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Researchers Have Been Underestimating the Cost of Wind and Solar

Alternative Energy

How should electricity from wind turbines and solar panels be evaluated? Should it be evaluated as if these devices are stand-alone devices? Or do these devices provide electricity that is of such low quality, because of its intermittency and other factors, that we should recognize the need for supporting services associated with actually putting the electricity on the grid? This question comes up in many types of evaluations, including Levelized Cost of Energy (LCOE), Energy Return on Energy Invested (EROI), Life Cycle Analysis (LCA), and Energy Payback Period (EPP).

I recently gave a talk called The Problem of Properly Evaluating Intermittent Renewable Resources (PDF) at a BioPhysical Economics Conference in Montana. As many of you know, this is the group that is concerned about Energy Returned on Energy Invested (EROI). As you might guess, my conclusion is that the current methodology is quite misleading. Wind and solar are not really stand-alone devices when it comes to providing the kind of electricity that is needed by the grid. Grid operators, utilities, and backup electricity providers must provide hidden subsidies to make the system really work.

This problem is currently not being recognized by any of the groups evaluating wind and solar, using techniques such as LCOE, EROI, LCA, and EPP. As a result, published results suggest that wind and solar are much more beneficial than they really are. The distortion affects both pricing and the amount of supposed CO2 savings.

One of the questions that came up at the conference was, “Is this distortion actually important when only a small amount of intermittent electricity is added to the grid?” For that reason, I have included discussion of this issue as well. My conclusion is that the problem of intermittency and the pricing distortions it causes is important, even at low grid penetrations. There may be some cases where intermittent renewables are helpful additions without buffering (especially when the current fuel is oil, and wind or solar can help reduce fuel usage), but there are likely to be many other instances where the costs involved greatly exceed the benefits gained. We need to be doing much more thoughtful analyses of costs and benefits in particular situations to understand exactly where intermittent resources might be helpful.

A big part of our problem is that we are dealing with variables that are “not independent.” If we add subsidized wind and solar, that act, by itself, changes the needed pricing for all of the other types of electricity. The price per kWh of supporting types of electricity needs to rise, because their EROIs fall as they are used in a less efficient manner. This same problem affects all of the other pricing approaches as well, including LCOE. Thus, our current pricing approaches make intermittent wind and solar look much more beneficial than they really are.

A clear workaround for this non-independence problem is to look primarily at the cost (in terms of EROI or LCOE) in which wind and solar are part of overall “packages” that produce grid-quality electricity, at the locations where they are needed. If we can find solutions on this basis, there would seem to be much more of a chance that wind and solar could be ramped up to a significant share of total electricity. The “problem” is that there is a lower bound on an acceptable EROI (probably 10:1, but possibly as low as 3:1 based on the work of Charles Hall). This is somewhat equivalent to an upper bound on the affordable cost of electricity using LCOE.

This means that if we really expect to scale wind and solar, we probably need to be creating packages of grid-quality electricity (wind or solar, supplemented by various devices to create grid quality electricity) at an acceptably high EROI. This is very similar to a requirement that wind or solar energy, including all of the necessary adjustments to bring them to grid quality, be available at a suitably low dollar cost–probably not too different from today’s wholesale cost of electricity. EROI theory would strongly suggest that energy costs for an economy cannot rise dramatically, without a huge problem for the economy. Hiding rising energy costs with government subsidies cannot fix this problem.

Distortions Become Material Very Early

If we look at recently published information about how much intermittent electricity is being added to the electric grid, the amounts are surprisingly small. Overall, worldwide, the amount of electricity generated by a combination of wind and solar (nearly all of it intermittent) was 5.2% in 2016. On an area by area basis, the percentages of wind and solar are as shown in Figure 1.

Figure 1. Wind and solar as a share of 2016 electricity generation, based on BP Statistical Review of World Energy 2017. World total is not shown, but is very close to the percentage shown for China.

There are two reasons why these percentages are lower than a person might expect. One reason is that the figures usually quoted are the amounts of “generating capacity” added by wind and solar, and these are nearly always higher than the amount of actual electricity supply added, because wind and solar “capacity” tend to be lightly used.

The other reason that the percentages on Figure 1 are lower than we might expect is because the places that have unusually high concentrations of wind and solar generation (examples: Germany, Denmark, and California) tend to depend on a combination of (a) generous subsidy programs, (b) the availability of inexpensive balancing power from elsewhere and (c) the generosity of neighbors in taking unwanted electricity and adding it to their electric grids at low prices.

As greater amounts of intermittent electricity are added, the availability of inexpensive balancing capacity (for example, from hydroelectric from Norway and Sweden) quickly gets exhausted, and neighbors become more and more unhappy with the amounts of unwanted excess generation being dumped on their grids. Denmark has found that the dollar amount of subsidies needs to rise, year after year, if it is to continue its intermittent renewables program.

