as a mobile depot with typical depot facilities was loaded with parcels at TNT’s depot near the airport in the morning. Next it was towed by a truck to a dedicated parking spot in the city center, where last mile deliveries as well as pick-ups were made with electric tricycles by a Brussels courier company, which then returned to the mobile depot with the collected parcels. At the end of the day, the mobile depot was towed back to TNT’s depot, from where the collected parcels were shipped. Challenges included gaining exclusive access to the parking location for the mobile depot, significant increases in operating costs, and decreases in the punctuality of the deliveries and pickups (Johansen et al. 2014), Verlinde et al. 2014).

They could find a niche application in short haul port drayage operations (CALSTART 2013b). One example of this practice is found at the Port of Los Angeles, where 25 heavy duty battery electric drayage trucks manufactured by Balqon were tested for operational suitability. In exchange for the purchase of the trucks, Balqon agreed to locate its factory in L.A. and pay the port a royalty for future sales (EVI et al. (2012)). The Port of L.A. also tested similar heavy duty battery electric trucks from Transpower and U.S Hybrid, as well as a fuel cell heavy duty truck (Port of L.A. 2014).

Incentives still play a critical role in the business case of these vehicles, but the long-term unsustainability of certain financial incentives and recent trends suggest their imminent phasing out (Bernhart et al. 2014) will require that these vehicles be cost competitive independent of such incentives. One could argue that these vehicles are not ready for this challenge, in view of current cost dynamics, recent financial setbacks of key industry players, often resulting in discontinued vehicle models (Schmouker 2012), Shankleman 2011), Truckinginfo 2013), Everly 2014), Torregrossa 2014)).

The market take-up of electric vehicles in urban freight transport is very slow, because costs are high compared to conventional vehicles and companies are still uncertain about the maturity of the technology and about the availability of charging infrastructure.

The worst possible use of an e-truck is daily mileage less than 40 km, never needs to return to the base, has little chance of charging while on operations, needs to be charged in 20 minutes or less, carry a full load equal to a diesel truck, carries the full load all day, goes the same speed much of the day, travels on freeways, hilly terrain, and charges at peak load. The best possible use of EV is 60+ km/day, returns to the base to recharge 3 to 6 times a day for 30 minutes a day, carries half a load, has very high variations in speeds traveled in flat urban areas and only charges off-peak.

Financially at least 50% public subsidies pay for it

At present, lithium ion batteries are most often used in electric freight vehicles with a current battery lifetime of 1000 to 2000 cycles (approximately 6 years). Also, the kilometer range declines over time, which may reduce peak power capacity and energy density. For these reasons electric vehicles are currently most suitable for daily urban distribution activities as the battery energy density is too low for regular long haul applications. At the moment, lithium ion batteries last for four years; however, practical experience has shown that the average period of use is only two years. Improvements in battery powered trucks are expected within five years in terms of the cost and durability of batteries.

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An astute journalist I know once described carbon capture and storage (CCS) as a "delay-and-fail strategy" devised by the fossil fuel industry. The industry's ploy was utterly obvious to him: Promise to perfect and deploy CCS at some vague point in the future. By the time people catch on that CCS won't work, the fossil fuel industry will have successfully extended the time it has operated without onerous regulation for another couple of decades.

And because huge financial resources (mostly government resources) will have gone to CCS projects instead of low-carbon energy production, society will continue to be wildly dependent on carbon-based fuels (giving the industry further running room).

The trouble is that the cynical CCS strategy has already been under way and failing for more than two decades already. And yet, it is seeking a renewed lease on life with a proposal for a vast network of carbon dioxide pipelines "twice the size of the current U.S. oil pipeline network by volume." The public face of the effort is a former Obama administration secretary of energy with a perennially bad haircut, Ernest Moniz.

Moniz has a partnership with the AFL-CIO to push the idea. No doubt unions like the project because it would create a lot of jobs regardless of whether it actually addresses climate change.

Just for the record, here's a list of reasons that CCS doesn't work and likely will not work in any time frame that matters for addressing climate change:

1. It's very costly. Many of the pilot projects have been shut down because they are uneconomical.

2. Suitable underground storage is not abundant and frequently not near facilities that produce the carbon dioxide.

3. Long-term storage may fail, releasing the carbon dioxide into the atmosphere anyway. After all, one must have injection wells into the underground storage, wells that can leak if not properly maintained. Not least, there is no multi-decade record of successful, leak-free sequestration. And finally, there is no assurance that such storage facilities can be maintained properly for the many centuries required to have them actually protect the climate.

4. The carbon dioxide in some current viable CCS projects is used by the oil industry to flush out more oil from existing wells. That's hardly in keeping with the purpose of addressing climate change.

Energy expert Vaclav Smil did some calculations for an American Scientist magazine article that demonstrate the scale of the CCS challenge:

[I]n order to sequester just a fifth of current CO2 emissions we would have to create an entirely new worldwide absorption-gathering-compression-transportation-storage industry whose annual throughput would have to be about 70 percent larger than the annual volume now handled by the global crude oil industry whose immense infrastructure of wells, pipelines, compressor stations and storages took generations to build. Technically possible—but not within a timeframe that would prevent CO2 from rising above 450 ppm.

Smil wrote that back in 2011. The latest reading in Hawaii at the often-cited Scripps Institution of Oceanography Mauna Loa Observatory is 418 parts per million of carbon dioxide in the Earth's atmosphere. The relentless upward slope of the observatory's graph of carbon dioxide concentration shows that the fossil fuel industry's tactics—of which delay-and-fail CCS is just one—are working splendidly.

It is troubling that a key official at the U.S. Department of Energy is taking the CCS plan seriously. One would think that decades of failure would finally make clear the false promises of the industry. But, of course, failure is the whole point of the CCS ruse. What's puzzling is that the failure to date has somehow become a rallying cry to try harder by building one of the biggest boondoggles ever conceived.

I have written many posts relating to the fact that we live in a finite world. At some point, our ability to extract resources becomes constrained. At the same time, population keeps increasing. The usual outcome when population is too high for resources is “overshoot and collapse.” But this is not a topic that the politicians or central bankers or oligarchs who attend the World Economic Forum dare to talk about.

Instead, world leaders find a different problem, namely climate change, to emphasize above other problems. Conveniently, climate change seems to have some of the same solutions as “running out of fossil fuels.” So, a person might think that an energy transition designed to try to fix climate change would work equally well to try to fix running out of fossil fuels. Unfortunately, this isn’t really the way it works.

In this post, I will lay out some of the issues involved.

[1] There are many different constraints that new energy sources need to conform to.

These are a few of the constraints I see:

• Should be inexpensive to produce
• Should work with the current portfolio of existing devices
• Should be available in the quantities required, in the timeframe needed
• Should not pollute the environment, either when created or at the end of their lifetimes
• Should not add CO2 to the atmosphere
• Should not distort ecosystems
• Should be easily stored, or should be easily ramped up and down to precisely match energy timing needs
• Cannot overuse fresh water or scarce minerals
• Cannot require a new infrastructure of its own, unless the huge cost in terms of delayed timing and greater materials use is considered.

If an energy type is simply a small add-on to the existing system, perhaps a little deviation from the above list can be tolerated, but if there is any intent of scaling up the new energy type, all of these requirements must be met.

It is really the overall cost of the system that is important. Historically, the use of coal has helped keep the overall cost of the system down. Substitutes need to be developed considering the overall needs and cost of the system.

The reason why the overall cost of the system is important is because countries with high-cost energy systems will have a difficult time competing in a world market since energy costs are an important part of the cost of producing goods and services. For example, the cost of operating a cruise ship depends, to a significant extent, on the cost of the fuel it uses.

In theory, energy types that work with different devices (say, electric cars and trucks instead of those operated by internal combustion engines) can be used, but a long delay can be expected before a material shift in overall energy usage occurs. Furthermore, a huge ramp up in the total use of materials for production may be required. The system cannot work if the total cost is too high, or if the materials are not really available, or if the timing is too slow.

[2] The major thing that makes an economy grow is an ever increasing supply of inexpensive-to-produce energy products.

Food is an energy product. Let’s think of what happens when agriculture is mechanized, typically using devices that are made and operated using coal and oil. The cost of producing food drops substantially. Instead of spending, for example, 50% of a person’s wages on food, the percentage can gradually drop down to 20% of wages, and then to 10% of wages for food, and eventually even, say, to 2% of wages for food.

As spending on food falls, opportunity for other spending arises, even with wages remaining relatively level. With lower food expenditures, a person can spend more on books (made with energy products), or personal transportation (such as a vehicle), or entertainment (also made possible by energy products). Strangely enough, in order for an economy to grow, essential items need to become an ever decreasing share of everyone’s budget, so that citizens have sufficient left-over income available for more optional items.

It is the use of tools, made and operated with inexpensive energy products of the right types, that leverages human labor so that workers can produce more food in a given period of time. This same approach also makes many other goods and services available.

In general, the less expensive an energy product is, the more helpful it will be to an economy. A country operating with an inexpensive mix of energy products will tend to be more competitive in the world market than one with a high-cost mix of energy products. Oil tends to be expensive; coal tends to be inexpensive. This is a major reason why, in recent years, countries using a lot of coal in their energy mix (such as China and India) have been able to grow their economies much more rapidly than those countries relying heavily on oil in their energy mixes.

[3] If energy products are becoming more expensive to produce, or their production is not growing very rapidly, there are temporary workarounds that can hide this problem for quite a number of years.

Back in the 1950s and 1960s, world coal and oil consumption were growing rapidly. Natural gas, hydroelectric and (a little) nuclear were added, as well. Cost of production remained low. For example, the price of oil, converted to today’s dollar value, was less than $20 per barrel.

Once the idyllic 1950s and 1960s passed, it was necessary to hide the problems associated with the rising cost of production using several approaches:

• Increasing use of debt – really a promise of future goods and services made with energy
• Lower interest rates – permits increasing debt to be less of a financial burden
• Increasing use of technology – to improve efficiency in energy usage
• Growing use of globalization – to make use of other countries’ cheaper energy mix and lower cost of labor

After 50+ years, we seem to be reaching limits with respect to all of these techniques:

• Debt levels are excessive
• Interest rates are very low, even below zero
• Increasing use of technology as well as globalization have led to greater and greater wage disparity; many low level jobs have been eliminated completely
• Globalization has reached its limits; China has reached a situation in which its coal supply is no longer growing

[4] The issue that most people fail to grasp is the fact that with depletion, the cost of producing energy products tends to rise, but the selling prices of these energy products do not rise enough to keep up with the rising cost of depletion.

As a result, production of energy products tends to fall because production becomes unprofitable.

As we get further and further away from the ideal situation (oil less than $20 per barrel and rising in quantity each year), an increasing number of problems crop up:

• Both oil/gas companies and coal companies become less profitable.
• With lower energy company profits, governments can collect less taxes from these companies.
• As old wells and mines deplete, the cost of reinvestment becomes more of a burden. Eventually, new investment is cut back to the point that production begins to fall.
• With less growth in energy consumption, productivity growth tends to lag. This happens because energy is required to mechanize or computerize processes.
• Wage disparity tends to grow; workers become increasingly unhappy with their governments.

