But what is this EROI (Energy Return on Energy Invested)? And why is it so Important?

 

If you are a lion, you don't just have to run faster than a gazelle; you have to make sure that the metabolic energy you obtain from eating the gazelle is higher than the energy you used for the chase. If not, you die. It is the harsh law of the EROI. 

The concept of Energy Return on Energy Invested (EROI or EROEI) has been around for a long time. It was introduced in its modern form in the 1980s by Charles Hall, but it is steeped in the thermodynamics of non-equilibrium systems. It can be easily understood if you see it as the equivalent of ROI (return on investment). ROI (EROI) is given by the money (energy) returned from a certain investment (energy infrastructure) divided by the monetary (energy) investment. You need a value larger than one in order for your investment to make sense or, if you are a lion, to survive. Large values of this parameter make life easy for investors, energy producers, and lions (although not for gazelles). (*)

Up to recent times, the conventional wisdom was that the EROI of fossil fuels was very high: during the heyday of oil extraction, it was said to be been around 100. Think of an investment that brings back to you back your capital multiplied by one hundred (!!), and you can understand why oil was, and remains, so important for our society. At the same time, the EROI of renewable energy was calculated to be of the order of 5-7, with some studies even placing it under 1. That gave rise to the narrative that only oil and other fossil fuels could sustain an industrial civilization and that renewables were not really so; at best they were "replaceables" as long as there was oil available. The consequence was an emphasis on social and political solutions: degrowth, energy saving, return to a rural economy, or, simply, accepting that we are all going to die soon. 

How fast things change! New studies, including one by Murphy et al., revealed that the EROI of oil may never have been so high. You need to take into account that oil in itself is useless: it needs to be transported, refined, and burned inside inefficient engines to provide energy for society. So, it is correct to calculate the EROI of oil at the "point of use" rather than at the "well mouth." Once that's done, it turns out that oil's EROI may well be (and have been) lower than 10. At the same time, technological progress and scale factors led to an improvement in the EROI of renewables (wind and photovoltaics) well over 10. 

Now, the paradigm is reversed. Renewables are truly renewable, while oil never was. That gives us a chance to revisit the dominant paradigm of how to face the energy crisis. The new paradigm is that we can rebuild a society that works on renewable power. It won't be the same as the one created by oil, and we may have to accept a considerable economic contraction in the process to get there. But it gives us a fighting chance to create a resilient and prosperous society. 

Of course, not everyone agrees on these concepts and there is a lively discussion in which several people are defending the old paradigm. One argument in the discussion says that if you use oil energy to refine oil, that energy should not be  counted in the denominator of the EROI ratio. And, therefore, that the EROI of fossil fuels is much larger than what the recent calculations indicate. This is silly: energy is energy, it doesn't matter where it comes from. Nafeez Ahmed discusses this point in detail in his blog, "The Age of Transformation" saying, among other things, that:

.... petroleum geologist Art Berman published a post also claiming that Murphy et. al’s paper is fundamentally incorrect. He concluded that if Murphy and his co-authors were right, then decades of EROI research showing extremely high values for fossil fuels would be wrong. He repeats the same argument as Hagens, and then uses it to offer a new calculation:

Nearly 9% of the total post-extraction costs for oil are for refining. Yet most of the energy for refining comes from the crude oil and refined products used in the refinery. It is, in effect, co-generated. That doesn’t negate the energy investment needed to operate the refinery but it is not a cost to society as indicated in the table… I divided their 8.9% for refining investment by 3 to account for the co-generation described above (it is probably much lower). The resulting oil EROI is 18. That completely removes the good news from Ahmed’s and Bardi’s proclamations of ‘mission accomplished’ and restores oil EROI to the consensus range for the last two decades.

The key error in this argument is where Berman says: “That doesn’t negate the energy investment needed to operate the refinery but it is not a cost to society as indicated in the table.”

But that is incorrect. The term ‘cost to society’ pertains precisely to energy invested which is not available for use by society. While the energy used to refine the crude oil is co-generated, it is still an input into the refinement process before the oil becomes available for actual work in society at the ‘final energy’ stage. In other words, the energy is being used to refine the oil and is therefore not available for society in any case.

What Berman and Hagens are effectively trying to do is classify the energy used to refine oil as an ‘energy output’ that represents useful work for society outside of the energy system. But this classification doesn’t make sense when we consider that it represents work that is specifically related to making the energy usable for society in the first place - because the oil must be refined and processed before it can actually be converted into usable energy for society.

Berman further questions that if EROI for fossil fuels was much lower, how could it have been so profitable?

As earth system scientist Ugo Bardi has pointed out, the profitability of an industry depends on numerous factors outside the energy system related to credit, markets, economic policy, investment, currency values and beyond. But in addition to that, the bottom line is that Murphy et. al’s research suggests that if oil has been profitable with EROI much lower than previously believed, then previous assumptions about economic prosperity requiring much higher EROI levels are questionable.

Because of the huge efficiency losses of converting energy from oil into useable forms (between 50 and 70% of energy is lost converting primary energy to final energy), as renewables avoid those losses they can produce about 50% less energy to meet demand. This means that the presumed minimum EROI to sustain a viable civilisation derived from fossil fuels could be much lower in a more efficient system.

As Marco Raugei points out, the shift to renewables and electrification “may open the door to achieving the required services with much lower demand for primary energy, which in turn entails that a significantly lower EROI than previously assumed may suffice”.

To learn more about EROI, you can look at these papers

The Role of Energy Return on Energy Invested (EROEI) in Complex Adaptive Systems, by Ilaria Perissi, Alessandro Lavacchi, and Ugo Bardi), Energies, 2021

Peaking Dynamics of the Production Cycle of a Nonrenewable Resource, by Ilaria Perissi, Alessandro Lavacchi, and Ugo Bardi, Sustainability 2023