One of the major issues with adding intermittent renewables to the electric grid is that doing so distorts wholesale electricity pricing. Solar energy tends to cut mid-day peaks in electricity price, making it less economic for “peaking plants” (natural gas electricity plants that provide electricity only when prices are very high) to stay open. At times, prices may turn negative, if the total amount of wind and solar produced at a given time is greater than the overall amount of electricity required by customers. This happens because intermittent electricity is generally given priority on the grid, whether price signals indicate that it is needed or not. A combination of these problems tends to make backup generation unprofitable unless subsidies are provided. If peaking plants and other backup are still required, but need to operate fewer hours, subsidies must be provided so that the plants can afford to hire year-around staff, and pay their ongoing fixed expenses.

If we think of the new electricity demand as being “normal” demand, adjusted by the actual, fairly random, wind and solar generation, the new demand pattern ends up having many anomalies. One of the anomalies is that required prices become negative at times when wind and solar generation are high, but the grid has no need for them. This tends to happen first on weekends in the spring and fall, when electricity demand is low. As the share of intermittent electricity grows, the problem with negative prices becomes greater and greater.

The other major anomaly is the need for a lot of quick “ramp up” and “ramp down” capacity. One time this typically happens is at sunset, when demand is high (people cooking their dinners) but a large amount of solar electricity disappears because of the setting of the sun. For wind, rapid ramp ups and downs seem to be related to thunderstorms and other storm conditions. California and Australia are both adding big battery systems, built by Tesla, to help deal with rapid ramp-up and ramp-down problems.

There is a lot of work on “smart grids” being done, but this work does not address the particular problems brought on by adding wind and solar. In particular, smart grids do not move demand from summer and winter (when demand is normally high) to spring and fall (when demand is normally low). Smart grids and time of day pricing aren’t very good at fixing the rapid ramping problem, either, especially when these problems are weather related.

The one place where time of day pricing can perhaps be somewhat helpful is in lessening the rapid ramping problem of solar at sunset. One fix that is currently being tried is offering the highest wholesale electricity prices in the evening (6:00 pm to 9:00 pm), rather than earlier in the day. This approach encourages those adding new solar energy generation to add their panels facing west, rather than south, so as to better match demand. Doing this is less efficient from the point of view of the total electricity generated by the panels (and thus lowers EROIs of the solar panels), but helps prevent some of the rapid ramping problem at sunset. It also gets some of the generation moved from the middle of day to the evening, when it better matches “demand.”

In theory, the high prices from 6:00 pm to 9:00 pm might encourage consumers to move some of their electricity usage (cooking dinner, watching television, running air conditioning) until after 9:00 pm. But, as a practical matter, it is difficult to move very much of residential demand to the desired time slots based on price. In theory, demand could also be moved from summer and winter to spring and fall based on electricity price, but it is hard to think of changes that families could easily make that would allow this change to happen.

With the strange demand pattern that occurs when intermittent renewables are added, standard pricing approaches (based on marginal costs) tend to produce wholesale electricity prices that are too low for electricity produced by natural gas, coal, and nuclear providers. In fact, wholesale electricity rates for supporting providers tend to diverge further and further from what is needed, as more and more intermittent electricity is added. The dotted line on Figure 2 illustrates the falling wholesale electricity prices that have been occurring in Europe, even as retail residential electricity prices are rising.

Figure 2. European residential electricity prices have risen, even as wholesale electricity prices (dotted line) have fallen. Chart by Paul-Frederik Bach.

The marginal pricing scheme gives little guidance as to how much backup generation is really needed. It is therefore left up to governments and local electricity oversight groups to figure out how to compensate for the known pricing problem. Some provide subsidies to non-intermittent producers; others do not.

To complicate matters further, electricity consumption has been falling rapidly in countries whose economies are depressed. Adding wind and solar further reduces needed natural gas, coal, and nuclear generation. Some countries may let these producers collapse; others may subsidize them, as a jobs-creation program, whether this backup generation is needed or not.

Of course, if a single payer is responsible for both intermittent and other electricity programs, a combined rate can be set that is high enough for the costs of both intermittent electricity and backup generation, eliminating the pricing problem, from the point of view of electricity providers. The question then becomes, “Will the new higher electricity prices be affordable by consumers?”

The recently published IEA World Energy Investment Report 2017 provides information on a number of developing problems:

“Network investment remains robust for now, but worries have emerged in several regions about the prospect of a “utility death spiral” as the long-term economic viability of grid investments diminishes. The still widespread regulatory practice of remunerating fixed network assets on the basis of a variable per kWh charge is poorly suited for a power system with a large amount of decentralised solar PV and storage capacity.”

The IEA investment report notes that in China, 10% of solar PV and 17% of wind generation were curtailed in 2016, even though previous problems with lack of transmission had been fixed. Figure 1 shows China’s electricity from wind and solar amounts to only 5.0% of its total electricity consumption in 2016.

Regarding India, the IEA report says, “More flexible conventional capacity, including gas-fired plants, better connections with hydro resources and investment in battery storage will be needed to support continued growth in solar power.” India’s intermittent electricity amounted to only 4.1% of total electricity supply in 2016.