[5] Authorities with an incorrect understanding of why and how energy supplies fall have assumed that far more fossil fuels would be available than is actually the case. They have also assumed that relatively high prices for alternatives would be acceptable.

In 2012, Jorgen Randers prepared a forecast for the next 40 years for The Club of Rome, in the form of a book, 2052, with associated data. Looking at the data, we see that Randers forecast that world coal consumption would grow by 28% between 2010 and 2020. In fact, world coal consumption grew by 0% in that period. (This latter forecast is based on BP coal consumption estimates for 2010 and 2019 from BP’s Statistical Review of World Energy 2020, adjusted for the 2019 to 2020 period change using IEA’s estimate from its Global Energy Review 2021.)

It is very easy to assume that high estimates of coal resources in the ground will lead to high quantities of actual coal extracted and burned. The world’s experience between 2010 and 2020 shows that it doesn’t necessarily work out that way in practice. In order for coal consumption to grow, the delivered price of coal needs to stay low enough for customers to be able to afford its use in the end products it provides. Much of the supposed coal that is available is far from population centers. Some of it is even under the North Sea. The extraction and delivery costs become far too high, but this is not taken into account in resource estimates.

Forecasts of future natural gas availability suffer from the same tendency towards over-estimation. Randers estimated that world gas consumption would grow by 40% between 2010 and 2020, when the actual increase was 22%. Other authorities make similar overestimates of future fuel use, assuming that “of course,” prices will stay high enough to enable extraction. Most energy consumption is well-buried in goods and services we buy, such as the cost of a vehicle or the cost of heating a home. If we cannot afford the vehicle, we don’t buy it; if the cost of heating a family’s home rises too high, thrifty families will turn down the thermostat.

Oil prices, even with the recent run-up in prices, are under $75 per barrel. I have estimated that for profitable oil production (including adequate funds for high-cost reinvestment and sufficient taxes for governments), oil prices need to be over $120 per barrel. It is the lack of profitability that has caused the recent drop in production. These profitability problems can be expected to lead to more production declines in the future.

With this low-price problem, fossil fuel estimates used in climate model scenarios are almost certainly overstated. This bias would be expected to lead to overstated estimates of future climate change.

The misbelief that energy prices will always rise to cover higher costs of production also leads to the belief that relatively high-cost alternatives to fossil fuels would be acceptable.

[6] Our need for additional energy supplies of the right kinds is extremely high right now. We cannot wait for a long transition. Even 30 years is too long.

We saw in section [3] that the workarounds for a lack of growing energy supply, such as higher debt and lower interest rates, are reaching limits. Furthermore, prices have been unacceptably low for oil producers for several years. Not too surprisingly, oil production has started to decline:

[

](https://i2.wp.com/ourfiniteworld.com/wp-content/uploads/2021/06/World-Crude-Oil-Production-EIA-2020.png?ssl=1)

Figure 1 – World production of crude oil and condensate, based on data of the US Energy Information Administration

What is really needed is sufficient energy of the right types for the world’s growing population. Thus, it is important to look at energy consumption on a per capita basis. Figure 2 shows energy production per capita for three groupings:

• Tier 1: Oil and Coal
• Tier 2: Natural Gas, Nuclear, and Hydroelectric
• Tier 3: Other Renewables, including Intermittent Wind and Solar

[

](https://i1.wp.com/ourfiniteworld.com/wp-content/uploads/2021/06/World-per-capita-energy-consumption-by-tier.png?ssl=1)

Figure 2 World per capita energy consumption by Tier. Amounts through 2019 based on BP Statistical Review of World Energy 2020. Changes for 2020 based on estimates provided by IEA Global Energy Review 2021.

Figure 2 shows that the biggest drop is in Tier 1: Coal and Oil. In many ways, coal and oil are foundational types of energy for the economy because they are relatively easy to transport and store. Oil is important because it is used in operating agricultural machinery, road repair machinery, and vehicles of all types, including ships and airplanes. Coal is important partly because of its low cost, helping paychecks to stretch further for finished goods and services. Coal is used in many ways, including electricity production and making steel and concrete. We use coal and oil to keep electricity transmission lines repaired.

Figure 2 shows that Tier 2 energy consumption per capita was growing rapidly in the 1965 to 1990 period, but its growth has slowed in recent years.

The Green Energy sources in Tier 3 have been growing rapidly from a low base, but their output is still tiny compared to the overall output that would be required if they were to substitute for energy from both Tier 1 and Tier 2 sources. They clearly cannot by themselves power today’s economy.

It is very difficult to imagine any of the Tier 2 and Tier 3 energy sources being able to grow without substantial assistance from coal and oil. All of today’s Tier 2 and Tier 3 energy sources depend on coal and oil at many points in the chain of their production, distribution, operation, and eventual recycling. If we ever get to Tier 4 energy sources (such as fusion or space solar), I would expect that they too will need oil and/or coal in their production, transport and distribution, unless there is an incredibly long transition, and a huge change in energy infrastructure.

[7] It is easy for energy researchers to set their sights too low.

[a] We need to be looking at the extremely low energy cost structure of the 1950s and 1960s as a model, not some far higher cost structure.

We have been hiding the world’s energy problems for years behind rising debt and falling interest rates. With very high debt levels and very low interest rates, it is becoming less feasible to stimulate the economy using these approaches. We really need very inexpensive energy products. These energy products need to provide a full range of services required by the economy, not simply intermittent electricity.

Back in the 1950s and 1960s, the ratio of Energy Earned to Energy Investment was likely in the 50:1 range for many energy products. Energy products were very profitable; they could be highly taxed. The alternative energy products we develop today need to have similar characteristics if they truly are to play an important role in the economy.

[b] A recent study says that greenhouse gas emissions related to the food system account for one-third of the anthropogenic global warming gas total. A way to grow sufficient food is clearly needed.

We clearly cannot grow food using intermittent electricity. Farming is not an easily electrified endeavor. If we do not have an alternative, the coal and oil that we are using now in agriculture really needs to continue, even if it requires subsidies.

[c] Hydroelectric electricity looks like a good energy source, but in practice it has many deficiencies.

Some of the hydroelectric dams now in place are over 100 years old. This is nearing the lifetime of the concrete in the dams. Considerable maintenance and repair (indirectly using coal and oil) are likely to be needed if these dams are to continue to be used.

The water available to provide hydroelectric power tends to vary greatly over time. Figure 3 shows California’s hydro electricity generation by month.

[

](https://i2.wp.com/ourfiniteworld.com/wp-content/uploads/2021/06/Californa-Hydroelectric-Generation-by-Month.png?ssl=1)

Figure 3. California hydroelectric energy production by month, based on data of the US Energy Information Administration.

Thus, as a practical matter, hydroelectric energy needs to be balanced with fossil fuels to provide energy which can be used to power a factory or heat a home in winter. Battery storage would never be sufficient. There are too many gaps, lasting months at a time.

If hydroelectric energy is used in a tropical area with dry and wet seasons, the result would be even more extreme. A poor country with a new hydroelectric power plant may find the output of the plant difficult to use. The electricity can only be used for very optional activities, such as bitcoin mining, or charging up small batteries for lights and phones.

Any new hydroelectric dam runs the risk of taking away the water someone else was depending upon for irrigation or for their own electricity generation. A war could result.

[d] Current approaches for preventing deforestation mostly seem to be shifting deforestation from high income countries to low income countries. In total, deforestation is getting worse rather than better.

[

](https://i1.wp.com/ourfiniteworld.com/wp-content/uploads/2021/06/Forest-Area-Percentage-by-Income-Group.png?ssl=1)

Figure 4. Forest area percentage of land area, by income group, based on data of the World Bank.

Figure 4 shows that deforestation is getting rapidly worse in Low Income countries with today’s policies. There is also a less pronounced trend toward deforestation in Middle Income countries. It is only in High Income countries that land areas are becoming more forested. In total (not shown), the forested area for the world as a whole falls, year after year.

Also, even when replanting is done, the new forests do not have the same characteristics as those made by natural ecosystems. They cannot house as many different species as natural ecosystems. They are likely to be less resistant to problems like insect infestations and forest fires. They are not true substitutes for the forest ecosystems that nature creates.

[e] The way intermittent wind and solar have been added to the electric grid vastly overpays these providers, relative to the value they add to the system. Furthermore, the subsidies for intermittent renewables tend to drive out more stable producers, degrading the overall condition of the grid.

If wind and solar are to be used, payments for the electricity they provide need to be scaled back to reflect the true value that they add to the overall system. In general, this corresponds to the savings in fossil fuel purchases that electricity providers need to make. This will be a small amount, perhaps 2 cents per kilowatt hour. Even this small amount, in theory, might be reduced to reflect the greater electricity transmission costs associated with these intermittent sources.

We note that China is making a major step in the direction of reducing subsidies for wind and solar. It has already dramatically cut its subsidies for wind energy; new subsidy cuts for solar energy will become effective August 1, 2021.

A major concern is the distorting impact that current pricing approaches for wind and solar have on the overall electrical system. Often, these approaches produce very low, or negative, wholesale prices for other providers. Nuclear providers are especially harmed by such practices. Nuclear is, of course, a low CO2 electricity provider.

It seems to me that in each part of the world, some utility-type provider needs to be analyzing what the overall funding of the electrical system needs to be. Bills to individuals and businesses need to reflect these actual expected costs. This approach might avoid the artificially low rates that the current pricing system often generates. If adequate funding can be achieved, perhaps some of the corner cutting that leads to electrical outages, such as recently encountered in California and Texas, might be avoided.

[8] When I look at the requirements for a successful energy transition and the obstacles we are up against, it is hard for me to see that any of the current approaches can be successful.

Unfortunately, it is hard for me to see how intermittent electricity can save the world economy, or even make a dent in our problems. We have searched for a very long time, but haven’t yet found solutions truly worth ramping up. Perhaps a new “Tier 4 approach” might be helpful, but such solutions seem likely to come too late.

THE THREAD OF RATIONAL INTERPRETATION

According to Greek mythology, Theseus, having killed the Minotaur, found his way back from the heart of the Labyrinth by following a thread given to him by Ariadne.

There are two lessons – in an earlier idiom, morals – to be taken from this story. The obvious one is the wisdom of taking a thread into the maze and using it to find the way back out. The less obvious lesson is that the thread Theseus followed was reliable, a guide which, like real gold, would pass an ‘assay’ of veracity.

Our current economic and broader circumstances merit comparison with the Labyrinth – we’re in a maze which has many complex blind-alleys, routes to nowhere which tempt the unwary. If we’re to fashion a reliable thread that can be followed through it, we need to apply the assays of logic and observation.

The thread followed here starts with the purposes of saving and investment, purposes which pass the assay of logic, but fail the test of observation. This points to dysfunction based on anomaly, the anomaly being that the practice only conforms to the principle in the presence of growth.

Postulating that the economy is an energy system rather than a financial one also passes the assays of logic and observation, and confirms we have a thread that can be followed to meaningful explanations and expectations.

An assay of logic

Capital theory is as a good a place to start as any. This theory is that, in addition to meeting current needs and wants, a sensible person puts aside a part of his or her income for the purposes both of having a reserve (“for a rainy day”) and of accumulating wealth. The flip-side of this process is that saving – as ‘economic output not consumed’ – provides capital for investment. This theory would apply, incidentally, even if some form of barter were substituted for money.

