People, Ideas & Objects took preemptive action to offset the clean energy discussion that was beginning in oil and gas in our July 2019 white paper “Profitable North American Energy Independence -- Through the Commercialization of Shale.” In our paper we included a review of The Manhattan Institutes March 2019 Mark P. Mills' paper entitled “The ‘New Energy Economy:’ An Exercise in Magical Thinking.” In our White Paper's section “An Inconvenient Set of Facts'' we highlighted Mr. Mills' evidence that the physics of wind and solar were incapable of carrying the freight that oil and gas does today. With 69% of the energy provided by oil and gas and only 12% by all sources of renewable energy the 57% differential reflects a misguided ambition. For 2020 the consumption by energy source is presented in this EIA chart that breaks down the overall and renewable energy sources share. We see that combined wind and solar energy consumption are currently at 4.44% of the total energy the U.S. consumed. This is achieved after the landscape has been overtaken by these facilities, nothing but government financial support and the monotonous leadership provided by misguided teenagers. Nuclear power continues to provide 9% of U.S. capacity, yet has been stagnant in terms of investment and support over the same period of time. Oddly enough we still source almost half of the renewable energy contribution (2.16%) from the burning of wood.
These are some of the quotes from Mr. Mills' paper that document the constraints which physics impose on the ability of clean energy to ever do the job.
Scientists have yet to discover, and entrepreneurs have yet to invent anything as remarkable as hydrocarbons in terms of the combination of low-cost, high-energy density, stability, safety, and portability. In practical terms, this means that spending $1 million on utility-scale wind turbines, or solar panels will each, over 30 years of operation, produce about 50 million kilowatt-hours (kWh)—while an equivalent $1 million spent on a shale rig produces enough natural gas over 30 years to generate over 300 million kWh.
Solar technologies have improved greatly and will continue to become cheaper and more efficient. But the era of 10-fold gains is over. The physics boundary for silicon photovoltaic (PV) cells, the Shockley-Queisser Limit, is a maximum conversion of 34% of photons into electrons; the best commercial PV technology today exceeds 26%. Wind power technology has also improved greatly, but here, too, no 10-fold gains are left. The physics boundary for a wind turbine, the Betz Limit, is a maximum capture of 60% of kinetic energy in moving air; commercial turbines today exceed 40%.
The annual output of Tesla’s Gigafactory, the world’s largest battery factory, could store three minutes’ worth of annual U.S. electricity demand. It would require 1,000 years of production to make enough batteries for two days’ worth of U.S. electricity demand. Meanwhile, 50–100 pounds of materials are mined, moved, and processed for every pound of battery produced. P. 4
Today’s reality: hydrocarbons—oil, natural gas, and coal—supply 84% of global energy, a share that has decreased only modestly from 87% two decades ago (Figure 1). Over those two decades, total world energy use rose by 50%, an amount equal to adding two entire United States’ worth of demand.
The small percentage-point decline in the hydrocarbon share of world energy use required over $2 trillion in cumulative global spending on alternatives over that period. Popular visuals of fields festooned with wind-mills and rooftops laden with solar cells don’t change the fact that these two energy sources today provide less than 2% of the global energy supply and 3% of the U.S. energy supply.
To completely replace hydrocarbons over the next 20 years, global renewable energy production would have to increase by at least 90-fold. For context: it took a half-century for global oil and gas production to expand by 10-fold. It is a fantasy to think, costs aside, that any new form of energy infrastructure could now expand nine times more than that in under half the time. P. 6
If the initial goals were more modest—say, to replace hydrocarbons only in the U.S. and only those used in electricity generation—the project would require an industrial effort greater than a World War II–level of mobilization. A transition to 100% non-hydrocarbon electricity by 2050 would require a U.S. grid construction program 14-fold bigger than the grid build-out rate that has taken place over the past half-century. Then, to finish the transformation, this Promethean effort would need to be more than doubled to tackle nonelectric sectors, where 70% of U.S. hydrocarbons are consumed. And all that would affect a mere 16% of world energy use, America’s share. P. 7
Availability is the single most critical feature of any energy infrastructure, followed by price, followed by the eternal search for decreasing costs without affecting availability.
It costs less than $1 a barrel to store oil or natural gas (in oil-energy equivalent terms) for a couple of months. Storing coal is even cheaper. Thus, unsurprisingly, the U.S., on average, has about one to two months’ worth of national demand in storage for each kind of hydrocarbon at any given time.
Meanwhile, with batteries, it costs roughly $200 to store the energy equivalent of one barrel of oil. Thus, instead of months, barely two hours of national electricity demand can be stored in the combined total of all the utility-scale batteries on the grid plus all the batteries in the 1 million electric cars that exist today in America.
For wind/solar, the features that dominate cost of availability are inverted, compared with hydrocarbons. While solar arrays and wind turbines do wear out and require maintenance as well, the physics and thus additional costs of that wear-and-tear are less challenging than with combustion turbines. But the complex and comparatively unstable electrochemistry of batteries makes for an inherently more expensive and less efficient way to store energy and ensure its availability.
