How Economic Growth Fails

We all know generally how today’s economy works:

Figure 1

Figure 1

Our economy is a networked system. I have illustrated it as being similar to a child’s building toy. Ever-larger structures can be built by adding more businesses and consumers, and by using resources of various kinds to produce an increasing quantity of goods and services.

Figure 2. Dome constructed using Leonardo Sticks

Figure 2. Dome constructed using Leonardo Sticks

There is no overall direction to the system, so the system is said to be “self-organizing.”

The economy operates within a finite world, so at some point, a problem of diminishing returns develops. In other words, it takes more and more effort (human labor and use of resources) to produce a given quantity of oil or food, or fresh water, or other desirable products. The problem of slowing economic growth is very closely related to the question: How can the limits we are reaching be expected to play out in a finite world? Many people imagine that we will “run out” of some necessary resource, such as oil, but I see the situation differently. Let me explain a few issues that may not be obvious.

1. Our economy is like a pump that works increasingly slowly over time, as diminishing returns and other adverse influences affect its operation. Eventually, it is likely to stop.

As nearly as I can tell, the way economic growth occurs (and stops taking place) is as summarized in Figure 3.

Figure 3. Overview of our economic predicament

Figure 3. Overview of our economic predicament

As long as (a) energy and other resources are cheap, (b) debt is readily available, and (c) “overhead” in the form of payments for government services, business overhead, and interest payments on debt are low, the pump can continue working as normal. As various parts of the pump “gum up,” the economic growth pump slows down. It is likely to eventually stop, once it becomes too difficult to repay debt with interest with the meager level of economic growth achieved.

Commodity prices are also likely to drop too low. This happens because the wages of workers drop so low that they cannot afford to buy expensive products such as cars and new homes. Growing purchases of products such as these are a big part of what keep the economic pump operating.

Let me explain some of the pieces of the problem that give rise to the slowing economic growth pump, and the difficulties it encounters as it slows down.

2. “Promises,” such as government pension programs for the elderly, and promises to repair existing roads, tend to get bigger and bigger over time.

We can understand how promises tend to grow by looking at an example I constructed:

Figure 4

Figure 4

Suppose a pension program begins in 2010 and gradually adds more retirees. Or suppose a road repair program starts out in 2010 with more roads gradually being added.

The payments made each calendar year, whether for the pensions or the road repairs, are the totals at the bottom of the column. These totals keep growing, even if each retiree gets the same amount each year, and even if each road costs the same amount to repair each year. Admittedly, using 100 for all amounts is unrealistic–this is done to keep the math simple–but regardless of what numbers are used, the sum of the payments each calendar year tends to rise.

If we look at US government expenditures as a percentage of wages, the pattern is as we might expect: government spending rises significantly faster than wages.

Figure 5

Figure 5

3. At least partly because of growing “promises,” it is very difficult for an economy to shrink in size without collapsing.

We can think of many kinds of promises in addition to pensions and road repairs. One such promise is the promise by banks that they will allow depositors to withdraw funds held on deposit in the bank. Another kind of promise is the promise of debtors to repay debt with interest. All of these promises tend to grow in total quantity over time, at least in part because population grows.

If an economy shrinks, all of these promises become very difficult to fulfill. This is the problem that Greece and other countries in financial difficulty are encountering. There is a need to reduce some program or to sell something so that the calendar year payments are not too high, relative to revenue for the year. These payments really represent a flow of goods and services to the individuals to whom the promises were made. “Printing money” does not really substitute for goods and services: pensioners expect that they will be able to buy food, medicine and housing with their pensions; those withdrawing money from a bank expect that the money will actually buy goods and services needed to live on.

If there is a major problem with “making good” on promises, it is difficult to have an economy. It is hard to operate an economy without functioning bank accounts. Even cutting off pensions or road repairs becomes a problem.

4. The over-arching problem as we reach diminishing returns is that workers become less and less efficient at producing desired end products.

When an economy starts hitting diminishing returns, we find that the economy produces goods less and less efficiently. It takes more worker-hours and more resources of various kinds (for example, fracking sand and deep sea drilling equipment) to produce a barrel of oil, causing the cost of producing a barrel of oil to rise. Usually this trend is expressed as a rising cost of oil production:

Figure 6

Figure 6

Looked at a different way, the number of barrels of oil produced per worker starts decreasing (Figure 7). It is as if the worker is becoming less efficient. His wages should be reduced, based on his new lack of productivity.

Figure 7. Wages per worker in units of oil produced, corresponding to amounts shown in Figure 6.

Figure 7. Wages per worker in units of oil produced, corresponding to amounts shown in Figure 6.

There are many types of diminishing returns. They tend to lead to a smaller quantity of  end product per worker. For example, if the population of a country increases, but arable land stays the same, adding more and more farmers to a plot of arable land eventually leads to less food produced on average per farmer. (Some might say that each additional farmer adds less marginal production.) Similarly, mining ores of lower and lower concentration leads to a need to separate more and more waste material from the desired mineral, leading to less mineral production per worker.

As another example, if a community finds itself short of fresh water, it may need to begin using desalination to produce water, instead of simply using relatively inexpensive wells. The result is a steep rise in the cost of water produced, not too different from the steep rise in the cost of oil in Figure 6. Viewed in terms of the amount of fresh water produced by each worker, the return per worker falls, as happens in Figure 7.

If workers get paid for their work, the logical result of diminishing returns is that after a point, workers should get paid less, because what they are producing as an end product is diminishing in quantity. Workers may be making more intermediate products (such as desalination plants or fracking sand), but these are not the end products people want (such as fresh water, electricity, or oil).

In some sense, fighting pollution leads to another form of diminishing returns with respect to human labor. In this case, increasing human effort and other resources are used to produce pollution control equipment and to produce workarounds, such as alternative higher-priced fuels. Again, wages per worker are expected to decline. This happens because, on average, each worker produces less of the desired end product, such as electricity.

Admittedly, less pollution, such as less smog, is desired as well. However, if it is necessary to pay extra for this service, the effect is recessionary because workers must cut back on purchasing discretionary goods and services in order to have sufficient funds available to purchase the higher-priced electricity. Thus, fighting pollution using approaches that raise the price of end products is part of what slows the world’s economic growth pump.

5. When civilizations collapsed in the past, a major cause was diminishing returns leading to declining wages for non-elite workers.

We know how diminishing returns played out in a number of past civilizations based on the analysis conducted by Peter Turchin and Surgey Nefedov for their book Secular Cycles. They found that typically a period of rapid population growth took place after some change occurred that increased the total amount of food an economy could provide. Perhaps trees were cut down on a large plot of land, or irrigation was introduced, or a war led to the availability of land previously farmed by others. When the original small population encountered the newly available arable land, rapid growth became possible for a while–very often, for well over 100 years.

At some point, the carrying capacity of the land was reached. Then the familiar problem of diminishing returns on human labor occurred: adding more farmers to the plot of land didn’t increase food production proportionately. Instead, the arable land needed to be subdivided into smaller plots to accommodate more farmers. Or the new farmers could only be “assistants,” without ownership of land, and received much lower wages, or went to work for the church, again at low wages. The net result was that at least part of the workers started receiving much lower wages.

One contributing factor to collapses was the fact that required tax levels tended to grow over time. Some reasons for this growth in tax levels are described in Items (2) and (3) above. Furthermore, the pressure of growing population meant that groups needed access to more arable land–a problem that might be overcome by a larger army. Paying for such an army would require higher taxes. Joseph Tainter in The Collapse of Complex Societies writes about the problem of “growing complexity,” with rising population. This, too, might give rise to the need for more government services.