In Europe, a spike in electricity prices to a 10-year high took place in January 2017, when both wind and solar output were low, and the temperature was unusually cold. And as previously mentioned, California and South Australia have found it necessary to add Tesla batteries to handle rapid ramp-ups and ramp-downs. Australia is also adding large amounts of transmission that would not have been needed, if coal generating plants had continued to provide services in South Australia.

None of the costs related to intermittency workarounds are currently being included in EROI analyses. They are generally not being included in analyses of other kinds, either, such as LCOE. In my opinion, the time has already arrived when analyses need to be performed on a much broader basis than in the past, so as to better capture the true cost of adding intermittent electricity.

Slide 1

Slide 2

Slide 3

Slide 4

Of course, as we saw in the introduction, worldwide electricity supply is only about 5% wind and solar. The only parts of the world that were much above 5% in 2016 were Europe, which was at 11.3% in 2016 and the United States, which was at 6.6%.

There has been a lot of talk about electrical systems being operated entirely by renewables (such as hydroelectric, wind, solar, and burned biomass), but these do not exist in practice, as far as I know. Trying to replace total energy consumption, including oil and natural gas usage, would be an even bigger problem.

Slide 5

The amount of electricity required by consumers varies considerably over the course of a year. Electricity demand tends to be higher on weekdays than on weekends, when factories and schools are often closed. There is usually a “peak” in demand in winter, when it is unusually cold, and second peak in summer, when it is unusually hot. During the 24-hour day, demand tends to be lowest at night. During the year, the lowest demand typically comes on weekends in the spring and fall.

If intermittent electricity from W&S is given first priority on the electric grid, the resulting “net” demand is far more variable than the original demand pattern based on customer usage. This increasingly variable demand tends to become more and more difficult to handle, as the percentage of intermittent electricity added to the grid rises.

Slide 6

EROI is nearly always calculated at the level of the solar panel or wind turbine, together with a regular inverter and whatever equipment is used to hold the device in place. This calculation does not consider all of the costs in getting electricity to the right location, and up to grid quality. If we move clockwise around the diagram, we see some of the problems as the percentage of W&S increases.

One invention is smart inverters, which are used to bring the quality of the electrical output up closer to grid quality, apart from the intermittency problems. Germany has retrofitted solar PV with these, because of problems it encountered using only “regular” inverters. Upgrading to smart inverters would be a cost not generally included in EROI or LCOE calculations.

The next problem illustrated in Slide 6 is the fact that the pricing system does not work for any fuel, if wind and solar are given priority on the electric grid. The marginal cost approach that is usually used gives too low a wholesale price for every producer subject to this pricing scheme. The result is a pricing system that gives misleadingly low price signals. Regulators are generally aware of this issue, but don’t have a good way of fixing it. Capacity payments are used in some places as an attempted workaround, but it is not clear that such payments really solve the problem.

It is less obvious that in addition to giving too low pricing indications for electricity, the current marginal cost pricing approach indirectly gives artificially low price indications regarding the required prices for natural gas and coal as fuels. As a result of this and other forces acting in the same directions, we end up with a rather bizarre situation:  (a) Natural gas and and coal prices tend to fall below their cost of production. (b) At the same time, nuclear electricity generating plants are being forced to close, because they cannot afford to compete with the artificially low price of electricity produced by the very low-priced natural gas and coal. The whole system tends to be pushed toward collapse by misleadingly low wholesale electricity prices.

Slide 6 also shows some of the problems that seem to start arising as more intermittent electricity is added. Once new long distance transmission lines are added, it changes the nature of the whole “game.” It becomes easier to rely on generation added by a neighbor; any generation that a country might add becomes more attractive to a neighbor. As long as there is plenty of electricity to go around, everything goes well. When there are shortages, then arguments begin to arise. Arguments such as these may destabilize the Eurozone.

One thing I did not mention in this chart is the increasing need to pay intermittent grid providers not to produce electricity when there is an oversupply of electricity. In the UK, the amount of these payments was over 1 million pounds a week in 2015.  I mentioned previously that in China, 17% of wind generation and 10% of solar PV generation were being curtailed in 2016. EROI calculations do not consider this possibility; they assume that 100% of the electricity that is generated can, in fact, be used by the system.

Slide 7

The pricing system no longer works because W&S are added whenever they become available, in preference to other generation. In many ways, the pricing system is like our appetite for food. Usually, we eat when we are hungry, and the food we eat reduces our appetite. W&S are added to the system with total disregard for whether the system needs it or not, leaving the other electricity producers to try to fix up the mess, using the false pricing signals they get. The IEA’s 2017 Investment Report recommends that countries develop new pricing schemes that correct the problems, but it is not clear that this is actually possible without correcting the hidden subsidies.

Slide 8

Why add more electricity supply, if there is a chance that you can use the new supply added by your neighbor?

