It’s often thought that clean energy represents a transition from cheap, abundant fossil fuels to expensive, scarce renewables. In this analysis, we will explore how this fear has it exactly backwards: in reality, the clean energy disruption will usher in a fundamental transformation in the way we produce energy, one that can revolutionalize the specific energy and labour relations that have historically generated episodes of resource scarcity under fossil fuels.
In part 1, we saw how the fear that mineral shortages will derail the clean energy disruption is largely unfounded, and that while the risk exists, it can be mitigated and eliminated with the right choices. In this analysis, we go further to explore how a clean energy system can be designed to create real abundance.
A wide-range of recent studies increasingly recognize that the global energy system is in fundamental transition. They point out that the fossil fuel-based energy system is experiencing a series of growing crises driven by a combination of economic and geological factors. Many of these studies therefore acknowledge the importance of the shift to a renewable energy system. But they argue that this system is likely to produce far less net energy than the incumbent fossil fuel system, implying that civilization must adjust to a painful new era of constrained resources requiring a contracted economy, and revised notions of prosperity.
However, such dire forecasts of our energy future suffer from a series of fundamental flaws.
What we are experiencing is less of a ‘transition’, and more of a disruptive transformation that entails a phase change in the energy system. Far from this implying a reduction in the net energy available to civilization, compelling scientific evidence confirms that if pursued optimally this phase change can generate the opposite: a hitherto inconceivable level of cheap, clean energy that will open up a vast possibility space for human civilization. This possibility space will not represent a simple continuation of business-as-usual through the present economic system. Rather, it will both require and entail fundamental economic, social and political transformations to harness, maximize and distribute the emerging benefits of this new energy system.
The concept of Energy Return On Investment (EROI) has become an important metric to understand the efficiency of an energy system. It comes in the form of a simple ratio that reflects how much energy is used to extract a single unit of energy from any given resource. The challenge with producing accurate assessments of the EROI of any resource is in ensuring correct assumptions about that resource, including exactly how and where the energy inputs and outputs are measured to derive the most accurate figures.
EROI is an important measure to the extent that it can provide useful insights into the amount of ‘net energy’ available to society beyond the energy used to extract energy in the first place. The higher the ratio, the more surplus net energy available to support other social and economic activities. But the lower the ratio, the less of the latter. A decline in EROI, then, implies economic decline.
There is now a compelling body of scientific literature showing that the EROI of the global fossil fuel energy system has been in decline for several decades, and as a result is experiencing a vicious cycle of diminishing returns from which there is no prospect of recovery.
Yet it’s often argued that while EROI decline is inevitable with fossil fuels, renewable energy represents a further decline in EROI which means they cannot accomplish the same levels of societal and economic complexity.
But this view was significantly challenged in a recent study led by Professor Paul Brockway at the University of Leeds, published in Nature Energy. It found that as fossil fuels are becoming “harder to reach”, they “require more energy to extract and, hence, are coming at an increasing ‘energy cost.’” The study noted that fossil fuel EROI is typically vastly overestimated because it is measured right at the well-head, and not at the most relevant point when energy enters the economy as electricity or petrol. EROI for fossil fuels, they conclude, is “very low… around 6:1 and declining.” It has already declined by at least 10% over the last 25 years.
The second crucial conclusion of the paper is that when measured properly, renewables already seem to have a higher EROI than fossil fuels. As most fossil fuel EROI studies are undertaken at the wrong stage, they are not directly comparable with wind and solar generation which immediately produce electricity. And while fossil fuels exhibit a declining EROI trend with escalating costs and diminishing returns, wind and solar are experiencing the opposite: an increasing EROI trend with increasing returns and declining costs. Therefore, Brockway et. al conclude that “the renewables transition may actually halt – or even reverse – the decline in global EROI at the final energy stage.”
The Nature Energy findings are corroborated by a more recent RethinkX study of the Levelized Cost of Electricity (LCOE), which measures the average cost of generating electricity across the entire lifetime of a power plant, including its building and operating costs. That study found that conventional LCOE estimates by the International Energy Agency (IEA) and Energy Information Administration (EIA) underestimate the per-kilowatt hour cost of coal, gas and large-scale hydropower by up to 400%. This would suggest that their EROI is significantly lower than usually believed.
Meanwhile, as even conventional LCOE figures show that solar, wind and batteries (SWB) have already reached parity with fossil fuels, these RethinkX findings indicate that SWB is already much cheaper, consistent with higher EROI.
Flaws in conventional thinking
Despite the findings of the Brockway paper, the idea that renewables represent a significant decline in EROI relative to fossil fuels is a persistent misconception that has plagued numerous other studies which tend to repeat the same mistakes over and over again, largely due to a failure to understand these technologies.