For this to work, the saver or investor must receive a real return on investment that is positive (that is, it exceeds inflation), and this return must be calibrated in proportion to any risk to which his or her investment is exposed. The user of this capital must earn a return on invested capital which exceeds the return paid to the investor. Any business unable to do this must fail, freeing up capital and market share for more efficient competitors.

This thesis rings true when measured on the ‘assay of logic’ – indeed, it describes the only rational set of conditions which can govern productive and sustainable relationships between saving, investment, returns and enterprise.

But it’s equally obvious that this does not describe current financial conditions. Returns to investors are not positive. These returns are not calibrated in proportion to risk. Businesses do not need to earn returns which exceed appropriate returns being paid to investors. Businesses unable to meet this requirement do not fail.

When logic points so emphatically towards one set of conditions, whilst observation leaves us in no doubt that contrary conditions prevail, we don’t need to venture further into investment theory in order to confirm the definite existence of an anomaly.

To discover the nature of this anomaly, let’s look again at capital theory to discover the predicates shared by all participants.

The investor needs returns which increase the value of his or her capital.

The entrepreneur needs returns which are higher again than those required by the investor.

The shared predicate here is that the sum of money X must be turned into X+.

For the system to function, then, the shared predicate is growth.

Logic therefore tells us two things. The first is that a functioning capital system absolutely depends on growth. The second, inferred-by-logic conclusion is that, if the system has become dysfunctional, the absence of growth is likely to be the cause of the dysfunction.

Observed anomaly is thus defined as a property of dysfunction, whilst dysfunction itself is a property of the absence of growth.

You don’t need a doctorate in philosophy to reach this conclusion. All you need do is follow a logical sequence which (a) defines anomaly as intervening between theory and current practice, and (b) identifies this anomaly as the absence of growth.

We can confirm this finding by hypothesis. If we postulate the return of real, solid, indisputable growth into this situation, we can follow a sequential chain which goes on to eliminate the anomaly and restore the alignment of theory and practice.

Testing the thread

The deductions that (a) dysfunction exists, and (b) that this is a product of the lack of growth, take us on to familiar territory. If you’re a regular visitor to this site, you’ll know that the basic proposition is that the economy, far from being ‘a function of money, and unlimited’, is in fact a function of energy, and is limited by resource and environmental boundaries.

Using logic and observation, we can similarly apply the ‘assay of rationality’ to the propositions informing the surplus energy interpretation. There are three of these propositions or principles, previously described here as “the trilogy of the blindingly obvious”.

The first principle is that all of the goods and services which constitute economic output are products of the use of energy. If it were false, this proposition would be easy to disprove. All we’d have to do is to (a) name anything of economic utility that can be produced without the use of energy at any stage of the production process, and/or (b) explain how an economy could function in the absence of energy supply.

The second principle, applied here as ECoE (the Energy Cost of Energy), is that whenever energy is accessed for our use, some of that energy is always consumed in the access process. Again, if this proposition were false, its fallacy could be demonstrated, simply by citing any example where energy can be accessed without the use of any energy at any stage in the access process.

The third proposition – that money has no intrinsic worth, and commands value only as a ‘claim’ on the output of the energy economy – ought, if false, to be the easiest one to disprove. We would need to do no more, as a thought-exercise, than cast ourselves adrift in a lifeboat, equipped with very large quantities of any form of money, but with nothing for which this money could be exchanged. If this experiment succeeded, the ‘claim only’ hypothesis would be disproved.

The inability to disprove these propositions means that the theory of the economy as a surplus energy system passes the assay of rationality. Application is a much more complex matter, of course, but the next test is to see how theory fits observation.

The assay of observation

From the mid-1990s, and as the following charts show, global debt started to expand far more rapidly than continuing growth in reported GDP. Available data for twenty-three economies – accounting for three-quarters of GDP – shows a corresponding trend in the broader measure of ‘financial assets’, which are, of course, liabilities of the non-financial economy of governments, households and private non-financial corporations (PNFCs).

There is reliable data showing yet another correspondence, this time between the GDPs and the unfunded pension obligations (“gaps”) of a group of eight economies which include global giants such as the United States, China, Japan and India.

Let’s be clear about where this takes us. We’ve already identified the absence of growth as the source of financial dysfunction. We’ve now seen parallel anomalies in the relationships between GDP and liabilities.

These divergent patterns can be explained – indeed, can really only be explained – in terms of exploding financial commitments distorting reported GDP. Put another way, there are compounding trends whose effect is to ‘juice’ and to mispresent reported economic output.

This observation accords with the logical conclusion, discussed earlier, that the relationships between saving, investment, returns and enterprise have been distorted into a dysfunctional, anomalous condition by the absence of growth. The only complication is that we have to look behind reported “growth” numbers to make this connection.

What, though, explains the absence – in practice, the deceleration, ending and impending reversal – of growth itself? The right-hand chart indicates that what was happening at the start-point of observed economic distortion was a rise in ECoEs.

The assay that we’ve undertaken has shown the validity of the concepts of output as a function of energy, ECoE as a characteristic of the output equation, and money in the role of ‘claim’. This in turn validates the linkage identified here.

Fig. 1

Once again, let’s apply the test of hypothesis. Assume that a new source of low-cost (low ECoE) energy is discovered. Prosperity would increase, and real growth would return to the system. The observed anomalies in capital relationships would disappear.

This, remember, is purely hypothesis, because the discovery of a new source of low-cost energy is at the far end of the scale of improbability. We can thus conclude that dysfunction and anomaly will continue, to the climacteric at which the monetary system described by capital theory reaches a point of failure.

The clarity of defined anomaly

For anyone who isn’t a mythical hero, venturing into the Labyrinth, confronting the Minotaur and finding our way out again sounds like a terrifying experience. There are clear analogies to the present, in terms of the uncertainty of the maze, and the fear induced by the unknown. We may not have Ariadne’s thread, but we can fashion a good alternative by opting for rationality, applied through logic and observation.

The results of this process do seem to have the merit of clarity. Comparing capital theory with observed conditions identifies a dysfunction or anomaly that can be defined as the absence of growth. This in turn can be explained in terms of a faltering energy economy. Take away the predicate – growth – and the financial system becomes dysfunctional.

This interpretation helps to clarify the roles of the various players in the situation. Taking the ‘elites’, for example, we know that the defined aim of all elites is to maintain and, wherever possible, to enhance their wealth and influence. We can infer that, if we can identify the dysfunctionality of capital theory and observed conditions, so can they.

Likewise, we know that the defined aim of governments is the maintenance of the status quo, and we can again infer that they, like we, recognize the essential dysfunction as ‘the failure of the predicate’.

To this extent, we can demystify the behaviour of elites and governments. We can also make informed judgements on their probabilities of success. (These probabilities are low, for reasons which lie outside the scope of this discussion).

A similar application of logic and observation tells us that anomaly cannot continue in perpetuity. We can hypothesize the resolution of the energy-ECoE problem, but examination of the factors involved suggests that any such resolution, even if attainable, is unlikely to happen in time to restore equilibrium to the financial system. There are equations which relate the investment of legacy energy (from fossil fuels) into a new energy system (presumably renewables), and these equations give few grounds for optimism where current systems are concerned.

If rationality can take us this far, it surely makes sense to adhere to it. The probabilities are that global prosperity will contract, meaning that systems predicated on growth will cease to function. The logic of the situation seems to be that, when old predicates change, we need to fashion new systems based on their successors.

When oil drillers descended on North Dakota en masse a decade ago, state officials and residents generally welcomed them with open arms. A new form of hydraulic fracturing, or "fracking" for short, would allow an estimated 3 to 4 billion barrels of so-called shale oil to be extracted from the Bakken Formation, some 2 miles below the surface.

The boom that ensued has now turned to bust as oil prices sagged in 2019 and then went into free fall with the spread of the coronavirus pandemic. The financial fragility of the industry had long been hidden by the willingness of investors to hand over money to drillers in hopes of getting in on the next big energy play. Months before the coronavirus appeared, one former oil CEO calculated that the shale oil and gas industry has destroyed 80 percent of the capital entrusted to it since 2008. Not long after that the capital markets were almost entirely closed to the industry as investor sentiment finally shifted in the wake of financial realities.

The collapse of oil demand in 2020 due to a huge contraction in the world economy associated with the pandemic has increased the pace of bankruptcies. Oil output has also collapsed as the number of new wells needed to keep total production from these short-lived wells from shrinking has declined dramatically as well. Operating rotary rigs in North Dakota plummeted from an average of 48 in August 2019 to just 11 this month.

Oil production in the state has dropped from an all-time high of 1.46 million barrels per day in October 2019 to 850,000 as of June, the latest month for which figures are available. Even one of the most ardent oil industry promoters of shale oil and gas development said earlier this year that North Dakota's most productive days are over. CEO John Hess of the eponymous Hess Corporation is taking cash flow from his wells in North Dakota and investing it elsewhere.

So, what has this meant for the state? Not only is the oil industry in North Dakota suffering, but all those contractors who service the oil industry. Beyond that are the housing and public services which had to be expanded dramatically during the boom. Will there be enough people to live in that housing years from now? Will the cities be able to maintain the greatly expanded infrastructure their dwindling tax revenues must pay for?

The state government relies on oil and gas revenues for 53 percent of its budget. So far those revenues are running 83 percent lower than projected for this year. In addition, the pandemic reduced other revenue sources, but those are returning to normal as the overall economy bounces back (at least for now). North Dakota's historically low unemployment rate popped from 2 percent in March to 9.1 percent in April, but has recently come down.

Perhaps the most enduring legacy of the boom will be the damage to the landscape and the water in North Dakota from years of sloppy environmental practices. While companies are legally responsible for cleaning up their sites and capping old wells, in practice the state's failure to force companies to post bonds to pay for these things means much of the work will have to be done by the state or not done at all. This is because bankrupt companies are just abandoning their wells and other infrastructure. There will be no one left with money to sue to pay for the cleanup in many cases.

What North Dakota may have traded for a temporary boom is a long-lived legacy of tainted land and especially water. Back in 2012 I warned about this danger from the fracking industry in a piece called "Pincushion America: The irretrievable legacy of drilling everywhere on drinking water."

In that piece, I cited a former EPA engineer who said that within 100 years most of the country's underground drinking water will be contaminated. What has happened in North Dakota (and is still happening at a somewhat reduced rate) has likely sped up that timetable considerably for the state. Even with the waning oil industry, the state still has considerable oil to produce and so the damage will only continue to mount.

North Dakota may now experience a long, slow withdrawal from what is called the resource curse. This is the paradoxical notion that natural resource-rich jurisdictions often fail to prosper partly due to the huge swings in prices of their principal products, swings which destabilize their societies. This is because disproportionate amounts of wealth (including labor) are devoted to the natural resource sector and therefore unavailable for other more stable forms of commerce and industry.

In addition, the enormous wealth and influence of those in the natural resource sector are used to thwart environmental protections necessary for the long-term well-being of the population. This influence also keeps taxes on the industry low, depriving the people in the state of the full fruits of the resource boom (and of investments necessary for the day when the resource will be depleted).