Raising taxes became a problem when wages for much of the population were stagnating or falling because of diminishing returns. If taxes were raised too much, low-paid workers found themselves unable to buy enough food. In their weakened condition, they tended to succumb to epidemics. If taxes couldn’t be raised enough, governments had different problems, such as not being able to support a large enough army to fend off attacks by neighboring armies.

6. The United States now has a problem with declining wages of non-elite workers, not too different from the problem experienced by civilizations that collapsed in the past.

Figure 8 shows that on an inflation-adjusted basis, US Median Family Income has been falling in recent years. In fact, the latest value is between the 1996 and 1997 value. In a sense, this represents diminishing returns on human labor, just as has occurred with agricultural civilizations that collapsed.

Figure 8

Figure 8

Wages have been falling to a much greater extent among young people in the United States. Figure 9 from a report by Dettling and Hsu in the Federal Reserve Bank of St. Louis Review shows that median wages have dropped dramatically since 1989, both for young people living with parents and for young people living independently. To make matters worse, the report also indicates that the share of young people living with parents has risen during the same period.

Figure 9

Figure 9

In some sense, the loss of efficiency of the economy (or diminishing returns) outlined in Item 4 is making its way through to wages. The wages of young people are especially affected.

7. Demand for goods and services comes from what workers can afford. If their wages are low, demand for goods of many kinds, including commodities, is likely to fall.

There are many rich people in the world, but most of their wealth sits around in bank accounts, or in ownership of shares of stock, or in ownership of land, or in other kinds of investments. They use only a small share of their wealth to buy food, cars, and homes. Their wealth has relatively little impact on commodity prices. In contrast, the many non-elite workers in the world tend to spend a much larger share of their incomes on food, homes, and cars. When non-elite workers cut back on major purchases, it is likely to affect total purchases of goods like homes and cars. Other related goods, such as gasoline, home heating fuel, and the building of new roads, are likely to be affected as well.

When the demand for finished goods falls, the demand for the commodities to produce these finished goods falls. Because of these issues, when the wages of non-elite workers fall, we should expect downward pressure on commodity prices. Commodity prices may fall back to a more affordable range, after they have spent several years at higher levels, as has happened recently.

There is a common belief that as we approach limits, the price of oil and other commodities will spike. I doubt that this can happen for any extended period. Instead, the low wages of non-elite workers will tend to hold commodity prices down. Because of this issue, we should expect predominately low oil prices ahead, despite the continuing pressure of rising costs of production because of diminishing returns.

The mismatch between the rising cost of commodity production and continued low commodity prices is likely to lead to a sharp drop in the supply of many types of commodities. Thus, the slowing operation of our economic growth “pump” is likely to lead to a situation where the production of commodities, including oil, falls because of low prices, not high prices. 

8. What is needed to raise the productivity of workers is a rising quantity of energy to leverage human labor. Such energy supplies are affordable only if the price of energy products is very low.

The amount a person can produce reflects a combination of his own labor and the resource he has to work with. If energy products are available, they act like energy slaves. With their assistance, humans can do things that they could not do otherwise–move goods long distances, quickly; operate machines (including computers) that can help a worker do tasks better and more quickly; and communicate long distance by means of the telephone or Internet. While technology plays a major role in making energy products useful, the ultimate benefit comes from the energy products themselves.

We have been using a rising amount of energy products since our hunter-gatherer days (Figure 10). In fact, the use of energy products seems to distinguish humans from other animals.

Figure 10

Figure 10

Clearly, cheaper is better when it comes to the affordability of energy products since available money goes further. If gasoline costs $5 per gallon, a worker with $100 can buy 20 gallons. If gasoline costs $2 per gallon, a worker with $100 can buy 50 gallons.

In recent years, with the high prices of energy products, world growth in energy consumption has lagged. It should not be surprising that world economic growth seems to be lagging during the same period.

Figure 11. Three year average growth rate in world energy consumption and in GDP. World energy consumption based on BP Review of World Energy, 2015 data; real GDP from USDA in 2010$.

Figure 11. Three year average growth rate in world energy consumption and in GDP. World energy consumption based on BP Review of World Energy, 2015 data; real GDP from USDA in 2010$.

In fact, Figure 11 seems to indicate that changes in energy consumption precede changes in world economic growth, strongly suggesting that growth in energy consumption is instrumental in raising economic growth. The recent steep drop in energy consumption suggests that the world is approaching another major recession, but this has not yet been recognized in international data.

9. One way of describing our current problem is by saying that the economy cannot live with the high commodity prices we have been experiencing in recent years and is resetting to a lower level that is affordable. This reset is related to low net energy production. 

If oil and other commodities could be produced more cheaply, they would be more affordable. We would not have the economic problems we have today. Energy use in Figure 11 could be rising more quickly, and that would help GDP grow faster. If GDP were growing faster, we would have more funds available for many purposes, including funding government programs, repaying debt with interest, and paying the wages of non-elite workers. We perhaps would not have the problem of falling wages of non-elite workers.

The current “fad” for solving our energy problem is to mandate the use of intermittent renewables, such as wind and solar PV. A major problem with this approach is that such renewables make the cost of electricity production rise even faster, exacerbating our problems, instead of making them better.

Figure 12 by Euan Mearns

Figure 12 by Euan Means. Installed capacity is in Watts (W) per capita.

To make matters worse:

  1. The way our economy works, energy flows in a given year (not on a net present value basis) are what are important, because this is the way we use energy to make goods such as foods, metals, and homes. The energy flows of renewables are very much front ended. Thus, the disparity in energy use on an energy flow basis is likely to be greater than reflected in Figure 12.
  2. What we really need from energy products is the ability to stimulate the economy in a way that adds tax revenue. Either the energy products must produce high tax revenue directly, or they must indirectly produce high tax revenue by stimulating demand for new cheaper goods, produced with the new inexpensive form of energy. This is what I think of as “adding net energy”. Wind and solar PV clearly do the opposite. Thus, they behave like “energy sinks,” rather than as products that add net energy.
  3. Modern renewables that are connected to the grid can be expected to stop working when the grid stops working. This may not be too far in the future because we need oil to operate the trucks and helicopters that maintain the electric grid. If this problem were considered in the pricing of electricity from wind and solar PV, their required prices would be higher.

As I see it, one of the major roles of energy products is to support the growing overhead of our economy; this is what the discussion about the need for “net energy” is about. Thus, we need energy products that are cheap enough that they can be taxed heavily now, and still produce an adequate profit for those producing the energy products. If we find ourselves mostly with energy products that are producing cash flow losses for their producers, as seems to be the case today, this is an indication that we have a problem. We don’t have enough “net energy” to run our current economy.

10. Debt and other paper assets are likely to “have a problem” as the economic growth pump falters and stops.

Debt is absolutely essential to making an economy work because it allows businesses to “bring forward” future profits, so that they don’t have to accumulate a high level of savings prior to building a new factory or opening a new mine. Debt also allows potential buyers of expensive products such as homes, cars, and factories to pay for them on an affordable monthly payment plan. Because more buyers can afford finished goods with the use of debt, debt raises the demand for goods, and indirectly raises the prices of commodities. With these higher prices, a greater quantity of commodity extraction is encouraged.