These mistakes can be found in many places, not least in the famous feature documentary by Michael Moore, Planet of the Humans. More recently, the Geological Survey of Finland has published a paper repeating such errors, as has the journal Energies.
Yet there are significant problems with these approaches. One of the most egregious is the statement that solar panels have a life span of around 20 to 30 years. Conventional conservative EROI calculations for solar therefore put EROI calculations at somewhere around 10:1 for somewhere like Switzerland. This is already higher than the 6:1 of fossil fuels demonstrated by Brockway et. al.
But the assumptions here are completely false. Solar panels do not spontaneously combust after two or three decades. Rather their efficiency declines over time by a very small amount every year. This means that after 20 years, most solar panels will still operate at 90% capacity. This suggests that their life span is likely to extend many decades beyond 30 years – as much as 40-50 years if not more – with a gradual decline in efficiency, suggesting that even the 10:1 estimate is far too low, and closer to something like 20:1 at least.
Similarly, research by Imperial College London confirms that the life span of wind turbines will extend to at least 25 years, most likely lasting beyond that for more recently produced turbines. Today, some of the most important design components for wind power such as transformers, copper ground cables, the towers they are positioned on, among others, last for 50 years or more. Once again, the trajectory is for a higher EROI value, particularly as these technologies continue to improve in performance.
The energy payback from solar and wind is also phenomenal, and comes at a fraction of the carbon footprint of fossil fuels, even if the latter included carbon capture and storage. A study in Nature Energy in 2017 found that the lifetime carbon footprints of solar and wind are about one-twentieth of coal and gas, including manufacturing and construction. Solar and wind installations also produce respectively 26 and 44 times more energy than the energy used to build them.
Misunderstanding the battery equation
So far, we have compared solar and wind to fossil fuels as if they will simply substitute for them in a one-for-one fashion. But this reveals another fundamental error of many of these studies: the energy disruption is not a one-for-one substitution within an energy system with the same architecture, but will fundamentally transform the entire architecture.
As one example of this, many influential models reduce the EROI of solar and wind installations when incorporating the role of battery storage, which is of course necessary to address the ‘intermittency’ issue – the fact that the sun doesn’t always shine, and the wind doesn’t always blow. Battery storage is added to solar and wind generation to capture energy while it’s being produced and then dispense it when it’s not – it therefore helps to solve the need to ‘curtail’ clean energy (that is, to deliberately reduce the energy output due to the inability to transmit it usefully).
A linear analysis tries to account for the additional energy inputs needed to manufacture and install battery storage, concluding that this implies more energy going in to produce the same energy output, implying a lower EROI overall. While not entirely false, that conclusion is only one half of the answer, based on a narrow approach to what an optimally-designed solar, wind and battery system would look like. It calculates EROI values discretely for each component and then aggregates them linearly without fully recognizing the extent to which such a system can produce surplus energy. Indeed, it doesn’t reflect how a solar, wind and battery system actually works in practice.
When scientists at the University of Waterloo attempted their own analysis by examining real data from renewable power installations, they found that far from reducing the EROI of solar and wind farms, the addition of lithium-ion batteries actually increased EROI by making energy that otherwise would be lost to curtailment available to the system: “We find that lithium-ion batteries increase the EROI of both wind and solar farms” – which can be even further improved with better transmission lines to the grid.
But this study was also too narrow, as it focused on studying single ‘renewable energy farms’, rather than seeing how solar, wind and batteries would operate in the context of an entire city, region or nation. As a result, most analysts end up further underestimating the potential EROI of SWB systems because they neglect the net systemic benefits of solar, wind and battery systems on wider scales, and overestimate the role of batteries in the system. SWB installations will not simply replace fossil fuel plants – they will create new energy system architectures overall which need to be understood in their own right. As a result, studies which routinely assume that EROI for a global renewable energy system will shrink compared to that of fossil fuels are comparing apples and oranges.
A new, better, and bigger system
A major review of the literature in One Earth in 2019 thus concluded that a global shift to solar, wind and batteries would not diminish EROI at all. The study noted that the pessimistic view is based largely on a linear methodology of extrapolating forward “short-term transitional trends in the energy transition (PV and wind replacing coal, biofuels replacing oil)” in a way which will not reflect the full possibilities of “an energy system based on massive deployment of cheap PV and wind power.”
For instance, the paper points to a scenario rarely considered by any model: “The much-touted problem of intermittency requiring fossil backup can be turned around by significantly overbuilding PV and wind and converting the intermittent electric oversupply into fuels.”
In this approach, building out far more solar and wind than is needed, and then putting in place systems to extract the surplus energy for other uses reduces the need for battery storage while making more energy available. In this case, the suggestion is to use the new energy system to cleanly generate synthetic fuels which can then be deployed to specific sectors, but that’s only one option. In the One Earth scenario, the EROI of the new clean energy system is around 10:1, which appears to be not dramatically different than the current fossil fuel system. However, this scenario is far too conservative, and underestimates the full transformative system-wide implications of the clean energy disruption due to mass deployment and economies of scale that do not emerge when looking at single power plants in isolation.