Beyond this, governments tend to rely on resource sectors too much for their revenue. This causes them to overspend during booms and face austerity during downturns.

All of the negative effects of the resource curse are now on display in North Dakota and may well get worse. Of course, what North Dakota is experiencing, many resource-rich places around the world are also experiencing in one form or another. The worst thing the state can do now is live by the hope that the oil industry will revive and save North Dakota from its woes. Now is the time to plan a new path to a more stable and sustainable economy.

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Naked Capitalism, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at kurtcobb2001@yahoo.com.

One of the things that used to puzzle me, as a very small boy, was why the day after Christmas was called “Boxing Day”.

Did people in the classic “Dickensian Christmas” – in the era evoked by traditional festive icons like snow, holly and robins – really set aside a day for pugilism? It seemed even less likely that a day of fist-fighting contests formed any part of the first Christmas.

All became clear, of course, when it was explained to the very young me that this was the day on which Christmas “boxes” (gifts) were exchanged. In those times, people drew a distinction between the Christian celebration, on 25th December, and the giving and receiving of presents, on the following day.

This distinction is even more pronounced here in Spain, where the exchange of gifts is deferred to the “Night of the Kings”, two weeks after Christmas itself. The festive season is thus more protracted here than in, say, Britain or America, but it’s also markedly less frenetic, and culminates, in most towns and cities, with a thoroughly enjoyable Night of the Kings carnival.

Depending on where you are and how you look at it, the Christmas holidays end, and something like “normality” resumes, at some point between the 2nd and the 7th of January. My view is that the word “normal”, whose definition has, in economic and broader terms, already been stretched a very long way indeed, might soon lose any realistic meaning. A situation in which the Fed is in the process of injecting at least $1 trillion of newly-created money into the system typifies the extent to which abnormality has already become the norm.

In these circumstances, my immediate aim is to produce a guide, comprehensive but succinct, to the surplus energy interpretation of the economy.

This will cover the energy basis of all economic activity, the critical role played by ECoE (the Energy Cost of Energy), and the true nature of money and credit as an aggregate claim on the output of the ‘real’ (energy) economy.

It will move on to discuss how SEEDS models, interprets and anticipates economic trends, and to set out an overview of where we are in energy-interpreted terms. It might also – if space permits – touch on what this tells us about the false dichotomy between environmental challenges and the customarily-misstated concept of “growth”.

What I aim to do here is to close out the year with some observations about where we are as we head into the 2020s.

The best place to start is with the deterioration in prosperity, and the simultaneous increase in debt, that have already destroyed the credibility of any ‘business as usual’ narrative in the Advanced Economies (AEs).

Starting with Japan back in 1997, and finally reaching Germany in 2018, the prosperity of the average Western person has hit a peak and turned downwards, not in a temporary way, but as part of a secular process which conventional economics cannot recognise, much less explain.

This process is now spreading to the emerging market (EM) economies, most of which can expect to see prior growth in prosperity per person go into reverse within the next three years. The signs of deceleration are already becoming apparent in big EM countries such as China and India.

Thus far, global average prosperity has been on a long plateau, with continuing progress in the EM economies largely offsetting deterioration in the West. Once decline starts in the EM group, though, the pace at which the average person Worldwide becomes poorer can be expected to accelerate.

If deteriorating prosperity is the first point worthy of emphasis, the second is that a relentlessly increasing Energy Cost of Energy (ECoE) is the fundamental cause of this impoverishment process. ECoE reflects that fact that, within any given quantity of energy accessed for use, a proportion is always consumed in the access process.

ECoE is a direct deduction from the aggregate quantity of energy available, which means that surplus (ex-ECoE) energy is the source of all economic activity other than the supply of energy itself.

In other words, prosperity is a function of surplus energy.

In the past, widening geographic reach, economies of scale and technological advance drove ECoEs downwards, to a low-point (of between 1% and 2%) in the immediate post-1945 decades. The subsequent rise in trend ECoEs has been driven by the fact that, with the benefits of reach and scale exhausted, depletion has now become the primary driver of ECoEs in the mature fossil fuels industries which continue to provide four-fifths of global energy supply. The role of technology has been re-cast as a process which can do no more than blunt the rate at which ECoEs are rising.

By 2000, when World trend ECoE had reached 4.5%, Advanced Economies were already starting to face an insurmountable obstacle to further growth. Prosperity turned down in Japan from 1997 (when ECoE there was 4.4%), and has been declining in America since 2000 (4.5%).

SEEDS studies demonstrate that prosperity in advanced Western countries turns down once ECoE enters a band between 3.5% and 5%. EM economies, by virtue of their lesser complexity, are less ECoE-sensitive, with prosperity going into reverse once ECoEs enter a range between 8% and 10%. Ominously, ECoE has now reached 8.2% in China, 10.0% in India and 8.1% in the EM countries as a group.

The key point about rising ECoEs is that there is nothing we can do about it. This in turn means that global prosperity has entered de-growth. The idea that we can somehow “decouple” economic activity from the use of energy is utter wishful thinking – not surprisingly, because the economy, after all, is an energy system.

This presents us with a clear choice between obfuscation and denial, on the one hand, and acceptance and accommodation, on the other. Our present position is one of ‘denial by default’, in that the decision-making process continues to be based on the false paradigm that ‘the economy is money’, and that energy is “just another input”.

This leads us to the third salient point, which is financial unsustainability.

Properly understood, money functions as a claim on the output of the ‘real’, energy-driven economy. Creating more monetary claims, without a corresponding increase in the goods and services against which these claims can be exercised, creates a gap which, in SEEDS terminology, is called “excess claims”.

Since these “excess” claims cannot, by definition, be honoured, then they must be destroyed. There are various ways in which this “claims destruction” can happen, but these mechanisms can loosely be divided into “hard” default (the repudiation of claims) or “soft” default (where claims are met, but in greatly devalued money).

These processes mean that “value destruction” has become an inevitability. This may involve waves of asset market crashes and defaults, or the creation (through reckless monetary behaviour) of hyperinflation.

The likelihood is that it’s going to involve a combination of both.

These issues take us to the fourth critical point, which is the threat to the environment. Let’s be clear that this threat extends far beyond the issue of climate change, into many other areas, which range from pollution and ecological damage to the dwindling availability of essentials such as water and food.

Conversion to renewable energy (RE) isn’t the solution to these problems, if by “solution” we mean “an alternative which can sustain our current level of prosperity”. RE, despite its many merits, isn’t going to replace the surplus energy that we’ve derived hitherto from fossil fuels. RE might well be part of the solution, but only if we take on board the inevitability of degrowth.

This brings me to my final point, which is choice. For well over two centuries we’ve been accustomed to an energy context which has been so favourable that it has given us the ability both to improve personal prosperity and to extend those benefits across a rapidly increasing population.

With this favourable context fading into the past, we have to find answers to questions that we’ve never had to ask ourselves until now.

The faculty of choice requires knowledge of the options, and this we cannot have whilst we persist in the delusion that “the economy is a financial system”. It isn’t, it never has been, and it never can be – but our ignorance about this fundamental point has been one of the many luxuries afforded to us by the largesse of fossil fuels.

This seems pretty depressing fare to put before readers at the start of the festive season. The compensating thought has to be that the connection between prosperity and happiness has always been a falsehood.

A lack of sufficiency can, and does, cause misery – but an excess of it has never been a guarantee of contentment.

In the coming days, Christians will recall with renewed force that Jesus was born in a humble stable. He went on to throw the money-changers out of the Temple, and to instruct people to lay up their treasure, not on Earth, but in Heaven. I hope it will be taken in the right spirit if I add that He never earned an MBA, or ran a hedge fund.

The single most important challenge that we face isn’t deteriorating prosperity, or the looming probability of a financial catastrophe. Rather, the great challenge is that of how to jettison the false notion that material wealth and happiness are coterminous.

‘Value’ may indeed be heading for mass destruction.

But values are indestructible.

In all the press coverage of the “the SNC-Lavalin affair,” not enough attention has been paid to the company’s involvement in Site C – the contentious $11 billion dam being constructed in B.C.’s Peace River valley.

The Liberals say that any pressure they put on Jody Wilson-Raybould to rubber-stamp a “deferred prosecution agreement” for SNC-Lavalin was to protect jobs at the company. But the pressure may have been to protect something much bigger: the Liberals’ vision for Canada’s future. Site C epitomises that vision.

The “Many Lives” of Site C

Birthed in 1959 on the drawing boards of the U.S. Army Corps of Engineers and BC Electric (then owned by Montreal-based Power Corp), the Site C dam has been declared dead, then alive, then dead again several times over the next five decades until 2010, when BC Premier Gordon Campbell announced that Site C would proceed. [1]

Tracking SNC-Lavalin’s involvement in Site C during recent years has been difficult, but Charlie Smith, editor of The Georgia Straight, has filled in some of the missing information.

...

Nuclear power costs too much

U.S. nuclear power plants are old and in decline. By 2030, U.S. nuclear power generation might be the source of just 10% of electricity, half of production now, because 38 reactors producing a third of nuclear power are past their 40-year life span, and another 33 reactors producing a third of nuclear power are over 30 years old. Although some will have their licenses extended, 37 reactors that produce half of nuclear power are at risk of closing because of economics, breakdowns, unreliability, long outages, safety, and expensive post-Fukushima retrofits (Cooper 2013. Nuclear power is too expensive, 37 costly reactors predicted to shut down and A third of Nuclear Reactors are going to die of old age in the next 10-20 years.

New reactors are not being built because it takes years to get permits and $8.5–$20 billion in capital must be raised for a new 3400 MW nuclear power plant (O’Grady, E. 2008. Luminant seeks new reactor. London: Reuters.). This is almost impossible since a safer 3400 MW gas plant can be built for $2.5 billion in half the time. What utility wants to spend billions of dollars and wait a decade before a penny of revenue and a watt of electricity is generated?

In the USA there are 104 nuclear plants (largely constructed in the 1970s and 1980s) contributing 19% of our electricity. Even if all operating plants over 40 years receive renewals to operate for 60 years, starting in 2028 it’s unlikely they can be extended another 20 years, so by 2050 nearly all nuclear plants will be out of business.

Joe Romm “The Nukes of Hazard: One Year After Fukushima, Nuclear Power Remains Too Costly To Be A Major Climate Solution” explains in detail why nuclear power is too expensive, such as:

• New nuclear reactors are expensive. Recent cost estimates for individual new plants have exceeded $5 billion (for example, see Scroggs, 2008; Moody’s Investor’s Service, 2008).
• New reactors are intrinsically expensive because they must be able to withstand virtually any risk that we can imagine, including human error and major disasters
• Based on a 2007 Keystone report, we’d need to add an average of 17 plants each year, while building an average of 9 plants a year to replace those that will be retired, for a total of one nuclear plant every two weeks for four decades — plus 10 Yucca Mountains to store the waste
• Before 2007, price estimates of $4000/kw for new U.S. nukes were common, but by October 2007 Moody’s Investors Service report, “New Nuclear Generation in the United States,” concluded, “Moody’s believes the all-in cost of a nuclear generating facility could come in at between $5,000 – $6,000/kw.”
• That same month, Florida Power and Light, “a leader in nuclear power generation,” presented its detailed cost estimate for new nukes to the Florida Public Service Commission. It concluded that two units totaling 2,200 megawatts would cost from $5,500 to $8,100 per kilowatt – $12 billion to $18 billion total!
• In 2008, Progress Energy informed state regulators that the twin 1,100-megawatt plants it intended to build in Florida would cost $14 billion, which “triples estimates the utility offered little more than a year ago.” That would be more than $6,400 a kilowatt. (And that didn’t even count the 200-mile $3 billion transmission system utility needs, which would bring the price up to a staggering $7,700 a kilowatt).