Since hydrocarbons are so easily stored, idle conventional power plants can be dispatched—ramped up and down—to follow cyclical demand for electricity. Wind turbines and solar arrays cannot be dispatched when there’s no wind or sun. As a matter of geophysics, both wind-powered and sunlight-energized machines produce energy, averaged over a year, about 25%–30% of the time, often less. Conventional power plants, however, have very high “availability,” in the 80%–95% range, and often higher.
A wind/solar grid would need to be sized to meet both peak demand and to have enough extra capacity beyond peak needs in order to produce and store additional electricity when sun and wind are available. This means, on average, that a pure wind/solar system would necessarily have to be about threefold the capacity of a hydrocarbon grid: i.e., one needs to build 3 kW of wind/solar equipment for every 1 kW of combustion equipment eliminated. That directly translates into a threefold cost disadvantage, even if the per-kWH costs were all the same. p. 8
Such a ban is not easy to imagine. Optimists forecast that the number of EVs in the world will rise from today’s nearly 4 million to 400 million in two decades. A world with 400 million EVs by 2040 would decrease global oil demand by barely 6%. This sounds counterintuitive, but the numbers are straightforward. There are about 1 billion automobiles today, and they use about 30% of the world’s oil. (Heavy trucks,aviation, petrochemicals, heat, etc. use the rest.) By 2040, there would be an estimated 2 billion cars in the world. Four hundred million EVs would amount to 20% of all the cars on the road—which would thus replace about 6% of petroleum demand. P. 13
An ant-size engine—which has been built—produces roughly 100,000 times less power than a Prius. An ant-size solar PV array (also feasible) produces a thousand- fold less energy than an ant’s biological muscles. The energy equivalent of the aviation fuel actually used by an aircraft flying to Asia would take $60 million worth of Tesla-type batteries weighing five times more than that aircraft. p. 13
Finally, when it comes to limits, it is relevant to note that the technologies that unlocked shale oil and gas are still in the early days of engineering development, unlike the older technologies of wind, solar, and batteries. Tenfold gains are still possible in terms of how much energy can be extracted by a rig from shale rock before approaching physics limits. That fact helps explain why shale oil and gas have added 2,000% more to U.S. energy production over the past decade than have wind and solar combined. p. 16
The inexorable march of technological progress for things that use energy creates the seductive idea that something radically new is also inevitable in ways to produce energy. But sometimes, the old or established technology is the optimal solution and nearly immune to disruption. We still use stone, bricks, and concrete, all of which date to antiquity. We do so because they're optimal, not “old.” So are the wheel, water pipes, electric wires ... the list is long. Hydrocarbons are, so far, optimal ways to power most of what society needs and wants.
More than a decade ago, Google focused its vaunted engineering talent on a project called “RE<C,” seeking to develop renewable energy cheaper than coal. After the project was canceled in 2014, Google’s lead engineers wrote: “Incremental improvements to existing [energy] technologies aren’t enough; we need some-thing truly disruptive. ... We don’t have the answers.” Those engineers rediscovered the kinds of physics and scale realities highlighted in this paper.
Hydrocarbons—oil, natural gas, and coal—are the world’s principal energy resource today and will continue to be so in the foreseeable future. Wind turbines, solar arrays, and batteries, meanwhile, constitute a small source of energy, and physics dictates that they will remain so. Meanwhile, there is simply no possibility that the world is undergoing—or can undergo—a near-term transition to a “new energy economy.” P. 18
Certainly not as catchy as will all be dead in 12 years, but physics was never a popular subject. What’s clearly needed in the clean energy business is an army of bureaucrats who have the competitive advantage of spending. A 20 fold increase in production from shale in comparison to what clean energy achieved in the same period is the factor that sticks out the most for me. Even in the hands of the bureaucrats, shale was far more productive in terms of delivering the needed energy. However, they couldn’t make any money at it and they’ll certainly never be doing so in clean energy with these constraints.
This must be why bureaucrats make the big bucks. Making tough decisions in difficult times. Figuring out how to do things that others think are impossible. Or, what is it that they’re doing? What is it that they’re thinking? Is this why they need to have the oil and gas revenues to support these activities? How are clean energy investments performing?
With the declaration that producers are unable to make money in any aspect of oil or gas exploration or production. What promise is there that these same people will be able to make money in clean energy? When 69% of the most powerful economy that man has ever known is supported by oil and gas. And those involved in that business can’t make it a viable business there has to be a significant issue involved. There’s a disconnect between the demand in the marketplace and those that are providing the product from a business point of view. That disconnect is with the leadership of the industry and their lack of understanding of business, full stop. The question therefore is what is it that should be done. They declared oil and gas was not viable and moved on to what they perceive to be greener pastures. Taking the proceeds of oil and gas inappropriately and in unauthorized fashion to fund their adventures. Do we now let them return and give them another shot at it and maybe they’ll get it right this time? A new opportunity to do what they should have known better throughout these past four decades. A time in which their own shareholders were withholding financial support because they were dissatisfied with the performance? Or are they so committed to their green agenda that nothing will pry them away from their task at hand? I naturally feel we’re better off without them and it's about time we cleaned the place up.
On the other hand we have no shortage of work to do. Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?
