Monday, May 10, 2010

THE IMPLICATIONS OF HIGH COST OF ENERGY

Modern civilization runs on one main, core, aspect. Lots of net energy available at a very cheap cost.

Net energy because it takes energy to get energy. To extract, process and transport oil, for example, it takes energy. If it takes one joule of energy to get one joule back, what's the point? This is true for all sources of energy, be it natural gas, nuclear and even hydro, to build and maintain these structures it takes energy, hence the source must produce more energy for it to be useful to society (we will see why that is important in the next part to this post)

In fact, it's not just more, but significantly more. For a source to produce just 10% net is not useful for society. In fact, the ratio is closer to 4:1. That is, the source must produce at least 4 times more energy than it consumes to be useful for society.

The term for this is called Energy Returned on Energy Invested (ERoEI).

It's simple enough to see. In our days of hunting and gathering, some 50,000 years ago, we spent most of the day looking for food for that day. Thus our ERoEI was very close to 1:1. This left little time to advance and invent. Thus our "society" evolved very slowly back then.

It was when we invented farming that things turned around big time. Farming allowed people to do less work for the same return of energy, that is their ERoEI ratio started to rise. This freed people up to spend the extra time to invent and improve the social order of the group. With excess food production it allowed others to specialize in new areas other than farming.

As the ratio of net energy increased, it allowed more people more time to implement improvements, thus fewer people were needed to farm, allowing others to take on new tasks. The Age of Oil dramatically increased the ratio to around 100:1, thus fossil fuels allowed us to radically improve the food supply. Not only do only 5% of the population farm for the rest, it allowed the population of humans to increase TWELVE TIMES since the late 1700's from 500 million to 6.7billion today.

Every aspect of this civilization is build, and requires, large net cheap energy.

A modern civilization requires that the cost of that net energy be cheap enough for everyone to afford. Not only is energy directly needed by people to power and heat their homes, but every item they buy has an energy cost in it.

Discretionary income, monies available to people to buy non-essential items, requires that energy not be a large component of the essential expenses. Increase the cost of energy, and people have less monies for the "frivolous" items, such as going out for dinner, hobbies, charitable activities, travelling to visit family, or even vacations. Those in the lower income brackets, who have little or no discretionary income will have to do with less of other necessities, like food, when energy prices increase.

With people spending less on food or "frivolous" items that means less of these items are purchased, that means less money for the companies and stores that provide those items, that means people laid off in those industries. Thus increasing energy costs to consumers means people lose their jobs, who then pay no taxes and must be supported by the government's IE benefits, which increases government expenses, which they either borrow or get from you in higher taxes, squeezing you even more.

Add to that when energy costs increase, industry pass those costs to the consumer. When retail outlets have higher energy costs they add even more onto the price of those items. This in turn puts more items out of reach, so fewer are sold, meaning layoffs.

To add salt to the wound, the Bank of Canada sees the increase in energy as core contributor of inflation, adding non-core item price increases due to the core energy price increase, and there is an over all increase in inflation. BoCs reaction is to increase interest rates in an attempt to throttle those increases.

Except it can't because energy increases are not curtailed by increases in interest rates because as people consume less energy to try and save on costs (where physcially possible), the energy providers ask for more increases to compensate for the loss!!

What a mess increasing energy costs precipitate. It's a vicious positive feedback cycle.

But there is more.

Those who wish for us to get off, completely, from fossil fuels want us to move more to electrical power, specifically for heating (ground source heat pumps), and electric vehicles. Though electric vehicles will put the biggest demand on power production, one can do the calculation and see that in order to replace the 15billion liters of gasoline Ontario consumes every year with electric vehicles would mean we would have to more than DOUBLE our nuclear capacity.
They want us to move to more electrical devices to curb fossil fuel use, but they want to charge more for that power. Quick way to kill the economy.

For people who are supposed to be highly educated in the executive of H1 and the Provincial Government, they sure are stupid about the ramifications of higher electrical costs to consumers.

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