Extract from Is Nuclear Power Our Energy Future, Or in a Death Spiral? March 6th, 2016, By Dave Levitan, Ensia:

In general, the more experience accumulated with a given technology, the less it costs to build. This has been dramatically illustrated with the falling costs of wind and solar power. Nuclear, however has bucked the trend, instead demonstrating a sort of “negative learning curve” over time.

According to the Union of Concerned Scientists, the actual costs of 75 of the first nuclear reactors built in the U.S. ran over initial estimates by more than 200 percent. More recently, costs have continued to balloon. Again according to UCS, the price tag for a new nuclear power plant jumped from between US$2 billion and US$4 billion in 2002 all the way US$9 billion in 2008. Put another way, the price shot from below US$2,000 per kilowatt in the early 2000s up to as high as US$8,000 per kilowatt by 2008.

Steve Clemmer, the director of energy research and analysis at UCS, doesn’t see this trend changing. “I’m not seeing much evidence that we’ll see the types of cost reductions [proponents are] talking about. I’m very skeptical about it — great if it happens, but I’m not seeing it,” he says.

Some projects in the U.S. seem to face delays and overruns at every turn. In September 2015, a South Carolina effort to build two new reactors at an existing plant was delayed for three years. In Georgia, a January 2015 filing by plant owner Southern Co. said that its additional two reactors would jump by US$700 million in cost and take an extra 18 months to build. These problems have a number of root causes, from licensing delays to simple construction errors, and no simple solution to the issue is likely to be found.

In Europe the situation is similar, with a couple of particularly egregious examples casting a pall over the industry. Construction began for a new reactor at the Finnish Olkiluoto 3 plant in 2005 but won’t finish until 2018, nine years late and more than US$5 billion over budget. A reactor in France, where nuclear is the primary source of power, is six years behind schedule and more than twice as expensive as projected.

“The history of 60 years or more of reactor building offers no evidence that costs will come down,” Ramana says. “As nuclear technology has matured costs have increased, and all the present indications are that this trend will continue.”

Nuclear plants require huge grid systems, since they’re far from energy consumers. The Financial Times estimates that would require ten thousand billion dollars be invested world-wide in electric power systems over the next 30 years.

In summary, investors aren’t going to invest in new reactors because:

• of the billions in liability after a meltdown or accident
• there may only be enough uranium left to power existing plants
• the cost per plant ties up capital too long (it can take 10 billion dollars over 10 years to build a nuclear power plant)
• the costs of decommissioning are very high
• properly dealing with waste is expensive
• There is no place to put waste — in 2009 Secretary of Energy Chu shut down Yucca mountain and there is no replacement in sight.

Nor will the USA government pay for the nuclear reactors given that public opinion is against that — 72% said no (in E&E news), they weren’t willing for the government to pay for nuclear power reactors through billions of dollars in new federal loan guarantees for new reactors.

Cembalest, an analyst at J.P. Morgan, wrote “In some ways, nuclears goose was cooked by 1992, when the cost of building a 1 GW plant rose by a factor of 5 (in real terms) from 1972” (Cembalest).

Further topics:

• Nuclear power depends on fossil fuels to exist (Ahmed 2017) ...
• Peak Uranium ...
• Nuclear power is Way too Dangerous ...
• Nuclear power plants take too long to build ...
• A crisis will harden public opinion against building new Nuclear Power Plants ...
• EROEI and decommissioning ...
• Scale ...
• Staffing ...
• Nuclear Proliferation & terrorism targets ...
• Water ...
• NIMBYism ...
• No good way to store the energy ...
• Ramping up and down quickly to balance solar & wind damages nuclear power plants ...
• Breeder reactors. You’d need 24,000 Breeder Reactors, each one a potential nuclear bomb (Mesarovic) ...

For context see

• The New Green Revolution, a.k.a. The Grand Transition to... ?? - Part I
• Green New Deal - Part II
• Green New Deal, Part III: How?

Recently, I gave in Polish an opening lecture, “Can we salvage our global civilization?”, at a one-day conference of the Polish Academy of Arts and Sciences (PAU). The conference took place in the Isabela Lanckoronska Auditorium at the historic PAU building on Slawkowska 17 Street in Kraków. This conference, “Civic organizations and local communities faced with climate change disasters,” was organized by the Committee on Threats to Civilization of PAU. The last lecture was given by a young activist from a well-known non-profit, who manifestly misled the audience with his proposed implementation of the Green New Deal that would immediately shut down all coal-fired electric power plants in Poland, and replace them with wind turbines, PV arrays and geothermal wells. I pointed out to the nice young man that his radical solution would cause immediate power blackouts in Poland, and asked if he shouldn't have mentioned some of the problems with the transition? His answer was that the ordinary people were not ready to hear an inconvenient truth and thus must be fed reassuring fairy tales to move them in the right direction. Hmm, and then we wonder why so many people trust no one.

The only answer to the harrowing, complex questions of the Big Transition in population, power and lifestyles is science. Science is imperfect. Scientists make mistakes. Some scientists and their funding agencies cannot resist publicity ploys, and oversell their findings. Some scientists have big egos and claim that their particular answers are the only ones that will save humanity. But, science is the merciless quest for perfection, the continuous verification of all models, and the immediate disposal of failed assumptions and theories. Science is continuous doubt. I know the pain of doubting everything, because I am a scientist. In the end, science is the only thing humanity has going for it. Without science, we are merely the dumb, suicidal lemmings that stumble in the dark, all 7.6 billion of us.

So here is the latest science from EOS: "Legions of scientists have put together the computer model that simulates the planet’s climate: the Community Earth System Model (CESM). Last year, the latest version of CESM, CESM2, debuted. Results from this new version’s simulations point toward a much hotter future climate—driven by humans continuing to burn fossil fuels and pump greenhouse gases into the atmosphere—than any previous version of CESM. The jump comes after what-if simulations in which researchers doubled the concentration of carbon dioxide in the atmosphere, starting with levels that existed before the dawn of the Industrial Revolution. (Those concentrations were about 280 parts per million. Today, levels are about 415 parts per million.)

Results from the same simulation from older versions of CESM were 2.9°C of warming in 2006, then 3.2°C in 2009, and 4.1°C in 2012. Now the projected warming is 5.3°C. The real planet has already warmed by 0.7°C to 0.9°C." The difference between the two models is accounting for the super-bright, solar radiation-reflecting clouds made of supercooled water. These clouds disappear fast from the warming up atmosphere and its models.

The supercooled water clouds over Wimberley, TX. Because of the extraordinarily wet spring in Texas, lots of ground moisture is being evaporated here each day. Now, the greedy Brazilians led by the corrupt neo-Nazi, Bolsonaro, want to "develop" (read destroy) the Amazon forest and change it into the soybean plantations for export to China. During that development process, the giant captive cloud system over the Amazonia will disappear. Today this supercooled cloud system gives the hot tropical Amazonia appearance of a cold Arctic region. The accelerated destruction of the Amazonia is yet another way, in which the US, led by Trump and his tariffs, will speed up to the conversion of our hospitable planet into a hot hell for all of us. But the myopic, self-annihilating greed and stupidity are general human features. My friend, Rex Weyler, reports a bumper sticker seen in Colorado on a black pickup with huge wheels and rattling muffler: “My carbon footprint is bigger than yours.” With the Amazon forest gone, parts of Colorado are likely to become a sand desert. Source: T.W. Patzek, 7/6/2019.

Thus, there are no other paths but to shrink, shrink more and transit away from fossil fuels. You can stop reading here, but if you are courageous enough to keep on reading you will understand a little better the Herculean difficulties with the shrinkage and transition.

All right, here are more facts: since 2004, the annual increases of total electricity consumption in the world have outpaced all electricity production by all PV arrays in the world, see Figure 1. And the 2.7 TW of electricity in 2018 was only 16% of total primary energy demand in the world. If you read Part III of this post, you'll understand that even in Sector 1 of the global economy (electricity generation) solar PV electricity has not kept pace with the incremental demand for electricity. As bad as this finding is, it merely illustrates the fact that without stringent population control in the poor countries and massive depowering of the rich countries there will be no comprehensive Green New Deal or Energiewende. But I already made these difficult to swallow points in Part II.

Figure 1. Here is the scope of our problem: since 2004 (the beginning of meaningful solar power) , the annual increases of total electricity demand have outpaced total electricity production from all PV arrays in the world. The only exception was the year 2009, when the global financial crisis was in full swing. Please digest this plot for a second or two, because it shows the height of the power mountain we are on. Data source: BP Statistical Review of World Energy 2019; data extracted by my electrical engineer friend, Pedro Prieto, 6/13/2019.

Let's go back to the GHG emissions that have been increasing rather briskly at 2.7% in 2018, also see Figure 2. At a recent Atlantic Council meeting, Mr. Spencer Dale, chief economist of BP, was reported to have said this :

"Dale closed his presentation with a discussion of the power sector, emphasizing the importance of its decarbonization. Despite the renewable energy surge in the last decade, the power sector fuel mix remains the same as twenty years ago. Dale argued that switching coal production to natural gas is key to cutting emissions, as switching just 10 percent of global coal consumption to natural gas would have the same impact on emissions as doubling the renewables capacities of China and the United States." See Figure 3, to understand the scales involved.

Figure 2. Notice that international aviation (us flying and our Valentine roses being flown from Costa Rica), and maritime transport (our stuff being shipped everywhere throughout the global fossil amoeba) emit as much of carbon dioxide as the continent of Africa. Source: Ourworldindata.org

My dear green friends, even though Mr. Dale works for the oil industry, he is telling the truth. I'll come back to him a little later. There is no other quick way of limiting GHG emissions from electricity generation, unless the rich countries insist on the immediate and deep, really deep, power cuts that would spell the end of the current global economy that our visionary (just kiddin') president Trump wants to kill. Please remember that a vast increase of solar power postulated in Part III, would require heavy subsidies from fossil fuels and the concomitant increase of GHG emissions by perhaps as much as 25%, see Part II.

OK, let's move on. In Part III of this post, I offered you a magic conversion from coal and oil to equivalent solar electrical power. I expected a few of you to push me back by arguing that we do not need as much as 89 TWp (terawatt peak) of photovoltaic electricity to replace most of the 11 TW of global coal and oil. If you did, I would have answered, no, in fact we need several times more solar electricity during the day to run all the background processes of generation of hydrogen or other energy carriers to power the rest of the economy during the night and provide heat for other industrial processes. If hydrogen generated by the solar electrolysis of water were to leave the closed loop of generation/burning, the need for photovoltaic power would increase again, not to mention a steady waste stream of salts from the electrolyzed water, one way or another.