Slide 9

South Australia had two recent major outages–both partly related to adding large amounts of wind and solar to the electric grid, and the loss of its last two coal-fired electricity generation plants. The first big outage came during a weather event. The second big outage occurred when temperatures were very high during summer, and because of this, electricity demand was very high.

One planned workaround for supply shortages was natural gas. Unfortunately, South Australia doesn’t actually have a very good natural gas supply to operate its units generating electricity from natural gas. Thus, the available natural gas generators could not really respond as hoped, except at very high prices. Some changes are now being made, including a planned Tesla battery system. With the changes being made, there are reports of electricity rate increases of up to 120% for businesses in South Australia.

The irony of the situation is that Australia is a major natural gas exporter. Businesses expected that they could make more money selling the natural gas abroad as LNG than they could by providing natural gas to the citizens of South Australia. These exports are now being curbed, to try to help fix the South Australia natural gas problem.

These issues point out how interconnected all of the different types of electricity generation are, and how quickly a situation can become a local crisis, if regulators simply assume “market forces will provide a solution.”

Slide 10

An expert panel in Australia has recommended an approach similar to this. It simply becomes too difficult to operate a system with built-in subsidies.

Slide 11

Slide 12

Timing makes a difference. The payments that are made for interest need to be made, directly or indirectly, with future goods and services that can only be made using energy products. Thus, they also require the use of energy products.

Slide 13

Slide 14

There is a real difference between (a) looking at the actual operating experiences of an existing oil and gas or coal company, and (b) guessing what the future operating experience of a system operated by wind panels and solar panels might be. The tendency is to guess low, when it comes to envisioning what future problems may arise.

It is not just the wind turbines and solar panels that will need to be replaced over time; it is all of the supporting devices that need to be kept in good repair and replaced over time. Furthermore, the electric grid is dependent on oil for its upkeep. If oil becomes a problem, there is a real danger that the electric grid will become unusable, and with it, electricity that is generally distributed by the grid, including wind and solar.

Slide 15

Slide 16

Economies and humans are both self-organized systems that depend on energy consumption for their existence. They have many other characteristics in common as well.

Slide 17

We know that with humans, we really need to examine how a new medicine or a change in diet works in practice. For one thing, medicines and diets aren’t necessarily used as planned. Unexpected long-term changes occur that we could not anticipate.

Slide 18

The same kinds of problems occur when wind and solar are added to a grid system. We really have to look at what is happening to see the full picture.

Slide 19

Anyone who has followed the news knows about medicine’s long history of announcements followed by retractions.

Slide 20

A fairly similar situation can be expected to happen with proposed energy solutions.

Slide 21

There is a whole package of costs and a whole range of direct and indirect outcomes to consider.

Slide 22

As far as I know, none of the attempts at producing a system that operates on 100% renewable energy have been a success. There has been some reductions in fossil fuel usage, but at a high cost.

Slide 23

2013 Weissabach et al. EROI analysis examines a situation with partial buffering of wind and solar (approximately 10 days worth of buffering). It leaves out several other costs of bringing wind and solar up to grid quality electricity, such as extra long distance transmission costs, and more significant buffering to allow transferring electricity produced in spring and fall to be saved for summer or winter. These authors calculated a partially buffered EROI of 4:1 for wind, and a partially buffered EROI range of 1.5:1 to 2.3:1 for solar PV.

Of course, more investigation, including looking at the full package of needed devices to provide non-intermittent electricity of grid quality, is really needed for particular situations. Improvements in technology would tend to raise EROI indications; adding more supplemental devices to bring electricity to grid quality would tend to reduce EROI indications.

If the cutoff for being able to maintain a modern society is 10:1, as mentioned earlier, then wind and solar PV would both seem to fall far below the required EROI cutoff, if they are to be used in quantity.

If, as Hall believes, an EROI as low as 3:1 might be useful, then there is a possibility that some wind energy would be helpful, especially if a particular wind location has a very high capacity factor (can generate electricity a large share of the time), and if pricing problems can be handled adequately. The EROI of solar PV would probably still be too low in most applications. In any event, we need to be examining situations more closely, instead of simply assuming that hidden subsidies can be counted on indefinitely.

Our Finite World



84 Comments on "Researchers Have Been Underestimating the Cost of Wind and Solar"

  1. Antius on Wed, 26th Jul 2017 10:21 am 

    This chart lays the problem of intermittent renewables bare:

    http://ahmed.triumf.ca/DFR_CAP/EROI_Figure.pdf

    Extracted from: http://www.sciencedirect.com/science/article/pii/S0360544213000492

    These EROI values are applicable to Europe, but illustrate the general problem in attempting to integrate low power density intermittent renewables into electricity grids.

  2. peakyeast on Wed, 26th Jul 2017 10:25 am 

    @antius: Interesting graph. Is it possible for you to describe what “buffered” means?

  3. rockman on Wed, 26th Jul 2017 10:30 am 

    peaky – “The electrical grid will have to implement storage in some way or another”. And there’s that basic chicken/egg problem again: how much incentive to develop commercial storage in a state that has very little to no wind/solar power? Which leads me to speculate that the first states to have significant commercial electricity storage develop are CA and Texas. And if I had to pick I would say Texas first since not only is wind continuing to grow but solar in now beginning to ramp up significantly.