RethinkX’s report, Rethinking Energy 2020-2030: 100% Solar, Wind and Batteries is Just the Beginning, shows that to supply energy through the darkest days of winter, we will need to build out significant overcapacity in solar and wind generation. This will produce larger amounts of energy than the incumbent fossil fuel system, with a much lower need for batteries. A 100% SWB system designed to provide power 24/7 when the sun doesn’t shine and wind doesn’t blow would be some five times bigger than conventionally assumed, but as a result would still supply all winter demand while needing 30-40 times less battery storage.
The report’s ‘Clean Energy U-Curve’ maps out the relationship between the costs of battery storage and solar/wind generation, demonstrating that this mix is the most optimal, least expensive, as well as the fastest and easiest to deploy. The curve can be applied to different regions to determine the specifics of the most optimal roll-out. On most days of the year, this SWB system will generate vast quantities of electricity at near-zero marginal costs. Instead of curtailing – i.e. wasting – this energy output, harnessing it will create a whole new possibility space for innovation in how to distribute this cheap, surplus energy for endless new applications. Overall, the report estimates that the new clean energy system will be able to generate three times as much energy as the incumbent fossil fuel system.
The assumption that the incumbent fossil fuel-centric grid will act as a constraint overlooks the reality of how disruptions work. Cars weren’t prevented from becoming ubiquitous by the complete lack of roads, but instead spurred the emergence of new transport networks. Similarly, computers and smartphones have disrupted landlines and spurred them to evolve into the internet. Similarly, the new possibility space represented by the capability to generate large quantities of near-free electricity for most of the year will incentivize and accelerate the evolution and transformation of the grid into larger, more flexible, diverse and capable systems. RethinkX describes the breakthrough possibility space opened up by the new clean energy system as ‘Super Power’, because while disrupting incumbent fossil fuel-centric business models, it will enable entirely new ones with the potential for tremendous value creation.
RethinkX’s modelling work takes forward the findings of other researchers. For instance, Marc Perez at Columbia University previously found that building out overcapacity of solar and wind by a factor of three times bigger not only dramatically reduces the need for battery storage, but lowers the cost of electricity by as much as 75%, while eliminating intermittency challenges. Yet even his study did not fully appreciate the implications of ‘Super Power’.
What, then, would the output of this energy system look like on a global scale? Because such a system has not been built yet, coming up with a valid figure for this is challenging as it’s inherently theoretical; and to get it right means avoiding the pitfalls of a siloed, linear approach that fails to grasp the completely novel properties of such a new clean energy system.
However, one such effort was attempted by scientists at the Swiss Federal Laboratories for Material Science and Technology. Noting that current global energy demand is equivalent to 6.7 terawatts (TW) of electricity generation every year, their study in Energies found in its most conservative scenario that overbuilding solar power, concentrated on the built environment alone, would be able to generate 22 TW of electricity, which is over three times higher than today’s consumption levels – corroborating RethinkX’s findings.
Yet even this figure barely scratches the surface of the possibilities. The scenario didn’t incorporate wind power, nor did it factor in the potential of areas of the world receiving the highest solar radiation (i.e. parts of the world’s deserts). Thus, in their most optimistic scenario, a global system which also harnessed and transmitted solar from these areas would be able to generate 71 TW of electricity, ten times as much as today. And this extraordinary conclusion is still conservative as it doesn’t factor in wind potential, which would add several further orders of magnitude to these figures.
The implication is that the most robust data available confirms that a new global clean energy system will be capable of providing a level of energy to our societies that is currently inconceivable. And even here, we appear to be underestimating the potential.
That’s because another common mistake is to view solar, wind and batteries as static technologies whose performance operates at a fixed level. But this is simply not the case. Fossil fuel extraction industries have entered a death spiral of diminishing returns, declining performance and escalating costs. In contrast, solar, wind and batteries are disruptive technologies experiencing increasing returns, exponentially accelerating performance, and exponentially declining costs.
In 2017, Stanford University scientists found that the EROI of solar was as high as 27 in Arizona and still as high as 14 in a low-sun area such as Alaska. As the addition of batteries for self-consumption only reduced this by 20%, EROI of a solar battery system in somewhere like Alaska would be around 11, and in Arizona around 22. But the scientists also found that adding batteries to systems to avoid curtailment could increase overall EROI by between 12 and 42%. The study concluded that higher EROI levels could be enabled by lowering the contribution of batteries and maximizing the capacity to excess energy to feed back into the grid.