For example, a 1 MWp solar plant can deliver at best 20 tons of oil equivalent (or 20 tons of gasoline equivalent) per year as liquid or compressed hydrogen. That's one tanker truck per year! As my Spanish electrical engineer friend, Pedro Prieto, calculates, a 1 MWp solar PV plant delivers to the consumers only 22% of its electricity production as usable hydrogen. I hope that you understand just how arduous and inefficient a large scale replacement of fossil fuels with hydrogen would be.

In keeping with the tone of this four-part post, the ever-brilliant Onion tells us - the rich people - what to do in order to become more sustainable:

"PROVIDENCE, RI—Redefining the necessary adjustments required to address the accelerated pace of the growing global environmental crisis, a report published Wednesday by researchers at Brown University concluded that a single individual who wishes to do their part to stop climate change must remove 40,000 cars from public roadways and revive 20 square miles of coral reef. “As long as everyone on the planet intensifies their efforts by personally clearing 6.5 tons of plastic from the ocean, installing 7,000 solar panels in their community, and cutting back their use of fresh water by 300 million gallons, the human race may still have a shot at slowing climate change,” said atmospheric scientist Dr. Lauren Moffat, who further noted that each person on the planet would also ideally commit to saving at least three species from extinction every month while simultaneously working to reduce the world’s population by 1.3 billion in order to forestall global environmental collapse. “Some believe it may be too late to reverse the damage humans have done to our planet, but individual change can start with something as small as picking up four tons of garbage every day. At this point, it’s a cultural imperative for everyone to pitch in by performing small but measurable tasks—such as replacing 150 hectares of industrial buildings with hardwood forests in every U.S. city—if we want to stall the meteoric rise in global temperatures for a few more years.” Moffat added that reversing climate change can be as simple as removing every single car from the road or perfecting cold fusion."

OK, scientifically speaking, I may have some beef with the Onion, but in general they are soo correct. Except that their population reduction goal is way too small, and personal water use too high.

Not to be outdone by the Onion, the Guardian proclaimed that

"The UK’s biggest carbon capture project will soon block thousands of tonnes of factory emissions from contributing to the climate crisis, by using them to help make the chemicals found in antacid, eyedrops and Pot Noodle. Within two years a chemical plant in Cheshire could keep 40,000 tonnes of carbon from the air every year, or the equivalent of removing 22,000 cars from the UK’s roads. ..."

This real project will deliver roughly half of the personal goal set out by the Onion. We live in a world in which comedians tell the scientifically defensible truth, and the serious, independent media seem to suffer from acute meningitis. And so many others just want to manipulate us, truth be damned. Are we still laughing?

On a more serious note, the Houston Chronicle published this analysis quoting the same Mr. Dale:

"An economist with European oil major BP recently concluded an unexpected jump in global energy demand last year largely was due to a rise in the number of very hot and very cold days in some of the world’s most populated areas, including the United States, driving up consumption of power and heating fuels — and the carbon emissions that most of the world’s governments are racing to reduce “As they reach for the switch of the heater or air conditioner, energy consumption goes up,” Spencer Dale, group chief economist at BP, said at an event at the Washington think tank Atlantic Council earlier this month. “If there’s a link between the growing level of carbon in the atmosphere leading to the weather effects we saw last year that will signal the beginning of a more worrying, vicious cycle where increasing levels of carbon lead to more extreme weather patterns, which in turn lead to greater growth in energy and carbon.” Climate change and the global effort to combat it generally have been perceived as a threat to Texas’s sprawling oil and gas sector and other industries that produce large volumes of carbon dioxide. But BP’s analysis suggests at least in the short term, a warming planet could increase demand for fossil fuels."

I'll add that this "short term" could last for several decades, unless a major rearrangement of the status quo happens real fast. And we cannot afford several decades of annual increases of GHG emissions around the world.

Figure 3. Petawatt hours (1 peta = 1000 tera = 1,000,000,000,000,000 watts) of electricity produced from all sources (red curve) and solar PV + wind turbines. As you can see, the contribution of "renewable electricity" is visible, but hardly sufficient to drive the Green New Deal even in Sector 1 of the global economy. I have put "renewable electricity" in quotes to stress that the solar PV arrays and wind turbines are machines that repeatedly produce electricity for 20-30 years, after which time they must be replaced, if it is still possible in the greener simplified economy with much less power throughput.

In conclusion, paraphrasing somewhat a recent email from David Hughes: "An increase of renewable power did account for 33% of the increase in electricity consumption in 2018 (Sector 1, please read Part III), but renewables haven’t actually reduced non-renewable consumption. Unfortunately, that still leaves the 84% of delivered power that is non-electric (Sectors 2-4 of the global economy). And down the road when we all drive electric cars and fly in electric planes with our food delivered by electric drones, and create hydrogen via electrolysis for fuel to colonize Mars the annual increases are going to get larger." I would say many-fold larger. Did I mention the stupid lemmings stumbling in the dark?

...

I read this book hoping Jaczko would explain why he shut Yucca mountain down. The 2013 book “Too Hot to Touch: The Problem of High-Level Nuclear Waste” by William M. Alley & Rosemarie Alley, Cambridge University Press goes into great detail about why Yucca Mountain is the ideal place to put nuclear waste.

I have a lot of problems with Yucca being shut down. How is it safer to have 70,000 tons of spent nuclear reactor fuel and 20,000 giant canisters of high-level radioactive waste at 121 sites across 39 states, with another 70,000 tons on the way before reactors reach the end of their life?

Spent fuel pools in America’s 104 nuclear power plants, have an average of 10 times more radioactive fuel stored than what was at Fukushima, most of them so full they have four times the amount they were designed to hold.

All of this waste will harm future generations for at least a million years, all of these above ground sites are vulnerable to terrorists, tsunamis, floods, rising sea levels, hurricanes, electric grid outages, earthquakes, tornadoes, and other disasters.

So Yucca mountain isn’t perfect? Not making a choice about where to store nuclear waste is a choice. We will expose many future generations to toxic radioactive wastes if we don’t clean them up now.

Here is what Jaczko has to say for why he shut down Yucca Mountain:

“There were many technical, political, and safety reasons why the site was not ideal, in fact Yucca failed to meet the original geological criteria. The rock that would hold the nuclear waste allowed far too much water to penetrate; water would eventually free the radiation and carry it elsewhere. In addition safety studies that showed the site to be acceptable were based on infeasible computer simulations projecting radiation hazards over millions of years. Realistically forecasting the complex, long-term behavior of spent nuclear fuel in underground facilities is scientifically impossible. After 35 years, the Yucca mountain project was over.”

Yet Jaczko knows his decision to leave nuclear waste at 121 sites is dangerous:

“As waste piles up, we leave behind dangerous materials that later generations will eventually have to confront. The short-term solution—leaving it where it is—can certainly be accomplished with minimal hazard to the public. But such solutions require active maintenance and monitoring by a less than willing industry. This is already an organizational and financial burden. In 30,000 years when these companies no longer exist who will be responsible for this material?” [my comment: or even 30 years after a financial crash or oil decline]

Thousands of scenarios were modeled at Yucca mountain of every combination of earthquake, volcanic intrusion and eruption, upwelling water, increased rainfall, and much more. Jaczko offers no countering scientific evidence, which I expected to find in his book. Yucca mountain passed with flying colors, here are just a few reasons why:

• Volcanic activity stopped millions of years ago
• Earthquakes mainly affect the land surface — not deep underground storage
• Waste could be stored 1,000 feet below the land surface yet still be 1,000 feet above the water table in an area with little water and only a few inches of rain a year. Rain was not likely to travel 1,000 feet down.
• The entire area is a closed basin. No surface water leaves the area. The Colorado River is more than 100 miles away.
• There’s no gold, silver, or oil to tempt future generations to dig or drill into the nuclear waste.
• The mountain is made of a rock that makes tunneling easy yet at the same time tough enough to form stable walls that are unlikely to collapse.

If Jaczcko’s secret motive was to stop Yucca waste storage so states wouldn’t build more nuclear power plants (6 states won’t allow new plants until there’s nuclear waste disposal), he shouldn’t have worried. The upfront costs to build a nuclear power plant is 4 times an equivalent natural gas plant so banks aren’t going to lend money, no money will be coming in for the minimum of ten years it takes to get permission and fight off lawsuits and NIMBYism, there are uninsurable liabilities, and there are limited uranium reserves left.

And once peak oil production hits, most likely within the next 5 years according to the latest IEA 2018 report, the odds are that we’ll spend dwindling energy on nuclear waste disposal to protect thousands of future generations is nil. That rapidly disappearing oil (at an exponential 6% per year) is going to be spent growing food and wars.

Jaczcko spends a few paragraphs on the hazards of spent nuclear fuel pools and points out that terrorism, floods, earthquakes, tornadoes, mudslides, and hurricanes could affect them enough for another Fukushima to happen here.

But if his agenda is to stop new nuclear power plants, he should have mentioned the 2016 report of the National Research Council “Lessons Learned from the Fukushima nuclear accident for improving safety and security of U.S. Nuclear plant” in which it was learned that

“If electric power were out 12 to 31 days (depending on how hot the stored fuel was), the fuel from the reactor core cooling down in a nearby nuclear spent fuel pool could catch on fire and cause millions of flee from thousands of square miles of contaminated land, because these pools aren’t in a containment vessel.”

The National Research Council estimated that if a spent nuclear fuel fire happened at the Peach Bottom nuclear power plant in Pennsylvania, nearly 3.5 million people would need to be evacuated and 12 thousand square miles of land would be contaminated. A Princeton University study that looked at the same scenario concluded it was more likely that 18 million people would need to evacuated and 39,000 square miles of land contaminated (see my post on this here).

In the worst case, nearly all of U.S. reactors would be involved if there were a nuclear bomb generated electromagnetic pulse, which could take the electric grid down for a year or more (see U.S. House hearing testimony of Dr. Pry at The EMP Commission estimates a nationwide blackout lasting one year could kill up to 9 of 10 Americans through starvation, disease, and societal collapse.

Okay, enough criticizing. Overall this book will interest anyone who is concerned about nuclear power, which comes up a lot now as a potential part of the Green New Deal and a way to provide power without CO2.

Here are some excerpts from the first half of the book, the second half is worth reading too.

...

Problems in the work of a number of Ukrainian enterprises threaten an environmental catastrophe. This was stated on the air of the “NewsOne” TV channel by the deputy of the Verkhovna Rada of Ukraine Sergey Shakhov. According to him, he regularly receives messages from the employees of enterprises, in particular the Zaporozhye nuclear power plant concerning the dangerous situations that arise due to the lack of control of inspection bodies.


“Thus, they become a mini-Chernobyl, a time bomb. Environmental catastrophe with every step in Ukraine,” said the deputy.

The member of the Council on International Relations under the President of Russia Bogdan Bezpalko in a conversation with RT noted that “this question should be carefully studied, however the danger of a repetition of large technogenic catastrophes in Ukraine indeed exists”.

In turn, the senior research associate of the Center for European Research of the Institute of World Economy and International Relations at the Russian Academy of Sciences Vladimir Olenchenko noted that Sergey Shakhov’s statement speaks about the strong wear of infrastructure in Ukraine.