    If commercial electricity storage is going to develop it will probably have to go thru the prototype stage like most new tech. Obviously no one is going to build a prototype in a state with little alt energy. As I pointed out above what Texas has achieved with alt energy (as well as Germany) doesn’t readily transfer to all other areas. Which, again, why much of the generalities (IMHO including those ridiculously detailed economic models) offered about alt energy expansion are actually meaningless.

    Each state/country has to be analized individually to get a general sense of what relief alt energy might provide the world in the future.

  4. Jan on Wed, 26th Jul 2017 11:48 am 

    Cloggie says

    You apparently missed that countries like the UK, Netherlands, Germany and Denmark have for years embarked on a strategy of using Norway (with Norwegian consent) as its battery. Nothing beats pumped hydro in cost. Round-trip efficiency 80%

    Then later he says

    What is the point you are making? Nobody suggest that Norwegian hydropower will be supplied to Germany or the UK.

    Next cloggie states

    “I have a figure in my head that that would be roughly 18 days of total EU consumption, a very significant buffer and substantial part of the solution of the storage problem.”

    He later says;

    You seem to be struggling with the false assumption that anybody suggested that Norway can deliver 18 days EU worth of electricity consumption storage capacity per year with the current infrastructure. Nobody says that. It will need huge investments in pumps, secondary storage basins, sub-sea wiring, transformers, etc., etc.

    Cloggie hardly surprising you cannot defend your position since you cannot even remember it.

  5. Cloggie on Wed, 26th Jul 2017 12:24 pm 

    These EROI values are applicable to Europe, but illustrate the general problem in attempting to integrate low power density intermittent renewables into electricity grids.

    Here a study from 2010 that states that EROI of wind is 20, which is more than enough.

    http://www.sciencedirect.com/science/article/pii/S096014810900055X

    Here an article where folks greatly diverge over EROEI:

    http://www.sciencedirect.com/science/article/pii/S0301421516307066

    EROEI is very problematic because it is unclear what should count as energy input.

    https://en.wikipedia.org/wiki/Energy_returned_on_energy_invested#cite_note-15
    In note 5 a study says:

    In the scientific literature EROIs normally vary between 20 and 50.

    Antius works in the UK nuclear industry and wants to push us in a plutonium economy. From a private standpoint understandable, but from a social standpoint not so much. Regardless, after Fukushima nuclear is dead meat.

  6. Cloggie on Wed, 26th Jul 2017 12:35 pm 

    EROI solar higher than oil:

    https://robertscribbler.com/2016/12/19/solar-now-produces-a-better-energy-return-on-investment-than-oil/

    Again, I have reserves with any EROI number as long as we don’t have a standardized method of determining EROI.

    And again, photovoltaics is still an immature technology, comparable with computers and harddrives and memory 40 years ago. Progress is made every day and prices are still falling rapidly and energy input is obviously a component of price.

  7. Davy on Wed, 26th Jul 2017 12:44 pm 

    You can’t expect balanced analysis out of Scribber. I like his blog and respect his climate credentials but he is off the wall on the solutions and his politics.

  8. Cloggie on Wed, 26th Jul 2017 1:13 pm 

    https://deepresource.wordpress.com/2017/07/26/prof-sinke-100-renewable-energy-base-feasible-in-2050/

    Prof. Sinke: 100% Renewable Energy Base Feasible in 2050

    Prof Sinke is the #1 authority on solar energy in the Netherlands.

    English subtitles.

  9. Apneaman on Wed, 26th Jul 2017 1:42 pm 

    The dutch are fake greens like everyone else. Long time euro cancer.

    The Abrupt Demise Of Dutch Gas

    “The largest and oldest-producing gas field in Western Europe, the Groningen field, is on the verge of being shut down. If that happens, it will entail the tumbling of Netherlands’ indigenous gas production, making it a net gas importer. This is a bitter pill to swallow for producers in the Netherlands, EU’s leading gas producer up to now, given that the Dutch led the world in the 1970s in natural gas exports volumes (the ramp-up in exports was so massive that the Dutch government implemented export caps to put some freeze on it).”

    http://oilprice.com/Energy/Oil-Prices/The-Abrupt-Demise-Of-Dutch-Gas.html

  10. Antius on Wed, 26th Jul 2017 3:10 pm 

    ‘Prof Sinke is the #1 authority on solar energy in the Netherlands.’

    Wow. A man that devotes his life to the pursuit solar energy thinks that solar energy can power the world. Who would have thought? I donno about the rest of you, but I’m sold.