At some point, it becomes very difficult to support the very large amount of debt outstanding. In part, this happens because of the large accumulated amount of debt. Falling inflation-adjusted wages of rank and file workers add to the problem. In such a situation, interest rates need to be kept very low, or it becomes impossible to repay debt with interest. Even with continued low rates, defaults can eventually be expected.

Once debt defaults begin, commodity prices are likely to drop even further. Such a drop is likely to lead to even more loan defaults, especially by commodity producers (such as oil companies) and commodity exporters. Prices of equities can be expected to drop as well, because the problems of the debt system will affect businesses of all kinds.

Once debtors start defaulting, it will become very difficult to keep financial institutions from collapsing. International trade is likely to become a problem because financial institutions are needed to provide debt-based financial guarantees for long-distance transactions.

Other Information on this Subject

I have written previously and talked about some of the issues raised in this post.

An academic article I wrote that is directly related is Oil Supply Limits and the Continuing Financial Crisis. It was published in the journal Energy in 2012. Scopus shows 30 articles citing this paper.

A series of talks and videos that I conducted in China are now available on this website. These are some links to my presentations:

1. Overview of Energy Modeling Problem

2 Importance of Energy

3 Overview of a Networked Economy

4 Economic Growth – Diminishing Returns

5 Government costs and debt

6. Competition and Resource Exhaustion

7. Twelve Principles of Energy and the Economy

8. Renewable Energy

Videos of these presentations are also available on my Presentations/Podcasts page.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
This entry was posted in Financial Implications and tagged , , , , , . Bookmark the permalink.

1,045 Responses to How Economic Growth Fails

  1. Niels Colding says:

    As ever Gail, a wonderful and easily understandable piece – especially I like your ‘If we find ourselves mostly with energy products that are producing cash flow losses for their producers, as seems to be the case today, this is an indication that we have a problem. We don’t have enough “net energy” to run our current economy’.
    However, you will not be able to explain that to German and Danish governments, neither to Hillary Clinton og her followers (but whether Trump is better og not is a disputable question). They see no connection between money and energy. And you don’t have to be polite: I my mind I exchange your ‘seems’ with ‘obviously is’.

    Thanks a lot once more!

    • I agree that I won’t be able to explain the problem to German and Danish government.

      We need a lot of cheap energy to run our economy. It is obvious to me that cheap energy should display itself in an obvious way–with high profits that can be taxed at a high level. We seem to have a lot of confused people who believe that model profits in 2050 will save us. This isn’t any more true for wind turbines than it is for Bakken oil production.

      • PeterEV says:

        I too wondered about solar in Germany and Denmark especially in winter. In December, the solar angle is around 12 degrees elevation. (90 degrees – (55 degrees avg. latitude + 23 degrees south declination of the sun) = 12 degrees at solar noon.) With my panels, I produce about 22% of my electricity needs in January and I am around 35 degree north latitude and the sun is at around 32 degrees high at solar noon in December. At 12 degrees, the sun would be barely above the tree tops and not for long.

        I’m paying off my panels through a net metering agreement even though our local rate is $0.10/kwhr. If our rate was $0.35/kwhr, there would be a lot more panels on individual homes and in solar farms.

        There may also be a political angle to this. Where does Europe get its natural gas from? In part the North Sea and also from Russia. NATO is suppose to protect Europe from Russia yet Russia is supplying Europe with natural gas. There was a President Nixon parody a long time ago in which “Nixon” said: ” When you have them by the b****, their hearts and minds will surely follow.”

        **All my calculations do ****not**** include any government subsidies or incentives.** with that said, I would not want anybody to try to subsist on the “profits” my panels produce. They are there to reduce my FF uptake. I can generate enough to recharge an EV. It’s not going to set the world on fire but it will slow the uptake of FF.s

        • Fast Eddy says:

          So you disagree with this comment from the article above?

          “What we really need from energy products is the ability to stimulate the economy in a way that adds tax revenue. Either the energy products must produce high tax revenue directly, or they must indirectly produce high tax revenue by stimulating demand for new cheaper goods, produced with the new inexpensive form of energy. This is what I think of as “adding net energy”. Wind and solar PV clearly do the opposite. Thus, they behave like “energy sinks,” rather than as products that add net energy.”

        • I am sure that a big part of the reason for the adoption of solar in northern countries is the decline in natural gas availability, and the need to replace it with something. I don’t anyone figured out that high cost and low output were problems, just that natural gas wouldn’t work.

          Our big problem now is keeping the economy working. Unfortunately, that takes more energy use, not less. Building solar panels moves forward energy use–coal now, versus other energy use later, so in a sense is helpful in this regard. (Adding debt to buy and build the solar panels also pumps up the economy, and helps raise fossil fuel prices.)

          Whether or not savings will come in the future is speculative, and depends on the ability of the economy to function for many years in the future.

          Many people who add solar panels hope that the panels will provide some electricity, when otherwise they would have had none. If the panels are part of the grid, and the grid goes down, I am afraid the answer is no.

          • InAlaska says:

            Although I agree that solar is not the solution and it acts as an energy sink when viewed in a global sense, from an individual point of view they will be quite helpful during periods of chaos. I don’t understand your all or nothing argument with solar. There are many ways of configuring a residential solar system. You can have a stand alone system that produces and stores power irregardless of grid status. You can have a grid inter-tie system that is dependent on the grid and will go down with it. Or you can have a grid inter-tie that you can isolate away from the grid during troubled times. This is the best of both worlds. And a pile of spare parts and batteries in the garage will get most people through a lifetime of use. Obviously, at a much lower standard than is prevalent today.Not an answer to our predicament, but a comfortable advantage to those who have them.

            • I have made the point that solar can be (sort of) helpful to the individual homeowner, but that it doesn’t help the electric grid system. One of the things I object to is subsidizing a system that helps a few rich people to better take care of themselves. If rich people want to buy these, they should buy them without subsidies indirectly from the less well off.

        • PeterEV says:

          In Figure 8 above depicting median family income versus time, there are underlying dynamics which probably need to be discussed. Around 1970, we experienced the first oil crisis. This shocked the economy and has had ripple effects going forward. From around 1970 to 1980, the curve is basically flat due to the disruption in oil. At that time, we also had no fall back and had to acquiesce politically while drilling for more oil.

          The second is the rise in the curve during the 1980’s through most of the 1990’s. Harry Dent is his book, “The Great Boom Ahead”, has a similar curve but he equates it to the relative number of people in the 40 to 50 age group. His premise being that the people in this age group are the ones who are most likely to spend and have the financial ability to spend. They are likely to upgrade their homes, take vacations, have teenagers who want to eat, drive cars, go to college, etc. The relative number of people coming into this group went positive in the early 1980’s and started to go negative toward the end of the 90’s. This parallels the Figure 8 curve above but manifests itself in the form of stock prices. Some would say the Dot.com bust in 2000 masked this underlying dynamic. Now this group is retiring and trying not to spend so they do not outlive their savings. The economy is not fairing very well as a result. During the 2010’s, Dent’s graph shows a steep decrease in stock prices as the aging Boomers sell their stocks to keep on living. The use of debt, under a policy of Quantitative Easing, has masked this dynamic. In the early 2020’s as the sons and daughters of the Boomers cause the relative numbers in the 40 to 50 age group to go positive again; a long protracted “not as Great Bull Market” appears. I suspect the overhang of debt will tend to stifle some of this last dynamic.