Indeed, a meta-analysis of EROI studies of solar photovoltaics published in Renewable and Sustainable Energy Reviews found a variation in EROI whose lowest value was 9:1 (already higher than Brockway’s 6:1 estimate for fossil fuels today), and whose highest value is 34:1 for panels using cadmium telluride. The lower values came in mainly due to incorporating older installations. Given that at its inception, coal’s maximum historical EROI has been estimated at around 80, it’s worth noting the conclusions of this study: “Based on the efficiency and embedded energy improvement potentials discussed in this paper, it is likely for PV technology to catch up to the maximum EROI from coal in the future.”
So it should not be surprising that some studies already put solar PV’s EROI at over 60:1.
As per Wrights Law, which has been empirically-validated for dozens of technologies, and as per RethinkX’s forecasts based on the Seba Technology Disruption Framework, SWB is heading toward becoming ten times cheaper within around a decade, while exhibiting continued performance improvements. A study by Oxford University’s Institute for New Economic Thinking published in September 2021 has corroborated RethinkX’s findings, seeing cost reductions at the current rate continuing for at least 15 years. This means that whatever assessments are valid today based on current technology are likely to be improved tenfold by 2030.
All this suggests that the EROI of an optimally-deployed global clean energy system would be orders of magnitude higher than the incumbent fossil fuel system. Given the highly conservative One Earth EROI estimate of 10:1, it is entirely plausible to estimate that the anticipated EROI of a new global clean energy system following a tenfold performance improvement by 2040 could easily approach if not dramatically exceed 100:1 – and this is a low-end scenario. If we are looking at EROI values today of 34:1, or even 60:1, then it would not be unreasonable to expect performance improvements to enable two decades from now EROI values of 340:1 and beyond for a properly designed global clean energy system.
The implication is that the clean energy disruption based on solar, wind and batteries heralds the potential to breakthrough to a new energy system the likes of which we have never seen before. It will enable humanity to not only meet our energy needs sustainably, but to electrify a vast array of public services which within the current system generates inordinate energy and environmental costs.
In RethinkX’s new report, Rethinking Climate Change, we demonstrate that the electrification of a vast array of industries and sectors, from wastewater treatment to recycling, from mining to manufacturing, will enable them to be powered through clean energy. This means that for the first time, the vast amount of ‘Super Power’ generated by the new system will allow us to cleanly sustain the extensive new industrial processes required for the circular economy in a way that was previously inconceivable. ‘Super Power’ in the new system will enable the continued maintenance and replacement of its component technologies sustainably within the new system.
Even within the incumbent system, it’s possible to see how rising demand for critical minerals will drive up demand for recycling, which will drive increasing economies of scale and cost reductions. But in the new clean energy system, ‘Super Power’ will make recycling commercially viable and technically efficient in a way that was previously impossible within the old paradigm. All mining and manufacturing of the very technologies for SWB systems will be sustainable thanks to the vast amounts of cheap electricity generated within the new system.
In the same way, while the clean energy disruption accelerates, it will intertwine with the electric vehicle (EV), A-EV (autonomous EVs), TaaS (Transport-as-a-Service), precision fermentation and cellular agriculture (PFCA) disruptions across the transport and food sectors. The combined and cascading effects of these disruptions will enable us, if we choose, to reduce carbon emissions far faster than previously believed possible (90% by 2035). They would further make a wide range of carbon withdrawal mechanisms that were previously unsustainable and commercially self-defeating in the fossil fuel system, economical and feasible on the basis of abundant clean electricity, as well as due to the freeing up of billions of acres of land to allow passive reforestation, active reforestation, rewilding and conservation on massive scales.
The new clean energy system will shift the primary ‘stock’ of resources to the limitless renewable sources of solar and wind, and dramatically reduce energy and labour inputs into the production of energy to zero marginal costs for most of the year. This can open up the ‘flow’ of energy to societies to a degree inconceivable in the fossil fuel system. By using this system to close raw materials flows within a circular dynamic, the system would be able to maximize energy generation without continually expanding the material footprint of the system. As a result, the new energy system could for the first time provide humanity the opportunity to create novel forms of prosperity and value creation that do not entail an endlessly accelerating expansion of our material footprint, but instead allow us to support new ways of regenerating the earth.
But this system won’t arrive automatically. Societies and decision-makers need to understand the coming possibility space and make the right choices to get there. The new system will not be commensurate with a continuation of ‘business-as-usual’ economics, centralized energy utilities, and the traditional metrics of the old hierarchical energy industries. Its optimal deployment will require rethinking our entire systems of social organization, beliefs, values and mindsets. If we don’t make the right choices now, civilization could collapse like those before it amidst a perfect storm of self-induced crises.
Yet if we succeed, we will be able to create an enormous new possibility space for civilization, the human species, and all species. As we leave the age of fossil fuels behind, we could enter an unprecedented new epoch of energy abundance, economic prosperity and ecological restoration. But we cannot get there if we refuse to see the destination. The choice really is ours.