“Zaporozhye is a densely populated area, a catastrophe at the nuclear power plant will affect not only infrastructure, but also the population. In general, any technological catastrophe will have serious effects on the territory of all Ukraine,” explained the expert in a conversation with RT.

Over the past few years there have been regularly emergency situations in Ukrainian nuclear power plants, which lead to shutdowns and the stoppage of power units.

Thus, on July 16th 2016 at the first block of the Khmelnitsky nuclear power plant there was the depressurisation of the first circuit of the block and radioactive coolant entered the steam generator, which led to an abnormal stoppage in the enterprise. This was reported by the deputy from the “Radical Party” of Ukraine Andrey Artemenko.

Later the work of the second generator stopped several times because of failures in the management system and the protection of the nuclear reactor. In September 2018 the second power unit was switched-off for a scheduled repair (according to the operator of the Ukrainian nuclear power plants of the “Energoatom” company) because of damage sustained by the transformer, but after activation it did not work for weeks. The operation of the block was resumed only on December 14th 2018.

Faults the power plant could have been avoided if in 2017 Kiev did not terminate the Russian-Ukrainian inter-governmental agreement on the construction of the third and fourth power units of the Khmelnitsky nuclear power plant. Now Ukraine continues to search for partners for their construction.

Repeated accidents also happened at the Zaporozhye nuclear power plant that Shakhov mentioned in his speech. Thus, in September 2018 there was an abnormal stoppage at the second power unit, which had to be switched-off in order to repair the main circulation pump. The stoppage of the block caused panic among the population, which the leadership of nuclear power plant blamed the local media for.

Soon after this incident one more power unit at the nuclear power plant – the sixth – was closed. According to the plan of repair work, it should’ve started to work again in January 2019, however is is still deactivated. And in March of this year one more block – the fourth – was switched-off.

In 2016 the academic publication “Energy Research & Social Science” reported that “during many years accidents at Ukrainian nuclear power plants were not registered in the database, despite information about them being available in the state media”.

As a result, the authors of the research came to the conclusion that the probability of a major atomic catastrophe in Ukraine in the upcoming years will reach 80%.

The authorities of Ukraine are not involved in restoring the energy infrastructure because they are incompetent, noted Vladimir Olenchenko.

“In addition, infrastructure needs to be supported financially, but it is necessary to ascertain the fact that the money that was given to Ukraine by the EU and IMF, including for these needs, dissolved in the air. The new government should find out what they were spent on,” said the expert.

The problem of a lack of financing is aggravated also by the refusal of the Ukrainian authorities to use Russian component parts and fuel.

According to Bogdan Bezpalko, over the last five years Kiev has methodically reduced the volume of cooperation with Russia, including in the field of supplying Ukrainian nuclear power plants with the necessary fuel elements.

“In order to cause damage to Russia and to deprive it of the Ukrainian market, Kiev severed all ties with our country and turned to the bankrupt Westinghouse instead. But the components delivered by this American company are not suitable for the nuclear power plants that were constructed in Ukraine,” said Bezpalko.

As a reminder, in 2008 the Ukrainian “Energoatom” and the American company “Westinghouse” signed a contract on providing from three to six power units of Ukrainian nuclear power plants with VVER-1000 reactors in with nuclear fuel for 2011-2015.

Experts in the field of nuclear power repeatedly criticised such a decision made by the Ukrainian authorities, specifying that the American fuel elements (TVEL) are incompatible with the reactors of Soviet construction. The fuel elements assembled in the US differ in terms of their configuration from the Soviet and Russian analogs. Russia manufactures six-sided elements, and in the US – quadrangular.

Speaking about the use of Westinghouse fuel in Soviet reactors, experts pointed to the experience of the Czech Republic, where such practice also led to regular failures of fuel assemblies, created threats of a catastrophe, and raised energy production costs because of extraordinary stoppages in power units.

In 2016 the use of American fuel at Ukrainian nuclear power plants was also criticised by Mikhail Umanets – the former director of the Chernobyl nuclear power plant.

American fuel is put in our power units without the approval of their chief designer. How safe it is, it is difficult for me to judge, only the chief designer has this information. But we all the same have no right to play with nuclear power plant safety, one Chernobyl will be enough for us

As a reminder, on April 26th 1986 at the fourth power unit of the Chernobyl nuclear power plant there was a catastrophe that led to a reactor explosion. The emission of a huge amount of radioactive materials resulted — in Ukraine 50,000 sq.km in 12 regions, in Belarus – 46,500 sq.km, and in Russia – 60,000 sq.km were contaminated. Radioactive emissions also reached Europe. The remaining three power units gradually stopped, and in December 2000 the station completely stopped its work.

The first sarcophagus was constructed around the fourth power unit for environment protection with the efforts of about 90,000 people in November 1986. It represented a simple concrete box. It became soon clear that such protection requires replacement.

The construction of a new sarcophagus began only in 2007 and was completed in November 2016.

The donors – among which there were Germany, Russia, Canada, and other countries – spent about €2 billion for the sarcophagus project. In April 2015 the government of the Russian Federation agreed to allocate about €10 million more in addition for the construction of a sarcophagus

The former adviser of the president of Ukraine Leonid Kuchma, the political scientist Oleg Soskin, in a conversation with RT said that Ukrainian deputies are concerned more by the language issue than the subject of environmental and technogenic safety.

“The Ukrainian population is unaware of the existence of an infrastructure threat. After the war in the East of Ukraine began, the subject of an environmental catastrophe became confidential. Earlier this issue was constantly discussed at environmental, economic, and technological forums. Today there is simply no exact information about the status of the atomic blocks of power plants,” noted the expert.

According to him, in Ukraine there are still zones with non-scrapped radiation and chemical waste from the Soviet period. But the public isn’t aware of the real threat of a technogenic catastrophe with a scale that can be more than the effects of the Chernobyl catastrophe, added Soskin.

“There is nobody in Ukraine to deal with the issue of restoring the energy infrastructure. Poroshenko had no desire to deal with these issues – he only cared about personal enrichment and his Roshen candy factory. In addition, in Ukraine there are simply no professionals who could deal with this problem,” considers the political scientist.

Soskin added that with the administration of Poroshenko leaving office there is hope that the situation concerning the condition of the nuclear power plants in Ukraine will change, however for this purpose it is necessary to wait for real actions from the new president.

“The current situation, perhaps, will change with the coming to power of Vladimir Zelensky. But only if a team that thinks in a new way and understands the scale of a future environmental catastrophe is formed”concluded the expert.

Preface. This is a book review of: Robert Bryce. 2009. Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future.

This is a brilliant book, very funny at times, a great way to sharpen your critical thinking skills, and complex ideas and principles expressed so enough anyone can understand them.

I have two main quibbles with his book. I’ve written quite a bit about energy and resources in “When trucks stop running” and energyskeptic about why nuclear power and natural gas cannot save us from the coming oil shortages — after all, natural gas and uranium are finite also.

This book came out in 2009. As far as Bryce’s promotion of nuclear power as a potential solution, perhaps he would have been less enthusiastic if he’d read the 2013 “Too Hot to Touch: The Problem of High-Level Nuclear Waste” by W. A. Alley et al., Cambridge University Press. And also the 2016 National Research Council “Lessons Learned from the Fukushima Nuclear Accident for Improving Safety and Security of U.S. Nuclear Plants: Phase 2”. As a result of this study, MIT (Massachusetts Institute of Technology) and Science Magazine concluded that a nuclear spent fuel fire at Peach Bottom in Pennsylvania could force up to 18 million people to evacuate. This is because the spent fuel is not stored under the containment vessel where the reactor is, which would keep the radioactivity from escaping, so if electric power were out for 12 to 31 days (depending on how hot the stored fuel was), the fuel from the reactor core cooling down in a nearby nuclear spent fuel pool could catch on fire and cause millions of flee from thousands of square miles of contaminated land.

Bryce on why the green economy won’t work:

There’s tremendous political appeal in “green jobs,” a “green collar economy,” and in what U.S. President Barack Obama calls a “new energy future.” We’ve repeatedly been told that if we embrace those ideas, provide more subsidies to politically favored businesses, and launch more government-funded energy research programs, then we would resolve a host of problems, including carbon dioxide emissions, global climate change, dependence on oil imports, terrorism, peak oil, wars in the Persian Gulf, and air pollution. Furthermore, we’re told that by embracing “green” energy we would also revive our struggling economy, because doing so would produce more of those vaunted “green jobs.”

These claims ignore the hard realities posed by the Four Imperatives: power density, energy density, cost, and scale.

It may be fashionable to promote wind, solar, and biofuels, but those sources fail when it comes to power density. We want energy sources that produce lots of power (which is measured in horsepower or watts) from small amounts of real estate.

And that’s the key problem with wind, solar, and biofuels: They require huge amounts of land to generate meaningful amounts of power. If a source has low power density, it invariably has higher costs, which makes it difficult for that source to scale up and provide large amounts of energy at reasonable prices.

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Preface. I’ve made a strong case in my book “When trucks stop running” and this energyskeptic website that we will eventually return to wood and a 14th century lifestyle after fossil fuels are depleted.

So if you’re curious about what that lifestyle will be like, and how coal changed everything, this is the book for you.

One point stressed several times is that in all organic economies a steady state exists. Or as economists put it, that there were just three “components essential in all material production; capital, labor, and land. The first two could be expanded as necessary to match increased demand, but the third could not, and rising pressure on this inflexible resource arrested growth and depressed the return to capital and the reward of labor.”

Then along came coal (and today oil and natural gas), which for a few centuries removed land as a limiting factor (though we’re awfully close the Malthusian limits as well, population is growing, cropland is shrinking as development builds over the best farm land near cities, which exist where they do because that was good crop land).

In today’s world, energy set the limits to growth, but in the future land once again will. So will the quality of roads, how many forests exist whose wood can be gotten to towns and cities, and so on. So if you’re in a transition town group or in other ways trying to make the future better, perhaps this book will give you some ideas.

If this world is too painful to contemplate, read some books about the Amish, which would be an ideal society for me minus the religious side of it.

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This is a long and very worthwhile article explaining why politics as it is practised is unable to understand and effectively cope with the current world circumstances. Read the comments too.

As regular readers will know, this site is driven by the understanding that the economy is an energy system, and not (as conventional thinking assumes) a financial one. Though we explore a wide range of related issues (such as the conclusion that energy supply is going to need monetary subsidy), it’s important that we never lose sight of the central thesis. So I hope you’ll understand the need for a periodic restatement of the essentials.

If you’re new to Surplus Energy Economics, what this site offers is a coherent interpretation of economic and financial trends from a radically different standpoint. This enables us to understand issues that increasingly baffle conventional explanations.

This perspective is a practical one – nobody conversant with the energy-based interpretation was much surprised, for instance, when Donald Trump was elected to the White House, when British voters opted for “Brexit”, or when a coalition of insurgents (aka “populists”) took power in Rome. The SEE interpretation of prosperity trends also goes a long way towards explaining the gilets jaunes protests in France, protests than can be expected in due course to be replicated in countries such as the Netherlands. We’re also unpersuaded by the exuberant consensus narrative of the Chinese economy. The proprietary SEEDS model has proved a powerful tool for the interpretation of critical trends in economics, finance and government.