          Another dynamic not shown in the graph is the amount of fraud on the Federal books. It is estimated that of the $18T in Federal Debt, $12T of it is do to fraud. Since the Federal Gov’t collects roughly $3T in taxes, this is roughly $4 of fraud for every $1 collected. Income Tax is less than half this amount with the other amounts derived from Social Security, Medicare, Corporate, and Excise tax payments. If fraud in my state is $500, that means that anyone paying over $62.50 in Income Tax has been defrauded. I know that my wife and I are not spending as much knowing that we will be the ones paying on this fraud and debt in one form or another. This could be someone else’s income — if we would just spend. Another reason for the decrease in **median** family income.

          The tag line on the above fraud is that “no one has gone to jail”. I think this could be prosecuted under the RICO statutes. As an example, any Congressperson receiving higher than normal campaign contributions and who caused the repeal of the Glass-Steagall act, would fall under that statute along with the major contributors from the financial industries. The Glass-Steagall Act was enacted to prevent the type of mal-investments we are seeing today. It was to prevent financial types from gambling with saver’s nest eggs instead of investing the funds wisely and where the financial types could be held accountable for irresponsible behavior.

          In an earlier one of Gail’s blogs, I posited that a $1T could supply enough PV over the lower 48 states (except for the Washington State area) in December to power enough EVs to make us truly energy independent. I would further posit that another $1.2T could supply enough EVs to use that electrical energy. That’s a total of $2.2T. Now compare that to the amount of money we have spent on the Iraq War, the amount of fraud on the Federal books, etc.

          Whatever is done to right the ship of state will leave us in a less wealthier position, less consumptive position, with likely higher costs. Already I see a lot of young people riding bikes to where they need to go. That is, in part, their response.

  2. Adam says:

    And yet still the frenetic building continues around the world, for projects that cannot long survive what is coming:

    http://www.theguardian.com/cities/2015/aug/07/land-starved-singapore-exhumes-its-cemeteries-to-build-roads-and-malls

  3. Rodster says:

    One thing that is striking with regards to a collapse is that every civilized and industrial nation is following the same recipe as the world and they are all interconnected. In the past such as in the Roman Era there was no such thing as Twitter, Facebook etc for instant communications. And economies back they had a huge buffer zone between them and other Nations and economies as they were more self reliant. In other words they wouldn’t import Citrus from Chile if they could grow it.

    Today it’s the complete opposite and all of this networking and complexity moving products and services around the world adds to the cost to the consumer. So when this collapse will be far more devastating than in the past because as the Leonardo Stick Toy illustrates, it’s nearly impossible to remove one or two sticks without the entire global system collapsing. It’s a lesson Hank Paulson was well aware of back in 2008 when he feared the US financial and banking system would trigger a global contagion and meltdown which would have resulted in a nightmare scenario.

    The good news (j/k) is we are in far worse shape today than back in 2008, by several magnitudes.

  4. Stilgar Wilcox says:

    Great analogy with the pump, Gail, and in particular I like #9 below.

    “9. One way of describing our current problem is by saying that the economy cannot live with the high commodity prices we have been experiencing in recent years and is resetting to a lower level that is affordable. This reset is related to low net energy production.”

    The word used there that caught my eye was ‘resetting’. As we all remember, oil rose in price to a crescendo of 147 then in the mortgage meltdown dumped to 34, then in the stimulus QE, Zirp activated global economy build back up, the commodity oil price began rising again until it hit about 124 for Brent, then began a slower descent in price to what we see today of less than 50 for a barrel of Brent.

    Part of what may be holding price this low now is all oil suppliers fighting a market share war, so the actual reset price consumers can afford may actually be somewhat higher. However, we can see the trend of diminishing returns in which future supply will be constrained by dropping consumer affordability as net energy declines.

    I like the pump as an analogy and we can see it needs more and more stimulus to keep going as net energy declines. It would seem we are much closer to collapse than most think, but how close is an open question.

    • Thanks! When I first drafted the post, I put the pump analogy at the end, to summarize what I was saying. I then thought maybe I should put it near the beginning to try to explain the story before I told it.

  5. edpell says:

    Gail, I like figures 12 and 10. If I use them I calculate a cost of 1.7 euros/KWHr for complete RE. With 8KW per capita this is 13.6 euros per capita per day or about 5000 euros per capita per year. That is about 20,000 euros per family of four per year. OK for families making 100,000 euros per year. Not so good for families making 30,000 euros per year.

    • edpell says:

      my bad that is 8000 watts not 8000 watt*hours/day! a difference of a factor of 24! 326 euros per capita per day! 120,000 euros per family of four per year. So, OK for Bill Gates but the rest of us are in trouble.

      • How do you figure such a high price for running on pure renewable energy? It seems like around $0.30 per KwH is a more reasonable price for dispatchable thermal solar, built along the Mediterranean.

        Energy consumption per capita could probably be cut in half, with lifestyle changes. I think 250 euros per month for a family of four would not be unreasonable.

        • Julian Brown says:

          What about those of us that do not live along the Mediterranean ?…
          There are very good reasons why the first civilizations arose around the Mediterranean.
          Life in Northern Europe will be very very hard if/when the present system collapses.
          The Vikings were big, bad and ugly – again, for very understandable reasons !

          • “What about those of us that do not live along the Mediterranean ?”

            Well, maybe it would restore balance to the EU of Greece was able to export energy to northern Europe in exchange for finished goods.

            Scandinavia has a huge amount of the one known renewable to prove to be as cheap or even cheaper than coal; hydro.

            • Jarle B says:

              “Scandinavia has a huge amount of the one known renewable to prove to be as cheap or even cheaper than coal; hydro.”

              Norway has enough el from hydro for it’s own needs, but that’s not much in the bigger picture – Norway is only about 5 million people.

    • I son’t think you can make the calculation you are making. This image just shows capacity, not kWh, as I understand it.

  6. MM says:

    There was an article on a german website today that was very proud that the german coal powered utilities face severe problems. Their shares are down and their revenue is down due to the oversupply of renewables on sunny days. These companies are forced to let the renewables overtake and have to take down their factories. This may sound like a victory but in the end it sums up to a net loss according to the points you make.
    Overall there is a loss in productivity for the nation and this will one day lead to the shutdown of these plants and then you have a grid of renewables that provide less then 25% of the energy on an intermittent base. This is no winning situation at all. The problem with it is that somehow we must swith to renewables but it can not work to offload all renewables on the grid and have coal plants working in a competitive price. The solution for the fans of it is to add some to be invented storage capacity. But if you look at germany as a whole there exists no such storage capacity in a figure that can be seen in the energy mix of the country after at least 25 years of buildup for renewables (0,01 % ?). And if you add storage you reduce the ereoi and the net energy available again. That is physically possible but in the end will lead to a vastly shrinking possibility to net produce something. I was checking out the possibilities with the Generation IV reactors lately and found that they have a huge security problem and are very difficult to hanldle. But these can produce the energy needed for a long time. From the russian BN-1200 project we can see that these sources can work between 5000 to 7000 hours a year. But to start building them now in germany (the US?) would be politically absolutely impossible, also due to the fact that the greens are so in love with their renewables. The question is, will we wake up to this reality fast enough to build up the required capacity? Because it is

    Grow or die

    And I did not yet talk about the energy that the chinese used to build all these PV cells. That already added another CO2. For the Generation IV reactor I do oinly see that the BN-1200 is a huge complex and it used a lot of cement to build, so again we have no zero emission thing.
    It is a bad tasting pill to swallow. What do you think of it?