  11. Cloggie on Wed, 26th Jul 2017 3:20 pm 

    The Abrupt Demise Of Dutch Gas

    Excellent news, nothing now can halt this:

    https://deepresource.wordpress.com/2017/07/07/contracts-signed-for-752-mw-offshore-wind-of-dutch-coast/

    http://www.offshorewind.biz/2017/04/13/shell-makes-case-for-20gw-of-dutch-offshore-wind-by-2030/

    Shell Makes Case for 20GW of Dutch Offshore Wind by 2030

    Shell knows it is over soon with fossil fuel.

    On the double!

  12. Apneaman on Wed, 26th Jul 2017 3:57 pm 

    clog, most businesses are going to be crippled or over soon.

    Climate Change Is About to Remake the Insurance Industry

    “Most businesses know that eventually, they could be profoundly affected by climate change. What’s surprising is how quickly the shifts, threats, and costs are materializing.

    Take the insurance industry, which might be expected to profit as people seek to ward off losses. But instead, it’s thrown into disarray when those losses are no longer possibilities, but inevitabilities. At a certain point, as the likelihood of extreme weather events increases, insurance companies are “not selling a risk aversion remedy to people,” says Dan Kahan, a professor at Yale Law School who specializes in risk perception. “[They’re] getting taken to the cleaners.”

    A recent industry study found that last year there were 750 major “loss events” like earthquakes, storms, and heat waves, well above the 10-year annual average of 590. Analytics firm CoreLogic has found that 6.9 million homes along the Atlantic and Gulf coasts are at risk of damage from hurricane storm surge that could cost more than $1.5 trillion.”

    http://fortune.com/2017/07/25/climate-change-insurance-industry/

  13. rockman on Wed, 26th Jul 2017 4:16 pm 

    Prior to production at Groningen field it was producing about €7.5 billion per yr. Earth damage claims were running about €250 million per year. Of course now that NG prices have fallen production has dropped to around €2.5 billion per year.

    Just depends on what the Dutch want to pay for: damage claims or 10X that much in revenue loss. More when NG prices inevitably increase.

  14. peakyeast on Wed, 26th Jul 2017 4:32 pm 

    @rockman: My opinion is that the government should allocate a % of the taxation for storage providers guaranteeing a steady income.

    This is about national/world security and our common future – i think that government incentives to force the development is an apt solution.

    One cannot wait for the risk adverse capitalists to convince themselves that its a winner sometime in the future. The storage has to be in place for the alts to be truly viable – and only then will there be a real economic incentive to provide storage – since it will be needed all the time.

    Later on in a possible transition the decision can be changed.

  15. Cloggie on Wed, 26th Jul 2017 5:46 pm 

    clog, most businesses are going to be crippled or over soon.

    Yes and we are all going to die.

  16. Apneaman on Wed, 26th Jul 2017 7:23 pm 

    clog, ya much easier for a childless woman-less 72 year old virgin to play pretend the future is bright. You have shared many details about your wealth of super awesome jobs (Walter Mitty much) but have never mentioned any family or wife or girlfriend or kids or anything like others around here have. Very strange. Plenty of cooing and adoration for super daddy strongmen like Putin & Trump though. Like I said before, closet homosexual.

  17. rockman on Wed, 26th Jul 2017 8:51 pm 

    Peaky – “My opinion is that the government should allocate a % of the taxation for storage providers guaranteeing a steady income.” I assume you mean commercial electricity storage. That gets the govt into the “picking winners and losers” business. Something they don’t have a good track doing.

    I would stick with the free market. When the storage investors make it economical to do it in Texas we can have a complete economic model. Which might work in some states but probably not all of them. But at least we would not be trying to make decisions based upon questionable theoretical economic models. Try to go full cycle with significant govt subsidies would only lead to huge govt outlays for all 50 states. Some of which may never produce sustainable economic systems without govt subsidies forever.

    IMHO not all states (or countries) are candidates for self sustainable wind/solar power.

  18. Simon on Thu, 27th Jul 2017 12:48 am 

    Rockman – I am with you to a certain extent, in that the market is pushing us in the direction of renewables (some subsidies, but lower than Nuk or FF), I would only put a caveat that R&D should be in part financed by the gov., after all whoever gets the first 10mw chemical non thermal storage on the market, is going to clean up.

  19. Cloggie on Thu, 27th Jul 2017 3:03 am 

    I would stick with the free market.

    You can’t leave young children to the free market either. They need to be nurtured, educated up to 25 years before they can come productive.

    With new technologies it is the same story. In the beginning they are like fragile little plants that needs to be protected, provided with dung, water, weeds removed, before you can finally harvest them.

    I agree with Simon that storage, THE bottleneck in renewable energy development, needs government subsidy, otherwise it won’t happen.