The aim here, though, isn’t simply to restate the core interpretation. Rather, there are three trends to be considered, each of which is absolutely critical, and each of which is gathering momentum. The aim here is to explore these trends, and share and discuss the interpretations of them made possible by surplus energy economics.

The first such trend is the growing inevitability of a second financial crisis (GFC II), which will dwarf the 2008 global financial crisis (GFC), whilst differing radically from it in nature.

The second is the progressive undermining of political incumbencies and systems, a process resulting from the widening divergence between policy assumption and economic reality.

The third is the clear danger that the current, gradual deterioration in global prosperity could accelerate into something far more damaging, disruptive and dangerous.

The vital insight

The centrality of the economy is the delivery of goods and services, literally none of which can be supplied without energy. It follows that the economy is an energy system (and not a financial one), with money acting simply as a claim on output which is itself made possible only by the availability of energy. Money has no intrinsic worth, and commands ‘value’ only in relation to the things for which it can be exchanged – and all of those things rely entirely on energy.

Critically, all economic output (other than the supply of energy itself) is the product of surplus energy – whenever energy is accessed, some energy is always consumed in the access process, and surplus energy is what remains after the energy cost of energy (ECoE) has been deducted from the total (or ‘gross’) amount that is accessed.

This makes ECoE a critical determinant of prosperity. The distinguishing feature of the world economy over the last two decades has been the relentless rise in ECoE. This process necessarily undermines prosperity, because it erodes the available quantity of surplus energy. We’re already seeing this happen – Western prosperity growth has gone into reverse, and progress in emerging market (EM) economies is petering out. Global average prosperity has already turned down.

The trend in ECoE is determined by four main factors. Historically, ECoE has been pushed downwards by broadening geographical reach and increasing economies of scale. Where oil, natural gas and coal are concerned, these positive factors have been exhausted, so the dominating driver of ECoE now is depletion, a process which occurs because we have, quite naturally, accessed the most profitable (lowest ECoE) resources first, leaving costlier alternatives for later.

The fourth driver of ECoE is technology, which accelerates downwards tendencies in ECoE, and mitigates upwards movements. Technology, though, operates within the physical properties of the resource envelope, and cannot ‘overrule’ the laws of physics. This needs to be understood as a counter to some of the more glib and misleading extrapolatory assumptions about our energy future.

The nature of the factors driving ECoE indicates that this critical factor should be interpreted as a trend. According to SEEDS – the Surplus Energy Economics Data System – the trend ECoE of fossil fuels has risen exponentially, from 2.6% in 1990 to 4.1% in 2000, 6.7% in 2010 and 9.9% today. Since fossil fuels continue to account for four-fifths of energy supply, the trend in overall world ECoE has followed a similarly exponential path, and has now reached 8.0%, compared with 5.9% in 2010 and 3.9% in 2000.

For fossil fuels alone, trend ECoE is projected to reach 11.8% by 2025, and 13.5% by 2030. SEEDS interpretation demonstrates that an ECoE of 5% has been enough to put prosperity growth into reverse in highly complex Western economies, whilst less complex emerging market (EM) economies hit a similar climacteric at ECoEs of about 10%. A world economy dependent on fossil fuels thus faces deteriorating prosperity and diminishing complexity, both of which pose grave managerial challenges because they lie wholly outside our prior experience.

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Comment: A very comprehensive overview of the Venezuela situation. Read it all. If medium.com gives you difficulties, you can read it here.

Venezuela used to be a dream US ally, model free-market economy, and a major oil producer. With the largest reserves of crude oil in the world, the conventional narrative is that its current implosion can only be due to colossal mismanagement of its domestic resources.

Described back in 1990 by the New York Times as “one of Latin America’s oldest and most stable democracies”, the newspaper of record predicted that, thanks to the geopolitical volatility of the Middle East, Venezuela “is poised to play a newly prominent role in the United States energy scene well into the 1990's”. At the time, Venezuelan oil production was helping to “offset the shortage caused by the embargo of oil from Iraq and Kuwait” amidst higher oil prices triggered by the simmering conflict.

But the NYT had camouflaged a deepening economic crisis. As noted by leading expert on Latin America, Javier Corrales, in ReVista: Harvard Review of Latin America, Venezuela had never recovered from currency and debt crises it had experienced in the 1980s. Economic chaos continued well into the 1990s, just as the Times had celebrated the market economy’s friendship with the US, explained Corrales: “Inflation remained indomitable and among the highest in the region, economic growth continued to be volatile and oil-dependent, growth per capita stagnated, unemployment rates surged, and public sector deficits endured despite continuous spending cutbacks.”

Prior to the ascension of Chavez, the entrenched party-political system so applauded by the US, and courted by international institutions like the IMF, was essentially crumbling. “According to a recent report by Data Information Resources to the Venezuelan-American Chamber of Commerce, in the last 25 years the share of household income spent on food has shot up to 72 percent, from 28 percent,” lamented the New York Times in 1996. “The middle class has shrunk by a third. An estimated 53 percent of jobs are now classified as ‘informal’ — in the underground economy — as compared with 33 percent in the late 1970's”.

The NYT piece cynically put all the blame for the deepening crisis on “government largesse” and interventionism in the economy. But even here, within the subtext the paper acknowledged a historical backdrop of consistent IMF-backed austerity measures. According to the NYT, even the ostensibly anti-austerity president Rafael Caldera — who had promised more “state-financed populism” as an antidote to years of IMF-wrought austerity — ended up “negotiating for a $3 billion loan from the IMF” along with “a second loan of undisclosed size to ease the social impact of any hardships imposed by an IMF agreement.”

So it is convenient that today’s loud and self-righteous moral denunciations of Maduro ignore the instrumental role played by US efforts to impose market fundamentalism in wreaking economic and social havoc across Venezuelan society. Of course, outside the fanatical echo chambers of the Trump White House and the likes of the New York Times, the devastating impact of US-backed World Bank and IMF austerity measures is well-documented among serious economists.

In a paper for the London School of Economics, development economist Professor Jonathan DiJohn of the UN Research Institute for Social Development found that US-backed economic > “liberalisation not only failed to revive private investment and economic growth, but also contributed to a worsening of the factorial distribution of income, which contributed to growing polarisation of politics.”

Neoliberal reforms further compounded already existing centralised nepotistic political structures vulnerable to corruption. Far from strengthening the state, they led to a collapse in the state’s regulative power. Analysts who hark back to a Venezuelan free market golden age ignore the fact that far from reducing corruption, “financial deregulation, large-scale privatisations, and private monopolies create[d] large rents, and thus rent-seeking/corruption opportunities.”
Instead of leading to meaningful economic reforms, neoliberalisation stymied genuine reform and entrenched elite power. And this is precisely how the West helped create the Chavez it loves to hate. In the words of Corrales in the Harvard Review:

“… economic collapse and party system collapse — are intimately related. Venezuela’s repeated failure to reform its economy made existing politicians increasingly unpopular, who in turn responded by privileging populist policies over real reforms. The result was a vicious cycle of economic and political party decay, ultimately paving the way for the rise of Chavez.”

While it is now fashionable to blame the collapse of the Venezuelan oil industry solely on Chavez’s socialism, Caldera’s privatisation of the oil sector was unable to forestall the decline in oil production, which peaked in 1997 at around 3.5 million barrels a day. By 1999, Chavez’s first actual year in office, production had already dropped dramatically by around 30 percent.

A deeper look reveals that the causes of Venezuela’s oil problems are slightly more complicated than the ‘Chávez killed it’ meme. Since peaking around 1997, Venezuelan oil production has declined over the last two decades, but in recent years has experienced a precipitous fall. There can be little doubt that serious mismanagement in the oil industry has played a role in this decline. However, there is a fundamental driver other than mismanagement which the press has consistently ignored in reporting on Venezuala’s current crisis: the increasingly fraught economics of oil.

Nate Hagens just released a new video course titled “Reality 101” that he produced for honors freshman at the University of Minnesota where he teaches.

The course is backed by 15 years of research into energy by Nate, and distills his 45 hour university course of the same name into 2 hours of video.

I’ve followed and admired Nate for many years and have posted some of his work here. Nate has one of the best big picture understandings of our predicament and is an excellent communicator.

Unlike some of his research colleagues, Nate retains hope and offers positive advice to young people on how to help make the future a desirable place to live.

I suspect this new video course will become a goto resource for people seeking honest education on a vitally important topic that is usually ignored, and when occasionally broached, is almost always misunderstood or denied by most educators, leaders, and news sources.

Nate can be found on both Twitter and Facebook.

Nate’s Facebook announcement of the video course:

I’ll be putting the entire Reality 101 course content (two 500 page books co-written w DJ White plus related content and videos) online for free this spring. In the meantime, the Honors Program at U of Minnesota asked for a ‘hologram’ of that material that could be watched in 4-5 hours (instead of ~150 hours of the course) for the Nexus One experience for all freshmen. They’ll watch this in 3 pieces: 1) Brain/behavior 2) Energy/economy and 3) Ecology/Earth systems/what to do/how to live during these times. The Energy videos (link below) are ‘finished’ (with a bunch of small errors to fix when I get time), The 12 videos are 1 hour 45 minutes total – as usual both too long for most peoples attn spans but too short to really get into some important nuances. Our culture is energy blind. This new choreography outlines the story of humans, growth, energy and the future in the most comprehensive way I could envision for a short(ish) summary. (thanks to Katie Fischer and Keegan L Robinson for tireless help and suggestions and to Katie for doing great work on the tech side)

Reality 101 full course description:

• How is the economy like a hurricane?
• Where does money come from?
• Will economic growth last forever?
• What is wealth?
• How many hours would it take you to generate the same amount of energy in a gallon of gasoline?
• Why are you so confident in your own beliefs?
• Why do you spend so much time on social media?
• Why do we want “more” than our neighbors?
• What do all of these questions have to do with the environment?
• With your future?
• What if our most popular societal beliefs about these issues turn out to be myths?

Reality 101 will delve into these questions and unify them as they apply to the major challenges humanity faces this century, among them: slow economic growth, poverty, inequality, addiction, pollution, ocean acidification, biodiversity loss, and war. The seminar will provide students with broad exposure to the foundational principles central to addressing these interrelated issues. The readings and lectures will cover literature in systems ecology, energy and natural resources, thermodynamics, history, anthropology, human behavior, neuroscience, environmental science, sociology, economics, globalization/trade, and finance/debt with an overarching goal to give students a general understanding of how our human ecosystem functions as a whole. Such a systems overview is necessary to view the opportunities and constraints relevant to our future from a realistic starting point. Though the hard science relating to sustainability will be surveyed, few answers will be presented and it is hoped that creativity and group dialogue will lead to emergent ideas on how these big themes fit together. While the class material is daunting and intense (reflecting our world situation), the course itself will be enlightening and deeply informative, with an open, engaging, and entertaining class atmosphere.

Dr. Nathan John Hagens worked on Wall Street at Lehman Brothers and Salomon Brothers and closed his own hedge fund in 2003 to pursue interdisciplinary knowledge about the bigger picture of modern society. Nate was the lead editor of the online web portal theoildrum.com, and is currently President of the Bottleneck Foundation and on the Boards of the Post Carbon Institute, Institute for Energy and Our Future, and IIER.

Click to play all 12 parts in sequence