    • I am afraid that there is no work around for this problem. We need a cheap, nonpolluting source of energy quickly. Any kind of storage is expensive. Just making excess capacity, and not using that capacity when there is an excess, is another option, but it is also expensive. Any expensive option allows the system to fail.

      • madflower69 says:

        We currently use the “create excess capacity” model for frequency regulation. It is the 1920s model of the grid Tesla designed. The -easiest- thing to do is to start connecting all the power companies together, which the US started under the Bush administration, and the EU is working on it too.

        We are working on better solutions for frequency regulation, and that does include storage. The storage market is getting ready to mass produce, which will significantly drive down the overall costs.

        There are advantages to having storage capacity besides for renewables for grid operators. Renewables are only a minor portion of the advantage of storage.

        The other advantage things like solar PV, and wind have are they don’t use any water even if you have a hard time swallowing they might use some energy to produce…

        • Fast Eddy says:

          “The storage market is getting ready to mass produce, which will significantly drive down the overall costs.”

          Can you provide evidence of that the storage market is getting ready to mass produce. Hard facts please.

          Based on this there is really not much to store….

          • madflower69 says:

            Have you heard about the Gigafactory at least? I’m not sure, the data you are quoting is from 2012. I don’t think you could comprehend what I wrote in the post you are responding to since you missed the point.

            There is a demand for storage in California to reduce overproduction which I already discussed:
            http://www.greentechmedia.com/articles/read/california-passes-huge-grid-energy-storage-mandate

            Here is something else that will also drive storage growth, if you can comprehend it:
            http://www.navigantresearch.com/newsroom/annual-plug-in-electric-vehicle-sales-in-north-america-are-expected-to-exceed-1-1-million-by-2024

            http://www.greentechmedia.com/articles/read/SunEdison-to-Buy-1000-of-Imergys-Flow-Batteries-for-Rural-Electrification
            (I don’t know if this mentions Imergy is looking at FoxxConn for manufacturing or not.)

            • Fast Eddy says:

              You are right. I don’t get it. I will never get it.

              Because 1+1=2 …. always 2…. never 3, or 5 , or876543….. 2.

              Time for a REFRESHER COURSE ON WHY RENEWABLE ENERGY IS AN EXERCISE IN FUTILITY:

              https://ourfiniteworld.com/2014/01/21/ten-reasons-intermittent-renewables-wind-and-solar-pv-are-a-problem/

              Time to Sing:

            • Thermal solar to some extent overcomes most of those problems. This idea of using lithium batteries to make everything work, needs to die off though. Solar using one of those power walls or whatever means $0.30 per kWh or more.

              It doesn’t really matter too much, the current financial system is going to blow off way before anyone can really do much of anything – all that really matters is what happens in the aftermath.

            • Fast Eddy says:

              “Thermal solar to some extent overcomes most of those problems”

              And here we are — on the cusp of total collapse — and the solution is right there staring us in the face

              And the solution is being ignored….

              Funny that.

            • “And here we are — on the cusp of total collapse”

              Always so dramatic. I’m sure we’ll just start over with new dollars and new GDP and new bonds and derivatives after the dust settles on the current financial system. Or maybe not, maybe it will all go down in flames.

              “And the solution is being ignored….”

              Not ignored, just being rolled out at a snail’s pace. The USA just needs to spend $100 trillion and use 1 million square kilometers of land to replace oil for its energy needs (not counting any substitution for oil’s other products).

              What this election needs is a radical green energy person who promises to borrow and invest that $100 trillion, to create tens of millions of jobs. Also, offer to annex Mexico instead of deporting all the illegals. To seal the deal, s/he needs to promise a big screen TV in every home.

            • madflower69 says:

              “You are right. I don’t get it. I will never get it.”
              You can get this. It isn’t that complicated.

              The overproduction is how the grid does frequency regulation (controls the voltage on the grid or how much energy is provided) The grid use isn’t steady it erratically spikes up and down, and people turn on and off devices. So you want to have capacity ready to cover the high end of the spikes, or else you have brown outs.

              When you start to approach the full load of the main power plant, they turn on what they call peaker plants, which are similar to a car engine, but much bigger and can take around 30-45 minutes to stabilize. Since they cost money to run, you have to guess what the load is going to be 30-45 minutes ahead of time in order to have enough capacity available.

              What storage can do because it can react immediately is eliminate the guesswork so if you can store say an hours worth of electric, you can pretty much wait to turn on the peaker plant until you actually need to turn it on. You aren’t turning on the peaker plant, and just letting it idle just in case the load spikes up, the load is already there.

              Another option might be to buy a contract to cover the additional load. Peaker plants are usually less efficient then main generators so buying excess from a another utility might be cheaper then using the peaker plant.

              The other advantage storage has is it can be placed anywhere on the grid. You run into space and emissions issues with peaker plants, but battery packs, can be tucked into odd places.

              If you have a substation in a congested area, that maxes out during the day, you can alleviate a lot of the pain, by having batteries cover some of the peak load, and fill them up during off-peak hours, so you are maximizing transmission capacity of the substation.

              Plus you are filling them up during off-peak times from your main generation facility, so the initial cost of the electric is cheaper anyway.

              They can save a lot of money before we even get to renewables.

              Now what happens with intermittent renewables is you have a much more difficult time making a guess as to what the demand is actually going to look like. They make the inefficiency in grid management problem significantly bigger.

              In short, since battery storage reacts immediately, it can replace overgeneration overhead costs, as well as absorb spikes in generation from intermittant renewables.

              Here is another battery story: NEC just finished a 3.9MW battery, and they have a 60mwh battery for PJM for frequency regulation.

              http://techon.nikkeibp.co.jp/english/NEWS_EN/20150711/427323/?ST=msbe

              “Time for a REFRESHER COURSE ON WHY RENEWABLE ENERGY IS AN EXERCISE IN FUTILITY:”

              I stopped reading after I read, today’s cars can’t run on electric. *eyeroll*

              “Thermal solar to some extent overcomes most of those problems. ”

              Correct, but it is now more expensive then PV, and the systems need to be utility scale.
              10 years ago, thermal solar, was cheaper then PV. The high cost of mirrors and trackers, towers, etc don’t really compare to solar pv which has a much more generic install system and easier to mass produce.

            • Fast Eddy says:

              The problem with storing energy is that when you do that you get a negative return on the energy

              In other words — the amount of energy that goes into manufacturing the solar panels and associated gear — and the batteries —- is more than you get out of the system over its life time.

              You put 1 tonne of coal in — and you get less than the equivalent energy of that 1 tonne of coal out the other side.

              That would explain this why solar as an energy source — is basically non-existent.

              It is pure folly and only an idiot would invest money into this nonsense (or a government that needs to votes of said idiots to get elected)

              Feel free to ignore the obvious and keep banging on about your solar Jesus… solar Jesus is the saviour of course….

            • “Correct, but it is now more expensive then PV, and the systems need to be utility scale.”

              It is not just about the cost of the system, but also the storage. Thermal solar uses potassium nitrate, or even sand, to store the energy, instead of lithium batteries. I bet sand or salt can handle more cycles than chemical batteries. Fewer parts to replace at lower cost.

        • I did think about connecting together power companies as a way of creating excess capacity, but I suppose it would work that way, because the percentage variability of a large group of users is a lot lower than that of a small group of users. Adding LED lights adds to the effect.

          I agree water is a huge problem, and work arounds to our water problems are part of the reason that the cost of producing electricity is rising.