    EU program storage seasonal heat:

    https://deepresource.wordpress.com/2017/01/02/merits-seasonal-heat-storage-breakthrough/

    EU program compressed air storage:

    https://deepresource.wordpress.com/2017/04/08/ricas-2020-compressed-air-storage/

    German University Jena:

    https://deepresource.wordpress.com/2017/07/20/brine4power-worlds-largest-battery-to-be-built-in-germany/

    US university Purdue liquid electrolyte:

    https://deepresource.wordpress.com/2017/06/04/ifbattery-instantaneous-recharging-a-battery/

    MIT battery breakthrough:

    https://deepresource.wordpress.com/2016/01/05/breakthrough-battery-technology-65kwh/

  20. Davy on Thu, 27th Jul 2017 5:49 am 

    Good points above on renewable technology developmental assistance. It is true technology and its economic transition to widely accepted cost effective applications requires a process. It is well known subsidies jump start this process. It does not have to be all about government. Academic and Business partnerships work too. With something like energy that is so big it is important government participate. Europe is leading the way with new energy technologies because its governments are actively promoting and support them.

    Today’s reality of dangerous predicaments related to overshoot argues many aspects of energy should not be in the private sector. Car ownership should not be private. At this point with what we are facing we need energy and transport to have a significant public component with controls and restrictions. Car choices should be geared to practical applications not discretionary wants. Energy needs to be applied per sweet spots of opportunity that are mandated for the common good. I would not have said that in the 20th century but we did not fully know what we are up against then.

    We need behavioral changes. Unhealthy and destructive lifestyles must be eliminated. Excessive wealth and parasitic profit taking by an elite, privileged, and connected few should be ended. Parasitic economic sectors can no longer be tolerated. We have already ditched the free markets at the level of our central banking for managed money liquidity. We did that because we came to the cliff of a Minsky Moment.

    The problem with this line of thinking is getting here to there. It would likely be a crisis that gets us there and it is likely a crisis that could end economic activity as we know it. People are not going to agree with it. People today are spoiled and have been spoon fed optimism and the opportunity of affluence. If they knew the reality of how close we are to collapse they might change their attitudes but they might also panic and destroy economic activity. Businesses and their lobbyist would howl. Those who are connected and affluent want nothing of change except change that benefits them.

    Yes, with renewables what Europe is doing is a great way to get critical mass going to these new technologies. Yet, before you Euro’s get a hard on for how wonderful you are remember the highest form of flattery is copying. It is also true copying is far cheaper and often allows the copier the advantage of having had the original developer do the hard part of financing the development. There will be few patents for what Europe is doing. It is all easy to copy and much cheaper than the original effort. Once the copying occurs the real cost saving and increase performance will be had. So Euros are wonderful on some levels but they may also be facilitating an easy road for other nations.

  21. Antius on Thu, 27th Jul 2017 6:41 am 

    ‘You can’t leave young children to the free market either. They need to be nurtured, educated up to 25 years before they can come productive.

    With new technologies it is the same story. In the beginning they are like fragile little plants that needs to be protected, provided with dung, water, weeds removed, before you can finally harvest them.’

    Long-term heat storage, wind turbines and all other renewable energy technologies (with the possible exception of photovoltaic) are no newer than the steam engine.

    We haven’t used them very heavily over the past hundred years because their EROI and therefore economic performance are crap. These things are not crap because they are new. They are crap because their power density is low and intermittency makes them impossible to use on their own. This is not a technological problem, it is something imposed upon us by nature.

  22. Cloggie on Thu, 27th Jul 2017 6:48 am 

    We haven’t used them very heavily over the past hundred years because their EROI and therefore economic performance are crap.

    The concept of EROI cannot be applied to storage, only to energy sources. Efficiency is what you probably mean.

    Seasonal storage of heat is very new and absolutely not “heavily used over the past 100 years”. I would love to learn about them. Examples please.

  23. Kenz300 on Thu, 27th Jul 2017 7:03 am 

    Researchers and reporters have been under estimating the subsidies for fossil fuels.

  24. rockman on Thu, 27th Jul 2017 7:33 am 

    “THE bottleneck in renewable energy development, needs government subsidy, otherwise it won’t happen.” You mean like the tens of $millions the govt spent on R&D of frac’ng, horizontal drilling, Deep Water oil production, oil sands development, etc. that has US production at near a historic high level? Oh, wait, it didn’t. Or do you mean like the millions the govt put into R&D research by solar companies that have since gone under? LOL

  25. Cloggie on Thu, 27th Jul 2017 7:37 am 

    The oil industry was/is the financially fattest industry around and they get their subsidies in other ways.

  26. Simon on Thu, 27th Jul 2017 8:18 am 

    EROI is nothing to do with ROI (within reason)

  27. Davy on Thu, 27th Jul 2017 8:30 am 

    Correct Simon, they belong in different contexts. Many fail to understand business is not physics and vice versa. They of course mix but not enough to interchange their studies 1-1.

  28. Antius on Thu, 27th Jul 2017 10:49 am 

    ‘Seasonal storage of heat is very new and absolutely not “heavily used over the past 100 years”. I would love to learn about them. Examples please.’

    At any point in the past 100 years human beings could have stored solar heated water in a tank and wrapped it in straw or Rockwool to keep it warm.

    We didn’t do it because we didn’t need to do it and it was a less than optimal solution, requiring large investments in the tank, insulation, solar collectors and distribution network.