          Our unfortunate problem is that people’s pocketbooks don’t respond well to higher prices, even if those higher prices are supported by higher costs. Consumers cut back on discretionary sectors, leading to layoffs in the discretionary sectors. It is as if consumers are being force to buy things that they never bought before, such as work arounds for water problems, and those added costs must be subtracted for some other part of the consumers’ spending.

          • “It is as if consumers are being force to buy things that they never bought before, such as work arounds for water problems, and those added costs must be subtracted for some other part of the consumers’ spending.”

            This is a big part of the problem in a nut shell. If the price of gasoline doubles, consumers don’t consume half as much, they cut spending elsewhere. I suspect that price fluctuations are a huge contributor – if people knew in advance that the price was going to be 5% higher every year, they could make rational decisions. If the price goes up 50% then back down, they gain no useful information to make a decision to alter their lifestyle.

          • madflower69 says:

            Connecting the grid does a few things. It is a larger service area as you mentioned, and it does smooth things like you mentioned.

            It also help provide some redundancy so if your main plant has an issue, you have the ability to get electric from other utilities to prevent outages.

            It also can reduce the amount of overcapacity you need online to meet any spikes in demand. Instead of 13 utilities having a peaker plant running just in case there is a spike in demand, but they are all running idle. You only need 1 online to cover any spike.

            Part of the law mandated regional markets, so there is a mechanism for line charges between utilities. if power is going from utility A through B’s lines to C, B actually collects a line fee.

            CaISO is by far the most advanced I have seen (and most talked about) because they include a variable pricing market.(it is like 15 minute periods, so not quite real time pricing.) Which means, you might be able to buy a contract cheaper then it costs to fire up a plant to meet demand or if you have your main plant running at half capacity, you can sell a contract. They also offer the “real time” pricing to commercial/industrial customers which has helped the behind the meter storage market. Since it is a variable market, it helps accommodate intermittent renewables.

            Water is used in both gas and electric production, so even if solar/wind isn’t CO2 negative is not using the copious quantities of water. I agree there are issues with intermittent renewables that need to be resolved.
            —-
            Geothermal, which uses water, but it isn’t an intermittent supply of power is gaining traction out west. It can cycle/vary with changes to demand. kind of like the combined cycle NG facilities.


            “Our unfortunate problem is that people’s pocketbooks don’t respond well to higher prices, even if those higher prices are supported by higher costs. ”

            Correct. But waiting until SHTF, then trying to do a massive changeover with no developed technology is definitely not going to work for anyone’s pocketbook. It is much easier to get the technology started, work through the problems and make improvements, and lower the overall cost before SHTF. We can do slower migration so it doesn’t sting our pocketbooks. To defray the costs, we are trying to sell our technology to other countries where they pay more for power and the our current technology is cost competitive. Hawaii is our oddball where they pay 40c/kwh for electric. We are arguing on the mainland about whether solar is competitive enough with wholesale pricing at 5c/kwh.

            There are a lot of kinks to work out, and improvements that can be made. Some of the infrastructure changes we are making to improve efficiency and reliability, are irrelevant to the source of the power.

            The LED lightbulb is a great example. When Bush first proposed getting rid of the incandescent lights, there was a huge uproar that lasted for years. At the time the LEDs existed but not as a lightbulb. CFLs existed but they were expensive and don’t produce as high of quality of light. (the flicker really bothers my eyes, and LED light is commonly mistaken for incandescents, you can’t tell them apart.) The first 40w LED lightbulbs were around 100 dollars each. They have improved and the last 60w ones I bought were around 2.50 each, but it took 10 years. One of mine was dropped from 3ft onto a wood floor, and didn’t break. I have a 75w one that runs 8 hours a day, for 5+ years straight. So the improved technology has been quite a bit better and more reliable. In fact LEDs are preferred in warehouses and food service, because of breakage, and they last a long time. They also don’t contain mercury so they are safer to dispose of.

            All the ridicule he took, because the idea really does sound stupid, until you think about it. It has actually saved americans millions of dollars. It is hard to realize because you get paid a few cents in savings at a time, with a big lump sum investment cost. It is also a slow migration as most people haven’t replaced all their bulbs yet.

            • One of the other cool effects of creating a global power grid: when something goes wrong, the whole world will get a blackout all at once. Brilliant.

            • Fun! Think of all of the nuclear power plants that need grid electricity to ramp back up after an outage.

            • I agree with nearly all of what you say.

              If we were farther away from limits, I would probably think the way you do. Right now, with the global economy beginning to implode, I am afraid it is too late. I don’t think it is possible to maintain electrical consumption for significantly longer than we can maintain the debt system and the fossil fuel extraction system. All of the pieces of the system are hooked together.

            • madflower69 says:

              “If we were farther away from limits, I would probably think the way you do. Right now, with the global economy beginning to implode, I am afraid it is too late. I don’t think it is possible to maintain electrical consumption for significantly longer than we can maintain the debt system and the fossil fuel extraction system. All of the pieces of the system are hooked together.”

              How are you explaining a reduction in electrical use, and an increase in the GDP in the US exactly?
              Consumer spending was up 2% last quarter in the face of lower commodity prices for oil.

              I should note that residential solar capacity surpassed commercial solar capacity last year.
              So that is part of the reduction in use, it doesn’t count towards the production numbers so that is part of the .9% decline in residential purchases.

              I agree there is a bubble for commodity prices of oil/ng because we are just using less, because of efficiency, not production. It is hard for a lot of people to wrap their heads around that concept especially commodity traders.

  7. cassandraclub says:

    Modern renewables that are connected to the grid can be expected to stop working when the grid stops working.
    It may be useful for factories, small villages or farms to disconnect from the national grid and become self-sufficient for electricity with a windturbine, solar panels. and perhaps a small generator.

    • edpell says:

      Here in New York State, US. We call these micro grids. As you say they can operate independently of the grid. For example when NYC went black NYU which has its own micro grid maintained power.

      The issue is your statement “small generator”. No large generator big enough to supply everybody and everything in the micro grid area. So distributed generators all over and gas transmission pipeline to the generators all over.

      The government in US and NY wants micro grids that will keep the government running even when the citizens and businesses go black. You know police, state police, army, FBI, CIA, DHS, NSA. Here in Rhinebeck, New York the proposal is to micro grid the police, town government, and hospital. How long they can run will depend on how it is fueled. If it is on-site storage tanks then it lasts until the tanks run dry. IBM Fishkill, New York maintains 2 million gallons of diesel on site for its generators for its chip factory.

      • xabier says:

        edpell

        Somehow the micro-grid idea – to maintain vital state functions as islands in the midst of chaos – makes me think of the end of Germany in 1944-45, with Albert Speer desperately trying to keep things going as the Reich disintegrated under Allied and Russian advances……….

    • Perhaps this is true if they have enough spare parts. The use of a generator will be expensive and difficult to maintain if oil is a problem.

      I don’t think that self-sufficiency with solar PV and wind turbines (and backup batteries) is possible if any kind of industry is done. In particular, getting enough electricity to melt metals, dye cloth, and even bake bread becomes a problem. If the solar PV and wind turbines are just to keep the lights on for a few homeowners in a mild climate, perhaps the plan will work for a while.

    • InAlaska says:

      I agree with you that there is a place for this type of renewable, although we should probably stop calling them renewables. Also, you can install a grid inter-tie system that is attached to the grid during normal times, but can be isolated from the grid during periods of chaos. It is as simple as installing an isolation switch. With extra battery capacity and a generator, it will be quite the advantage in the hard times to come.

  8. Erik Esselstyn says:

    While an ardent follower of Gail’s analysis for years, I tremble at the absence of telling inclusion of the role of climate change in her economic overview. Today base load costs of renewable electric power in many setting provide rates competitive with or cheaper than coal or nuclear. Costs for renewable technology continue their dramatic downward march. And breakthroughs in power storage will soon consign the intermittency challenge to history. The continuing use of our atmosphere as the sewer for CO2 pollution already costs nations billions each year in recovery from floods, wild fires, and drought.

    My grandchildren deserve a life of options and opportunity based on today’s leaders taking historic courageous measures to eliminate most fossil fuel. Vermont – that means winter electric heat pumps rather that heating oil. America – that means we will longer take a Caribbean vacation via Delta. Without question the challenges humanity faces demand profound changes for us all.

    Anthropogenic climate disruption, alas, makes our current economic challenges pale by comparison.

    • edpell says:

      The levelized cost of wind and solar matches coal in some cases. But if you want electric at night that is a different number need storage. If you want electric in the month of November month long storage, here in NY November is basically cloudy all month. Please tell me the cost of RE plus storage. Elon’s batteries cost $12,000 per house per one day of use stored. 30 days $360,000. Yes, wind can be out of sync with sunshine. Tell me the costs for 20,000MW of transmission lines from the windy northwest of NY state to NYC.

      I like the idea of RE but I want to see the whole cost for a whole system.

      I think my above at $1.8/KWHr versus coal at $0.03/KWHr is about right (order of magnitude, yeah, I am a physicist). Can you show a number for something more than the instantaneous levelized cost?

    • Greg says:

      Solar PV and wind farms are extensions of fossil fuels. Why is that? Well, without input of resources (copper, lead, iron, concrete etc) made available through the burning of fossil fuels, solar PV and wind farms could not be built (at any cost). So, it seems to me someone is leaving out some costs of the “renewable energy.” It seems intuitive to me that solar PV and wind farm costs must be added to the costs of the fossil fuel energy used to create and maintain them. Someone is conveniently leaving that out and starting the capitulations with the assumption the solar PV panel or wind turbine is already produced. There is no “free lunch.”

      • Chris Harries says:

        I think most solar enthusiasts privately know all this. They know that dilute energy forms can’t power a mighty industrial civilisation that was founded on very dense energy forms. But there is a certain (unstated) logic that drives it forward anyway. It goes simply: “better something than nothing”.

        I liken this to driving on a very long dirt road and coming to a patch of deep mud as far as the eye can see and no way around. There’s no chance of getting through so you are faced with just two choices: 1) Stare at it for a very long time. 2) Accelerate as hard as you can and bravely charge into it and see how far you can get.

        Choice number 2) gets picked because we are habituated to acting. We are not ones for retreating. We believe in Progress. With a wing-and-a-prayer you hope that something else will turn up when you do get totally bogged. think of it like karma. Maybe a helicopter will come by and lift you out. If that’s as far as you get, at least you can say that you tried.

        Meanwhile, to keep the passengers happy you have to persuade them you’re going to make it through to the end. No enterprise succeeds on a foundation of Doubt.The one thing the passengers need most of all is Belief.

        I’m not being totally cynical here. There’s a certain logic to it when you look at what else can be done.

        • Your car on a dirt road analogy is good. The politicians have been good at persuading people that we will make it through our current mess. No one could ever think anything different.

    • If you take the climate change models, and add our current economic problems to them, they undoubtedly will come out quite differently. In fact, they may come out worse for a while, if global dimming is preventing climate change. So I am not convinced that we “know” what we think we know. It may be that the financial collapse leads to extinction or near extinction of humans. Some people believe that we need to “take care of the earth,” but I expect the earth can pretty much take care of itself, by cycling to a new state.

      I see no hope for renewable technologies, because they are so dependent on fossil fuels. They are simply small add ons to the current system. If I thought that they had a chance of truly being helpful, I would have mentioned the possibility.

      • MM says:

        Yep, I recently came across a point that is also to be taken into account: when the climate will change more dramatically as we excpected some 10 years ago (latest Hansen Paper) we can not even be shure that local weather patterns may persist for a long time in the future that was there now. Will there be still wind where you projected your turbine ? The ocean currents are massively changing and even large scale offshore will face a problem when the sea level goes up too fast (not yet seen luckily) or the global wind dynamics change (that can be seen in the polar jet stream already)

        • MM says:

          maybe this is for shure: a hot and dry place will become more hot and dry, so maybe concetrated solar power is an option but it is VERY expenive (but also can scale up)

        • InAlaska says:

          Its also quite possible that global warming is fending off the next ice age cycle. It could be that the heat engine of civilization is actually keeping our planet from cooling off as it has done with a regular periodicity for hundreds of thousands of years. We have been in an unusually stable interglacial period now for longer than is usual. If you look at any timeline of ice ages, you can see that we are due, indeed, perhaps over due for the next. Here’s a link among many you can find by googling it: https://www.google.com/search?q=timeline+of+ice+ages&espv=2&biw=1097&bih=511&tbm=isch&tbo=u&source=univ&sa=X&ved=0CDUQ7AlqFQoTCMHi3oSDo8cCFQyliAod5L0DZA&dpr=1.75

        • PeterEV says:

          With all the parroting about climate change warming the planet or not warming the planet, I thought that this might gives us some pause to think about and search for how solar activity affects earth temperature cycles. After all, there is a fundamental connection between our planet and the Sun.

          I heard a scientist talk about her sun activity related abstract on NPR the other day. This scientist was investigating and modeling the Sun’s magnetic activitiy. At
          http://www.sciencedaily.com/releases/2015/07/150709092955.htm There is this summary from that page: “A new model of the Sun’s solar cycle is producing unprecedentedly accurate predictions of irregularities within the Sun’s 11-year heartbeat. The model draws on dynamo effects in two layers of the Sun, one close to the surface and one deep within its convection zone. Predictions from the model suggest that solar activity will fall by 60 per cent during the 2030s to conditions last seen during the ‘mini ice age’ that began in 1645.”

          This goes along with other solar modeling summarized at:
          https://en.wikipedia.org/wiki/Solar_cycle#Models

          Some of the current graphing is depicting some of this activity from a decrease in solar activity during this solar cycle:
          This shows 400 years of Sunspot Observations with an approximate 180 year cycle. This means we are due for minimum sunspot activity which is thought to be associated with reduced solar energy output.


          This graph shows the last 2.5 sunspot cycles with a noticeable downward decline in number.


          What is interesting about this chart of Arctic Ice volume is that since 2010, there has been a noticeable upward trend in ice volume.


          and here:


          **If all this is a trend**, we may see cooler temperatures on average in the near future and if the seas are slower to cool down, the added water vapor may cause more storms through cyclogenesis. Also the plastic gyres in the Atlantic and Pacific Oceans may also be creating a cap over the water in which the water is heated underneath any translucent plastic sheets. It would be interesting to see if there are any studies related to the gyres forming a cover and heating up the local waters some.

          Think of a translucent pool cover. What percentage coverage would you need in order to see a significant rise in pool temperature? Might be a good “science fair” project for some kid with a couple of tupperware containers, zip lock bags and a thermometer.