    It is being done now, not because technology has fundamentally changed. Fuel prices have risen, but not enough to drive this sort of infrastructure investment. It is government driven policies that are driving it, largely for political ideological reasons.

    In this particular example, I do not think development of the capability is insensible, but we shouldn’t kid ourselves into thinking that this is happening because of some clever new technology that we have now but didn’t have before. It isn’t true. The same can be said for wind power. We could have built wind power plants at any time in the industrial era.

  29. Cloggie on Thu, 27th Jul 2017 11:52 am 

    At any point in the past 100 years human beings could have stored solar heated water in a tank

    But we didn’t.
    We’re on the same page again.

    We didn’t do it because we didn’t need to do it

    Indeed, because we had fossil fuel.

    It is being done now, not because technology has fundamentally changed. Fuel prices have risen, but not enough to drive this sort of infrastructure investment. It is government driven policies that are driving it, largely for political ideological reasons.

    Do you believe in climate change and if yes in the necessity to combat it?
    Do you believe in fossil fuel depletion?

    I myself am more of the “global lukewarming type” and that depletion is not as bad as we many, including me, thought it was five years ago.

    My attitude: let’s switch to renewable energy because:

    1. Europe has no easy fossil fuel (energy independence)
    2. climate change needs to be addressed, just to be on the safe side
    3. renewable energy has the potential to become the cheapest of them all
    4. renewable energy doesn’t stink
    5. cars on renewable energy are silent, a blessing for cities
    6. after Fukushima and Chernobyl is nuclear a no-go area (you are allowed to disagree with that.lol)

  30. Antius on Thu, 27th Jul 2017 5:29 pm 

    Western civilisation is going bankrupt because of the falling EROI of fossil fuels. This acts as a constant headwind against economic growth. Low EROI substitutes may not stink and may ultimately reduce CO2 emissions, but they do not solve our key problem of falling societal energy surplus.

    Personally I don’t think anything we do will make much long term difference so long as we remain trapped on a finite planet. Every resource is depleting, not just energy resources. Energy requirements are gradually going up across the board. It takes more energy each year to produce a pound of copper or steel. Topsoils are depleting requiring more energy to produce a pound of food.
    When we couple these problems with declining energy source EROI, we clearly have a problem that isn’t likely to be solved in any sort of permanent way as long as we remain trapped on finite Earth.

  31. Makati1 on Thu, 27th Jul 2017 8:55 pm 

    Antius, thanks for pointing out the obvious to those here who are less educated/intelligent. You put the decline in the correct perspective. There is no way out for humans at this point. All the bullshit articles about living on other planets, etc is just that, techie dreams. It is more likely that humans will go out in a massive nuclear suicide than any other way.

  32. Davy on Fri, 28th Jul 2017 5:01 am 

    “My attitude: let’s switch to renewable energy because:”

    Cloggie, very good reasons to support renewables. What Europe is doing is fantastic and a great gift to the world. You guys are seriously invested in an energy transition. Yet, this effort is still half baked and the hardest part is ahead. The economy may at some point end your effort. It is not yet clear a renewable world is possible. This is the reason you battle here daily with energy issues. Keep the material coming but realize I will fight you on false optimism. I have already moderated my doom because of changes that have occurred over the last few years but doom still outweighs optimism on my scale.

  33. Cloggie on Fri, 28th Jul 2017 5:19 am 

    Low EROI substitutes may not stink and may ultimately reduce CO2 emissions, but they do not solve our key problem of falling societal energy surplus

    Antius, I invite you to challenge this back-of-an-envelope calculation regarding offshore wind, of which your country is blessed with in abundance (certainly now that floating windturbines are being installed near Scotland for the first time #Hywind):

    https://deepresource.wordpress.com/2017/07/26/eroi-of-offshore-wind/

    I arrive at EROI 60 for offshore wind as a very conservative estimate, as these wind towers are able to withstand centuries, not just the 30 years used as a calculation base.

    It is not yet clear a renewable world is possible.

    If you don’t shoot, you will always miss.

  34. Davy on Fri, 28th Jul 2017 5:37 am 

    “It is not yet clear a renewable world is possible. If you don’t shoot, you will always miss.” Cloggie, this is about more than the technicals. It is about more than energy. It is about human nature. It is attitudes like yours that must change. Optimism only leads to “Moar”. We have to have behavioral changes to succeed. This “succeed” is likely only with a new way of living on a planet that has been reduced to our parking lot with a failing biosphere.

    These behaviors involve “no and less”. It is as simple as that. So, what I am saying is it is great what you are preaching as a policy of extension but it will not be a transition because energy alone cannot make a transition. Energy is only a part of the puzzle. So I think it is wonderful we can even contemplate EROI of 60 for offshore wind. That is wonderful! The problem is your attitude with 60 EROI. This is blinding you from the other issues. Until real sacrifices are talked about nothing changes. This 60 EROI will just get added to the mix of “Moar”. It is not even apparent if our global system can embrace “no and less” because this is not a growth based policy. We are already teetering on an economic black hole.

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