        • PeterEV says:

          I had trouble uploading the graphs to the above comment using html code. Here are the links:


        • PeterEV says:

          Here’s some additional clarification to the above. This is a quote in USA Today concerning Valentina Zharkova’s research on climate change: “She said that although she did not intend to suggest an ice age is coming, she doesn’t dispute it. She maintains the decline in solar activity will reduce solar irradiance, which heats the sun [ed. earth(?)].”
          (Ref: http://www.usatoday.com/story/news/nation/2015/07/16/scientists-dispute-ice-age-warnings/30257409/).

          Basically, one effect, increasing CO2, will likely be offset the temperature increasing effects by another effect, decreased irradiance from the sun; but to what extent?. My conjecture is that it will show up here in the volume of ice in the Arctic Ocean:

          Along with other climatic changing effects such as volcanic eruption output reaching high altitude. There are still the effects of increased acidification of the oceans.

    • Fast Eddy says:

      “And breakthroughs in power storage will soon consign the intermittency challenge to history.”

      Be sure to let us know when this happens…. We will be waiting…. and waiting…. and waiting…. and waiting…

      In terms of my concerns climate change ranks right up there with who is going to win Dancing with Stars and American Idol…. (I have never watched either of these shows…)

      Why?

      Because BAU will collapse long before climate change gets me… and the only way to stop (maybe) climate change is to stop BAU now — which means we all starve.

    • nequin says:

      Anthropogenic climate disruption IMHO is the least of our worries.
      I am in the Fast and Gail camp.

  9. David Gower says:

    Number 4, last 2 paragraphs should be required reading for everyone especially the politicians. Young people affected in #6 are completely oblivious to the problem until they graduate with enormous debt and low job prospects. Calling Wind and Solar “energy sinks” is a valid comparison to the stimulative effects of low interest rates.

    Your first line is sadly not true, a lot of people do not know how an economy works. Unfortunately some of these are in positions of power elected by an apparent majority.

    • The two paragraphs you are referring to are

      In some sense, fighting pollution leads to another form of diminishing returns with respect to human labor. In this case, increasing human effort and other resources are used to produce pollution control equipment and to produce workarounds, such as alternative higher-priced fuels. Again, wages per worker are expected to decline. This happens because, on average, each worker produces less of the desired end product, such as electricity.

      Admittedly, less pollution, such as less smog, is desired as well. However, if it is necessary to pay extra for this service, the effect is recessionary because workers must cut back on purchasing discretionary goods and services in order to have sufficient funds available to purchase the higher-priced electricity. Thus, fighting pollution using approaches that raise the price of end products is part of what slows the world’s economic growth pump.

      Unfortunately, an awfully lot of people (including economists) never got farther than, “We pay each other’s wages.” Actually what happens is that adding energy products, or using energy products more efficiently, allows us to make more end products that can be shared by members of the economy. Using the resources we have less efficiently leads to fewer end products that can be shared by the members of the economy. The effect is recessionary, and standards of living go down. If people don’t understand how important cheap energy is for the economy, they miss this point.

      • Rodster says:

        Recycling is a huge resource hog.

        • I didn’t get to recycling in this post. I think we should ban subsidies to the recycling system. If it costs more to recycle than to produce new products, it doesn’t really get us anywhere. Cost is to a significant extent a measure of energy involved. The big problem with recycling is that it takes too much energy and other resources (including human labor) to recycle. Recycling looks like it would work, but in many cases it just raises costs.

          • Greg Machala says:

            What about re-using things like glass jars and bottles? That is recycling. If one could have a grocery store with bulk bins and one were to just keep refiling the same glass jar or bottle with goods then that would be a form of recycling that would work. However, there are probably jobs that would be lost in that process.

            I agree though that recycling complex products like electronics is pointless. Plastic recycling is probably an energy looser as well. It does add jobs I suppose; which creates growth that keeps the hamster on the wheel.

            • John Doyle says:

              Remember today a truckload of the best gold ore has up to 40 times less gold than a truckload of mobile phones.

          • Chris Harries says:

            Quite a few local councils have done the sums and worked out that long distance recycling uses up more resources than just burying it. They do recycling anyway, partly because disposal in most cases end up being a headache for them. But more so, they do it because the community would be outraged if it isn’t carried out. Having preached the benefits of recycling for decades the principle is now rock solidly in our culture.

          • Mark Sharkey says:

            You need to include in your analysis the environmental cost of not recycling in your new product costs. If the environmental cost is too great then may be the new product should not be allowed to be made.

            • No matter how we treat the cost, we are reaching “increased inefficiency” when we need to recycle the parts when we get done with the product. The prior approach–just throwing it out, into a junk heap somewhere–admittedly was not sustainable, but it was what generally got built into the cost structure. Once we need to add the cost of recycling somewhere along the way, the costs generally go up. It is just a different form of diminishing returns. For an economy built on growth, it is hard to have diminishing returns–this problem must be offset by even more growth elsewhere.

            • “No matter how we treat the cost, we are reaching “increased inefficiency” when we need to recycle the parts when we get done with the product.”

              It depends on the product. In many cases, it is more cost and energy effective to recycle than to mine raw ores. Copper and Iron have been recycled for thousands of years because of this.

              For sure, electronic devices are difficult because there is so many different elements in such tiny quantities, effective recycling is much harder.

            • There is an energy cost in all recycling. It varies with respect to how the recycling energy cost compares to the “new material” energy cost.

            • madflower69 says:

              “Once we need to add the cost of recycling somewhere along the way, the costs generally go up. ”

              I would argue they tend to go down, as the market and usability of recycled materials increases. It is boosted when the prices of the virgin materials, and the price of refuse goes up.

              Instead of getting a dumpster for 200 bucks, we called some scrappers that took our old aluminum siding away for free. They probably made 500 bucks in scrap aluminum. They had to do -some- work to get that, but they made money and everyone was happy including the scrap yard, and the whoever they sold it to.

              The people in south america that make solar water heating systems out of old 2 liter bottles. They don’t have any money and the material is free, and they can save money by doing it. So even though it is labor intensive, not having to pay for hot water saves them some of the money they don’t have.

              In fact the older generation who lived through the depression and WWII. They save -everything- just in case they might need it for something. They won’t buy something unless they -have- to buy it. Newer generations rebelled against that and mocked them quite viciously.

            • Fast Eddy says:

              The District, Baltimore and many counties in between are contributing millions annually to prop up one of the nation’s busiest facilities here in Elkridge, Md. — but it is still losing money. In fact, almost every facility like it in the country is running in the red. And Waste Management and other recyclers say that more than 2,000 municipalities are paying to dispose of their recyclables instead of the other way around.

              http://www.washingtonpost.com/local/dc-politics/american-recycling-is-stalling-and-the-big-blue-bin-is-one-reason-why/2015/06/20/914735e4-1610-11e5-9ddc-e3353542100c_story.html

          • madflower69 says:

            “Recycling looks like it would work, but in many cases it just raises costs.”
            Recycling is free and dumping it in the garbage costs money.

            If you can cut your garbage costs in half by recycling, then not only do you not have to worry about landfill property, it costs you half as much. If someone can break even, or even if you subsidize them less then half your garbage cost, you saved money.

            You need to read one of those “increase your wealth” types of books instead of economic theory.

            • I would agree that you have to do a comparison to the cost of alternative options.

              Part of our problem is that the cost of alternative options is going up as well–land fill isn’t free–this is part of the diminishing returns problem.

            • madflower69 says:

              “Part of our problem is that the cost of alternative options is going up as well–land fill isn’t free–this is part of the diminishing returns problem.”

              Correct. There is also money in recycling, but there are issues that need to be addressed to make it a more profitable endeavor to make it sustainable.

Comments are closed.